Latest / Bloomberg Intelligence / Investing In Space

Transcript

Investing In Space · 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. All right, let's talk space. Now,
0:22
Speaker 1: we're talking outer space. Just in the last month we've
0:25
Speaker 1: seen Sir Richard Branson and Jeff Bezos rocket into space,
0:29
Speaker 1: continuing the commercialization, if you will, of outer space. Let's
0:33
Speaker 1: get a sense of where we're going for John Wensby,
0:37
Speaker 1: executive director of the Allen b Levan NSU Broward Center
0:40
Speaker 1: of Innovation, joins is John, give us a sense here.
0:43
Speaker 1: You know, when I was a kid, it was all
0:44
Speaker 1: about the Apollo UH program and NASA, and you know
0:49
Speaker 1: the US government talk to us about is the future
0:52
Speaker 1: space innovation? Is it no longer NASA? Is it with
0:56
Speaker 1: billionaire entrepreneurs? Well, ga Marine, and thanks for having me.
1:01
Speaker 1: I'm actually glad that you mentioned UH the Apollo program
1:04
Speaker 1: because we recently recruited Buzz Aldrin's son Andrew Aldrins, the
1:08
Speaker 1: director of our new space program called Level five Space
1:11
Speaker 1: dook to support these entrepreneurial opportunities. But to really answer
1:15
Speaker 1: your question, there's never been a more opportune time for
1:18
Speaker 1: entrepreneurs to launch and scale companies in the space sector.
1:21
Speaker 1: And it's not the old government model of doing anything.
1:24
Speaker 1: It's really moving into the privatization and the commercialization of
1:27
Speaker 1: space through public private partnerships and more private sector um support.
1:32
Speaker 1: And the barriers of entry are coming down, and the
1:34
Speaker 1: technological advances that are creating expectations for the future are
1:38
Speaker 1: much more cost effective than they've ever been. They're still high,
1:41
Speaker 1: but they're certainly coming down, which really leads to increased
1:44
Speaker 1: private investment by investors who are ran new to the
1:47
Speaker 1: space sector. And the recess successes as you mentioned with
1:51
Speaker 1: SpaceX and Version Galactic and Blue Origin are really great examples.
1:56
Speaker 1: But the point is it's not just about it's not
1:58
Speaker 1: just about billionaires, right, because we talked to so many people,
2:01
Speaker 1: some of them young, you know gen z startup people
2:07
Speaker 1: who are getting into the space business because not everybody
2:10
Speaker 1: has to do the launch, right, there's so many other aspects. Yeah,
2:14
Speaker 1: you're absolutely correct, and the future of space isn't the
2:17
Speaker 1: big names and brands that you know, it's it's the
2:20
Speaker 1: people that are behind it. So you're these early stage
2:23
Speaker 1: entrepreneurs that are focused on technology development, whether it's the
2:27
Speaker 1: hardware side or the software side, there are two evolving worlds.
