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Sectors To Watch: Tech, Consumer Discretionary, Homebuilders - YouTube
Channel: TD Ameritrade Network
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sean o'hara is back with us president at
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pacer etfs
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sean so last year we kind of had this
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bifurcated market where at any given
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moment he had to choose
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either quarantine growth tech or
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cyclical
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reopening and value are we going to get
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something different
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or are we going to get a broad rally
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walk me through how you're thinking
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about now this period where
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things are looking normal again and we
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did get some froth cleaned out of tech
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yeah thanks oliver for having me good
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morning you know i was thinking as i was
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getting ready for this interview you
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know like
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maybe you know we should just like take
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the year-to-date returns and just say
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let's just book them for the rest of the
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year let
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me just catch up because that's really
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you know like seriously like what 12 13
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on the s p so that's a pretty good
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year's worth of returns
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and if we took a breather for the next
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six months and let earnings catch up i'd
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feel a lot better about overall
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valuations in the market
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okay i do think we're seeing some of
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this uh
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some of this change in leadership or
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change in opportunity in terms of
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potential for
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for making higher than average or higher
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than market returns
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you know we're seeing that here in the
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strategy that we use
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free cash flow yield as a screen for and
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i was just peeking at some of the names
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earlier you mentioned
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tech we are overweight tech but we're
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not overweight the stay-at-home tech
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names or the social media tech names
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we're overweight
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you know ibm and intel and so like ibm's
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kind of an interesting story right
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they're not a cloud player the big cloud
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players you know are dominated amazon
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microsoft google but they are
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sort of making this big play towards um
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a hybrid cloud approach which might lean
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more towards mist as opposed to cloud
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and so they have a tremendous amount of
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free cash flow every year about 12
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billion dollars they've got businesses
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that
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are sort of old line businesses that
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they're trying to shudder
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and so if you do want to continue to
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play cloud but you don't want to play it
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at these excessive valuations you can
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buy a name like ibm
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for example that isn't trading at an
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enormous valuation that does generate a
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lot of free cash flow yield
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and is sort of trying to find a if you
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will a slightly different place for
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themselves to be the dominant player
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as the cloud continues to evolve um you
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know the
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uh other names that we like are consumer
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discretionary names you know we have
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a tilt that way in the portfolios and
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that's sort of
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uh the reopening trade if you will
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um you know i was out and about over the
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weekend you know i moved here from
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pennsylvania to new jersey on the
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weekends in the summer to go to the
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shore
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and you know anybody that's been out and
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about knows that you know that it
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it appears that people are just dying to
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get their lives back and dying to just
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get
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back to normal and so the stores are
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starting to get more crowded
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um you know there is a little bit of a
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problem perhaps as
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a headwind coming up with regard to
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ending the
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uh unemployment checks for the 16 or 17
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million people are still uh
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been displaced as a result of the the
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the
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covet 19 pandemic but
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um i think people have some money in
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their pockets and are going to start to
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spend it and then the last little theme
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we mentioned
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you know like the last time which we
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still like uh we own uh homebuilders
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like lennar and toll brothers and polti
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again you know there's a supply demand
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challenge there that
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um that is sort of tilting in the favor
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of the the home builders and maybe away
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from the consumer
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and and the consumer still has pricing
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power because i saw the 30-year mortgage
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rate the other day was still under 3
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so again good solid names not huge
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valuations lots of free cash flow
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high free cash flow yield and for the
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interim um
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you know i think we'd rather trade those
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names right now than
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uh focus at the top of the market in the
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big market cap names or those that have
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been the big winners during the stay at
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home part of this uh
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this phase of the pandemic so sean as we
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go through this uh
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period here where you know thankfully
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things feel pretty normal again and
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the drama has slowed down i see news
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stories about uh
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sports more often and celebrities and
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who's dating
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who right uh the coven stories are no
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longer
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on the headlines anymore and as we do
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get into the summer trading as we're
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talking here this morning
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volumes have been pretty low uh but uh
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does that mean necessarily that the bull
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case is going to be as
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powerful or intact without those big
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tech narratives from last year working
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is the impetus here on
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bears to make the case and pull the
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market down or is it
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on the bulls to say that hey we can
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still get big gains without tech because
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i imagine that's just
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a different market when i mean just our
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conversations over the past two years so
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i would probably say
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four out of five times shawna horizon he
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likes you know big tech and um
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this is a very different tone than i
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hear from you
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well you know it's probably neither you
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know you you can have a bowl case for
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part of your portfolio that's
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sort of down the market cap stack if you
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will and you can have some of the bigger
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tech names that have been you know
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dominant players in terms of driving the
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markets higher
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sort of settle down and so you could
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have a flat market but within that flat
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market you actually could have a great
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opportunity to make a lot of money
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but i think the last time we were here
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we were talking about cal z cowz it's up
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like 28 29
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year to date it's 100 stock portfolio it
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is overweight tech it is overweight
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uh healthcare it's overweight
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communication services and it's
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overweight uh the consumer
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but it trades at like 14 times earnings
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and and so
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that may be going forward uh where the
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money is made so you could you could be
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paying attention to the broad markets
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and looking at that for your bull market
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indicator
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or trying to find a mini bull market or
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a smaller bull market within
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those broad indexes um you know i still
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think there's
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a potential need for a little bit of
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caution
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um you know the thing i've noticed
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lately is that you know nobody has any i
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went to buy my son a pair of shoes the
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other day because it was his birthday
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they don't have them in stock in the
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store now i could get them online i
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guess and all of that other stuff
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um but even online it takes two weeks
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and so you're seeing some of the supply
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chain
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fragility if you will that's going on
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and and so
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you can't have a perfect reopening and
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the economy get back to where it was
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supposed to be
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uh with a supply chain that's still in
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turmoil and then
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you know the story i saw yesterday that
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you know i was you know it's cookout
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season for god's sakes and so you saw
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the story about the
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the big brazilian meat uh uh provider
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that uh that
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that got hacked and maybe you know
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paying some ransomware
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and so we're gonna have a disruption in
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the beef supply maybe for the next week
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or
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so and i think that's to you know cause
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a little bit of short-term inflation
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there
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um i buy the fed's narrative that
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inflation could be transitory because i
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think they look at the supply chain and
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say once things get back to normal
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um then we shouldn't we should see some
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of the short-term inflation
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subside but it's not so much the
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printing of the money part of the
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equation that's driving inflation as it
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is the
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the lack of goods that have been able to
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sort of make their way back through the
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supply chains and so
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i think between the end of the year
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you'll be a little cautious
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you know you if you've made a lot of
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money um you maybe you start to
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redeploy into some lower cost names or
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names that have you know more solid or
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high quality businesses that actually
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generate a lot of cash
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um you know in a in a rising interest
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rate rising
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inflationary environment you don't want
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to buy growth because you're paying for
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future earnings and they need to be
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discounted so
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i'd rather get current cash on my
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investments today if that's a worry
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okay and you want to buy the dip in home
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builders confirm before we go sean is
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that correct
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yeah i think you know i still think
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there's a lot of room ahead for the home
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builders i mean you know we have this uh
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you know this
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supply demand imbalance um i think
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they're going to continue to be winners
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in that
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right you know with interest rates as
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low as there unless we get mortgages to
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creep back up i still think that the the
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interest rate environment from a
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mortgage perspective
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continues to allow the average person to
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buy a whole lot more home than they
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would have been able to buy without
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mortgage rates where they are and that's
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good for home builders
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you
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