Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you.
Speaker 1: Along with my co host Lisa Brahma Waits. Each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money. Whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. We are so lucky, Paul Uh
Speaker 1: to be able to have the opportunity to sit down
Speaker 1: with Bill Miller, legendary investor widely respected for his ability
Speaker 1: to outperform the SMP five hundred with his like Mason
Speaker 1: Value Trust for fifteen consecutive years, an unheard of track record,
Speaker 1: and he joins us here currently chairman and Chief Investment
Speaker 1: Officer of Miller Value Partners with two billion dollars of
Speaker 1: assets under management. So Bill, thank you for being with us.
Speaker 1: I want to start with this idea of out performance
Speaker 1: because you have achieved that, and I'm wondering as people
Speaker 1: talk about Bill Gross, for example, talking about how it's
Speaker 1: increasingly difficult to outperform in an era of indexed funds,
Speaker 1: do you agree. I think it's always been difficult to
Speaker 1: to outperform. In fact, when Warren Buffett set up his
Speaker 1: partnership in the nineteen fifties, he said that he would
Speaker 1: consider a good result if he could outperform the Dow
Speaker 1: Jones Industrial Index and pointed out that I think there
Speaker 1: might have been eight or eighty five mutual funds at
Speaker 1: the time, and only about five percent of those had
Speaker 1: been able to do that over the past ten years.
Speaker 1: So it's always been difficult. I think it's it's trickier
Speaker 1: now a little bit, not because of index funds, but
Speaker 1: because of the changed i'd say polarity of the market
Speaker 1: after the financial crisis, and specifically that the financial crisis
Speaker 1: was so devastating to so many people that that effectively
Speaker 1: people are risk and volatility phobic, and so whenever there's
Speaker 1: a perception of increased risk or the stock market volatility
Speaker 1: goes up, everybody rushes to quote reduce their risk exposure,
Speaker 1: and that leads to these kind of cascading events like
Speaker 1: we saw in the fourth quarter. Well, but we've seen
Speaker 1: a tremendous move towards passive investment across the investment horizon.
Speaker 1: Maybe that was accelerated a little bit by some of
Speaker 1: the things come out of the financial crisis. Is that
Speaker 1: a trend you expect to continue or do you think
Speaker 1: there's a day for active advisers. I know, I think
Speaker 1: the trend is likely to continue. I saw a study,
Speaker 1: but I think Mercer that UH indicated that the market
Speaker 1: could still performance functions of price discovery if even if
Speaker 1: over seventy percent of the market stock market we're indexed.
Speaker 1: And I think the trend is you know, it's it's
Speaker 1: long standing UM and I think it's there for a
Speaker 1: good reason, which is that UM, it's very difficult to
Speaker 1: outperform and be so many people that are trying to
Speaker 1: outperform are afraid of tracking error going away from the market,
Speaker 1: especially in the downside that they're effectively closet indexers, so
Speaker 1: they're they're basically high priced passive investors. And so the
Speaker 1: movement isn't so much from active to passive, it's from
Speaker 1: expensive passive to cheap passive. Well, it seems like that's
Speaker 1: a no brainer as to what people would want. You know,
Speaker 1: you talked about how it's always been hard to outperform,
Speaker 1: and yet you did so for more than a decade's
Speaker 1: rate with your fund. What's the secret please reveal it
Speaker 1: right now, you know I think that that, Um, I'll
Speaker 1: answered slightly different ways. It in two different ways, right,
Speaker 1: the way in which we invest and people cannot perform
Speaker 1: a wide read different strategies. But we're value investors, and
Speaker 1: so we're looking to buy businesses at a discount or
Speaker 1: what they're worth. And I'd say that the secret is
Speaker 1: that the earnings have very little to do with what
Speaker 1: they're worth. Probably the best example is Amazon, where people
Speaker 1: for fifteen or eighteen years would say, oh, it's grossly
Speaker 1: over priced because they make no money. And my answer
Speaker 1: to that was My answer to that was always, well,
Speaker 1: they came public with a four hundred million dollar market
Speaker 1: value and now they have an eight hundred billion dollar
Speaker 1: market value and they never sold any stock. Where where'd
Speaker 1: that value come from? And the answer is that they
Speaker 1: created a lot of value. They just didn't didn't report
Speaker 1: a lot of profits under gap accounting. And one of
Speaker 1: the one of the things that I try to impress
Speaker 1: upon people is there's a reason it's called generally accepted
Speaker 1: accounting principles and not divinely inspired account of principles or
Speaker 1: accurately conceived the counting. Well, it's interesting as you talk
Speaker 1: about how the amount of money that they actually are
Speaker 1: bringing in any given time isn't necessarily what the company
Speaker 1: is worth. Interesting to say this at a time when
Speaker 1: Lift it just started trading, and we have all of
Speaker 1: the I p O is the big tech tour links
Speaker 1: that are slated to go public later this year. Do
Speaker 1: you think that that's a similar situation to Amazon or
Speaker 1: do you think it's different because they waited for so
Speaker 1: much longer and they're coming it's sort of a peak
Speaker 1: market valuation time. You know, I don't. I haven't looked
Speaker 1: at Lift carefully enough to have an informed judgment about it. Um.