2:30
Speaker 1: And the hardware we often refer to as the vehicle
2:33
Speaker 1: uh and the satellites as an example that on the
2:36
Speaker 1: hardware side, it's all around data and how you use
2:39
Speaker 1: data in space for the betterment of Earth or for
2:41
Speaker 1: inner and outer space applications. And it's really provided opportunities
2:45
Speaker 1: for anybody no matter what your economic status is. If
2:48
Speaker 1: you've got a great idea that serving a need for
2:50
Speaker 1: now in the future, this is the time to be
2:53
Speaker 1: able to be focusing on that. Is there is there
2:57
Speaker 1: a profit angle here at all? John? I mean, you know,
3:00
Speaker 1: I look at Sir Richard Branson and Jeff Bezos and
3:03
Speaker 1: I'm not sure they're really focused on making money here
3:06
Speaker 1: given their status. Is there a belief that there is
3:09
Speaker 1: a profit model in the commercialization of space? Well, I
3:16
Speaker 1: think when you're associating these these big names that are
3:19
Speaker 1: they're internationally known, they're making headlines, and what they're doing
3:22
Speaker 1: is they're bringing more awareness to the opportunities associated with space,
3:26
Speaker 1: and I would say that profit is not the number
3:28
Speaker 1: one objective. It's about breaking down the barriers so that
3:31
Speaker 1: we can get to that next level. The future of
3:35
Speaker 1: the entrepreneur, though, is about the profit, and these start
3:39
Speaker 1: these small companies that are creating concepts and inventions that
3:43
Speaker 1: support the space sector, whether it's in the private or
3:45
Speaker 1: public sector. Their goal at the end of the day
3:48
Speaker 1: is to be able to make money and scale these businesses,
3:51
Speaker 1: and there's more infrastructure that's now available to be able
3:53
Speaker 1: to do that than there's ever been before. But it's
3:56
Speaker 1: the it's the names that we're not aware of that
3:58
Speaker 1: are going to be successful. Are the ones that are
4:01
Speaker 1: profiting as they support these bigger initiatives. And I think
4:03
Speaker 1: it's really important to focus on the big names like
4:06
Speaker 1: the Nassas of the world and the Branson's and the
4:08
Speaker 1: Bezos as examples. But what's happening is the space agencies
4:12
Speaker 1: around the world are moving more to the private sector
4:15
Speaker 1: in terms of support, where they're establishing very defined verticals
4:19
Speaker 1: of need and then you market those needs and you
4:21
Speaker 1: find the smaller entrepreneur that can cater to the development
4:24
Speaker 1: of the inventions and technologies for those needs, and then
4:27
Speaker 1: they're co funded. Um in many cases will be acquired
4:31
Speaker 1: with into those space agencies, but they're they're generating a
4:34
Speaker 1: profit at the end of the day. It's also I mean,
4:36
Speaker 1: there's so many other angles besides the launch. And I
4:40
Speaker 1: said it already, but I think it's important to point out. Look,
4:43
Speaker 1: Netflix is producing a documentary um where SpaceX is going
4:48
Speaker 1: to put four civilians into orbit and that's next month.
4:52
Speaker 1: I mean, it just blows my mind. I know that
4:55
Speaker 1: media is not your wheelhouse. I bring it up because
4:57
Speaker 1: it is Paul's wheelhouse. But what are the other business
5:00
Speaker 1: lines you think, John that are going to be profitable soon? Well,
5:06
Speaker 1: I think when you break it back down into the
5:08
Speaker 1: hardware and the software side, the hardware is a little
5:10
Speaker 1: bit more difficult. That's the space vehicles and the satellites
5:12
Speaker 1: that are previously mentioned. That's very difficult because of the
5:15
Speaker 1: high cost of putting that together. The profitable side of
5:18
Speaker 1: the business is the low hanging fruit, as I'm calling
5:20
Speaker 1: it is to software is the data. It's a it's
5:22
Speaker 1: a uniquely feasible space product, and if you know how
5:24
Speaker 1: to collect it and analyze it and integrate it, and
5:27
Speaker 1: then distribute that into different forms of technologies. That's truly
5:31
Speaker 1: the future, and that can be done anywhere in the world.
5:33
Speaker 1: It hasn't doesn't have to be in a in a
5:35
Speaker 1: space environment, if you will. And there are multiple industries
5:38
Speaker 1: that are currently creating things that may not even recognize
5:42
Speaker 1: that they're directly supporting space or have the potential to
5:44
Speaker 1: directly support space. But when you think about evolving themes
5:48
Speaker 1: and this in this emerging world in which we live
5:51
Speaker 1: around acceleration and disruption, it's things like cybersecurity or agriculture,
5:56
Speaker 1: marine industries, telecommunications, um manufacturing and dance manufacturing, even smart
6:01
Speaker 1: city development and design for the future, as well as
6:04
Speaker 1: the creation of new space services that don't even exist today.
