Latest / Bloomberg Intelligence / Inflation, Health Tech, And Alcoa’s Strong Q4

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Inflation, Health Tech, And Alcoa’s Strong Q4 · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller. Every business day, we bring
• 0:06
  Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
• 0:11
  Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
• 0:15
  Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
• 0:18
  Speaker 1: at Bloomberg dot com slash podcast. You're kind of a
• 0:22
  Speaker 1: rough start to the year for markets here, and uh,
• 0:25
  Speaker 1: you know, it's been a while since these markets have
• 0:27
  Speaker 1: had to deal with a rising interest rate environment, and
• 0:31
  Speaker 1: people are concerned about, you know, how these risk assets
• 0:34
  Speaker 1: really perform here in that type of environment. Let's check
• 0:36
  Speaker 1: in with a professional who does this for a living,
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  Speaker 1: Jim Lowell. He's the c i O of Advisor Investments. Jim,
• 0:42
  Speaker 1: thanks so much for joining us here. I love to
• 0:44
  Speaker 1: get your thoughts, like, what are you telling your clients
• 0:49
  Speaker 1: as you know, you kind of start two and this
• 0:52
  Speaker 1: is gonna be a different environment than what most investors
• 0:54
  Speaker 1: have had to deal with for the last I don't
• 0:56
  Speaker 1: know decade plus. What do you say, Jim, Well, one
• 1:00
  Speaker 1: of the things we're saying is that any sort of
• 1:03
  Speaker 1: selling on short term rumors or news is welcomed by
• 1:06
  Speaker 1: us because of course, as long term investors, that means
• 1:09
  Speaker 1: we can add to our best ideas at this kount
• 1:11
  Speaker 1: of price is something that was pretty difficult to do
• 1:13
  Speaker 1: over the last year or two, not to mention over
• 1:16
  Speaker 1: the past decade where everything was going up like a
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  Speaker 1: hockey stick. In particular, of course six or seven stocks
• 1:22
  Speaker 1: inside of the SMP. We're also pointing out that inside
• 1:25
  Speaker 1: the SMP those six seven stocks that really drove its
• 1:28
  Speaker 1: performance mass the fact that's the vast majority of stocks
• 1:32
  Speaker 1: are either in correction or even crash level discounted pricing.
• 1:37
  Speaker 1: There's a lot of opportunity both we think on the
• 1:40
  Speaker 1: growth and the value side of offense. UH is you
• 1:43
  Speaker 1: are a discipline, patient, long term investor. For traders, I
• 1:48
  Speaker 1: think i'd be, I'd be exceptionally cautious, but we're not traders,
• 1:52
  Speaker 1: so we are relatively optimistic. Relatively optimistic, Jim. There's a
• 1:58
  Speaker 1: lot of talk about a d basis point rate hike
• 2:01
  Speaker 1: in March when you have the bond market really just
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  Speaker 1: posing in twenty seven basis points. But of course traders
• 2:07
  Speaker 1: in particular making the leap that that means perhaps to
• 2:10
  Speaker 1: rate hikes wrapped into one in as soon as March.
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  Speaker 1: Is that a line of thinking that you're taking seriously? Well,
• 2:19
  Speaker 1: we certainly look at all the opinions, both both respected
• 2:23
  Speaker 1: and simply the those that are broadcasts and red large
• 2:27
  Speaker 1: on the daily headlines. But we were patient, will will
• 2:30
  Speaker 1: let the data and the FEDS come to us. The
• 2:33
  Speaker 1: Fed clearly as broadcasts the fact that they are going
• 2:35
  Speaker 1: to be tapering fast there raising rates more, potentially raising
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  Speaker 1: rates at a higher eclip than is expected. Any consensus
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  Speaker 1: still expects the quarter point. I can first go around,
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  Speaker 1: not a not a half point, but whatever the said
• 2:49
  Speaker 1: in fact does. We think it's a little bit different
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  Speaker 1: this time around. They're not trying to fend off any
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  Speaker 1: sort of recessionary pressure. They're trying to tamp down inflation.
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  Speaker 1: And investors, if they us look at the headlines, would
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  Speaker 1: think that inflation was nothing but negative news for them.