Speaker 1: I think all of those companies that you're talking about
Speaker 1: are are very rapidly growing companies doing something different from
Speaker 1: what other people had done ten or twenty years ago,
Speaker 1: and so they generated a lot of excitement because they've
Speaker 1: grown revenues very rapidly. It's it's less clear to me
Speaker 1: what the economic model of the business is sustainably longer term. So,
Speaker 1: but we've had some tremendous volatility, you know, just over
Speaker 1: the last four or five months. That meltdown in December,
Speaker 1: you know, I guess hitting the trough Christmas Eve and
Speaker 1: then there's a great start to twenty uh nineteen with
Speaker 1: the SMP up over twelve percent. What is your view
Speaker 1: of the market right now? Oh, I think the market
Speaker 1: you know, we're gonna end the quarter up somewhere twelve um.
Speaker 1: I think the market is very attractively priced relative to alternatives.
Speaker 1: You know, the bonds, you what two point four percent something.
Speaker 1: Let's they trade at forty times a cash flow stream
Speaker 1: that isn't gonna grow, and stocks trade around sixteen times
Speaker 1: forward earnings and with a cash flow stream that's gonna
Speaker 1: grow around six percent, generating a lot of free cash.
Speaker 1: So I don't think I don't think that the alternatives
Speaker 1: two stocks are particularly attractive. And I think that stocks,
Speaker 1: by the way, are are actually cheap well explay. There
Speaker 1: are a lot of stocks out there that are very
Speaker 1: cheap and that um that I think are going to
Speaker 1: do very very well in the United States. Oh yeah, yeah,
Speaker 1: names yeah, Well, well, Amazon is still twenty percent off
Speaker 1: the high and if you look at a w S
Speaker 1: Amazon Web Services, and you look at the advertising business
Speaker 1: that they've just recently been growing those two businesses alone
Speaker 1: in about three and a half years. If they're valued
Speaker 1: similarly to what Facebook and Google were valued at when
Speaker 1: they were in the high growth phase or that um,
Speaker 1: something like uh Salesforce is currently valued at those two
Speaker 1: businesses alone will be worth more than Amazon's entire market account.
Speaker 1: What about the banking sector because we've seen them really
Speaker 1: beaten up based on the narrowing yield curve and fears
Speaker 1: of growth. If stocks still look good, then that means
Speaker 1: growth isn't that bad? Attract evaluations there? Oh? Yeah, yeah,
Speaker 1: we love what we love the financials broadly speaking, but
Speaker 1: we young you know, we own JP Morgan, um, we
Speaker 1: do Bank America. Are you adding here? We have we
Speaker 1: have full positions in those. If we didn't have them,
Speaker 1: we would be buying them here. Yeah, what are some
Speaker 1: of the other Is there any sector that just scares
Speaker 1: you right here that whether from a valuation perspective, you
Speaker 1: just you can't get your hands around the fundamentals because
Speaker 1: it seems like again with a twelve percent move here
Speaker 1: and yes and P has been pretty broad performance here,
Speaker 1: I think that you abilities and consumer staples are unattractive
Speaker 1: in here. They're trading high valuations relative history. That's because
Speaker 1: they're they're low volatility, they're predictable, and so they perform
Speaker 1: a risk mitigation function in many people's portfolios. But in
Speaker 1: terms and and so obviously if we if we have
Speaker 1: a deflation, if if the world gets a lot worse,
Speaker 1: they'll continue to do fine. But I think we're going
Speaker 1: to settle in here to a one point eight percent
Speaker 1: to two point one percent growth rate, and and they're
Speaker 1: not competitive in that in that kind of an environment.