6:07
Speaker 1: So we have to create a whole world that supports
6:08
Speaker 1: everything that happens up in inner in outer space. So
6:12
Speaker 1: there really isn't an industry that can't connect to space
6:14
Speaker 1: in a direct or indirect way. All right, John, great
6:18
Speaker 1: having you. Um. John Bensfeen is I think internationally known
6:23
Speaker 1: expert on air transport. He wrote Air Transportation and Management
6:27
Speaker 1: Perspective and Wheels Up Airline Business Plan Development, So he
6:31
Speaker 1: really knows, you know, not only how these businesses work,
6:33
Speaker 1: but how they can turn a profit. John, thanks very
6:36
Speaker 1: much for joining us. Let's get back to the markets
6:42
Speaker 1: right now, and specifically to Disney earnings coming out after
6:46
Speaker 1: the bell today. Kevin Near joins US Equity Research associated
6:49
Speaker 1: Bloomberg Intelligence. He is live, Are you live in the studio?
6:52
Speaker 1: All right? Cool? So you're with I mean the two
6:56
Speaker 1: guys at the company who probably know more about Disney
6:59
Speaker 1: than anyone else save possibly David Weston because I think
7:03
Speaker 1: he used to work work there, work there. Um, what
7:06
Speaker 1: do we expect? We've been talking a lot about the parks,
7:09
Speaker 1: but there's also a lot going on in their media business.
7:12
Speaker 1: And you know, you've got the TV, You've got the sports?
7:16
Speaker 1: What what what the highlights? Definitely definitely thank you so
7:19
Speaker 1: much again for having me. Uh so for us for
7:21
Speaker 1: Disney earnings, you know, we're looking at three key things.
7:24
Speaker 1: One is the update on this on the streaming subscriber story,
7:28
Speaker 1: obviously Disney Plus being sort of the most important product
7:31
Speaker 1: on that side, but Hulu ESPN Plus also important. Uh. Next,
7:34
Speaker 1: we're gonna be looking for an update on the box
7:36
Speaker 1: office on their distribution side. Uh. You know, Disney has
7:40
Speaker 1: been really holding their cards close to their chest as
7:42
Speaker 1: opposed to some of the other studios. UM. And then lastly,
7:46
Speaker 1: as you as you mentioned, we're gonna be looking for
7:47
Speaker 1: commentary on the theme parks business. We're expecting that this
7:51
Speaker 1: this past quarter fiscal three Q will be their first
7:54
Speaker 1: profit in that business since last year, since obviously the
7:57
Speaker 1: virus shut down that side of the business. UM. But
8:00
Speaker 1: that said, you know rising delta cases, there's something that
8:03
Speaker 1: we're looking at very closely. And uh, and we're gonna
8:05
Speaker 1: be looking for commentary on their on their bookings going forward.
8:08
Speaker 1: So what do we know on the theme park business
8:10
Speaker 1: because it's you know, it's a business that a lot
8:11
Speaker 1: of people overlook because they look at the streaming business
8:13
Speaker 1: and they look at ESPN. But the parks and resorts
8:16
Speaker 1: quarter after quarter A it's a big business and be
8:18
Speaker 1: it grows double digit earnings every quarter. But I'm really
8:21
Speaker 1: concerned about this delta variant an impact you could have
8:24
Speaker 1: in Florida, in California and their international things. Have they
8:27
Speaker 1: given any indication to how things maybe trending? Yeah, absolutely absolutely,
8:31
Speaker 1: So that's exactly what we're gonna be looking for. And uh,
8:33
Speaker 1: and again you bring up with great points. Um. You know,
8:36
Speaker 1: as far as the international side, there's still a little
8:38
Speaker 1: bit further behind than obviously on the domestic side. Uh,
8:41
Speaker 1: they just had to reinstate obviously wearing masks in in
8:45
Speaker 1: both those parks, Disney World and in Disneyland, Um, which
8:48
Speaker 1: you know again you know that's that's that's writing on
8:51
Speaker 1: the wall. I think consumers really see that. Um. There's
