1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa Brahma Waits. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,960 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:23,600 Speaker 1: at Bloomberg dot com. We are so lucky, Paul Uh 8 00:00:23,760 --> 00:00:25,640 Speaker 1: to be able to have the opportunity to sit down 9 00:00:25,640 --> 00:00:30,400 Speaker 1: with Bill Miller, legendary investor widely respected for his ability 10 00:00:30,480 --> 00:00:33,360 Speaker 1: to outperform the SMP five hundred with his like Mason 11 00:00:33,440 --> 00:00:38,000 Speaker 1: Value Trust for fifteen consecutive years, an unheard of track record, 12 00:00:38,440 --> 00:00:41,040 Speaker 1: and he joins us here currently chairman and Chief Investment 13 00:00:41,080 --> 00:00:44,360 Speaker 1: Officer of Miller Value Partners with two billion dollars of 14 00:00:44,400 --> 00:00:48,120 Speaker 1: assets under management. So Bill, thank you for being with us. 15 00:00:48,159 --> 00:00:51,640 Speaker 1: I want to start with this idea of out performance 16 00:00:52,240 --> 00:00:55,400 Speaker 1: because you have achieved that, and I'm wondering as people 17 00:00:55,440 --> 00:00:58,120 Speaker 1: talk about Bill Gross, for example, talking about how it's 18 00:00:58,160 --> 00:01:02,480 Speaker 1: increasingly difficult to outperform in an era of indexed funds, 19 00:01:02,960 --> 00:01:06,040 Speaker 1: do you agree. I think it's always been difficult to 20 00:01:06,040 --> 00:01:08,920 Speaker 1: to outperform. In fact, when Warren Buffett set up his 21 00:01:08,920 --> 00:01:12,280 Speaker 1: partnership in the nineteen fifties, he said that he would 22 00:01:12,280 --> 00:01:14,920 Speaker 1: consider a good result if he could outperform the Dow 23 00:01:15,080 --> 00:01:17,240 Speaker 1: Jones Industrial Index and pointed out that I think there 24 00:01:17,319 --> 00:01:19,640 Speaker 1: might have been eight or eighty five mutual funds at 25 00:01:19,640 --> 00:01:21,520 Speaker 1: the time, and only about five percent of those had 26 00:01:21,640 --> 00:01:23,680 Speaker 1: been able to do that over the past ten years. 27 00:01:23,680 --> 00:01:26,560 Speaker 1: So it's always been difficult. I think it's it's trickier 28 00:01:26,600 --> 00:01:29,240 Speaker 1: now a little bit, not because of index funds, but 29 00:01:29,400 --> 00:01:32,200 Speaker 1: because of the changed i'd say polarity of the market 30 00:01:32,280 --> 00:01:35,959 Speaker 1: after the financial crisis, and specifically that the financial crisis 31 00:01:35,959 --> 00:01:38,919 Speaker 1: was so devastating to so many people that that effectively 32 00:01:38,959 --> 00:01:42,640 Speaker 1: people are risk and volatility phobic, and so whenever there's 33 00:01:42,680 --> 00:01:45,760 Speaker 1: a perception of increased risk or the stock market volatility 34 00:01:45,760 --> 00:01:49,160 Speaker 1: goes up, everybody rushes to quote reduce their risk exposure, 35 00:01:49,320 --> 00:01:51,200 Speaker 1: and that leads to these kind of cascading events like 36 00:01:51,240 --> 00:01:53,160 Speaker 1: we saw in the fourth quarter. Well, but we've seen 37 00:01:53,440 --> 00:01:58,600 Speaker 1: a tremendous move towards passive investment across the investment horizon. 38 00:01:58,600 --> 00:02:00,360 Speaker 1: Maybe that was accelerated a little bit by some of 39 00:02:00,400 --> 00:02:02,400 Speaker 1: the things come out of the financial crisis. Is that 40 00:02:02,440 --> 00:02:04,760 Speaker 1: a trend you expect to continue or do you think 41 00:02:04,800 --> 00:02:08,359 Speaker 1: there's a day for active advisers. I know, I think 42 00:02:08,360 --> 00:02:11,000 Speaker 1: the trend is likely to continue. I saw a study, 43 00:02:11,040 --> 00:02:15,359 Speaker 1: but I think Mercer that UH indicated that the market 44 00:02:15,440 --> 00:02:19,200 Speaker 1: could still performance functions of price discovery if even if 45 00:02:19,240 --> 00:02:21,840 Speaker 1: over seventy percent of the market stock market we're indexed. 46 00:02:22,080 --> 00:02:24,120 Speaker 1: And I think the trend is you know, it's it's 47 00:02:24,160 --> 00:02:26,280 Speaker 1: long standing UM and I think it's there for a 48 00:02:26,280 --> 00:02:28,959 Speaker 1: good reason, which is that UM, it's very difficult to 49 00:02:28,960 --> 00:02:32,560 Speaker 1: outperform and be so many people that are trying to 50 00:02:32,560 --> 00:02:35,280 Speaker 1: outperform are afraid of tracking error going away from the market, 51 00:02:35,360 --> 00:02:38,720 Speaker 1: especially in the downside that they're effectively closet indexers, so 52 00:02:38,760 --> 00:02:41,840 Speaker 1: they're they're basically high priced passive investors. And so the 53 00:02:41,880 --> 00:02:44,880 Speaker 1: movement isn't so much from active to passive, it's from 54 00:02:44,880 --> 00:02:48,320 Speaker 1: expensive passive to cheap passive. Well, it seems like that's 55 00:02:48,320 --> 00:02:50,720 Speaker 1: a no brainer as to what people would want. You know, 56 00:02:50,800 --> 00:02:53,160 Speaker 1: you talked about how it's always been hard to outperform, 57 00:02:53,200 --> 00:02:56,000 Speaker 1: and yet you did so for more than a decade's 58 00:02:56,080 --> 00:03:00,080 Speaker 1: rate with your fund. What's the secret please reveal it 59 00:03:00,160 --> 00:03:04,960 Speaker 1: right now, you know I think that that, Um, I'll 60 00:03:04,960 --> 00:03:07,720 Speaker 1: answered slightly different ways. It in two different ways, right, 61 00:03:07,960 --> 00:03:11,680 Speaker 1: the way in which we invest and people cannot perform 62 00:03:11,720 --> 00:03:14,520 Speaker 1: a wide read different strategies. But we're value investors, and 63 00:03:14,520 --> 00:03:16,760 Speaker 1: so we're looking to buy businesses at a discount or 64 00:03:16,800 --> 00:03:19,760 Speaker 1: what they're worth. And I'd say that the secret is 65 00:03:19,800 --> 00:03:21,880 Speaker 1: that the earnings have very little to do with what 66 00:03:21,960 --> 00:03:25,000 Speaker 1: they're worth. Probably the best example is Amazon, where people 67 00:03:25,040 --> 00:03:27,520 Speaker 1: for fifteen or eighteen years would say, oh, it's grossly 68 00:03:27,560 --> 00:03:30,240 Speaker 1: over priced because they make no money. And my answer 69 00:03:30,240 --> 00:03:32,880 Speaker 1: to that was My answer to that was always, well, 70 00:03:32,919 --> 00:03:36,040 Speaker 1: they came public with a four hundred million dollar market 71 00:03:36,160 --> 00:03:39,440 Speaker 1: value and now they have an eight hundred billion dollar 72 00:03:39,640 --> 00:03:43,040 Speaker 1: market value and they never sold any stock. Where where'd 73 00:03:43,040 --> 00:03:45,440 Speaker 1: that value come from? And the answer is that they 74 00:03:45,520 --> 00:03:47,880 Speaker 1: created a lot of value. They just didn't didn't report 75 00:03:48,360 --> 00:03:50,880 Speaker 1: a lot of profits under gap accounting. And one of 76 00:03:50,880 --> 00:03:52,720 Speaker 1: the one of the things that I try to impress 77 00:03:52,760 --> 00:03:55,320 Speaker 1: upon people is there's a reason it's called generally accepted 78 00:03:55,320 --> 00:03:59,760 Speaker 1: accounting principles and not divinely inspired account of principles or 79 00:03:59,800 --> 00:04:04,760 Speaker 1: accurately conceived the counting. Well, it's interesting as you talk 80 00:04:04,840 --> 00:04:08,000 Speaker 1: about how the amount of money that they actually are 81 00:04:08,040 --> 00:04:11,600 Speaker 1: bringing in any given time isn't necessarily what the company 82 00:04:11,680 --> 00:04:13,480 Speaker 1: is worth. Interesting to say this at a time when 83 00:04:13,560 --> 00:04:16,599 Speaker 1: Lift it just started trading, and we have all of 84 00:04:16,600 --> 00:04:18,320 Speaker 1: the I p O is the big tech tour links 85 00:04:18,360 --> 00:04:21,000 Speaker 1: that are slated to go public later this year. Do 86 00:04:21,040 --> 00:04:23,839 Speaker 1: you think that that's a similar situation to Amazon or 87 00:04:23,880 --> 00:04:25,640 Speaker 1: do you think it's different because they waited for so 88 00:04:25,720 --> 00:04:29,080 