Semiconductor and growth stocks are down this year, bonds are underwater, and even the S&P 500 is in a bear market. It’s a challenging picture for many portfolios. So how should investors cover such huge losses? Speaking to CNBC “Pro Talks”, Foord Asset Management’s Brian Arcese said investors should sell underperforming stocks as soon as they realize they’ve made a “mistake” in their portfolio. “You have to look at each stock for itself,” said Arcese, who manages two funds that oversee more than $1.6 billion in assets. “If you don’t think the business model of some meme stocks like GameStop or AMC is sustainable, then you’re better off going out and buying from a company no matter what happens in the near to medium term. Believe it.” According to the portfolio manager, many investors continue into losing positions, taking “emotional pain” in the process. “I think it’s more behavioral than anything else.” Investors are also “feared” of losing the recovery rather than stepping back and re-evaluating the companies they own, he added. Arcese said it would consider retaining an underperforming stock if the company makes changes to its management team or is willing to restructure and turn the business around. “But if nothing has really changed, then it’s very hard to fully believe that. [stock]In 2022, stock markets have been rude to investors of all kinds, whether they’re hedge funds, billionaire family offices, or meme stock investors. More than 85% of hedge funds and billionaire investors lost 18% on average. According to CNBC Pro’s analysis of 271 fund data from Investing.com, 232 funds have lost value this year, while 11 funds have lost more than 50%. “The world’s top investors are probably right 60-70% of the time,” Arcase told CNBC. I am speaking from Singapore. “This means that everyone, at least a third of the time, invests in a company that is out of business for some reason.” According to Arcese, most of the pain can be avoided if investors simply buy “quality” companies with great management teams that offer good returns and solid stocks. Stock selections The fund manager has identified three stocks that will “work in any economic environment” — UnitedHealth Group , Air Products and Freeport McMoRan. Arcese acknowledges that shares of all three companies will likely be hit by a recession, but they are likely to outperform “deep cycles” such as semiconductors and the broader market. UnitedHealth, a US-based health and insurance company, said in October It has a buy rating from 16 of 19 analysts who have covered the stock since Jan. 14. The median price target of analysts surveyed by FactSet is $597.5, indicating a potential increase of 10.3% from current levels. Air Products, which is an inflation hedge, is an “incredibly defensive company,” according to Arcese. They have increased their dividends year after year. “They have 15 and 20 year inflation-based contracts with their customers,” he said. Meanwhile, Freeport McMoRan, an Arizona-based copper mining giant, is a “low-cost” producer of a commodity the world falls short of, according to the fund manager. “If you believe in the energy transition, in green energy, there isn’t enough copper in the world to get us there,” he said. Six of the 12 analysts covering the stock have rated FCX as a “buy” since its third-quarter results. Shares of the company are down 21% to date, mainly following copper prices.