• Video
  • Banrion Capital Management's Sissel on Valuations, AI, Trump Admin

Banrion Capital Management's Sissel on Valuations, AI, Trump Admin

Show Transcript
Bloomberg 08:35 · 3542 Views

Banrion Capital Management President, CEO, Founder Shana Orczyk Sissel discusses valuation concerns, technology trends, and the incoming Trump administration. (Interview occurred on December 23, 2024)

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more

Transcript

  • 00:00 I have to start with valuation because we've seen again, a 2324% move in the S&P 500 this year.
  • 00:06 And I don't know, I don't have my calculator with me, but I don't think earnings have gone up
  • 00:10 a commensurate level.
  • 00:11 How stretched, if at all, are we on valuation for this market?
  • 00:15 Depends on what you're looking at.
  • 00:17 We're stretched in some areas of the market, namely big tech,
  • 00:21 but there are other areas of the market that haven't participated in the rally as much
  • 00:26 and those areas are slightly more attractive.
  • 00:28 If you are selective, you can absolutely find
  • 00:32 attractive
  • 00:34 stocks with
  • 00:35 reasonable valuations in the market
  • 00:37 even today.
  • 00:38 And we've seen a bit of a sell off as well.
  • 00:40 So there's a little more for the picking,
  • 00:44 you know, in the last week or so.
  • 00:47 OK, I'm going to go single name.
  • 00:49 Don't worry if you don't want to comment on single names, but I'm looking at
  • 00:52 46 times
  • 00:54 future earnings is where NVIDIA trades, for example, we're still above that $3.3 trillion market capitalization.
  • 01:01 However, many would still want to get into this names.
  • 01:04 We need to type up analyst recommendations.
  • 01:06 I mean still significantly more buys than sells on in terms of recommendations.
  • 01:10 In fact, 0
  • 01:12 sell recommendations on NVIDIA and 70 buy recommendations.
  • 01:16 So
  • 01:17 how do you fight that sort of narrative even though the valuation
  • 01:20 isn't stupid?
  • 01:21 We're not looking at Palantir levels in terms of valuation more than 140, but you are still seeing valuations that have been questioned.
  • 01:29 Yes, but NVIDIA is always traded at a premium.
  • 01:32 It's always had strong momentum.
  • 01:34 There's certain things you don't
  • 01:36 really fight against and having a somewhat
  • 01:39 premium valuation, but not one that is outrageous
  • 01:43 has never actually hurt you.
  • 01:46 If you look at the history of stocks that traded, you know, a 20% premium to the, to
  • 01:50 the market,
  • 01:51 or in this case, I, I think the market's at like 20 times.
  • 01:54 So it's at a 50% premium to the market.
  • 01:56 But that that said,
  • 01:59 you know, it, it, it, it's not necessarily
  • 02:02 something that's overly expensive.
  • 02:04 And I always like to remind people that your valuation metrics of future earnings is only as good as the E that it's based on.
  • 02:11 And so
  • 02:12 NVIDIA has done a good job beating its earnings expectations.
  • 02:15 And as long as that continues to be the case,
  • 02:17 the actual valuation of the stock on its future earnings is probably more attractive and more reasonable than the 46 times that we see today.
  • 02:27 I mean revenue has been absolutely extraordinary when you're looking at
  • 02:30 previous this year.
  • 02:31 I mean the extent that they've risen what we're expecting 130 billion to have been brought in, that's more than double
  • 02:37 on a year on year growth perspective.
  • 02:39 Is there a broadening out to happen here though?
  • 02:41 Like
  • 02:42 we heard such a pertinent question coming from Paul to Alexandra earlier as just what about breadth?
  • 02:47 And many have talked about just other parts of the AI play, money going into the energy sector, money going into Broadcom, other chip makers that are out there, they can get caught up in the AI hype.
  • 02:56 Are we going to start to see that for the smaller tech industry?
  • 02:59 I, I'd like to say yes, but we've been saying that that would be the case for a while.
  • 03:03 The one bright spot is that I've been a, a
  • 03:05 bull of Marvell for a while
  • 03:08 and
  • 03:09 for like the first half of the year that stock did not look particularly good.
  • 03:14 It had not done well.
  • 03:15 But as we've gotten into more of this custom silicon
  • 03:18 chip
  • 03:19 discussion and the development of the next stage of
  • 03:23 AI,
  • 03:24 Marvell has
  • 03:25 completely changed course and has actually done quite well in the second-half the year.
  • 03:30 And so we actually are starting to see it broadening out.
