Investors look set to close out January with profit-taking on Big Tech after Microsoft, Google and AMD didn’t quite bedazzle, as a Fed decision awaits.
Where tech is concerned it’s been a matter of timing for the past couple of years. Our call of the day comes from Thomas Hayes, founder and chairman of long/short equity manager Great Hill Capital, who made some prescient stock calls in that period and has some “rocket ship” investing ideas to share.
After calling the pandemic bottom, Hayes was among a handful of investors who turned bullish on stocks in October 2022 and October 2023, both big market turning points. For example, in October 2022, he took long positions in Amazon and Alphabet when “you couldn’t give them away,” and says they have no plans to sell.
Speaking to MarketWatch on Tuesday, Hayes admitted to his less lucrative bets — biotechs and Alibaba
— tied to expectations for a faster recovery in China, but sees a turnabout coming.
“Now that the Fed is getting out of the way, I think it’s a rocket ship both in Alibaba and biotech,” he said.
Hayes, who blogs at Hedge Fund Tips, explains that there is money to be made in long-duration assets. “So those assets that were negatively impacted by high rates are going to start to outperform as we move into a great normalization period,” he said.
Biotech and real-estate investment trusts are areas to look at. As for the former, he says this year will be about “deals and drugs. So as capital becomes more available, as the Fed becomes more accommodative and risk appetite increases, you’re going to see a lot more yield,” he said. Big pharma has lots of cash, but little growth and innovation, and will need deals with undervalued biotech companies to make that happen, he adds.
Smaller companies are lagging a bit as they “have not yet started to behave in line with a rate normalization environment,” he notes.
What does he like? He owns Cooper-Standard
a global supplier of sealing and fluid handling systems and components for GM
Shares have climbed to $18 per share from $6 when he first started buying in May 2022.
“There is still pent-up demand, because there was limited supply due to the semiconductor shortage just a year and a half ago and before. As those volumes return closer to prepandemic levels, the operating leverage in some of these auto parts suppliers to the companies producing new cars will be phenomenal,” he said.
He also likes Canada Goose
“the Apple Store of luxury expensive jackets,” as it’s increasing margins and direct-to-consumer sales, and poised for a “good turnaround recovery story” looking out 24 to 36 months.
Hayes owns Comstock Resources
which sits in the “most hated” sector of natural gas. He sees it as a “turnaround play on global demand,” even though it’s currently a depressed asset.
As for the year ahead, he sees general stock indexes rising by “high single digits, low double digits [percentage], which would be in line with an average presidential election year average of 11.28% since 1928. So the bigger opportunities are going to be under the surface. And I think the Alpha opportunities are going to be found in small and mid caps and emerging markets plus China,” he says.
Daily Chart Report’s Patrick Dunuwila notes the financial sector ETF
closed at a two-year high on Tuesday, roughly 5% below all-time highs. “Financials have shown impressive leadership since the Oct. low. It has become the second-largest sector of the S&P 500, and it’s bullish to see that Tech isn’t the only area working,” he said.
These were the top-searched tickers on MarketWatch as of 6 a.m.:
|Advanced Micro Devices
The humans chasing robots on the loose at companies.
A monk on a comic roll. The very first British joke.
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