8:54
Speaker 1: been no mention on you know, you know, vaccine mandates
8:56
Speaker 1: as far as that. We think it's unlikely that they
8:58
Speaker 1: will mandate vats nations considering just how they're how their
9:03
Speaker 1: clientele really excuse you know, much younger. Obviously the children
9:06
Speaker 1: under twelve haven't been approved yet. Um. But that said,
9:10
Speaker 1: you're exactly to your point now, and you'd be turning
9:13
Speaker 1: away so many people, so many Americans are vaccine hesitant,
9:17
Speaker 1: I guess is the politically correct way to put it now,
9:19
Speaker 1: but exactly anti vaxers, and you don't want to lose
9:21
Speaker 1: those dollars, do you exactly exactly so that that remains
9:25
Speaker 1: a threat, you know, near term. It's it's just very
9:27
Speaker 1: unclear at this point how how delta is going to
9:30
Speaker 1: shake out. You know, we're still waiting on that f
9:32
Speaker 1: t f D a mandate for for the vaccine, which
9:34
Speaker 1: should theoretically change things. I guess either way, the streaming
9:37
Speaker 1: business is good. I just wonder how you differentiate because
9:39
Speaker 1: you you mentioned they've got Disney Plus, Hulu, ESPN, and
9:44
Speaker 1: there's so many other offerings out there with um Netflix
9:48
Speaker 1: and Apple TV, and I mean, so I'm subscribed to
9:51
Speaker 1: p g A, I'm subscribed to MLB, Like the bills
9:56
Speaker 1: are higher than my cable box used to cost, right
9:58
Speaker 1: right now, that's that's the It's exactly right. And just
10:01
Speaker 1: to contextualize this a little bit, what we've seen so far,
10:03
Speaker 1: you know, this past quarter was really a mixed bag
10:05
Speaker 1: on the streaming side. You know, this is domestic. International
10:08
Speaker 1: again is a different story. But uh, you know, Netflix
10:10
Speaker 1: posted really really some some weak result. They actually posted
10:13
Speaker 1: a loss domestically in the US and Canada. On the
10:16
Speaker 1: subscriber side, Stars which is a premium spot service owned
10:20
Speaker 1: by lions Gate, they saw a similar trend losing subscribers domestically,
10:25
Speaker 1: and that's really all all based on weaker content slates.
10:28
Speaker 1: And meanwhile, exactly to your point, some of those newer services,
10:31
Speaker 1: Paramount Plus, HBO, Max Discovery Plus, they're posting gains you know,
10:35
Speaker 1: at or above expectations. And you know, part of that
10:38
Speaker 1: is is price promotions. Part of that is higher marketing
10:40
Speaker 1: spence for those those newer services. UM. But what we're
10:44
Speaker 1: really seeing now is that you know, what we like
10:45
Speaker 1: to say is is the streaming wars have really started.
10:47
Speaker 1: You know, they've really started now. We've been talking about
10:49
Speaker 1: the streaming wars for a while, UM, but it's it's
10:52
Speaker 1: has gotten real just this pass quarter. And the expectation
10:55
Speaker 1: is that you know, Netflix, obviously they're the big dog,
10:57
Speaker 1: but Disney has established itself as a solid number two.
10:59
Speaker 1: So of to we'll take a look at those earnings
11:01
Speaker 1: coming out after the close tonight. Kevin Near joins his
11:04
Speaker 1: is equity research associate at Bloomberg Intelligence, joining us here
11:07
Speaker 1: in the Bloomberg Interactive Broker studio. He works with the
11:09
Speaker 1: great ether rung Onohan, who is also media analysts and
11:13
Speaker 1: she covered some of the tech stuff as well. So
11:15
Speaker 1: another generation men of equity research covering the media sector
11:19
Speaker 1: coming up for Bloomberg Intelligence. Kevin, you're joining us here.
11:24
Speaker 1: I want to get over to Greg Hahn. He is
11:28
Speaker 1: the chief investment officer at Winthrop Capital Management and I
11:32
Speaker 1: want to kick it off with an inflation question. Question,
11:34
Speaker 1: Greg Jarrett was just talking about the price of oil.