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  Speaker 1: But of course it infences organic growth and no organic
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  Speaker 1: growth that the set is clearly concerned that things might
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  Speaker 1: get overheated. So that's an environment where we think investors
• 3:14
  Speaker 1: clearly can can take advantage of other people's fears. A
• 3:19
  Speaker 1: Jim Worth just kind of getting starting beginning earning season here,
• 3:24
  Speaker 1: what are you looking for in terms of earnings, I mean,
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  Speaker 1: how criticals of you to get some really strong earnings
• 3:30
  Speaker 1: here in terms of trying to think about that pe
• 3:33
  Speaker 1: ratio for this market. So we like to say that
• 3:36
  Speaker 1: earnings drive the markets because for the most part they do,
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  Speaker 1: although obviously subject to momentum driven headline and news. What
• 3:44
  Speaker 1: we're looking for this time clearly we're looking at the
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  Speaker 1: degree to which top bottom line sales were or were
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  Speaker 1: not impacted by the latest virus variant um, but we're
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  Speaker 1: also very focused on guidance. We want to know where
• 3:58
  Speaker 1: our best business leaders see their current state and also
• 4:02
  Speaker 1: where they think they're going to go from here in
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  Speaker 1: the next quarter or two. It still remains a very
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  Speaker 1: difficult environment in which to forecast from from virtually any
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  Speaker 1: business inside of any industry where one thinks one will
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  Speaker 1: be just a quarter or two ahead. But we're definitely
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  Speaker 1: looking at i would say guidance, not more so but
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  Speaker 1: equally as much as we're looking on how companies are
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  Speaker 1: being able to continue to manage in the pandemic slash
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  Speaker 1: endemic that we're in. So how do you hedge against it,
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  Speaker 1: I mean bets into do you just do it through
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  Speaker 1: the bond market. Do you through do it through Big Tex?
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  Speaker 1: Do you do it through commodities for example, oil, copper?
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  Speaker 1: How do you How do you protect yourself so you
• 4:43
  Speaker 1: can do it through all of those. But we're big
• 4:45
  Speaker 1: believers that bonds are great bulwarks, great bluffers for stock
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  Speaker 1: market volatility. Cash for outright defense but also for opportunity.
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  Speaker 1: We think cash will definitely play an attractive role and
• 4:57
  Speaker 1: investors portfolio this year for both of those reasons. Um
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  Speaker 1: we would we would probably be hesitant in terms of
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  Speaker 1: trying to go on the commodity side to hedge our
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  Speaker 1: our bets, mainly because the commodity side is purely dependent
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  Speaker 1: upon inflation lingering higher and longer than we think it
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  Speaker 1: may yet do. That said, we do have some tactical
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  Speaker 1: training portfolios that that are open to both commodities and
• 5:22
  Speaker 1: currencies as ways of hedging stock market volatility. Jim, I'm
• 5:26
  Speaker 1: willing to take on a little bit of extra risk here.
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  Speaker 1: Should I be looking at emerging markets? I think emerging
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  Speaker 1: markets established foreign markets, China, which is a market unto
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  Speaker 1: itself all present long term investors good opportunities here and now,
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  Speaker 1: even out of this difficult starting game for the US market.
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  Speaker 1: In two we've seen the EFA that the broad established
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  Speaker 1: foreign market measure UH even relatively greater strength than our own.
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  Speaker 1: We know there are opportunities, we know there are rubies
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  Speaker 1: in the rubble across the global global landscape, but you're
• 6:03
  Speaker 1: gonna have to be highly selective. We think finding good
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  Speaker 1: active managers with stellar track records in being able to
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  Speaker 1: turn over stones in the international market makes for for
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  Speaker 1: a good purchase idea here, you know, fascinating stuff. I
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  Speaker 1: love that you talked about emerging markets a little bit.
• 6:21
  Speaker 1: I want to bring it back to the equity market
• 6:23
  Speaker 1: because a lot of people, and I think I can
• 6:26
  Speaker 1: throw Paul Sweeney into this as well, is perhaps a
• 6:28
  Speaker 1: little bit more optimistic on the value trade. The idea
• 6:31
  Speaker 1: the airlines, cruise lines, hotels essentially are going to come back.
