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Protecting your portfolio at record highs

With stocks trading near record highs, investors often start to suffer from acrophobia — or fear of heights.

While no investor wants to be the last buyer at the bull market party, Brian Milligan, co-manager of the Ave Maria Growth fund, says there are ways to stay invested and not lose a lot of money or your sanity.

Lesson No. 1 is stick with quality stocks and steer clear of lousy companies, no matter how cheap their share price appears to be.

“The biggest risk is stretching for low-quality stocks that can lead to a (so-called) value trap,” he says.

Lesson No. 2 is stick to your investment discipline. If a stock you like is a stalwart in its business space, have the conviction to stick with it and buy it on weakness. That’s what Milligan did recently when home-improvement retailer Lowe’s sold off nearly 6% on Aug. 17 after disappointing Wall Street with its quarterly earnings.

“We like to buy good companies on weakness,” he says, adding Lowe’s eventually will benefit when Millennials start to buy homes and Lowe’s builds out sales targeting professional contractors.

Seek out companies that might fly under the radar and which are leaders in their industry. For example, Milligan likes Graco, which makes pumps and paint sprayers. This industrial company will benefit from a weakening dollar and an economic uptick.

“Find companies with the strongest competitive position,” he says.