We have big tech earnings on the way from Microsoft and Alphabet, as the Fed meeting approaches.
What worries big money managers? “The problem is that we are bearing the costs of a soft landing. But there has been no soft landing,” Matthew McLennan, co-head of the global value team at First Eagle Investments, told WealthTrack in a recent interview.
McLennan, who oversees about $90 billion in assets, says that with US employment rising, it may be difficult for the Fed to ease too much without sparking more inflation. He is also concerned that the market is ignoring the poor financial situation in the United States, with government debt rising to even higher levels.
MacLennan, who is also co-portfolio manager of the five-star First Eagle Global Fund SGENX which he has managed since 2008, says these concerns can be mitigated through diversified and balanced investments. Industry fields available at the right price.
He says their portfolio is split 50/50 between US and international names, and some gold.
“About 70 to 75% of our portfolio is in companies that we want to own over the next decade, but we have about 15% of the portfolio in gold and gold miners as a potential hedge,” McLennan said, noting that there is an uptick in gold. The recent exposure has addressed financial concerns in the US, where it will perform well “if the outlook becomes more modest going forward”.
As for stock picking, the manager starts with the artificial intelligence (AI) sector, where he sees a range of companies benefiting. Two of his biggest holdings are Meta Platforms META
And Oracle ORCL,
Valuations say “quite reasonable” compared to potential growth.
But he also likes companies that use AI in their business processes, such as Japan's Fanuc JP:6954,
It is an industrial automation giant that has “long invested in studying artificial intelligence” and using it in predictive maintenance for its robots.
Investors “don't have to buy concept stocks worth 40 times earnings or 50 times earnings to be beneficiaries of AI in the economy,” McLennan says. Fanuc trades at 28 times current earnings, versus 35 for Meta and 82 for Nvidia NVDA..
His next pick is Latin American beer leader AmBev ABEV,
Of which Anheuser-Busch BUD is owned just over half,
With a growing business, no debt, net cash, and a 6% dividend yield. He says it's just one of many commodities with “century-old brands trading at a discount to the market.”
“So, if you're willing to buy something that's perceived as more difficult in this environment, I think something like AmBev, because of its emerging market contamination… has reasonable value,” he says.
McLennan is also investing in the unpopular Chinese market via its Netherlands-listed holding company Prosus NL:PRX.
Which owns a 27% stake in Tencent HK:700,
A leading Chinese online company with the best gaming, social media and advertising platforms.
He points out that Tencent trades at less than 10 times its earnings before interest, depreciation and amortization taxes, with a strong balance sheet and is doing stock buybacks. Prosus trades at a discount to Tencent Holdings' value and has a further 25% stake in leading online companies in Eastern Europe, Brazil and India.
Finally he informed Exxon Mobil XOM,
A “basic infrastructure company” they have owned for a few years, as an investment for long-term investors looking to diversify.
He says Exxon has some of the world's “greatest, longest-duration and most cost-effective energy basins,” while its primary business is oil and natural gas, which have much lower hydrocarbon intensity.
McLennan says the above companies can survive even the toughest environments. “I think if you have a good business that sells relevant products at reasonable prices, it's a good place to be in the long term,” he says.
Markets
ES00 stock futures
YM00
NQ00
Bond yields weaken
It fell as the Fed's two-day meeting was scheduled to begin. Gold GC00
High at $2,034.20 per ounce. Hang Sing
Decreased 2.3%.
|
Performance of key assets |
last |
5d |
1 m |
YTD |
1y |
|
Standard & Poor's 500 |
4,927.93 |
1.30% |
3.90% |
3.31% |
20.88% |
|
Nasdaq Composite |
15,628.04 |
1.31% |
5.84% |
4.11% |
34.90% |
|
10 year treasury |
4.05 |
-8.78 |
11.40 |
16.91 |
53.85 |
|
gold |
2,037.40 |
0.71% |
-1.66% |
-1.66% |
5.97% |
|
oil |
76.75 |
2.79% |
7.60% |
7.60% |
-1.36% |
|
Data: Market Monitor. The change in Treasury yields expressed in basis points |
|||||
Buzz
UPS UPS
Sinking due to declining revenues and pessimistic forecasts. AFTER HOURS, GOOGL ALPHABET
(Preview), Microsoft MSFT
(Preview) and AMD AMD
(preview), along with Starbucks SBUX
and Electronic Arts EA
He will report on everything.
Berkshire Hathaway BYD CN:002594
Disappointing earnings guidance and Tesla TSLA
The competitor's shares fell 4%.
The S&P Case-Shiller home price index is scheduled for release at 9 a.m., followed by jobs and consumer confidence at 10 a.m. The data showed the continued economic recession in Europe.
Elon Musk says his neurotech company Neuralink has performed the first brain transplant in a human patient, and early results have been “promising.”
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