11:38
Speaker 1: We know the President wants the price at the pumps
11:40
Speaker 1: to come down, even if the I e A. Says
11:43
Speaker 1: demand is going to get crimped. Are you a believer
11:45
Speaker 1: in UH continuous inflation or is it transitory? So right now,
11:53
Speaker 1: the way that monetary policy is working is we actually
11:55
Speaker 1: think that it's transitory whatever we define. However we define transitory,
12:00
Speaker 1: UH inflation is going to be here a little bit
12:01
Speaker 1: longer than what FED would want us to think, just
12:04
Speaker 1: because of the supply chain dislocations and just corporate incentives
12:08
Speaker 1: to keep prices up. Um. But as long as excess
12:11
Speaker 1: reserves are parked down, the balance shoes the FED. And
12:14
Speaker 1: that's not they're not leaking into the financial system. That
12:17
Speaker 1: I think the Fed's got a good shot at controlling
12:19
Speaker 1: the rate of inflation. Hey, Greg, you know, I look
12:23
Speaker 1: at the ten year here trading at one point three,
12:26
Speaker 1: and I gotta just step back and say, you know,
12:29
Speaker 1: I've been an equity guy in my entire career in
12:31
Speaker 1: thank goodness, because I have no idea if I were
12:33
Speaker 1: a fixing co investor where I would go today. For
12:36
Speaker 1: any yield or return. What are these people doing all day?
12:40
Speaker 1: I mean, how do you generate return with the tenure
12:43
Speaker 1: at one? Right? So it's it's pretty much known that
12:47
Speaker 1: bond investors can suck the fun out of the room
12:50
Speaker 1: faster than anybody. So the bond the bond world right now,
12:54
Speaker 1: if you're investing in public, publicly traded bonds, it's a
12:57
Speaker 1: very very difficult environment UM and institutional side. In the
13:01
Speaker 1: private credit space, there are more opportunities to earn yield,
13:06
Speaker 1: but those are coming down. Those would include clos and
13:09
Speaker 1: commercial mortgage loans. But there are ways for individual investors
13:13
Speaker 1: to capture the c l O investment or the bank
13:16
Speaker 1: through UM some mutual funds and EPF so those obviously
13:20
Speaker 1: have a higher risk associated with them different liquidity issues.
13:22
Speaker 1: But that is the one of the answers to where
13:25
Speaker 1: do you get where do you get yield? And the
13:27
Speaker 1: other is leverage and the closed and fund provides that.
13:32
Speaker 1: I mean, the other answer that Howard Marks gave us
13:34
Speaker 1: is that it's just tough. You know, it's not It's
13:37
Speaker 1: not easy, he said, um people are happy with three hundred.
13:41
Speaker 1: He's happy with three hundred basis points on high yield debt.
13:45
Speaker 1: That's that's enough. Um too, he thinks cover the costs
13:49
Speaker 1: are the risk of a default. And I thought that
13:52
Speaker 1: was amazingly told Eric Shasker that, Um, he said, people
13:55
Speaker 1: that need seven percent? He doesn't know what to do.
13:57
Speaker 1: Of course, he's a distress guy. Um what about in stocks?
14:03
Speaker 1: Every time I think that we can't possibly run any
14:07
Speaker 1: higher than this and valuations look pretty full, Um, we do,
14:11
Speaker 1: and how much further can we go? So here's so.