  • 03:32 Broadcom is another one that in the last few months has really seen a rally
  • 03:38 as people are looking for ways to play on the AI
  • 03:42 trend and get into names that maybe haven't participated previously.
  • 03:46 You also pointed out, you know, there was a name that you brought up,
  • 03:51 Bridget,
  • 03:52 and one that I'm not even familiar with that's on the
  • 03:55 quantum stock.
  • 03:56 Yeah,
  • 03:56 yes, there you go.
  • 03:57 It's on the quantum computing side
  • 04:00 again,
  • 04:00 moving into that AI, quantum computing and AI are sort of cousins, if you will.
  • 04:06 And, and that trend into needing more computing power, more energy, all of those things are true.
  • 04:13 There's a number of names that have benefited from that, that maybe we don't talk about nearly as much, but it certainly is happening.
  • 04:20 And the breadth of the market hasn't really been there at all in in the last year.
  • 04:26 But
  • 04:26 there's reason to believe that we'll start to see more breath in the market as we have continuing strong economic conditions here in the US.
  • 04:34 And inflation is a little on the higher side.
  • 04:37 But generally speaking, inflation around 3% is advantageous for stocks
  • 04:42 and for earnings.
  • 04:43 So, you know, there's a number of tailwinds that I think will hopefully start to see breath improve in the market,
  • 04:49 but there's certainly opportunities to play
  • 04:52 that AI, quantum computing and beyond NVIDIA
  • 04:56 Shana, did your investment outlook or maybe just kind of.
  • 05:00 The discussions you have with your clients,
  • 05:01 that changed materially the day after the election when we kind of realized that we're going to
  • 05:06 have a Trump administration coming in again and we're going to have a Republican controlled
  • 05:10 Congress.
  • 05:10 Did that change your outlook at all?
  • 05:13 Not in a meaningful way, but I will say that it became slightly more bullish.
  • 05:18 And I think that the vast majority of clients were relieved to see a
  • 05:22 second Trump administration, whether they'll admit it or not.
  • 05:25 But I think the general belief in the, you know,
  • 05:28 business community was that
  • 05:30 Trump presidency was better for business than a Harris presidency.
  • 05:34 And and so generally speaking, I think there was kind of like a sigh of relief
  • 05:39 when we had the election results.
  • 05:43 But I, I remain somewhat defensive in that,
  • 05:46 you know, the Fed's
  • 05:48 comments in the Fed outlook
  • 05:50 is not
  • 05:51 necessarily as conducive to
  • 05:53 a really
  • 05:55 LAX monetary policy that would really push stocks higher.
  • 05:58 And there's still some concern that inflation isn't completely under control.
  • 06:02 We've seen Treasury yields obviously increase.
  • 06:05 We still have housing market issues.
  • 06:07 So it's not, you know, a perfect economic scenario for, you know,
  • 06:10 continued bull market, but it's certainly,
  • 06:14 you know, slightly better than it would have been otherwise
  • 06:17 given all that background there.
  • 06:19 Shayna, what's your key theme for 2025 that you're going up to with your clients?
  • 06:24 You know, I continue to be an alternatives person.
  • 06:27 I obviously, you know,
  • 06:29 there's a number of single name stocks that I like, Marvell, Lidos, NVIDIA,
  • 06:34 Apple, Those are all names that, you know, we've talked about in the past.
  • 06:38 But at the end of the day, I continue to believe that the place to be
  • 06:42 going into 2025, especially with
  • 06:45 the Fed
  • 06:46 outlook being the way it is and the bond markets reacting, they happen is more in the alternative space finding opportunities and things like managed futures like CTA
  • 06:55 and momentum based stocks like S AM T or ETFs like S AM TA, little bit defensive with something like BTAL.
  • 07:04 You know, there are a number of different names out there that I think are good to have in your, your playbook maybe
  • 07:10 instead of fixed income
  • 07:12 that
  • 07:13 will do better
  • 07:14 in a volatile
  • 07:15 fixed income environment.
  • 07:17 So those are kind of how I'm positioning
  • 07:20 and that, that's kind of my theme for 2025.
  • 07:22 I, I, I was more equity
  • 07:26 biased in 2024, but in 2025 I'm a little more defensive, but not using fixed income as my downside protection, more focusing on,
  • 07:34 on using alternative strategies, which can still get some upside from the equity markets
  • 07:40 if, if positioned correctly and, and, and sort of
  • 07:43 deal with and, and
  • 07:46 dampen the volatility of the fixed income markets, which I think we'll see quite a bit of in the in the next year.