Opening Bell

Patrick Healey

for some more insight in early morning trading. I'm joined by Patrick Healy founder and president of caliber financial partners. We've certainly seen Patrick to kind of be hugging the flatline this morning, not in full on rally mode like we were yesterday. What are you kind of making of early trading activity today? And what do you anticipate? Well, good morning. Yeah. Look at the, the start of the year was incredibly volatile and we've seen some signs that maybe we're bottoming and we're getting some footing in the markets last week we saw a big recovery intraday from a big sell off to start the day and, and, and ending up in the green and when I see signs of that, I think you're starting to see bargain hunters come in and pick off good names with a long term view. And so, um, it's good to see some green on the board to start the day. I hope it persists. Um, but I think we're, we're still trying to get our footing in the stock market and that may persist for a bit. Yes, speaking on kind of getting our footing in the market january to your point, a really rough month. We had the S and p down 5.8% from its all time high. The NASDAQ certainly hit correction territory. I think it ended the month down under that about 8% over the last four weeks, focusing though, in, on the NASDAQ since we saw kind of the biggest rally there yesterday and probably the his swings truly in the big tech space. Um, what is your kind of take on the overall industry and the tech spaces performance and to your point a moment ago where the kind of brighter spots and where investors kind of being picky at. Yeah, yeah. So the bank stocks in particular, which are largely technology focused really were the market leaders in 2021 really going into the end of the year and we've seen, some some *** in the armor, so to speak with some of those names getting sold off. But really across technology and high growth names in general, there's been an indiscriminate selloff. And again, I think we're starting to see some bargain hunters come in and say some of these companies with really long term attractive revenue growth rates are going to be there if you can look out past the horizon and beyond this, this pocket of volatility and I think we're seeing some of that this week. And again, I would like to see that continue. Um, but uh, you know, some of the fang names, um you know, we've seen netflix reported earnings, they sold off. Um Microsoft came in strong amazon is kind of sold off. Um, and so I think, you know, it's, it's not surprising when we see fears of inflation and higher interest rates that technology names are going to get hit, even the big fang names. Um, but I think it's important to put things in perspective, we're talking about a 5 to 6% selloff After a pretty significant rally 2021, so in the grand scheme of things, Yes, it feels painful in the moment, but we're still in a pretty good spot, all things considered. Yeah. To your point there, obviously evaluation coming into focus amid an upcoming kind of higher interest rate environment for big tech, but I wonder kind of some of these companies with just an incredible amount of cash flow, Do you think um they're going to succeed in in this higher interest rate environment better than others? Yeah. So I do think cash is king when you see higher interest rates and how they use that cash is important. Do they decide to buy back shares which should improve some of their valuation numbers. Do they decide to initiate or increase dividends, which will make shareholders happy and probably build a loyal shareholder base and attract more money into uh into some of those names, because there are dividend focused mutual funds and E. T. S. That will allocate two names that are, you know, holding up with an attractive yield in a higher interest rate environment. So, yeah, the cash flow, the higher cash flow names are going to do well, um certainly in the short run, um and until we have a clearer picture on how much the Fed is going to move. And so I think you've seen that over the last couple of months. I think people will continue to hide out in some of those names until we have more clarity around interest rate policy as we get through the year. Um, and again as we look into the following year and have more clarity around uh, you know, the midterm elections and some of the things that are going on in the markets, you know, in in addition to the Fed and anticipated activity, you know, with the Fed moving the markets, earnings certainly have been a factor moving the markets or move the markets in january and even coming into focus this week as we have again, over 100 companies reporting this week to companies reporting actually today after the clothes are going to be Qualcomm and A. M. D curious in terms of, you know, what are you watching, you know, with these companies and what opportunities do you see kind of just within the broader tech space? Yeah, so both of those names are kind of involved in sort of the chip shortage that's going on with, with technology names and so uh, if, if they can kind of overcome some of that and produce good numbers according to the forecast that they put out, I think that will settle the market down and again attract some attention in a good way in a positive light to those names. Um, I think the guidance is what is much more important than just the previous quarter's earnings and that is really true of the market in general. And so if they put out, you know, attractive guidance and they think that they can meet that going forward in light of some of the chip shortage issues. I think that will also be a vote of confidence for the market kind of pivoting to another space that has really just seen significant kind of booms over the last couple of weeks, certainly end of last year. And this year it's kind of the energy space. And in one kind of company there, obviously Exxonmobil, it posted a $40 billion jump in revenue year over year in the Ceo highlighted cost reduction and company restructuring attributed to that to that growth. What is this earnings report signal about the future of, of the energy companies? Yeah, What, what a difference a year makes, right? And uh, you know, a year ago, uh, the traditional energy names were really struggling. There was a lot of signs that the administration was advancing clean energy and focus on electric vehicles, I think that will continue. But where energy prices are in the market, both for crude oil and natural gas. Uh, the traditional energy names like Exxon, like Chevron are going to do very well and you're seeing that reflected in their earnings and some of the forecast going forward. It's important to see how some of these companies are nimble around the move towards clean energy and how they can kind of position the company to not only take advantage of that, but be a real player in the space, but clearly they're benefiting from higher crude and natural gas prices. Um, and I think that's going to continue in 2020 to a lot of the forecasts are suggesting that crude may even hit $100 a barrel. And that certainly benefits names like Exxon, The energy sector in general really has just been dominating. The conversation has been one of the best performers. How long do you see it being that is it to your point there through 2022 and even beyond. Yeah, so it's tough to say beyond, but certainly for this year, I think, you know, some of the administrative policies around energy in the United States are contributing to higher prices and some of the geopolitical risk and in Russia and Ukraine right now are kind of lifting prices and we're also going through a very cold winter here in the Northeast. And so, you know, the demand for natural gas and heating oil is higher than it would otherwise be. And so, um, difficult to predict too far out on the curve. But for this year, I think, you know, signs are pointing to higher oil prices in a steady state and uh, and more demand and supply Before I let you go here, just want to get your thoughts on financials because that was really a sector that at the end of last year many were pointing to is kind of being a driving force and an opportunity when it comes to the higher interest rate environment that many were anticipating and still are anticipating. But financials they're down about 1.1% in the last four weeks. Is there any concern that profit margins are not going to grow at the same rate, you know, come March? And what's your overall kind of outlook on the sector? Yeah, Great question. So I'm not a big proponent of the financials sector as an investment thesis. Yeah, the, the, the traditional outlook is higher interest rates means higher net interest margin for banks and lending institutions. And that's true to some extent. But I think the market is kind of overestimating how much the Fed is going to move. And I don't think that the banks are going to benefit nearly as much as uh, some would suggest. And so some of the revenues have, have kind of trailed off in terms of m and a activity for investment banks trading volume, et cetera. And so I don't, I don't particularly like the banking sector or the financials. I think some of the non traditional financials, like asset managers where there's a big asset base and they're earning fee revenue will continue to do well. And you see names like Blackstone or Apollo or are examples of that, but traditional banks and financials. Uh it's not something that I particularly focus on as an investment thesis. And it clearly looks like you're not kind of alone in that thesis, given the sector has been kind of down in the last four weeks to the one moment of the 1.1% really appreciate your inside Patrick, Healy, founder and president at Caliber Financial Partners.