Speaker 1: much longer and they're coming it's sort of a peak 89 00:04:29,160 --> 00:04:31,920 Speaker 1: market valuation time. You know, I don't. I haven't looked 90 00:04:31,920 --> 00:04:36,159 Speaker 1: at Lift carefully enough to have an informed judgment about it. Um. 91 00:04:36,200 --> 00:04:38,560 Speaker 1: I think all of those companies that you're talking about 92 00:04:38,680 --> 00:04:42,880 Speaker 1: are are very rapidly growing companies doing something different from 93 00:04:42,920 --> 00:04:45,719 Speaker 1: what other people had done ten or twenty years ago, 94 00:04:46,240 --> 00:04:48,279 Speaker 1: and so they generated a lot of excitement because they've 95 00:04:48,279 --> 00:04:51,120 Speaker 1: grown revenues very rapidly. It's it's less clear to me 96 00:04:51,200 --> 00:04:56,159 Speaker 1: what the economic model of the business is sustainably longer term. So, 97 00:04:56,240 --> 00:04:58,920 Speaker 1: but we've had some tremendous volatility, you know, just over 98 00:04:58,960 --> 00:05:01,320 Speaker 1: the last four or five months. That meltdown in December, 99 00:05:01,640 --> 00:05:04,000 Speaker 1: you know, I guess hitting the trough Christmas Eve and 100 00:05:04,000 --> 00:05:07,320 Speaker 1: then there's a great start to twenty uh nineteen with 101 00:05:07,360 --> 00:05:09,360 Speaker 1: the SMP up over twelve percent. What is your view 102 00:05:09,360 --> 00:05:12,919 Speaker 1: of the market right now? Oh, I think the market 103 00:05:12,920 --> 00:05:17,479 Speaker 1: you know, we're gonna end the quarter up somewhere twelve um. 104 00:05:17,920 --> 00:05:20,919 Speaker 1: I think the market is very attractively priced relative to alternatives. 105 00:05:21,279 --> 00:05:24,520 Speaker 1: You know, the bonds, you what two point four percent something. 106 00:05:24,560 --> 00:05:27,159 Speaker 1: Let's they trade at forty times a cash flow stream 107 00:05:27,160 --> 00:05:30,200 Speaker 1: that isn't gonna grow, and stocks trade around sixteen times 108 00:05:30,200 --> 00:05:32,920 Speaker 1: forward earnings and with a cash flow stream that's gonna 109 00:05:32,920 --> 00:05:34,880 Speaker 1: grow around six percent, generating a lot of free cash. 110 00:05:35,320 --> 00:05:37,360 Speaker 1: So I don't think I don't think that the alternatives 111 00:05:37,360 --> 00:05:40,240 Speaker 1: two stocks are particularly attractive. And I think that stocks, 112 00:05:40,360 --> 00:05:43,920 Speaker 1: by the way, are are actually cheap well explay. There 113 00:05:43,960 --> 00:05:45,960 Speaker 1: are a lot of stocks out there that are very 114 00:05:46,040 --> 00:05:48,200 Speaker 1: cheap and that um that I think are going to 115 00:05:48,279 --> 00:05:50,920 Speaker 1: do very very well in the United States. Oh yeah, yeah, 116 00:05:51,440 --> 00:05:54,520 Speaker 1: names yeah, Well, well, Amazon is still twenty percent off 117 00:05:54,520 --> 00:05:56,800 Speaker 1: the high and if you look at a w S 118 00:05:56,839 --> 00:06:00,000 Speaker 1: Amazon Web Services, and you look at the advertising business 119 00:06:00,000 --> 00:06:03,800 Speaker 1: that they've just recently been growing those two businesses alone 120 00:06:04,000 --> 00:06:06,920 Speaker 1: in about three and a half years. If they're valued 121 00:06:07,000 --> 00:06:10,520 Speaker 1: similarly to what Facebook and Google were valued at when 122 00:06:10,520 --> 00:06:13,520 Speaker 1: they were in the high growth phase or that um, 123 00:06:13,640 --> 00:06:16,920 Speaker 1: something like uh Salesforce is currently valued at those two 124 00:06:16,920 --> 00:06:20,040 Speaker 1: businesses alone will be worth more than Amazon's entire market account. 125 00:06:20,200 --> 00:06:23,120 Speaker 1: What about the banking sector because we've seen them really 126 00:06:23,160 --> 00:06:27,040 Speaker 1: beaten up based on the narrowing yield curve and fears 127 00:06:27,040 --> 00:06:30,080 Speaker 1: of growth. If stocks still look good, then that means 128 00:06:30,120 --> 00:06:34,120 Speaker 1: growth isn't that bad? Attract evaluations there? Oh? Yeah, yeah, 129 00:06:34,160 --> 00:06:36,479 Speaker 1: we love what we love the financials broadly speaking, but 130 00:06:36,520 --> 00:06:39,760 Speaker 1: we young you know, we own JP Morgan, um, we 131 00:06:39,839 --> 00:06:42,279 Speaker 1: do Bank America. Are you adding here? We have we 132 00:06:42,320 --> 00:06:44,760 Speaker 1: have full positions in those. If we didn't have them, 133 00:06:44,760 --> 00:06:46,880 Speaker 1: we would be buying them here. Yeah, what are some 134 00:06:46,920 --> 00:06:49,000 Speaker 1: of the other Is there any sector that just scares 135 00:06:49,040 --> 00:06:51,640 Speaker 1: you right here that whether from a valuation perspective, you 136 00:06:51,720 --> 00:06:54,080 Speaker 1: just you can't get your hands around the fundamentals because 137 00:06:54,080 --> 00:06:55,760 Speaker 1: it seems like again with a twelve percent move here 138 00:06:55,800 --> 00:06:58,839 Speaker 1: and yes and P has been pretty broad performance here, 139 00:06:59,360 --> 00:07:02,479 Speaker 1: I think that you abilities and consumer staples are unattractive 140 00:07:02,480 --> 00:07:05,880 Speaker 1: in here. They're trading high valuations relative history. That's because 141 00:07:05,920 --> 00:07:09,840 Speaker 1: they're they're low volatility, they're predictable, and so they perform 142 00:07:09,880 --> 00:07:13,720 Speaker 1: a risk mitigation function in many people's portfolios. But in 143 00:07:13,840 --> 00:07:15,400 Speaker 1: terms and and so obviously if we if we have 144 00:07:15,440 --> 00:07:17,560 Speaker 1: a deflation, if if the world gets a lot worse, 145 00:07:17,640 --> 00:07:19,840 Speaker 1: they'll continue to do fine. But I think we're going 146 00:07:19,880 --> 00:07:22,600 Speaker 1: to settle in here to a one point eight percent 147 00:07:22,680 --> 00:07:25,400 Speaker 1: to two point one percent growth rate, and and they're 148 00:07:25,400 --> 00:07:27,440 Speaker 1: not competitive in that in that kind of an environment. 149 00:07:27,480 --> 00:07:30,800 Speaker 1: There seems to be a real kind of dissonance in 150 00:07:30,840 --> 00:07:33,000 Speaker 1: the market right now because there are a lot of 151 00:07:33,000 --> 00:07:37,640 Speaker 1: people saying that US equities are still very attractive, But 152 00:07:37,680 --> 00:07:41,520 Speaker 1: then you also have bonds that are gaining dramatically, yields 153 00:07:41,560 --> 00:07:46,120 Speaker 1: dropping and indicating some sort of downturn slow down. Do 154 00:07:46,160 --> 00:07:49,840 Speaker 1: you think that those two ideas are incoherent? That basically, 155 00:07:49,880 --> 00:07:52,720 Speaker 1: you can't have bonds continuing to rally with yields continuing 156 00:07:52,760 --> 00:07:58,760 Speaker 1: to go lower with stocks still ripping higher. Well, I's 157 00:07:58,760 --> 00:08:01,120 Speaker 1: put it in a little broader content. X SO bonds 158 00:08:01,160 --> 00:08:04,120 Speaker 1: had a thirty five year bull market from night one too, 159 00:08:04,200 --> 00:08:07,720 Speaker 1: roughly with two thousand and thirteen fourteen right, and so 160 00:08:07,920 --> 00:08:10,640 Speaker 1: bond bonds are in a bearer market right now. Bond 161 00:08:10,720 --> 00:08:13,880 Speaker 1: yields bottomed in two thousand and sixteen so at one 162 00:08:14,080 --> 00:08:16,840 Speaker 1: one thirty eight, I think and uh, and so now 163 00:08:16,880 --> 00:08:20,400 Speaker 1: we're at two thirty two forty, So yes, they've rallied 164 00:08:20,400 --> 00:08:23,200 Speaker 1: from where they were last year. But I think that 165 00:08:23,520 --> 00:08:25,280 Speaker 1: you know, if you look at stocks, stocks are a 166 00:08:25,280 --> 00:08:27,200 Speaker 1: lot higher than they were in two thousand and sixteen. 167 00:08:27,760 --> 00:08:29,680 Speaker 1: So I think that stocks and that's the reason for 168 00:08:29,760 --> 00:08:31,840 Speaker 1: that is that stocks are more attractive than bonds. And 169 00:08:31,840 --> 00:08:34,560 Speaker 1: and bonds will protect you on uh, you know if 170 00:08:34,600 --> 00:08:37,320 Speaker 1: if we have a recession, but um, they're not going 171 00:08:37,360 --> 00:08:39,280 Speaker 1: to help you. If growth just chugs along at one 172 00:08:39,280 --> 00:08:41,760 Speaker 1: and a half or two percent, you're gonna gradually lose 173 00:08:41,800 --> 00:08:44,880 Speaker 1: money in bonds over time. You mentioned the R word recession. 