14:16
Speaker 1: So the general rule of thumb in our world, this
14:19
Speaker 1: is the Winthrop world, is that as long as we
14:21
Speaker 1: have aggressive monetary policy and we have aggressive fiscal policy,
14:25
Speaker 1: which we have both right now. Um, there's a safety
14:28
Speaker 1: net on on asset prices. So um, that's can be
14:33
Speaker 1: a catalyst for stocks to go higher. We are very,
14:37
Speaker 1: very concerned about the market right now, and the reason
14:39
Speaker 1: is there's a there's kind of a crossroads that are
14:41
Speaker 1: taking place. The Fed um is going to start to
14:44
Speaker 1: remove its stimulus, which means that the interest rates naturally
14:48
Speaker 1: will drift higher. And then the question becomes, how will
14:52
Speaker 1: the stock market handle that at a time when the
14:55
Speaker 1: earnings comparisons, earning comps year over year are going to
14:59
Speaker 1: We're not going to have disfavorable earnings comp coming out
15:01
Speaker 1: of the pandemic. They're gonna We're gonna see earnings growth
15:04
Speaker 1: start too slow. So it's going to be a challenge
15:07
Speaker 1: for equity investors going forward. And Greg's interesting. Earlier this week,
15:11
Speaker 1: Tom Keen and I had on Doug Cass from Seabree's
15:14
Speaker 1: Partners Legendary Investors, and he's at with a note, I
15:17
Speaker 1: think on Tuesday, basic and entitled sell stocks now, basically
15:22
Speaker 1: taking some of the concerns that you just highlighted and
15:25
Speaker 1: said they're more than concerns. They're coming and that's not
15:28
Speaker 1: good for equity markets. But that is very much the
15:31
Speaker 1: contrarian view out here as far as I can tell.
15:36
Speaker 1: It's it's it is tough. I mean, we're ones to
15:38
Speaker 1: stay invested, We're not ones to try to time the market.
15:41
Speaker 1: But the the underlying theme here that the challenge that
15:44
Speaker 1: we have is that we we in our world, we
15:46
Speaker 1: recognize the structure of the capital markets has changed. And
15:50
Speaker 1: you sort of touched on it with this idea on
15:53
Speaker 1: the fixed income side is where do investors go? The
15:55
Speaker 1: consequence of these said policies has been that US savers
16:00
Speaker 1: people that are looking at retirement or in retirement, it's
16:03
Speaker 1: very difficult to earn a an income stream in retirement
16:07
Speaker 1: to support our lifestyle. We have to look at capital
16:09
Speaker 1: games to do that. So it's it's a challenge that um,
16:13
Speaker 1: you know, it's just it's just a challenge. Thank goodness.
16:16
Speaker 1: We have social security right well, yeah and that. But
16:20
Speaker 1: but just being sarcastic, I don't know, sometimes my sarcasm
16:23
Speaker 1: doesn't read on radio. Yeah, but I meant like it's
16:28
Speaker 1: not enough. Yeah. But in the in the equity markets,
16:31
Speaker 1: we're not ones that there are there are places to go.
16:34
Speaker 1: And I'm one of those that that is seriously a
16:37
Speaker 1: China because of what's happened there is there's one. We
16:40
Speaker 1: think there's just a tremendous buy an opportunity. It is
16:43
Speaker 1: not a place to run from. It's a place to
16:45
Speaker 1: really study and look into that. Their form of capitalism
16:48
Speaker 1: competing alongside Western capitalism, is going to be a survivor
16:53
Speaker 1: over the next ten years. And there's some cheap stocks there.
16:56
Speaker 1: But you look there just for do you look for
16:58
Speaker 1: a capital appreciation or do you for returns? Yeah, well
17:02
Speaker 1: that's its capital appreciation. The income stream is not not competitive, Yeah,
17:08
Speaker 1: it's it's a little scary. As Bloomberg had a story
17:11
Speaker 1: I think yesterday, just highlighting how many millions of people
17:16
Speaker 1: in America are going to be a turning sixty five
17:20
Speaker 1: and you know, if you retire at sixty five. My
17:22
Speaker 1: parents are retiring their seventy and they're still gonna live
17:26
Speaker 1: another twenty or thirty years, which I'm happy about. But
17:29
Speaker 1: it's expensive, and especially if you get hit with something
17:33
Speaker 1: like Alzheimer's or you know, it's it's a horrible thing
17:36
Speaker 1: to think about, but it's just so expensive healthcare. Springing
17:39
Speaker 1: in a professionals or putting them in a home. It's
17:42
Speaker 1: just you've got to be prepared, and I think a
17:45
Speaker 1: lot of people are a little underprepared. Greg. Great having
17:47
Speaker 1: you on the program, Greg Han, chief investment officer at
17:50
Speaker 1: Winthrop Capital Management. Ernesta Ramo's chief investment officer for the
17:58
Speaker 1: U S for bmo A Global Asset Management. He joins
18:01
Speaker 1: us on the phone from Chicago. Ernesta, we're basically through
18:04
Speaker 1: this second quarter earning period. You've got Disney after the
18:06
Speaker 1: Clothes tonight, but really really impressive earnings growth. Was that
18:11
Speaker 1: enough for those who feel like this market is expensive?