• 6:34
  Speaker 1: But we started that kind of thinking at the beginning
• 6:37
  Speaker 1: of and look how it turned out. What are your
• 6:40
  Speaker 1: thoughts on that? Well, my thoughts are that Omicron is
• 6:45
  Speaker 1: not going to be the last variant, and that we
• 6:47
  Speaker 1: are going to have to continue to be able to
• 6:49
  Speaker 1: battle the headwinds of a virus that's clearly capable of
• 6:53
  Speaker 1: awarding our our best efforts and hopes uh, in terms
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  Speaker 1: of being more disruptive for a longer period of time
• 7:00
  Speaker 1: than I think anyone priced in last year. We don't
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  Speaker 1: think that that changes this year. Rather than be beholden
• 7:07
  Speaker 1: to sectors that obviously would have a firelit under them
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  Speaker 1: if we could finally turn the pandemics corner, we like
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  Speaker 1: to invest in managers who have good track records being
• 7:16
  Speaker 1: able to find decent value in growth stocks and growth
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  Speaker 1: in value stocks across across the spectrum. So we don't
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  Speaker 1: think this is a time to be either style specific
• 7:29
  Speaker 1: or to try and that uh, you know, even quarter
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  Speaker 1: of the ranch on one major value oriented theme. But
• 7:38
  Speaker 1: that's we have begun to increase the waiting within our
• 7:42
  Speaker 1: overall portfolios on the value side of the ledger. We
• 7:45
  Speaker 1: definitely think there's some opportunity there. Jim, Before we let
• 7:48
  Speaker 1: you go, i'd love to just get your number one
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  Speaker 1: message you're going to your clients with today, because there's
• 7:54
  Speaker 1: so many cross currents out there in the market. So
• 8:00
  Speaker 1: my number one messages don't let short term selling trump
• 8:03
  Speaker 1: long term views. The reality is that what happens today
• 8:07
  Speaker 1: is going to matter infinite, desimally less. But you think
• 8:10
  Speaker 1: it will three five, ten years down the road, what
• 8:13
  Speaker 1: will matter most is sticking to your discipline, hopefully being
• 8:16
  Speaker 1: diversified so that you can smooth out the volatility. Come
• 8:20
  Speaker 1: what may, there will always be volatility, and achieve the
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  Speaker 1: goals you hope to achieve while still being able to
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  Speaker 1: sleep well at night. All right, Jim, thank you so much.
• 8:29
  Speaker 1: We appreciate that. Jim Lowell, Chief investment Officer for Advisor
• 8:33
  Speaker 1: Investments are based up in Newton, Massachusetts. A lot of
• 8:37
  Speaker 1: smart folks up there in the Boston Greater Boston area. Okay, folks.
• 8:45
  Speaker 1: The Aluminium Company of America otherwise known as ALCOA, they
• 8:51
  Speaker 1: are based in Pittsburgh, one of the great American companies.
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  Speaker 1: Stock reported better than expected results today, Stocks up two today,
• 9:00
  Speaker 1: A up a hundred and sixty seven percent Aluminium? Who
• 9:04
  Speaker 1: would have thunk it up a hundred sixty seven percent
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  Speaker 1: over the trailing twelve months. Our next guest gets a
• 9:09
  Speaker 1: b A in Industrial Engineering and Operations research from Virginia Tech.
• 9:13
  Speaker 1: Who does that? And then get some masters at Carnegie
• 9:15
  Speaker 1: mill and so I'm thinking this person likes numbers. Bill Applinger,
• 9:19
  Speaker 1: he's a CFO and executive vice president for ALCOHOLA Hey, Bill,
• 9:22
  Speaker 1: Thanks so much for joining us. I know you're you're
• 9:24
  Speaker 1: busy these days with your earnings. Here just give us
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  Speaker 1: a snapshot of what you guys reported with your quarterly
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  Speaker 1: earnings and then more importantly with your guidance. Hey, Paul, thanks,
• 9:35
  Speaker 1: thanks for that great introduction, and thanks for having me on.
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  Speaker 1: We had a strong fourth quarter recorded close to a
• 9:43
  Speaker 1: billion dollars of adjusted but UH adjusted net earnings were
• 9:48
  Speaker 1: two dollars and fifty cents of share. We provided guidance
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  Speaker 1: UH for the first quarter that said it would be
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  Speaker 1: as strong as as the fourth quarter. UH. We're seeing
• 9:58
  Speaker 1: some very good under the ying market fundamentals in our
• 10:02
  Speaker 1: in our industry, riding the benefits of some higher prices.
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  Speaker 1: But over the last five years we've really spent a
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  Speaker 1: lot of time trying to transform the company into the
• 10:11
  Speaker 1: company that has become This year and UH one, the
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  Speaker 1: fourth quarter really capped off a very strong one that
• 10:19
  Speaker 1: was transformative for the company. Talk to us a little
• 10:24
  Speaker 1: bit about how you're pricing in simply some of these
• 10:28
  Speaker 1: kind of new supplies that may or may not come.
• 10:31
  Speaker 1: In December, you halted, and I say you'll CoA halted
• 10:34
  Speaker 1: their primary aluminum production at its plant in Spain. You're
• 10:37
  Speaker 1: also dealing with cut output from of course you're the
• 10:39
  Speaker 1: rest of Europe and China. On top of that, you're
• 10:42
  Speaker 1: dealing with potential conflict between Russia and Ukraine. How are
• 10:46
  Speaker 1: you crunching the numbers on that pretty h WE We
• 10:50
  Speaker 1: have seen UH some supply constraints that have come about
• 10:55
  Speaker 1: in in Europe. As you alluded to, with the higher
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  Speaker 1: energy prices in Europe. UH we in Spain had to
• 11:03
  Speaker 1: purtail the facility that we have there a little over
• 11:06
  Speaker 1: two d thousand metric tons. We have seen significant reductions
• 11:11
  Speaker 1: and capacity, and some of our competitors also in Europe.