Speaker 1: There seems to be a real kind of dissonance in
Speaker 1: the market right now because there are a lot of
Speaker 1: people saying that US equities are still very attractive, But
Speaker 1: then you also have bonds that are gaining dramatically, yields
Speaker 1: dropping and indicating some sort of downturn slow down. Do
Speaker 1: you think that those two ideas are incoherent? That basically,
Speaker 1: you can't have bonds continuing to rally with yields continuing
Speaker 1: to go lower with stocks still ripping higher. Well, I's
Speaker 1: put it in a little broader content. X SO bonds
Speaker 1: had a thirty five year bull market from night one too,
Speaker 1: roughly with two thousand and thirteen fourteen right, and so
Speaker 1: bond bonds are in a bearer market right now. Bond
Speaker 1: yields bottomed in two thousand and sixteen so at one
Speaker 1: one thirty eight, I think and uh, and so now
Speaker 1: we're at two thirty two forty, So yes, they've rallied
Speaker 1: from where they were last year. But I think that
Speaker 1: you know, if you look at stocks, stocks are a
Speaker 1: lot higher than they were in two thousand and sixteen.
Speaker 1: So I think that stocks and that's the reason for
Speaker 1: that is that stocks are more attractive than bonds. And
Speaker 1: and bonds will protect you on uh, you know if
Speaker 1: if we have a recession, but um, they're not going
Speaker 1: to help you. If growth just chugs along at one
Speaker 1: and a half or two percent, you're gonna gradually lose
Speaker 1: money in bonds over time. You mentioned the R word recession.
Speaker 1: What is your view of this inverted yield curve and
Speaker 1: how much concern should investors have as it relates to
Speaker 1: potentially recession? Very little? Um, you know, people are you're
Speaker 1: not thinking about? I think the yield curve in a
Speaker 1: in a way that reflects what's going on there. So
Speaker 1: you've got you've got ten trillion dollars worth of sovereign
Speaker 1: bonds of negative yields, and you've had this financial repression,
Speaker 1: whether it be Japan buying half of the j g
Speaker 1: B s or what DROG did or what the U
Speaker 1: s FET has done, so that that has suppressed yields
Speaker 1: globally and uh and actually us the yields in the
Speaker 1: in the US I think are reflective of that. And
Speaker 1: also to emphasize again, the financial crisis change people's perceptions
Speaker 1: of risk. So here we are at the Game conference.
Speaker 1: They're all these students here who are looking to go
Speaker 1: into the business. What advice would you give a budding
Speaker 1: young professional looking to go into finance right now? Well,
Speaker 1: I think you know, finances. Actually this is not uh,
Speaker 1: something that I think people are happy up to. Finance
Speaker 1: has been gradually gaining market share in the global economy
Speaker 1: for a long time, and it changes the where the
Speaker 1: where the you know, where the action is, so that
Speaker 1: you know, right now the action is in VC and
Speaker 1: startups and things like that. Maybe maybe hedge funds, not
Speaker 1: in mutual funds, which you're in secular decline, But I'd
Speaker 1: say that I'd say the most important thing is get in,
Speaker 1: you know, get a job in finance, and once you're in,
Speaker 1: then it's easier to move around to something that might
Speaker 1: be more attractive. But as it management is still an
Speaker 1: attractive career. Yes, yeah, it's it's it's a good business.
Speaker 1: It's a business it's under secular pressure for the reasons
Speaker 1: I talked about, which is the move to passive uh
Speaker 1: for example. And uh. And I think there's you know,
Speaker 1: there's it's it's highly regulated. So that's that's a negative
Speaker 1: in my in my opinion. But but no, it's it's
Speaker 1: an attractive business. It's interesting you mentioned regulation, and obviously
Speaker 1: a significant layer of regulation came upon the financial services
Speaker 1: industry after the financial crisis. Is that just the new
Speaker 1: way of life? Already? Think that the you know, as
Speaker 1: time moves on, some of those regulations may peel off
Speaker 1: this industry and will allow maybe improve the profitability of
Speaker 1: the financial services industry. Um. You know, I think I
Speaker 1: agree with Jamie Diamond. Uh. And when when Jamie said
Speaker 1: it's it's not a question of more or less regulation,
Speaker 1: it's a question of good or bad regulation. So I
Speaker 1: think we want to get rid of bad regulations and
Speaker 1: good regulations we can have more of those. Bill Miller,
Speaker 1: thank you so much for all the time you've given us.