174 00:08:45,240 --> 00:08:48,319 Speaker 1: What is your view of this inverted yield curve and 175 00:08:48,320 --> 00:08:51,280 Speaker 1: how much concern should investors have as it relates to 176 00:08:51,520 --> 00:08:56,600 Speaker 1: potentially recession? Very little? Um, you know, people are you're 177 00:08:56,640 --> 00:08:58,240 Speaker 1: not thinking about? I think the yield curve in a 178 00:08:58,679 --> 00:09:01,080 Speaker 1: in a way that reflects what's going on there. So 179 00:09:01,160 --> 00:09:03,920 Speaker 1: you've got you've got ten trillion dollars worth of sovereign 180 00:09:03,960 --> 00:09:07,760 Speaker 1: bonds of negative yields, and you've had this financial repression, 181 00:09:07,800 --> 00:09:09,520 Speaker 1: whether it be Japan buying half of the j g 182 00:09:09,679 --> 00:09:12,880 Speaker 1: B s or what DROG did or what the U 183 00:09:12,960 --> 00:09:15,400 Speaker 1: s FET has done, so that that has suppressed yields 184 00:09:15,400 --> 00:09:19,280 Speaker 1: globally and uh and actually us the yields in the 185 00:09:19,360 --> 00:09:21,160 Speaker 1: in the US I think are reflective of that. And 186 00:09:21,200 --> 00:09:25,040 Speaker 1: also to emphasize again, the financial crisis change people's perceptions 187 00:09:25,040 --> 00:09:27,960 Speaker 1: of risk. So here we are at the Game conference. 188 00:09:28,000 --> 00:09:29,960 Speaker 1: They're all these students here who are looking to go 189 00:09:30,080 --> 00:09:33,840 Speaker 1: into the business. What advice would you give a budding 190 00:09:33,880 --> 00:09:37,439 Speaker 1: young professional looking to go into finance right now? Well, 191 00:09:37,600 --> 00:09:40,839 Speaker 1: I think you know, finances. Actually this is not uh, 192 00:09:41,000 --> 00:09:42,960 Speaker 1: something that I think people are happy up to. Finance 193 00:09:43,000 --> 00:09:46,440 Speaker 1: has been gradually gaining market share in the global economy 194 00:09:46,440 --> 00:09:48,960 Speaker 1: for a long time, and it changes the where the 195 00:09:48,960 --> 00:09:50,840 Speaker 1: where the you know, where the action is, so that 196 00:09:50,880 --> 00:09:53,160 Speaker 1: you know, right now the action is in VC and 197 00:09:53,200 --> 00:09:55,680 Speaker 1: startups and things like that. Maybe maybe hedge funds, not 198 00:09:55,679 --> 00:09:58,320 Speaker 1: in mutual funds, which you're in secular decline, But I'd 199 00:09:58,360 --> 00:10:00,520 Speaker 1: say that I'd say the most important thing is get in, 200 00:10:00,880 --> 00:10:03,600 Speaker 1: you know, get a job in finance, and once you're in, 201 00:10:03,760 --> 00:10:05,760 Speaker 1: then it's easier to move around to something that might 202 00:10:05,800 --> 00:10:07,720 Speaker 1: be more attractive. But as it management is still an 203 00:10:07,760 --> 00:10:11,000 Speaker 1: attractive career. Yes, yeah, it's it's it's a good business. 204 00:10:11,000 --> 00:10:13,560 Speaker 1: It's a business it's under secular pressure for the reasons 205 00:10:13,559 --> 00:10:16,840 Speaker 1: I talked about, which is the move to passive uh 206 00:10:16,880 --> 00:10:19,160 Speaker 1: for example. And uh. And I think there's you know, 207 00:10:19,160 --> 00:10:22,920 Speaker 1: there's it's it's highly regulated. So that's that's a negative 208 00:10:22,920 --> 00:10:25,480 Speaker 1: in my in my opinion. But but no, it's it's 209 00:10:25,480 --> 00:10:28,679 Speaker 1: an attractive business. It's interesting you mentioned regulation, and obviously 210 00:10:28,920 --> 00:10:31,760 Speaker 1: a significant layer of regulation came upon the financial services 211 00:10:31,800 --> 00:10:34,960 Speaker 1: industry after the financial crisis. Is that just the new 212 00:10:35,000 --> 00:10:37,960 Speaker 1: way of life? Already? Think that the you know, as 213 00:10:38,040 --> 00:10:40,440 Speaker 1: time moves on, some of those regulations may peel off 214 00:10:40,480 --> 00:10:43,000 Speaker 1: this industry and will allow maybe improve the profitability of 215 00:10:43,040 --> 00:10:46,440 Speaker 1: the financial services industry. Um. You know, I think I 216 00:10:46,440 --> 00:10:49,160 Speaker 1: agree with Jamie Diamond. Uh. And when when Jamie said 217 00:10:49,280 --> 00:10:51,760 Speaker 1: it's it's not a question of more or less regulation, 218 00:10:51,800 --> 00:10:54,400 Speaker 1: it's a question of good or bad regulation. So I 219 00:10:54,480 --> 00:10:56,520 Speaker 1: think we want to get rid of bad regulations and 220 00:10:56,520 --> 00:10:58,880 Speaker 1: good regulations we can have more of those. Bill Miller, 221 00:10:59,040 --> 00:11:00,920 Speaker 1: thank you so much for all the time you've given us. 222 00:11:00,920 --> 00:11:03,880 Speaker 1: We really appreciate it. Bill Miller is chairman and chief 223 00:11:03,880 --> 00:11:07,000 Speaker 1: investment officer at Miller Value Partners. With two billion dollars 224 00:11:07,200 --> 00:11:12,440 Speaker 1: under management. But Bill Miller, legendary investor, he outperformed his 225 00:11:12,559 --> 00:11:16,920 Speaker 1: leg basin value trust outperformed the SMP five hundred benchmark 226 00:11:17,120 --> 00:11:21,319 Speaker 1: for fifteen straight years. It can be done. It's difficult, 227 00:11:21,320 --> 00:11:38,839 Speaker 1: It's always been difficult, but Bill Miller has done it well. 228 00:11:38,880 --> 00:11:41,240 Speaker 1: Today we are closing out what is shapes up to 229 00:11:41,240 --> 00:11:44,400 Speaker 1: be the best quarter performance for the SMP five hundred 230 00:11:44,480 --> 00:11:46,760 Speaker 1: since two thousand nine. The question a lot of investors 231 00:11:46,800 --> 00:11:49,400 Speaker 1: have is what's left to help. We're gonna pose that 232 00:11:49,480 --> 00:11:52,640 Speaker 1: question to our next guest, Kate Moore, Kate's chief equity 233 00:11:52,679 --> 00:11:55,480 Speaker 1: strategist for black Rock with get this assets on the 234 00:11:55,520 --> 00:12:00,719 Speaker 1: management's Lisa six trillion with a T. It's just amazing. Uh. 235 00:12:01,000 --> 00:12:03,600 Speaker 1: Kate joins us here at in New York at the 236 00:12:03,760 --> 00:12:07,040 Speaker 1: ninth annual Quinnipiac Game Conference here in midtown. K thanks 237 00:12:07,080 --> 00:12:09,120 Speaker 1: so much for joining us. So I'll put that question 238 00:12:09,120 --> 00:12:10,960 Speaker 1: to you. God, we've had such a run here this 239 00:12:11,080 --> 00:12:13,520 Speaker 1: first quarter. I think the bulls will tell you yeah, 240 00:12:13,600 --> 00:12:15,480 Speaker 1: but we're just kind of clawing back what we lost 241 00:12:15,480 --> 00:12:18,439 Speaker 1: in the fourth quarter last year. How do you see it? 242 00:12:18,480 --> 00:12:21,920 Speaker 1: Glass half full or half empty? Uh? Glass neutral? At 243 00:12:21,920 --> 00:12:23,959 Speaker 1: the moment. Look, as an equity investor, I think you 244 00:12:24,000 --> 00:12:25,600 Speaker 1: always have to be a little bit of an optimist 245 00:12:25,600 --> 00:12:28,200 Speaker 1: and you have to really look for long term opportunities. 