• 11:15
  Speaker 1: UM combine that with some of the overall structural changes
• 11:19
  Speaker 1: that we see in China UH in that they are
• 11:22
  Speaker 1: capping their their UH their their output to a forty
• 11:26
  Speaker 1: five million metric ton capacity cap really combined with some
• 11:32
  Speaker 1: of the stronger market dynamics that we're seeing on the
• 11:35
  Speaker 1: demand side, has UH has it led to some of
• 11:37
  Speaker 1: the higher aluminum prices UH that that we're UH that
• 11:41
  Speaker 1: we're seeing today. As far as the Ukrainian situation goes, UH,
• 11:46
  Speaker 1: the impacts of that are yet to be determined. However,
• 11:50
  Speaker 1: if it does have any impact as far as higher
• 11:53
  Speaker 1: energy costs in Europe, that would put further pressure on
• 11:57
  Speaker 1: some of the supply side uh in in Europe, and uh,
• 12:01
  Speaker 1: aluminum is largely you know, very energy intensive and therefore, uh,
• 12:08
  Speaker 1: you know, increased energy costs would put upward pressure on
• 12:11
  Speaker 1: on aluminium crisis. So it remains to be term be
• 12:14
  Speaker 1: determined based on what the response from other countries will be.
• 12:19
  Speaker 1: Bill you mentioned, Uh, you know, aluminium is energy intensive.
• 12:23
  Speaker 1: How do you think about your carbon footprint you as
• 12:26
  Speaker 1: a company, as an industry you know, I'm sure you're
• 12:29
  Speaker 1: getting some question slash pressure from investors and other stakeholders
• 12:34
  Speaker 1: about the kind of the whole E s G aspect
• 12:36
  Speaker 1: of your business. How do you guys think about that? Oh,
• 12:39
  Speaker 1: we think a lot about it, Paul, and the industry
• 12:42
  Speaker 1: itself is decarbonizing, uh, and we think we will lead
• 12:46
  Speaker 1: the way. We along with our joint venture partner Rio Tinto,
• 12:50
  Speaker 1: have launched the technology called Elisis, which is zero carbon smelting.
• 12:55
  Speaker 1: So it is a revolutionary process that takes the carbon
• 12:58
  Speaker 1: emissions out of the smelting process. And UH we will
• 13:03
  Speaker 1: be uh coming out with a commercialized package for that,
• 13:07
  Speaker 1: or I should say Ellisish the joint venture will be
• 13:09
  Speaker 1: coming out with a commercialized package for that in four
• 13:13
  Speaker 1: and that will lead the industry in low carbon technology
• 13:17
  Speaker 1: for UH for for aluminum smelting. I'm just looking at
• 13:22
  Speaker 1: your forward guidance here. A lot of this is based
• 13:24
  Speaker 1: on just stronger aluminium demand. This persistent supply constraints. Any
• 13:28
  Speaker 1: concerns around meeting some of that capacity, that's a course
• 13:32
  Speaker 1: been a concern we talked for the oil market, for example,
• 13:34
  Speaker 1: can you apply the same to aluminum? So on on.