18:15
Speaker 1: And that's a reason to maybe be cautious. Well, there's
18:19
Speaker 1: certainly been incredible earnings growth, as you point out, Uh,
18:23
Speaker 1: it's clearly all in the price as we speak. And
18:26
Speaker 1: the question is what's the earnings growth going to be
18:30
Speaker 1: look looking like going forward? And that's a that's a
18:33
Speaker 1: clear that's a question that doesn't have a clear answer.
18:36
Speaker 1: The only thing that we think it's clear is that
18:39
Speaker 1: it's not going to be as strong as it has been,
18:42
Speaker 1: uh for the last old months. I mean the earnings
18:45
Speaker 1: over the last all months for the smp F. I
18:47
Speaker 1: found it up. I don't think any analysts out there
18:50
Speaker 1: has that kind of number for for the for the
18:54
Speaker 1: next told months. So we think the market is a
18:58
Speaker 1: bit richly valued in might need to take a breather here,
19:03
Speaker 1: and that's why we favor higher quality stocks are not
19:08
Speaker 1: very very abriginally value top what we call quality value stocks. Yeah,
19:13
Speaker 1: I'm looking at UM on the Bloomberg an esto. You
19:16
Speaker 1: can type an index and then gego, which allows you
19:20
Speaker 1: to graph a number of things. But I put up,
19:23
Speaker 1: for example, trailing PE. Right now, we're at seven on
19:26
Speaker 1: the smp We were at the beginning of the year,
19:30
Speaker 1: UM up around thirty three so the earnings have done
19:34
Speaker 1: a lot to bring that down. But if you look
19:37
Speaker 1: at um the forward PE estimates, we're trading around twenty
19:42
Speaker 1: two and we had been at the high at the
19:44
Speaker 1: end of last year up around twenty seven. What do
19:47
Speaker 1: you think fair value is well with the with the
19:51
Speaker 1: kind of monetary policy of the interest rates where they are.
19:55
Speaker 1: I think the market can handle to you know, but
20:00
Speaker 1: it's gonna need earning scurowth to to get further ahead.
20:05
Speaker 1: And right now, if you look at about the consensus,
20:09
Speaker 1: they're pricing in about or they're looking for twenty earnings
20:14
Speaker 1: to come in and about plus nine percent for one
20:17
Speaker 1: will come in. And so I think the market doesn't
20:21
Speaker 1: have a lot of room to go with nine percent
20:23
Speaker 1: earning s growth maybe a couple of percent higher from
20:26
Speaker 1: where it is now. So it's it's gonna be interesting
20:29
Speaker 1: to see what what gives. But specifically, what we're looking
20:32
Speaker 1: to do in our portfolis is tilt a little bit
20:35
Speaker 1: away from from growth to value because we see the cycle,
20:40
Speaker 1: the economic cycle is really recovering strongly uh and uh
20:45
Speaker 1: and and and and also tilt a little bit towards
20:49
Speaker 1: smaller caps, so smaller cap value over large cap growth.
20:53
Speaker 1: But we're not dramatically, just just a little bit, just
20:56
Speaker 1: so that you get a little bit more exposure to
20:58
Speaker 1: two sectors that are more uh tied to the economic cycle. Here,
21:03
Speaker 1: I tell you of the many reasons I like working
21:06
Speaker 1: with Matt Miller is his knowledge of Bloomark functionality is amazing.