246 00:12:28,559 --> 00:12:29,920 Speaker 1: But I'll be honest with you, as much of a 247 00:12:29,960 --> 00:12:32,320 Speaker 1: bull as I've been over the last ten years this cycle, 248 00:12:32,720 --> 00:12:34,720 Speaker 1: I have to say the run that we have in 249 00:12:34,720 --> 00:12:37,160 Speaker 1: the fourth first quarter is gonna be really difficult to 250 00:12:37,200 --> 00:12:40,240 Speaker 1: replicate in the second quarter. So much of the returns, 251 00:12:40,320 --> 00:12:42,400 Speaker 1: not just in the US equity market, but across all 252 00:12:42,440 --> 00:12:45,840 Speaker 1: regions have really been driven by multiple expansion and not 253 00:12:45,920 --> 00:12:48,840 Speaker 1: so much about an upgrade of fundamentals. So I am 254 00:12:48,960 --> 00:12:51,880 Speaker 1: very focused as companies are reporting their first quarter earnings 255 00:12:52,080 --> 00:12:55,199 Speaker 1: for more positive guidance and for sort of a sense 256 00:12:55,280 --> 00:12:58,120 Speaker 1: that the downward revisions we've had to two thousand nineteen 257 00:12:58,160 --> 00:13:00,720 Speaker 1: expectations are kind of behind us. We're not gonna get 258 00:13:00,720 --> 00:13:05,559 Speaker 1: another big multiple snap back like we had um in 259 00:13:05,679 --> 00:13:08,720 Speaker 1: terms of multiple expansion this year. So so Lift Chairs, 260 00:13:08,760 --> 00:13:10,920 Speaker 1: I should just mention because we've been talking about this 261 00:13:10,960 --> 00:13:14,199 Speaker 1: throughout the day. Lift shares did open up for trading 262 00:13:14,240 --> 00:13:16,920 Speaker 1: on the Nasdaq. They opened at eighty seven dollars and 263 00:13:16,960 --> 00:13:19,120 Speaker 1: twenty four cents to share, a huge pop from the 264 00:13:19,160 --> 00:13:22,040 Speaker 1: seventy two dollars uh that it was initially priced at 265 00:13:22,120 --> 00:13:24,280 Speaker 1: yesterday when it had its I p O And I 266 00:13:24,320 --> 00:13:27,640 Speaker 1: just wonder, Kate, this will be viewed as a huge 267 00:13:27,679 --> 00:13:29,960 Speaker 1: win for the slate of I p O s that 268 00:13:30,120 --> 00:13:32,800 Speaker 1: are lined up for later in this year. I'm thinking Pinterest, 269 00:13:32,880 --> 00:13:36,200 Speaker 1: I'm thinking Uber, I'm thinking Palin here all these big 270 00:13:36,200 --> 00:13:40,439 Speaker 1: tech darlings. Do you view this as a positive sign 271 00:13:40,600 --> 00:13:43,480 Speaker 1: or a negative sign for equity markets? I think there's 272 00:13:43,480 --> 00:13:47,480 Speaker 1: an almost insatiable demand for tech companies. What we need 273 00:13:47,520 --> 00:13:49,160 Speaker 1: to see is that all the companies that come to 274 00:13:49,200 --> 00:13:52,240 Speaker 1: market end up becoming profitable and not just good stories 275 00:13:52,360 --> 00:13:54,400 Speaker 1: or have a good consumer base to begin with. This 276 00:13:54,480 --> 00:13:56,960 Speaker 1: is a story about sustainability. At this point in the cycle. 277 00:13:57,280 --> 00:13:59,800 Speaker 1: We're not in the early stages where at the later stages, 278 00:14:00,160 --> 00:14:02,440 Speaker 1: you know, once we get you know, these shares treating, 279 00:14:02,440 --> 00:14:04,560 Speaker 1: it's going to be a show me moment, I say, 280 00:14:04,559 --> 00:14:06,800 Speaker 1: over the coming quarters. So I'm not going to comment 281 00:14:06,840 --> 00:14:09,360 Speaker 1: specifically on LIFT, but to say, you know, we are 282 00:14:09,679 --> 00:14:12,679 Speaker 1: long term roles on technology. We see a lot of 283 00:14:12,720 --> 00:14:15,240 Speaker 1: these companies coming to market. It's kind of broadening the 284 00:14:15,360 --> 00:14:18,320 Speaker 1: landscape for that sector. But we really want to see 285 00:14:18,360 --> 00:14:22,480 Speaker 1: them earn good money and earn it through slower growth periods. 286 00:14:22,600 --> 00:14:25,320 Speaker 1: Can you imagine that that's actually something that investors care 287 00:14:25,360 --> 00:14:27,440 Speaker 1: about making money? I mean, he's sitting in I don't 288 00:14:27,440 --> 00:14:28,760 Speaker 1: know if Kate was in the New York lunch or 289 00:14:28,760 --> 00:14:30,920 Speaker 1: there's probably hundreds of investors. I wonder if people were 290 00:14:30,920 --> 00:14:33,160 Speaker 1: really pushing back on the profitability. It doesn't seem the 291 00:14:33,280 --> 00:14:35,920 Speaker 1: lack thereof the lack thereof the lack thereof So okay, 292 00:14:35,960 --> 00:14:37,400 Speaker 1: you know, one of the things that's been driving the 293 00:14:37,440 --> 00:14:39,960 Speaker 1: market this year and arguably pushed it down in the 294 00:14:39,960 --> 00:14:43,280 Speaker 1: fourth quarter last year, or some of the not non 295 00:14:43,360 --> 00:14:45,840 Speaker 1: earnings things, some of the geo political issues, you know, 296 00:14:45,920 --> 00:14:48,760 Speaker 1: and one of the things is trade for example. So 297 00:14:48,840 --> 00:14:50,600 Speaker 1: I mean, I know, we're our folks are over in 298 00:14:50,720 --> 00:14:53,240 Speaker 1: China right now. How important is that still to the 299 00:14:53,280 --> 00:14:56,920 Speaker 1: market to get something done with China, something meaningful. I 300 00:14:56,920 --> 00:14:59,360 Speaker 1: think it's incredibly important. And here's what I would say. 301 00:15:00,440 --> 00:15:03,640 Speaker 1: We've had a real repricing of the US China risk, 302 00:15:04,000 --> 00:15:06,880 Speaker 1: not just the tension around trade, but also the overall 303 00:15:06,920 --> 00:15:09,440 Speaker 1: relationship between the two countries. You know, in the last 304 00:15:09,520 --> 00:15:12,280 Speaker 1: three months, certainly that was a downward pressure on the 305 00:15:12,320 --> 00:15:14,920 Speaker 1: market in the fourth quarter. We don't want the market 306 00:15:14,960 --> 00:15:17,680 Speaker 1: to become complacent about this though. Uh. If we get 307 00:15:17,680 --> 00:15:20,960 Speaker 1: an agreement that's not substantial or that doesn't really dig 308 00:15:20,960 --> 00:15:23,880 Speaker 1: get some of the deep issues between the two countries, 309 00:15:24,200 --> 00:15:27,440 Speaker 1: then we're going to be constantly revisiting, um the relationship 310 00:15:27,520 --> 00:15:31,080 Speaker 1: and trade for many quarters to come. So look, as 311 00:15:31,080 --> 00:15:33,800 Speaker 1: I think about the next couple of weeks, Uh, we 312 00:15:33,840 --> 00:15:36,760 Speaker 1: need to see something that is you know, more than surface. 313 00:15:37,000 --> 00:15:39,640 Speaker 1: We need to see something that's more sustainable. It seems 314 00:15:39,640 --> 00:15:41,640 Speaker 1: that both the US and China are looking to sit 315 00:15:41,640 --> 00:15:43,600 Speaker 1: at the table together for sustained periods of time, So 316 00:15:43,640 --> 00:15:46,880 Speaker 1: that's encouraging. But if something doesn't manifest, I'd say the 317 00:15:46,960 --> 00:15:49,400 Speaker 1: left tail on this trade is pretty big, um, and 318 00:15:49,440 --> 00:15:51,080 Speaker 1: you could see some of the steam come out of 319 00:15:51,120 --> 00:15:54,400 Speaker 1: the market, all right, So that potentially could be a 320 00:15:54,440 --> 00:15:57,880 Speaker 1: wild card. I'm curious about a call that you made 321 00:15:57,920 --> 00:16:01,040 Speaker 1: recently in a report that you helped call her where 322 00:16:01,080 --> 00:16:04,280 Speaker 1: you still see a value in having a substantial allocation 323 00:16:04,280 --> 00:16:07,080 Speaker 1: to government bonds even at yields that are this load. 324 00:16:07,080 --> 00:16:09,600 Speaker 1: Do you stand by that? Why? Look, this is about 325 00:16:09,800 --> 00:16:12,960 Speaker 1: overall portfolio construction, like look on an equity strategist, but 326 00:16:13,000 --> 00:16:15,480 Speaker 1: I come from a macro background, and I understand that 327 00:16:15,520 --> 00:16:16,920 Speaker 1: at this point in the cycle you need to have 328 00:16:16,960 --> 00:16:21,200 Speaker 1: a pretty good balance between risk and reward. And uh, 329 00:16:21,480 --> 00:16:24,160 Speaker 1: we're recommending still an overweight to equities and to US 330 00:16:24,200 --> 00:16:27,120 Speaker 1: and emerging market equities in particular, but also to sort 331 00:16:27,160 --> 00:16:30,200 Speaker 1: of balance out your portfolio by saying, you know, it 332 00:16:30,280 --> 00:16:32,760 Speaker 1: makes sense to own treasuries at this point in both 333 00:16:32,760 --> 00:16:35,440 Speaker 1: the business and a market cycle. Where like, what ma Charity, 334 00:16:36,240 --> 00:16:39,000 Speaker 1: So we've had a pretty big move in the last 335 00:16:39,480 --> 00:16:42,520 Speaker 1: week and have two weeks so no value is a 336 00:16:42,520 --> 00:16:45,200 Speaker 1: little less exciting than it had been. So she's saying, 337 00:16:45,240 --> 00:16:50,200 Speaker 1: short en up. That's basically yeah, that is exactly what 338 00:16:50,240 --> 00:16:53,040 Speaker 1: I'm saying, Um, you know that, and that this move 339 00:16:53,080 --> 00:16:56,000 Speaker 1: actually says, you know, sending different signals to different risk, 340 00:16:56,040 --> 00:16:59,440 Speaker 1: ASCID markets, etcetera. But that doesn't mean we shouldn't own 341 00:16:59,640 --> 00:17:02,200 Speaker 1: treasure rays as a balance the to the equity part. 342 00:17:02,640 --> 00:17:05,399 Speaker 1: Given the dovish tilt by the FED, we've seen a 343 00:17:05,400 --> 00:17:08,520 Speaker 1: lot of the risky assets performed well, the high old bonds, 344 00:17:08,720 --> 00:17:11,119 Speaker 1: emerging markets. What is your view on some of that 345 00:17:11,240 --> 00:17:12,960 Speaker 1: pushing out on the risk curve a little bit. Given 346 00:17:12,960 --> 00:17:15,000 Speaker 1: the performance that we've had you know, it's frustrating a 347 00:17:15,000 --> 00:17:16,879 Speaker 1: little bit because you think about the last decade and 348 00:17:16,920 --> 00:17:19,560 Speaker 1: we've wanted to get to a period where the market 349 00:17:19,600 --> 00:17:25,080 Speaker 1: was obsessing less about fed moves, fed language, fed body 350 00:17:25,240 --> 00:17:29,200 Speaker 1: language and and all sorry yeah, and overall central bank tone. 351 00:17:29,600 --> 00:17:32,399 Speaker 1: And you know, the frustrating thing here is that we 352 00:17:32,440 --> 00:17:36,440 Speaker 1: are still incredibly focused on every bit of news we 353 00:17:36,520 --> 00:17:39,720 Speaker 1: get from policymakers. There was a former boss of mine 354 00:17:39,760 --> 00:17:43,680 Speaker 1: that used to say, uh, markets stop panicking when policymakers 355 00:17:43,680 --> 00:17:45,520 Speaker 1: start panicking. And I think that's what we've had a 356 00:17:45,560 --> 00:17:47,399 Speaker 1: little bit over the last three to four months. The 357 00:17:47,520 --> 00:17:50,800 Speaker 1: shift to dovishness has made markets feel more confident. But 358 00:17:50,840 --> 00:17:53,639 Speaker 1: I would sort of note, you know, we don't we 359 00:17:53,680 --> 00:17:56,159 Speaker 1: don't expect we're going to be in a contraction in 360 00:17:56,240 --> 00:17:58,840 Speaker 1: the US economy or the global economy. We're still in 361 00:17:58,880 --> 00:18:01,919 Speaker 1: pretty good shape. And I think the balance of risks 362 00:18:01,960 --> 00:18:05,200 Speaker 1: around the next rate move UH is not being appreciated 363 00:18:05,200 --> 00:18:07,199 Speaker 1: by the market. That's a nice way of saying the 364 00:18:07,200 --> 00:18:09,400 Speaker 1: markets pricing and cuts when we don't think that's likely 365 00:18:09,400 --> 00:18:12,240 Speaker 1: in the near term. Kate, since we are here at 366 00:18:12,400 --> 00:18:15,240 Speaker 1: the Quinnipiac Game Forum with all of these students here, 367 00:18:15,880 --> 00:18:20,000 Speaker 1: what advice would you give someone starting out in finance. Yeah, 368 00:18:20,040 --> 00:18:21,800 Speaker 1: I think the biggest piece of advice I would give 369 00:18:21,880 --> 00:18:24,400 Speaker 1: is to stay really open minded. Our industry is changing. 370 00:18:24,480 --> 00:18:26,679 Speaker 1: The way that we invest today is so different than 371 00:18:26,720 --> 00:18:29,320 Speaker 1: we did it ten years ago or twenty years ago. Uh, 372 00:18:29,359 --> 00:18:33,000 Speaker 1: the kinds of information we incorporate into our investment process. Uh, 373 00:18:33,040 --> 00:18:35,679 Speaker 1: the flexibility you need to have. And so you know, 374 00:18:35,840 --> 00:18:38,920 Speaker 1: I'm completely blown away by how many students are here 375 00:18:38,960 --> 00:18:41,840 Speaker 1: and their passion for investing already. UM, but as if 376 00:18:41,840 --> 00:18:44,320 Speaker 1: they think about their careers, they need to stay really 377 00:18:44,359 --> 00:18:48,320 Speaker 1: open minded. UM as this industry changes. I've pivoted a 378 00:18:48,359 --> 00:18:50,080 Speaker 1: couple of times. I'm sure I still will in the 379 00:18:50,520 --> 00:18:53,440 Speaker 1: balance of my career. UM. And to be really willing 380 00:18:53,440 --> 00:18:55,560 Speaker 1: to sort of disrupt your own process. Don't get stuck 381 00:18:55,560 --> 00:18:58,040 Speaker 1: on analyzing a stock or an asset class in a 382 00:18:58,119 --> 00:19:01,200 Speaker 1: very specific way. Be really will to take into new information. 383 00:19:01,600 --> 00:19:03,760 Speaker 1: Kate Moore, we always love having you on. Thank you 384 00:19:03,840 --> 00:19:05,920 Speaker 1: so much for being with us. Kate Moore is chief 385 00:19:06,119 --> 00:19:09,439 Speaker 1: was equity strategist for Black Rock with nearly six trillion 386 00:19:09,480 --> 00:19:29,320 Speaker 1: dollars of assets under management. Boy, the SMP is up 387 00:19:30,160 --> 00:19:33,000 Speaker 1: year to date. It seems like you know everybody's making money, 388 00:19:33,000 --> 00:19:35,320 Speaker 1: but one sector of the market that is just getting 389 00:19:35,320 --> 00:19:39,080 Speaker 1: cloberts healthcare just news, you know, I guess most recently 390 00:19:39,160 --> 00:19:42,600 Speaker 1: news that the Trump administration is renewing is it's pushed 391 00:19:42,600 --> 00:19:45,239 Speaker 1: to eliminate obombacare. To get a sense of kind of 392 00:19:45,280 --> 00:19:47,880 Speaker 1: what is going on in healthcare and how to view 393 00:19:47,920 --> 00:19:50,840 Speaker 1: the sector going forward, to welcome Aaron Gibbs. Aaron is 394 00:19:50,840 --> 00:19:55,359 Speaker 1: a portfolio manager at SMP Advisory Services. She joins us 395 00:19:55,359 --> 00:19:59,200 Speaker 1: here in New York at the Quinnipiac Game Conference. Aaron, 396 00:19:59,200 --> 00:20:02,800 Speaker 1: thanks so much for joy us. So this seems like 397 00:20:02,840 --> 00:20:06,440 Speaker 1: a secular concern and overhang for this sector. How should 398 00:20:06,480 --> 00:20:09,359 Speaker 1: investors approach healthcare? So what you really need to do 399 00:20:09,440 --> 00:20:12,000 Speaker 1: is break it down in between the industries, because a 400 00:20:12,040 --> 00:20:14,840 Speaker 1: few of the industries are what's really dragging down the 401 00:20:15,000 --> 00:20:18,320 Speaker 1: entire sector, specifically all the managed care companies. So your 402 00:20:18,359 --> 00:20:22,760 Speaker 1: company is like your stevs and um uh senting anything 403 00:20:22,760 --> 00:20:26,080 Speaker 1: that has a lot of exposure to Medicaid that's been 404 00:20:26,119 --> 00:20:30,040 Speaker 1: really hurt um. Now, there are some areas like biotech 405 00:20:30,119 --> 00:20:32,560 Speaker 1: that are really don't have so much to do with 406 00:20:32,600 --> 00:20:36,880 Speaker 1: the big headlines. It's more about, you know, failing drug trials. 407 00:20:36,920 --> 00:20:39,480 Speaker 1: So it's it's tough to say that. You know, this 408 00:20:39,560 --> 00:20:41,879 Speaker 1: is all of healthcare at the sector is just getting 409 00:20:41,960 --> 00:20:45,000 Speaker 1: hurt by the headlines. UM. A couple of weeks ago, 410 00:20:45,280 --> 00:20:47,360 Speaker 1: they were actually being helped by some of the Medicare 411 00:20:47,400 --> 00:20:49,719 Speaker 1: for All on the Democratic side. So we've got this 412 00:20:49,800 --> 00:20:53,480 Speaker 1: whiplash constantly going back and forth. Ultimately, that leads to 413 00:20:53,520 --> 00:20:57,600 Speaker 1: a lot of uncertainty about any managed care providers. I'd 414 00:20:57,600 --> 00:21:00,240 Speaker 1: say the one safe spot for most of it is 415 00:21:00,440 --> 00:21:05,200 Speaker 1: big pharma. Uh. They are just slow and steady. Their 416 00:21:05,280 --> 00:21:07,600 Speaker 1: profits tend to be so large that they're not going 417 00:21:07,640 --> 00:21:11,159 Speaker 1: to be massively hit by changes in Medicare or you know, 418 00:21:11,240 --> 00:21:14,320 Speaker 1: a few million people here they're subscribing. Uh. And so 419 00:21:14,440 --> 00:21:16,960 Speaker 1: that is one safety area. And another area that we 420 00:21:17,040 --> 00:21:21,720 Speaker 1: still like are the life sciences, the technology, the analytics. UM. Again, 421 00:21:21,760 --> 00:21:23,919 Speaker 1: people are still going to be using those products, and 422 00:21:23,960 --> 00:21:27,080 Speaker 1: that's one area of really high growth that hasn't been 423 00:21:27,160 --> 00:21:30,040 Speaker 1: hit even half. It's hard. Yeah, I understand the reluctance 424 00:21:30,119 --> 00:21:33,880 Speaker 1: to bed on policy and politics. It seems like that 425 00:21:34,080 --> 00:21:38,560 Speaker 1: is a rather fickle type of assessment. But here we 426 00:21:38,640 --> 00:21:42,840 Speaker 1: are the health insurance industry. Health insurance stocks have lost 427 00:21:42,880 --> 00:21:46,600 Speaker 1: about forty billion dollars of market value in the past 428 00:21:46,800 --> 00:21:50,320 Speaker 1: month based on some of the news that we've been hearing. 