• 13:39
  Speaker 1: On the capacity side, um we we have seen very
• 13:43
  Speaker 1: strong UH demand growth UH in one across all of
• 13:48
  Speaker 1: our end markets. We're projecting that that will continue in
• 13:52
  Speaker 1: two UH and we will have demand growth in in
• 13:58
  Speaker 1: in the aluminum demand space. UM so we will be
• 14:02
  Speaker 1: able to meet some of that by some of the
• 14:04
  Speaker 1: restarts that we are currently having in uh IN. Down
• 14:08
  Speaker 1: in Brazil, we've announced capacity that will be coming online
• 14:12
  Speaker 1: UH later this year in one of our Brazilian operations
• 14:15
  Speaker 1: called Alumar. We are also restarting a small amount of
• 14:19
  Speaker 1: capacity in Australia. UH so we will be able to
• 14:22
  Speaker 1: meet some of that higher demand. In essence, though across
• 14:26
  Speaker 1: the industry, we are seeing a deficit of of metal
• 14:30
  Speaker 1: going into two about another million and a half metric
• 14:34
  Speaker 1: tons of deficits. So that should burn off some of
• 14:39
  Speaker 1: the inventories that we see across the industry. Hey Bill,
• 14:43
  Speaker 1: When we have members of the corporate C suite on,
• 14:46
  Speaker 1: we love to just get a sense of yeah, maybe
• 14:49
  Speaker 1: how their businesses has been impact by this pandemic. I
• 14:51
  Speaker 1: think so we think about al COHA, this is you know,
• 14:54
  Speaker 1: iconic aluminum manufacturing industrial America type company. How is it
• 15:00
  Speaker 1: some of the ways that your company, your business, your
• 15:02
  Speaker 1: day to day has been impacted by the pandemic. Well,
• 15:06
  Speaker 1: when when the pandemic first hit back in February, in
• 15:09
  Speaker 1: March of we we took action to make sure that
• 15:12
  Speaker 1: we would be able to keep our operations running. It
• 15:14
  Speaker 1: has not been easy, especially with the with the latest
• 15:17
  Speaker 1: omicron variant UH spreading so rapidly. However, we've not we've
• 15:23
  Speaker 1: we've largely not been impacted from an operations perspective. We've
• 15:26
  Speaker 1: been able to keep the plants going. We reacted quickly,
• 15:30
  Speaker 1: we added shifts, we we did everything we needed to do.
• 15:33
  Speaker 1: So a real testament to the folks that are that
• 15:35
  Speaker 1: are running our plants that we've been able to keep
• 15:37
  Speaker 1: that going the rest of the rest of the organization,
• 15:41
  Speaker 1: probably very similar to a lot of the companies that
• 15:44
  Speaker 1: you talked to. We've gone to a flexible work policy, uh,
• 15:48
  Speaker 1: you know, to to to the credit of many of
• 15:50
  Speaker 1: the people at work at Alcoa, we've been able to
• 15:54
  Speaker 1: release earnings as quickly as we do even though we've
• 15:57
  Speaker 1: been remote. We've done a numerous spawn train actions, we've
• 16:00
  Speaker 1: done a lot of corporate activity, announced our first dividend
• 16:04
  Speaker 1: in the fourth quarter, and largely uh, much of the
• 16:07
  Speaker 1: staff continues to work remotely. And so how about the
• 16:11
  Speaker 1: on the labor front? Bill, just quickly thirty seconds? Are
• 16:14
  Speaker 1: you okay on the labor front, because we here a
• 16:15
  Speaker 1: lot of companies are not the labor front of tell
• 16:20
  Speaker 1: you honestly, Paul, the labor front has been difficult, especially
• 16:24
  Speaker 1: in certain parts of the world. We've been able to
• 16:27
  Speaker 1: work through it. We we do that by making sure
• 16:30
  Speaker 1: that our compensation packages are fair and competitive. But I
• 16:36
  Speaker 1: really believe that the long term vision of the company
• 16:40
  Speaker 1: is one that appeals to people and uh, and we've
• 16:43
  Speaker 1: been able to manage through some of the difficult labor environments. Hey, Bill,
• 16:47
  Speaker 1: thanks so much for joining us. We really appreciate getting
• 16:49
  Speaker 1: some of your time. Bill Opplinger, CFO and executive vice
• 16:52
  Speaker 1: president for Alcoa UH company just reported some pretty strong
• 16:56
  Speaker 1: numbers of stock has performed very well over the trailing
• 16:59
  Speaker 1: twelve You know, I think I'm probably like a lot
• 17:06
  Speaker 1: of investors that during this pandemic, I've spent more time
• 17:09
  Speaker 1: thinking about healthcare investing, you know, big farmer, biotech, healthcare services, UM.
• 17:17
  Speaker 1: Because you think about how well these farma and biotech
• 17:21
  Speaker 1: companies did in terms of delivering a vaccine to the
• 17:24
  Speaker 1: world in such incredibly short time. UH, it really makes
• 17:28
  Speaker 1: you rethink kind of your views of healthcare, and our
• 17:31
  Speaker 1: next guest certainly spends a lot of time thinking about
• 17:33
  Speaker 1: investing in healthcare. That's Nina dec A, senior research analysts
• 17:36
  Speaker 1: at Robo Global. Nina, thanks so much for joining us here.
• 17:40
  Speaker 1: I wonder where you guys are thinking about maybe where
• 17:45
  Speaker 1: some of the best opportunities are in healthcare right now. Sure, so, UM,
• 17:51
  Speaker 1: as you mentioned, there's just been a lot of really
• 17:54
  Speaker 1: interesting and impressive UM demonstrations of technology and innovation over
• 17:58
  Speaker 1: the last couple of years. With the endemic, rapid adoption
• 18:01
  Speaker 1: of telehealth, for example, UM, we've seen a lot of
• 18:05
  Speaker 1: companies rise about what we're not hearing. Oh and you
• 18:08
  Speaker 1: mentioned the vaccines. Of course, the rapid um UH research
• 18:12
  Speaker 1: and development and bringing vaccines to market. Now, as we
• 18:15
  Speaker 1: look forward, we've got the next public health crisis, which
• 18:18
  Speaker 1: is UH staffing shortages, and that is driving a very
• 18:22
  Speaker 1: compelling needs for automation AI, UH data integration technology, robotic solutions.
