Corvex Management’s Keith Meister said 2023 will be a tricky year for stock investors on the back of the Federal Reserve’s rate-hiking campaign. “It’ll be a choppy year, if you think about the risk premium for equities,” Meister said on CNBC’s ” Closing Bell ” Tuesday. “There’s always wonderful one-off opportunities. And my guess is this is a year in which people can create value by being good stock pickers … trading around positions and taking advantage of short term dislocations.” The hedge fund manager said this year will be driven by how much tightening the central bank has left to do. The Fed has raised its benchmark interest rate to a target range of 4.5%-4.75%, the highest since October 2007. Meister said in a rising-rate environment, skillful traders and active managers tend to get rewarded. “During a period of QE all you had to do was buy the easiest obvious things, your multiple was safe and you had the earnings growth,” Meister said. “During a period of QT, you get paid for complexity.” His hedge fund cut exposure in Big Tech names Amazon , Microsoft and Alphabet last quarter as Meister thinks the upside for these names would be limited. “We believe there’s a cap on the upside. … We still have some exposure, all three of those things. We think they’re unique businesses,” Meister said. He revealed that a better way to own that exposure to Big Tech was by selling, long-dated puts amid elevated volatility in the markets. Put options give holders the right to sell a specified amount of an underlying security at a specified price within a specified time frame. “There’s still room for Microsoft and Amazon and Google … but maybe we can own it through a different structure that can create more value than just owning a common stock,” Meister said.