429 00:21:50,359 --> 00:21:52,480 Speaker 1: At what point do you say, all right, this is 430 00:21:52,480 --> 00:21:54,960 Speaker 1: pricing in a lot of bad stuff. It kind of 431 00:21:54,960 --> 00:21:57,600 Speaker 1: seems like a buy right now. So not right now, 432 00:21:57,640 --> 00:22:01,119 Speaker 1: and so particularly looking at any of the health insurers 433 00:22:01,240 --> 00:22:05,240 Speaker 1: managed care that that entire group um right now, we 434 00:22:05,480 --> 00:22:08,800 Speaker 1: don't see a bottom just yet. Certainly the valuations were 435 00:22:08,840 --> 00:22:12,119 Speaker 1: looking interactive. They're trading well below their three year averages. 436 00:22:12,600 --> 00:22:15,840 Speaker 1: In fact, the actually the health insurers have the second 437 00:22:15,920 --> 00:22:21,000 Speaker 1: highest expected earnings growth out of the healthcare sector. So fundamentally, 438 00:22:21,359 --> 00:22:25,359 Speaker 1: at least the expectations still to date are looking very good. 439 00:22:25,400 --> 00:22:27,960 Speaker 1: But obviously that can change dramatically if any of these 440 00:22:28,080 --> 00:22:31,440 Speaker 1: come into play. So I'd say until some of the uncertainty, 441 00:22:31,560 --> 00:22:34,560 Speaker 1: until some of these headlines start dying down, we can 442 00:22:34,600 --> 00:22:37,719 Speaker 1: still see some more downside. I would not say that 443 00:22:37,720 --> 00:22:42,040 Speaker 1: this is necessarily the point to get in, uh, particularly 444 00:22:42,080 --> 00:22:45,280 Speaker 1: those companies that have large exposure to Medicaid. It's interesting 445 00:22:45,359 --> 00:22:47,320 Speaker 1: least a quota that forty billion dollar number. I was 446 00:22:47,359 --> 00:22:49,960 Speaker 1: actually taken aback about how much some of the sectors 447 00:22:50,040 --> 00:22:53,199 Speaker 1: within healthcare have actually traded off on this concern that 448 00:22:53,240 --> 00:22:55,600 Speaker 1: there might be a rollback of Obamacare because with the 449 00:22:55,640 --> 00:22:58,879 Speaker 1: Democrats now controlling the House, it just didn't seem very likely. 450 00:22:58,960 --> 00:23:03,040 Speaker 1: But the markets certainly put some some stock into that. Well, 451 00:23:03,080 --> 00:23:04,800 Speaker 1: I mean a lot of it was just sort of 452 00:23:04,840 --> 00:23:06,680 Speaker 1: the decline that we had in the beginning of March, 453 00:23:06,720 --> 00:23:08,560 Speaker 1: so that was just more of the general market. If 454 00:23:08,560 --> 00:23:10,520 Speaker 1: you just looked at the past week where this has 455 00:23:10,560 --> 00:23:13,480 Speaker 1: actually become part of the headlines, it's really just the 456 00:23:13,520 --> 00:23:15,880 Speaker 1: managed care that has been down in the past five days. 457 00:23:15,880 --> 00:23:18,119 Speaker 1: So if you break it down between like market, what 458 00:23:18,280 --> 00:23:22,040 Speaker 1: some markets going on in healthcare, it's it's really just 459 00:23:22,080 --> 00:23:25,639 Speaker 1: been the past. It's been the managed care companies, biotech, pharma, 460 00:23:26,119 --> 00:23:29,280 Speaker 1: a lot of these companies, life sciences. They've actually been 461 00:23:29,280 --> 00:23:32,280 Speaker 1: holding up pretty well for the past five days. You know, 462 00:23:32,440 --> 00:23:34,800 Speaker 1: you talked about biotech and how it can be really 463 00:23:34,880 --> 00:23:36,840 Speaker 1: hit or miss right depending on a lot of these trials. 464 00:23:37,080 --> 00:23:39,359 Speaker 1: How do you even assess that unless you've got you know, 465 00:23:39,400 --> 00:23:43,520 Speaker 1: a doctorate in US in in research and medical research. 466 00:23:43,600 --> 00:23:47,600 Speaker 1: I mean, and even then, uh so, truthfully, so we 467 00:23:47,600 --> 00:23:51,480 Speaker 1: we are value investors and I also have a quantitative background. 468 00:23:51,680 --> 00:23:54,680 Speaker 1: So yes, biotech is actually one area that I tend 469 00:23:54,680 --> 00:23:59,040 Speaker 1: to avoid because how can I possibly manage or estimate 470 00:23:59,520 --> 00:24:02,000 Speaker 1: or value rate in the company when they're supposed to 471 00:24:02,040 --> 00:24:04,880 Speaker 1: lose money for three years and then babe, they hit 472 00:24:04,920 --> 00:24:07,440 Speaker 1: it big. So yeah, I actually think this is one 473 00:24:07,480 --> 00:24:09,879 Speaker 1: area that I I highly recommend that it needs to 474 00:24:09,920 --> 00:24:13,199 Speaker 1: be a fundamental analyst really with a PhD. Actually have 475 00:24:13,240 --> 00:24:15,200 Speaker 1: a couple of friends that are in that space that 476 00:24:15,280 --> 00:24:18,720 Speaker 1: all have PhD and D it's crazy exactly, and so 477 00:24:18,960 --> 00:24:20,800 Speaker 1: they're the ones that I go to advice when it 478 00:24:20,880 --> 00:24:23,760 Speaker 1: comes to biotech, not a quant like me. So I'm 479 00:24:23,800 --> 00:24:26,159 Speaker 1: not going to give any DIK stock picks on bios. 480 00:24:26,160 --> 00:24:27,919 Speaker 1: What's interesting, you know, one of the other themes, And 481 00:24:27,960 --> 00:24:30,360 Speaker 1: I agree that's it seems like a casino on those 482 00:24:30,400 --> 00:24:32,760 Speaker 1: biotech stocks, you know, kind of a We saw Biogen 483 00:24:32,920 --> 00:24:35,400 Speaker 1: just with their Alzheimer's drug a couple of weeks ago 484 00:24:35,440 --> 00:24:37,520 Speaker 1: with the stock yeah and that and that pulled down 485 00:24:37,520 --> 00:24:40,720 Speaker 1: the entire industry for that week, right, So it's very difficult. 486 00:24:40,920 --> 00:24:43,399 Speaker 1: One of the other big themes in healthcare that's just 487 00:24:43,440 --> 00:24:45,080 Speaker 1: been there as long as I've looked at the sector's 488 00:24:45,200 --> 00:24:47,320 Speaker 1: m and a um, you know, we see you know, 489 00:24:47,359 --> 00:24:50,680 Speaker 1: going after big farmer companies buying biotech, buying drugs, buying 490 00:24:50,680 --> 00:24:53,600 Speaker 1: pipe pipeline. Is that still a theme that you think 491 00:24:53,680 --> 00:24:57,040 Speaker 1: is prevalent for this healthcare sector going forward. I know 492 00:24:57,359 --> 00:25:00,600 Speaker 1: a lot of big farmer has stopped, has been pulling back. UM. 493 00:25:01,040 --> 00:25:03,560 Speaker 1: You know, they they're somewhat saturated than some of the 494 00:25:03,680 --> 00:25:07,040 Speaker 1: M and A. They're being more particular. UM. Also a 495 00:25:07,080 --> 00:25:09,840 Speaker 1: lot of biodects of finding that they're able to raise 496 00:25:10,000 --> 00:25:12,600 Speaker 1: enough money in private equity in order to I p 497 00:25:12,720 --> 00:25:15,640 Speaker 1: O eventually until they have a viable product line. So 498 00:25:15,800 --> 00:25:18,399 Speaker 1: I don't see that as being as big of a 499 00:25:18,440 --> 00:25:23,119 Speaker 1: trend UM with with the big pharmaceuticals UM. What I 500 00:25:23,240 --> 00:25:27,000 Speaker 1: do see more is the life sciences UH, the analytics, 501 00:25:27,520 --> 00:25:31,840 Speaker 1: medical equipment UM, basically taking some of the human element 502 00:25:31,880 --> 00:25:35,320 Speaker 1: out UH and creating those processes. I see that as 503 00:25:35,359 --> 00:25:38,159 Speaker 1: a big area of