21:10
Speaker 1: That function I did not know it and I've been
21:12
Speaker 1: here twelve years. Thank you for that, Sernesto. You know,
21:17
Speaker 1: what are some of the sectors that you guys are
21:19
Speaker 1: working on these days? I mean again, we just came
21:22
Speaker 1: through earnings. We've got some more information about how companies
21:24
Speaker 1: are thinking about their businesses going forward. Are there some
21:27
Speaker 1: sectors that you guys are doing some extra work on
21:30
Speaker 1: these days? Well, we really are more focused on the
21:33
Speaker 1: companies at the at the bottom, up the level, so
21:38
Speaker 1: companies that AutoZone, companies like Carl Ruf. The AutoZone is
21:43
Speaker 1: is you know, celebrate care type shop where people that
21:47
Speaker 1: want to fix their own cards go by parts and whatnot.
21:51
Speaker 1: H card Rufi, which is tied to the recovery in
21:55
Speaker 1: in the housing sector and people um fixing their house
22:00
Speaker 1: is up. And also it's also tried te a little
22:02
Speaker 1: bit infrastructure growth and and UH companies like like all State,
22:08
Speaker 1: which is an insurre not not too many people will
22:10
Speaker 1: come on shows and talk about insurance, but it's a
22:13
Speaker 1: company doing very well. And these are the one thing
22:16
Speaker 1: that characterizes them. For example, all State trades in like
22:19
Speaker 1: eight and a half times earnings, which is pretty pretty
22:24
Speaker 1: ridiculously cheap. But the thing that all of these companies
22:27
Speaker 1: have in common is that they don't trade at very
22:29
Speaker 1: expensive valuations. And and that's the one thing we're making
22:32
Speaker 1: sure in our portfolos, even in our growth portfolios, we're
22:35
Speaker 1: not overpaid for any one stock because at these levels
22:39
Speaker 1: of valuation, the biggest risk in the market right now
22:42
Speaker 1: is a valuation risk and that we have a correction
22:47
Speaker 1: just because the market is originally valued. What are the
22:53
Speaker 1: you think the best sectors where we can find how
22:57
Speaker 1: do you screen for value stocks? Industrials is one, Financials
23:03
Speaker 1: is another, UH, Materials is another. UM. You know, those
23:08
Speaker 1: are the traditional value sectors. UH, But but there's companies
23:13
Speaker 1: in in in UH the consumer discretion area for example
23:17
Speaker 1: of auto zone, which which I mentioned already, that that
23:20
Speaker 1: are that are attractively valued. So you really have to
23:24
Speaker 1: go sector by sector. Technology in general is going to
23:28
Speaker 1: be richly valued, but you're gonna find companies here and
23:31
Speaker 1: there that are doing very well and not trading at
23:34
Speaker 1: very high valuations. So it's really a question of focusing
23:38
Speaker 1: on the company themselves and their individual prospects run to
23:42
Speaker 1: make broad based sector or industry calls. It's just all
23:47
Speaker 1: about the companies, and our approach really measures the evaluation.
23:52
Speaker 1: Of course it is very important, but profitability, quality, growth
23:55
Speaker 1: of every company, as well as market sentiment, and we
23:59
Speaker 1: aggregate a bunch of metrics on all of these to
24:01
Speaker 1: come up with a with a shortlisted. Then we do
24:04
Speaker 1: a lot of fun the mode men. All right, Naste,
24:07
Speaker 1: thanks very much. Nasto Ramos from BMO. Thanks for listening
24:11
Speaker 1: to the Bloomberg Markets podcast. You can subscribe and listen
24:14
Speaker 1: to interviews at Apple Podcasts or whatever podcast platform you prefer.
24:19
Speaker 1: I'm Matt Miller. I'm on Twitter at Matt Miller three.
24:23
Speaker 1: Put on fall Sweeney I'm on Twitter at pt Sweeney.
24:26
Speaker 1: Before the podcast, you can always catch us worldwide at
24:29
Speaker 1: Bloomberg Radio.