• 18:28
  Speaker 1: So when we look forward on UH. In fact, we
• 18:31
  Speaker 1: have a Healthcare Innovation e t S the tickers H
• 18:34
  Speaker 1: Tech ht e C. It's comprised of about eighty five companies,
• 18:38
  Speaker 1: half of which are small MidCap names that a lot
• 18:40
  Speaker 1: of people have never heard of. However they're they're driving
• 18:43
  Speaker 1: fast growth. One of which is called both Sarah. This
• 18:45
  Speaker 1: is a company that helps to integrate all the different
• 18:48
  Speaker 1: medical devices within a hospital and smooth and make the
• 18:51
  Speaker 1: nurses workload a lot more efficient. We need this type
• 18:55
  Speaker 1: of technology as we move forward to deal with the
• 18:57
  Speaker 1: fact that UH, the the US healthcare system alone has
• 19:00
  Speaker 1: lost over a half million healthcare workers since February UH
• 19:05
  Speaker 1: And then a Striker just announced that they're going to
• 19:08
  Speaker 1: acquire both Era. This goes to show that there is
• 19:10
  Speaker 1: demand for these these integration capabilities helped here just got
• 19:14
  Speaker 1: digitized in the last ten years, and so we're going
• 19:17
  Speaker 1: to see a lot of investment dollars going towards digitization
• 19:21
  Speaker 1: and integration moving forward. You know, that is fascinating to me.
• 19:24
  Speaker 1: The combination of biotech and AI sounds like something from
• 19:30
  Speaker 1: perhaps Paul, I mean, Paul and I talk about just
• 19:33
  Speaker 1: the kind of very binary response when it comes to
• 19:35
  Speaker 1: some of these biotech stocks and getting FDA approvals or
• 19:38
  Speaker 1: clinical trial developments or everything. How do you price something
• 19:41
  Speaker 1: like that? How do you looking at this the monster
• 19:44
  Speaker 1: gains that Paul was mentioning in the biotech space. How
• 19:47
  Speaker 1: do you decide if you want to really enter the
• 19:49
  Speaker 1: sector at a time when this is of course very
• 19:52
  Speaker 1: front and center. Well, interestingly, you mentioned a great entry
• 19:57
  Speaker 1: point would be now, uh, if you get the h
• 20:00
  Speaker 1: tech portfolio, it's trading at around five and a half
• 20:03
  Speaker 1: times next year's sales. Um that that valuation is just
• 20:07
  Speaker 1: not sustainable for these high growth technology forward disruptive companies,
• 20:12
  Speaker 1: um with with very most of which have very strong
• 20:15
  Speaker 1: balance sheets. To two thirds of the portfolio is net
• 20:18
  Speaker 1: cash positive. So or I should say it so um
• 20:22
  Speaker 1: So as you look forward right now, these stocks have
• 20:26
  Speaker 1: all really come in due to concerns about rising interest
• 20:30
  Speaker 1: rates inflation. UM tech stocks kind of took a back
• 20:33
  Speaker 1: seat last year because people are concerned about companies that
• 20:36
  Speaker 1: aren't profitable yet or don't have cash positivity yet. But
• 20:40
  Speaker 1: when you look at healthcare innovation, we are only in
• 20:44
  Speaker 1: the earliest days. We have just seen one type of
• 20:47
  Speaker 1: mr and A therapy come to market, and that is
• 20:49
  Speaker 1: the vaccine for coronavirus. There are over twenty other uh
• 20:55
  Speaker 1: mRNA therapies that that the company of Maderna had in
• 21:00
  Speaker 1: its pipeline and all it took for is one to
• 21:03
  Speaker 1: come to market for the rest of these to all
• 21:05
  Speaker 1: UH see some some further UM tail winds for that industry.
• 21:09
  Speaker 1: And that's just one area. UM. We're going to see
• 21:12
  Speaker 1: more adoption of telehealth. We're gonna see early cancer detection.