growth. We're talking with Aaron Gibbs, 504 00:25:38,200 --> 00:25:42,560 Speaker 1: portfolio manager focused on equities for SMP Investment Advisory Services 505 00:25:42,680 --> 00:25:46,800 Speaker 1: here at the ninth annual Quinipiac Game Conference and just 506 00:25:46,920 --> 00:25:49,040 Speaker 1: give you a sense we're ending the quarter on a 507 00:25:49,119 --> 00:25:51,800 Speaker 1: high note. The NASDAC up about a half a percentage point, 508 00:25:51,840 --> 00:25:56,160 Speaker 1: SMP closing out. It's best quarterly returned since two thousand 509 00:25:56,200 --> 00:25:59,119 Speaker 1: and nine. A lot of people wondering how long this 510 00:25:59,200 --> 00:26:01,000 Speaker 1: can go on. Aaron, I would love to get your 511 00:26:01,040 --> 00:26:03,800 Speaker 1: sense on a broader level of whether there is a 512 00:26:03,800 --> 00:26:07,280 Speaker 1: sense of optimism and whether the technicals seem to indicate 513 00:26:07,280 --> 00:26:09,640 Speaker 1: that this has staying power. So one of the things 514 00:26:09,640 --> 00:26:11,800 Speaker 1: we looked at is that when you've had these really 515 00:26:11,880 --> 00:26:15,159 Speaker 1: great first quarters, what was happening in the year before 516 00:26:15,720 --> 00:26:18,000 Speaker 1: and the thing and you need to take this into context, 517 00:26:18,000 --> 00:26:19,960 Speaker 1: and the big thing is that fourth quarter of last 518 00:26:20,000 --> 00:26:24,920 Speaker 1: year we were down. So when you're this is really 519 00:26:24,960 --> 00:26:28,120 Speaker 1: a rebound quarter, it's not about oh, this is such 520 00:26:28,160 --> 00:26:31,040 Speaker 1: a great economy, we're growing us a fast right, it's 521 00:26:31,119 --> 00:26:34,760 Speaker 1: just undoing the carnage that happened in the prior quarter. 522 00:26:35,359 --> 00:26:37,560 Speaker 1: And when we look at the forecast for this year, 523 00:26:37,600 --> 00:26:41,120 Speaker 1: particularly when we're looking at two and a half profit 524 00:26:41,200 --> 00:26:47,000 Speaker 1: growth for the SMP five, that's below mediocre. So I mean, 525 00:26:47,080 --> 00:26:48,760 Speaker 1: how much you you mentioned a profit growth? I mean 526 00:26:48,800 --> 00:26:51,040 Speaker 1: there's a concern here that obviously the first quarter earnings 527 00:26:51,040 --> 00:26:54,359 Speaker 1: we know across will not be good second quarter also, 528 00:26:54,600 --> 00:26:57,639 Speaker 1: so you might have that earnings recession that people talk about. 529 00:26:58,200 --> 00:27:00,320 Speaker 1: Yet people a lot of investors are hanging had on 530 00:27:00,440 --> 00:27:02,919 Speaker 1: improvement in the second half of the year. Are you 531 00:27:02,960 --> 00:27:05,400 Speaker 1: in that camp as well? Certainly, I mean we're looking 532 00:27:05,400 --> 00:27:08,080 Speaker 1: at contraction in the first half, so I mean i'd 533 00:27:08,080 --> 00:27:10,159 Speaker 1: certainly hope that we'd at least start to see some 534 00:27:10,200 --> 00:27:12,199 Speaker 1: growth in the second half and at least end up 535 00:27:12,240 --> 00:27:15,479 Speaker 1: somewhat neutral. But for for the most part, are our 536 00:27:15,560 --> 00:27:18,560 Speaker 1: expectations are tempered. We're not saying that we're looking for 537 00:27:18,600 --> 00:27:22,040 Speaker 1: a recession or unnecessarily a down market, um, but given 538 00:27:22,080 --> 00:27:25,000 Speaker 1: that we're already up twelve and a half percent this year, 539 00:27:25,480 --> 00:27:28,960 Speaker 1: I don't maybe we'll end today. I honestly, I'd be 540 00:27:28,960 --> 00:27:31,240 Speaker 1: happy if we could just go home like flat for 541 00:27:31,280 --> 00:27:35,639 Speaker 1: the rest of the year. Just lastly, I want to 542 00:27:35,640 --> 00:27:37,560 Speaker 1: wrap up here with the lift I p O. It 543 00:27:37,600 --> 00:27:39,880 Speaker 1: does seem like it his position to open at eighty 544 00:27:39,960 --> 00:27:43,639 Speaker 1: six dollars a share from the actual I p O 545 00:27:43,720 --> 00:27:45,920 Speaker 1: price of seventy two, so a real nice pop there. 546 00:27:45,960 --> 00:27:47,920 Speaker 1: It hasn't started trading yet, but that seems to be 547 00:27:48,000 --> 00:27:52,439 Speaker 1: the indications. Do you view the sort of roster of 548 00:27:52,480 --> 00:27:53,840 Speaker 1: I p O s that are slated to come to 549 00:27:53,920 --> 00:27:57,280 Speaker 1: market this year is a good sign for just the 550 00:27:57,280 --> 00:28:00,439 Speaker 1: health of the economy, etcetera. Or do you view it 551 00:28:00,480 --> 00:28:03,640 Speaker 1: as a sign of the market peak in general? If 552 00:28:03,680 --> 00:28:06,360 Speaker 1: we're having more more companies come to market, I think 553 00:28:06,400 --> 00:28:09,320 Speaker 1: that's a good thing. I'm personally I do not recommend 554 00:28:09,359 --> 00:28:14,119 Speaker 1: investors get into LIFT, but overall for general markets purrective, certainly, 555 00:28:14,119 --> 00:28:16,120 Speaker 1: I think that's very healthy, much better than what we've 556 00:28:16,119 --> 00:28:18,359 Speaker 1: been seeing in prior years. Aaron Gibbs, thank you so 557 00:28:18,440 --> 00:28:21,159 Speaker 1: much for being with us. A pleasure having you. Aaron Gibbs, 558 00:28:21,280 --> 00:28:25,560 Speaker 1: portfolio manager focused on equities for SAP Investment Advisory Services 559 00:28:25,600 --> 00:28:41,920 Speaker 1: in New York City. You know what, we have a 560 00:28:41,960 --> 00:28:43,920 Speaker 1: lot of guests on who talk about the future of 561 00:28:43,960 --> 00:28:47,400 Speaker 1: finance and what it might look like, the asset management fields, 562 00:28:47,480 --> 00:28:50,400 Speaker 1: the investment banking business. There's no better way to get 563 00:28:50,400 --> 00:28:52,280 Speaker 1: a sense of that to look at the people who 564 00:28:52,320 --> 00:28:55,280 Speaker 1: are going to be running everything UH in the future. 565 00:28:55,440 --> 00:28:57,600 Speaker 1: And so we are very pleased to be joined by 566 00:28:57,840 --> 00:29:01,440 Speaker 1: students of Quinnipiac Business School, as well as the Dean 567 00:29:01,600 --> 00:29:06,120 Speaker 1: and Professor of Finance at Quinnipiac School of Business, Matthew O'Connor, students, 568 00:29:06,160 --> 00:29:10,600 Speaker 1: John Wentz Alessandra Abbess, thank you all for joining us. Matthew, 569 00:29:10,600 --> 00:29:13,280 Speaker 1: I want to start with you about this conference, which 570 00:29:13,280 --> 00:29:16,640 Speaker 1: is organized by students. If I understand this correctly, what 571 00:29:16,880 --> 00:29:19,760 Speaker 1: do you think is the most important thing that they 572 00:29:19,760 --> 00:29:22,560 Speaker 1: get out of it? So well, first of all, thanks 573 00:29:22,600 --> 00:29:24,920 Speaker 1: for having us on this morning. We really appreciate it, 574 00:29:24,960 --> 00:29:27,520 Speaker 1: and I want to welcome everybody to the quinnipi x 575 00:29:27,680 --> 00:29:31,080 Speaker 1: ninth Annual Game Forum. So there's a couple of things 576 00:29:31,080 --> 00:29:33,400 Speaker 1: that we think are great about game and what students 577 00:29:33,400 --> 00:29:35,560 Speaker 1: really get out of it. The first is we're getting 578 00:29:35,560 --> 00:29:37,440 Speaker 1: them out of the classroom and in front of the 579 00:29:37,560 --> 00:29:40,840 Speaker 1: very best minds on Wall Street, and that is an 580 00:29:40,880 --> 00:29:43,840 Speaker 1: incredible learning opportunity for them. So they can compare what 581 00:29:43,880 --> 00:29:46,280 Speaker 1: they've learned in the classroom and see that it's not 582 00:29:46,320 --> 00:29:49,440 Speaker 1: always exactly the same. And they also see that there's 583 00:29:49,480 --> 00:29:52,640 Speaker 1: a wide range of opinions that are expressed throughout the 584 00:29:52,640 --> 00:29:55,520 Speaker 1: panels and the sessions. So that's a great learning opportunity 585 00:29:55,560 --> 00:29:58,080 Speaker 1: for them. But the second thing that's just as important 586 00:29:58,160 --> 00:30:02,320 Speaker 1: is there's about students here and so they're starting to 587 00:30:02,360 --> 00:30:05,280 