Welcome to my video interview with my colleague J.R. (“Jimmy”) Butts, the chief investment strategist of the premium trading service Top Stock Advisor. Below is a condensed transcript of our discussion.

With the markets trending downward in volatile trading, now’s an opportune time to tap Jimmy’s investment acumen. As the title of his publication indicates, Jimmy has a proven knack for picking the top stocks in the market. My questions are in bold.

In early 2022 so far, the major indices have all taken a tumble, with the tech-heavy NASDAQ getting clobbered the worst. Rising interest rates tend to hurt growth stocks. Explain that dynamic for us.

Sure. There’s likely a lot of other factors in play, but the simplest way to think about it, is when we make an investment we have to think about risk. We’re putting our money at risk, and in return we expect that money to make us money.

When interest rates are low, it sort of pushes us into riskier investments if we want to earn a decent return, because the money sitting in a savings account or T-bill isn’t offering us much in return. But when rates rise, we can find descent returns with lower risk.

So, folks then ask themselves, if I can get a comfortable return and I don’t have to lay awake at night wondering if my mega-growth stock that hasn’t turned a profit yet is going to drop by 30% tomorrow because it missed earnings, is that worth it?

With higher rates we no longer have to wait for that projected growth to materialize, which means that future growth in those growth stocks suddenly gets discounted and are worth much less.

From the academic side of things interest rates and time are your two variables when calculating net present value. When rates go up, the present value of money goes down, because you can invest less money today to get the same amount you could get by investing at a lower interest rate. Hopefully, that wasn’t too confusing…

Not at all. Do you think we’re on the cusp of a correction, or maybe even a bear market?

I do. As I explained to readers of Top Stock Advisor at the beginning of January, there’s a long history of market corrections after the Fed turns off the printing presses.

And we just went through the biggest monetary expansion in history so I’d expect that we could see (and we are already seeing) major turmoil in the markets.

What are some of the positive underlying factors in 2022 that should give investors hope?

I think there are plenty of things to be optimistic about despite what I believe will be a tough year in the markets.

I know the trend of rising rates has some folks worried, but higher rates means that we can (hopefully) make a little more money on any cash laying around in savings.

From an investment standpoint, it’s great for financial institutions and insurance companies, as even a small uptick in rates can provide a nice boost in profit as they can now get a better rate of return on the astronomical amounts of cash they have on their books.

Other positives include a strong overall economy. There are more jobs than people, housing is still strong, and best of all is that if we do see a major selloff then we have the opportunity to invest in wonderful companies that will be trading at even better prices.

Surely, investors can still find reasonably valued growth stocks, even tech shares, if they know where to look. Which growth segments still hold appeal to you?

Yes, absolutely. I mean look at Alphabet (NSDQ: GOOGL), the parent company of Google and YouTube.

Alphabet may not be the sexiest investment and it won’t score you any brownie points at your next cocktail party, but here’s a company that continues to grow sales at an impressive clip (it’ll be near 40% year-over-year growth in 2021), and it makes a boatload of cash. We’re talking about over $70 billion in free cash flow.

Alphabet trades for less than 22 times next 12 months earnings, which is below its five-year historical average. And there are a number of other growth stocks that will be very appealing once the dust settles.

What are your favorite sectors right now, under current conditions?

There’s a lot to like in the energy and mining sectors still, even though energy had a banner year last year. But there are some names with great financials and balance sheets that are still trading for cheap.

What criteria do you apply to pick a “top stock?”

The vast majority of my recommendations are going to be great companies that consistently produce a lot of cash flow and are trading at fair prices. I try to keep it relatively simple and not over-complicate things.

I do have a section where we will take a flier on a smaller growth company that may not be profitable yet, but really the goal is to provide a portfolio that’ll fit just about everybody’s needs, to grow and build wealth. And I think we’ve done a pretty good job at that.

Jimmy Butts just provided you with invaluable investment advice. He also has put together a special report, “Seven Shocking Predictions for 2022,” and how to profit from them. To download your free copy of Jimmy’s report, click here.

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