• 21:16
  Speaker 1: There's been over ten billion dollars worth of M and
• 21:19
  Speaker 1: A going towards companies who are looking to acquire new
• 21:22
  Speaker 1: technology to help detect cancer earlier, and estimated hundred thousand
• 21:27
  Speaker 1: lives can be saved each year if cancer is the
• 21:29
  Speaker 1: text center. The technology exists and now it's a matter
• 21:33
  Speaker 1: of adoption. This is a huge multi billion dollar market opportunity.
• 21:37
  Speaker 1: There's a long runway for growth here and this is
• 21:39
  Speaker 1: a great entry point you we gotta get you back.
• 21:42
  Speaker 1: There's a ton more to talk about when you're talking
• 21:45
  Speaker 1: healthcare investing in healthcare, and again, I think a lot
• 21:47
  Speaker 1: of folks probably have a greater appreciation for some of
• 21:50
  Speaker 1: the opportunities in the healthcare investing space. Nina Decca, senior
• 21:54
  Speaker 1: research analysts for Robo Global uh former cell Side analysts
• 21:58
  Speaker 1: Piper Sandler. Piper Sandlers all always had really good healthcare
• 22:02
  Speaker 1: research and they've trained a lot of good analysts there.
• 22:09
  Speaker 1: Today's Bloomberg Markets brought to you by Commonwealth, supporting more
• 22:13
  Speaker 1: than two thousand independent financial advisors with the solutions they
• 22:16
  Speaker 1: need to grow a thriving business. Commonwealth Go where you grow.
• 22:20
  Speaker 1: Visit Commonwealth dot com to learn more. Well. I think
• 22:24
  Speaker 1: the first lesson I learned on Wall Street way back
• 22:27
  Speaker 1: in six from Johnny Coglan, the head of the block
• 22:30
  Speaker 1: trading desk at pain Weber, and probably the most valuable
• 22:32
  Speaker 1: lesson is don't fight the Fed. So now I've got
• 22:35
  Speaker 1: to fed raising interest rates. This year they kind of
• 22:38
  Speaker 1: indicated three. Now the market was telling me four, maybe
• 22:42
  Speaker 1: as many as five What is a trader to do?
• 22:46
  Speaker 1: What is an investor to do? David Coudla, founder CEO
• 22:49
  Speaker 1: and c I O of Mainstay Capital Management, hopefully has
• 22:52
  Speaker 1: some answers for us. David, how are you thinking about
• 22:54
  Speaker 1: your Federal reserve in Hi? Paul? Yeah, it's been I
• 23:01
  Speaker 1: think more fun and meaningful to watch this or listen
• 23:04
  Speaker 1: to this bidding war that seems to have been going
• 23:07
  Speaker 1: on the last week as to who can call for
• 23:11
  Speaker 1: more rate hikes or a higher basis point rate hike.
• 23:15
  Speaker 1: We you know, we had Jamie Diamond last week at
• 23:18
  Speaker 1: this time talking about six or seven rate hikes this year.
• 23:23
  Speaker 1: Bill Ackman one up and with fifty basis points at
• 23:27
  Speaker 1: the first March hike, and then JP Mortgage Global ce
• 23:31
  Speaker 1: IO Fixed Income earlier this week on Bloomberg talked about
• 23:34
  Speaker 1: eight rate hikes in and so I think, you know,
• 23:40
  Speaker 1: investors need to take that for what it's worth. Uh.
• 23:43
  Speaker 1: These are smart people that have good ideas. But you know,
• 23:46
  Speaker 1: we think that the market has priced in somewhere around
• 23:49
  Speaker 1: four rate hikes right now, and we expect and there
• 23:52
  Speaker 1: could be another pivot by the Fed as we get
• 23:56
  Speaker 1: towards that March meeting. We have CPI coming out just
• 23:59
  Speaker 1: six days before it and talk to me a little
• 24:03
  Speaker 1: bit about just I mean, we've talked about the amount
• 24:06
  Speaker 1: of rate hikes and of course the markets pricing, and
• 24:08
  Speaker 1: there's also been the thought that what if every meeting
• 24:11
  Speaker 1: just comes with the rate high. It's kind of a
• 24:13
  Speaker 1: two and one if you will, Uh, at what point
• 24:16
  Speaker 1: do you start to see the bond market, the equity market,
• 24:19
  Speaker 1: or even the underly economy having averse reaction to that?