Speaker 1: make their network and build their network to make connections 588 00:30:05,280 --> 00:30:07,480 Speaker 1: with each other. So we think that's the second most 589 00:30:07,480 --> 00:30:10,560 Speaker 1: important thing about the Game conference. Networking. You can never 590 00:30:10,560 --> 00:30:13,480 Speaker 1: start early nothing networking exactly exactly here it starts a 591 00:30:13,560 --> 00:30:19,040 Speaker 1: kindergartens exactly. So, Alessander, you are a senior, is that right? Yes? Okay, 592 00:30:19,040 --> 00:30:22,440 Speaker 1: so he's a senior majoring in finance. Uh. What is 593 00:30:22,480 --> 00:30:25,120 Speaker 1: your area of interest here today? What do you want 594 00:30:25,120 --> 00:30:26,160 Speaker 1: to hear? What do you want to see? What do 595 00:30:26,160 --> 00:30:28,880 Speaker 1: you want to understand? I'm really interested in seeing more 596 00:30:29,120 --> 00:30:33,080 Speaker 1: UM and hearing more about the global portfolio management UM, 597 00:30:33,160 --> 00:30:37,640 Speaker 1: merging markets and domestic markets UM. I am the portfolio 598 00:30:37,680 --> 00:30:42,040 Speaker 1: manager of the cunoopiak Endowmond offshoot student run portfolio. And uh, 599 00:30:42,160 --> 00:30:44,040 Speaker 1: is that real money? Yes, that's a real money. It's 600 00:30:44,040 --> 00:30:46,080 Speaker 1: two point five million dollars. Oh, that is real money. 601 00:30:46,160 --> 00:30:48,920 Speaker 1: How you doing doing pretty well? Our growth fund is 602 00:30:48,960 --> 00:30:52,400 Speaker 1: up on the year. And uh, John's gonna talk about 603 00:30:52,400 --> 00:30:54,800 Speaker 1: a value portfolio. Oh yeah, we also have a value 604 00:30:54,800 --> 00:30:57,600 Speaker 1: fund that we run. UM. It's larger, it's larger of 605 00:30:57,640 --> 00:31:00,120 Speaker 1: the two funds. But UM compared to the sm P 606 00:31:00,640 --> 00:31:04,960 Speaker 1: it was up versus eleven for the SMP. So you 607 00:31:05,000 --> 00:31:09,479 Speaker 1: know we're seeing out performance are both funds. So now 608 00:31:09,520 --> 00:31:12,120 Speaker 1: it's going well and you're enjoying it. Well, one thing done. 609 00:31:12,640 --> 00:31:15,720 Speaker 1: You're a finance major. Uh, and an accounting minor, And 610 00:31:15,760 --> 00:31:19,400 Speaker 1: I'm wondering, at a time of such flux in the 611 00:31:19,480 --> 00:31:22,560 Speaker 1: finance business, whether it's on the asset management side or 612 00:31:22,760 --> 00:31:27,120 Speaker 1: on the banking side, how does that affect kind of 613 00:31:27,160 --> 00:31:31,239 Speaker 1: how you want to position yourself going into into the business. Um, 614 00:31:31,280 --> 00:31:36,480 Speaker 1: you know, I mean obviously the market today for outgoing 615 00:31:37,120 --> 00:31:39,560 Speaker 1: students going into this field and to finance, it's it's 616 00:31:39,680 --> 00:31:42,640 Speaker 1: very competitive. You really have to know what you're talking about. 617 00:31:42,640 --> 00:31:45,080 Speaker 1: You have to know you know what you're looking at, 618 00:31:45,280 --> 00:31:46,840 Speaker 1: and you have to be able to speak, you know, 619 00:31:47,200 --> 00:31:50,400 Speaker 1: correctly and fluently. And um, I think it's gonna be 620 00:31:50,480 --> 00:31:54,080 Speaker 1: I think it's gonna be difficult going and actually on 621 00:31:54,120 --> 00:31:55,960 Speaker 1: that path and finding what I want to do and 622 00:31:56,040 --> 00:31:57,600 Speaker 1: getting to the point where I want to be at. 623 00:31:58,080 --> 00:31:59,880 Speaker 1: But you know, other than that, I think if I 624 00:32:00,040 --> 00:32:01,920 Speaker 1: it just you know, knows to the grind song like 625 00:32:01,960 --> 00:32:05,160 Speaker 1: I've been doing, and you know, like the like the 626 00:32:05,160 --> 00:32:07,560 Speaker 1: work that Alessandra and I've been doing, I think that 627 00:32:07,600 --> 00:32:11,640 Speaker 1: will ultimately reach my goal of you yep, So so 628 00:32:11,880 --> 00:32:14,480 Speaker 1: diet O'Connor. You know, it seems like when I you know, 629 00:32:14,520 --> 00:32:16,400 Speaker 1: back in my day, it was all about Wall Street, 630 00:32:16,440 --> 00:32:19,480 Speaker 1: all about business school, and now it's tech text, the 631 00:32:19,560 --> 00:32:22,680 Speaker 1: sexy cool thing that a lot of kids going engineering 632 00:32:22,680 --> 00:32:24,880 Speaker 1: and all the kind of how are the business schools adapting? 633 00:32:25,200 --> 00:32:27,120 Speaker 1: So I think they're adapting in a couple of ways. 634 00:32:27,240 --> 00:32:31,640 Speaker 1: Uh so, absolutely right. Tech is critically important, but now 635 00:32:31,680 --> 00:32:34,000 Speaker 1: all of our students are getting a much better grounding 636 00:32:34,080 --> 00:32:37,920 Speaker 1: and in analytics, were introducing things like coding um into 637 00:32:37,920 --> 00:32:40,200 Speaker 1: the business school curricum. We're not expecting them to be 638 00:32:40,320 --> 00:32:42,880 Speaker 1: expert coders, but we want them to be able to 639 00:32:42,880 --> 00:32:45,560 Speaker 1: to understand that and contribute in their firms. So I 640 00:32:45,560 --> 00:32:49,000 Speaker 1: think if we we take the traditional business education, it's 641 00:32:49,000 --> 00:32:52,280 Speaker 1: still critically important, but layer on some of the new things, 642 00:32:52,320 --> 00:32:58,600 Speaker 1: particularly analytics, particularly coding, bring in discussions about fintech. I 643 00:32:58,600 --> 00:33:01,640 Speaker 1: think the students are gonna still be great contributors down 644 00:33:01,720 --> 00:33:06,760 Speaker 1: the road. So, Alessandro, what's been the best performing bet 645 00:33:06,760 --> 00:33:08,720 Speaker 1: that you guys have paid in your portfolio? So, the 646 00:33:08,760 --> 00:33:12,200 Speaker 1: best performing bets so far has been GW Pharmaceuticals. Okay, 647 00:33:12,320 --> 00:33:15,960 Speaker 1: I actually pitched that last semester. We had a one 648 00:33:16,000 --> 00:33:19,920 Speaker 1: twenty entry and we did a trim around. I think 649 00:33:20,000 --> 00:33:23,960 Speaker 1: it was one s. It's it's I'd loved following that 650 00:33:24,000 --> 00:33:27,240 Speaker 1: company at a real passion for it. I researched it 651 00:33:27,280 --> 00:33:30,560 Speaker 1: a lot, and it's paid off straightly. So John's sitting 652 00:33:30,560 --> 00:33:32,400 Speaker 1: in that seat about fifteen minutes ago, was the greatest 653 00:33:32,480 --> 00:33:36,160 Speaker 1: value investor arguably of all time. Bill. Yeah, so Bill 654 00:33:36,240 --> 00:33:43,160 Speaker 1: Miller pick shoes. I guess in fifteen seconds, what was 655 00:33:43,200 --> 00:33:47,000 Speaker 1: the best name so far in your portfolio this year? UM? Overall, todate. 656 00:33:47,280 --> 00:33:49,480 Speaker 1: Microsoft has been a big name in our value portfolio 657 00:33:49,680 --> 00:33:52,920 Speaker 1: year to date. UM. I believe that a lot of 658 00:33:52,960 --> 00:33:55,280 Speaker 1: the tech stocks that we have in the value section 659 00:33:55,800 --> 00:34:00,240 Speaker 1: UM are the outperformers. UM. I believe Microsoft. Your attention 660 00:34:00,320 --> 00:34:02,960 Speaker 1: to Microsoft being a value stock. Matthew O'Connor, Dean and 661 00:34:02,960 --> 00:34:06,440 Speaker 1: Professor of Finance at Quinnipiac School of Business, John Wentz 662 00:34:06,480 --> 00:34:10,160 Speaker 1: and Alessandra Abus, both seniors at the Quinnipiac School of Business, 663 00:34:10,160 --> 00:34:13,279 Speaker 1: thank you all for joining us. Thanks for listening to 664 00:34:13,280 --> 00:34:15,719 Speaker 1: the Bloomberg P and L podcast. You can subscribe and 665 00:34:15,760 --> 00:34:18,920 Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform 666 00:34:18,960 --> 00:34:22,040 Speaker 1: you prefer. I'm Paul Sweeney, I'm on Twitter at pt Sweeney. 667 00:34:22,080 --> 00:34:24,560 Speaker 1: I'm Lisa abram Woyit's I'm on Twitter at Lisa abram 668 00:34:24,600 --> 00:34:27,200 Speaker 1: Woyits one before the podcast. You can always catch us 669 00:34:27,280 --> 00:34:28,880 Speaker 1: worldwide on Bloomberg Radio