• 24:25
  Speaker 1: You know, it's interesting when we look back historically, Uh,
• 24:28
  Speaker 1: there's a lot of anxiety leading up to that first
• 24:30
  Speaker 1: rate hike. We're seeing that right now. Uh, and we're
• 24:34
  Speaker 1: seeing a lot of that almost seems like a near
• 24:36
  Speaker 1: panic these last few weeks with the ten year, two
• 24:39
  Speaker 1: year getting bit up really across the whole short and
• 24:43
  Speaker 1: intermediate term portion of the of the yield curve. But
• 24:48
  Speaker 1: as rate hikes start, uh, we sometimes will see, you know,
• 24:52
  Speaker 1: the markets settled down a little bit, the equities tend
• 24:54
  Speaker 1: to do okay. It's it's probably going to be a
• 24:57
  Speaker 1: more important about, you know, where investors are looking to
• 25:01
  Speaker 1: have their exposure and what they're gonna do about volatility
• 25:05
  Speaker 1: in because we expected to be quite a bit higher
• 25:08
  Speaker 1: than what we've experienced really the last twenty two months
• 25:12
  Speaker 1: since since the pandemic started, we've had very little volatility.
• 25:17
  Speaker 1: We've just now broken a record for a pullback for
• 25:20
  Speaker 1: the S and p fived through yesterday. So, you know,
• 25:25
  Speaker 1: I think it's important for investors that they look at
• 25:28
  Speaker 1: with the FED, not as as Paul kicked off the
• 25:31
  Speaker 1: segment with don't fight the Fed. So when the FED
• 25:35
  Speaker 1: has been easing these long duration stocks, tech stocks, even
• 25:38
  Speaker 1: you know, the gross stocks that are nonprofitable that were
• 25:41
  Speaker 1: highly leveraged very well because of so much money slashing around,
• 25:44
  Speaker 1: that liquidity is now going to be drying up. And
• 25:47
  Speaker 1: so we think that points is to the high quality
• 25:51
  Speaker 1: names with good free cash flow, profitable, good balance sheets. Uh.
• 25:58
  Speaker 1: And that's in either growth or value. We think it's
• 26:00
  Speaker 1: important that if if investors haven't done it yet, that
• 26:02
  Speaker 1: they're bringing more value into their portfolio, because this will
• 26:06
  Speaker 1: be a year for value. Um. But most importantly is
• 26:10
  Speaker 1: companies that uh, not necessarily an exercise bike with an iPad,
• 26:14
  Speaker 1: but companies that are are highly profitable, high free cash flow,
• 26:20
  Speaker 1: very strong balance sheets. I like my exercise bike with
• 26:23
  Speaker 1: an iPad. I think I must might even have like
• 26:25
  Speaker 1: a hundred thirty rides or something. How about Paul's a
• 26:28
  Speaker 1: peloton man, Jen Sherman fan something. Nothing. I don't and
• 26:34
  Speaker 1: I don't mean that against the product, not at all.
• 26:38
  Speaker 1: Just just you know, there's a lot of other examples
• 26:40
  Speaker 1: out there of of stock that did so well during
• 26:43
  Speaker 1: the pandemic or during you know, this period of AD
• 26:46
  Speaker 1: twenty billion dollars of stimulus to the too. You know,
• 26:50
  Speaker 1: the let's face it into in the financial system that
• 26:53
  Speaker 1: finds its way to stocks, and and that's let those
• 26:56
  Speaker 1: stocks continue get bit up and we're seeing the we're
• 26:59
  Speaker 1: seeing the air come out of those Now we've all
• 27:01
  Speaker 1: heard the statistic of you know, of the of the
• 27:05
  Speaker 1: stocks in the NaSTA Accora down more than um It's
• 27:09
  Speaker 1: it's been it's been a blood letting. Ye absolutely all right, David,
• 27:13
  Speaker 1: thank you so much for joining us once again. We
• 27:15
  Speaker 1: always appreciate getting your perspective. I think of all our guests,
• 27:18
  Speaker 1: critic dame, it's got the strongest social media game. I mean,
• 27:22
  Speaker 1: yet it'll be all over to fulfill you on Twitter.
• 27:24
  Speaker 1: You do absolutely you need to followed. David Coodley is
• 27:26
  Speaker 1: the founder, CEO and c I of main Stay Capital Management,
• 27:29
  Speaker 1: He also is a founder and sponsor of Engage. That's
• 27:32
  Speaker 1: the world's largest student stock pitch competition conference. It's hosted
• 27:37
  Speaker 1: at the University of Michigan. It's are really a great
• 27:40
  Speaker 1: event getting some young folks to really think about investing
• 27:44
  Speaker 1: in the stock market. And David's been a founder and sponsor.
• 27:47
  Speaker 1: That's that's really cool too. Thanks for listening to the
• 27:51
  Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews
• 27:55
  Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm
• 27:59
  Speaker 1: a Miller. I'm on Twitter at Matt Miller venty three
• 28:04
  Speaker 1: and on Faull Sweeney I'm on Twitter at pt Sweeney.
• 28:06
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 28:09
  Speaker 1: Bloomberg Radio.