Speaker 1: We really appreciate it. Bill Miller is chairman and chief
Speaker 1: investment officer at Miller Value Partners. With two billion dollars
Speaker 1: under management. But Bill Miller, legendary investor, he outperformed his
Speaker 1: leg basin value trust outperformed the SMP five hundred benchmark
Speaker 1: for fifteen straight years. It can be done. It's difficult,
Speaker 1: It's always been difficult, but Bill Miller has done it well.
Speaker 1: Today we are closing out what is shapes up to
Speaker 1: be the best quarter performance for the SMP five hundred
Speaker 1: since two thousand nine. The question a lot of investors
Speaker 1: have is what's left to help. We're gonna pose that
Speaker 1: question to our next guest, Kate Moore, Kate's chief equity
Speaker 1: strategist for black Rock with get this assets on the
Speaker 1: management's Lisa six trillion with a T. It's just amazing. Uh.
Speaker 1: Kate joins us here at in New York at the
Speaker 1: ninth annual Quinnipiac Game Conference here in midtown. K thanks
Speaker 1: so much for joining us. So I'll put that question
Speaker 1: to you. God, we've had such a run here this
Speaker 1: first quarter. I think the bulls will tell you yeah,
Speaker 1: but we're just kind of clawing back what we lost
Speaker 1: in the fourth quarter last year. How do you see it?
Speaker 1: Glass half full or half empty? Uh? Glass neutral? At
Speaker 1: the moment. Look, as an equity investor, I think you
Speaker 1: always have to be a little bit of an optimist
Speaker 1: and you have to really look for long term opportunities.
Speaker 1: But I'll be honest with you, as much of a
Speaker 1: bull as I've been over the last ten years this cycle,
Speaker 1: I have to say the run that we have in
Speaker 1: the fourth first quarter is gonna be really difficult to
Speaker 1: replicate in the second quarter. So much of the returns,
Speaker 1: not just in the US equity market, but across all
Speaker 1: regions have really been driven by multiple expansion and not
Speaker 1: so much about an upgrade of fundamentals. So I am
Speaker 1: very focused as companies are reporting their first quarter earnings
Speaker 1: for more positive guidance and for sort of a sense
Speaker 1: that the downward revisions we've had to two thousand nineteen
Speaker 1: expectations are kind of behind us. We're not gonna get
Speaker 1: another big multiple snap back like we had um in
Speaker 1: terms of multiple expansion this year. So so Lift Chairs,
Speaker 1: I should just mention because we've been talking about this
Speaker 1: throughout the day. Lift shares did open up for trading
Speaker 1: on the Nasdaq. They opened at eighty seven dollars and
Speaker 1: twenty four cents to share, a huge pop from the
Speaker 1: seventy two dollars uh that it was initially priced at
Speaker 1: yesterday when it had its I p O And I
Speaker 1: just wonder, Kate, this will be viewed as a huge
Speaker 1: win for the slate of I p O s that
Speaker 1: are lined up for later in this year. I'm thinking Pinterest,
Speaker 1: I'm thinking Uber, I'm thinking Palin here all these big
Speaker 1: tech darlings. Do you view this as a positive sign
Speaker 1: or a negative sign for equity markets? I think there's
Speaker 1: an almost insatiable demand for tech companies. What we need
Speaker 1: to see is that all the companies that come to
Speaker 1: market end up becoming profitable and not just good stories
Speaker 1: or have a good consumer base to begin with. This
Speaker 1: is a story about sustainability. At this point in the cycle.
Speaker 1: We're not in the early stages where at the later stages,
Speaker 1: you know, once we get you know, these shares treating,
Speaker 1: it's going to be a show me moment, I say,
Speaker 1: over the coming quarters. So I'm not going to comment
Speaker 1: specifically on LIFT, but to say, you know, we are
Speaker 1: long term roles on technology. We see a lot of
Speaker 1: these companies coming to market. It's kind of broadening the
Speaker 1: landscape for that sector. But we really want to see
Speaker 1: them earn good money and earn it through slower growth periods.
Speaker 1: Can you imagine that that's actually something that investors care
Speaker 1: about making money? I mean, he's sitting in I don't
Speaker 1: know if Kate was in the New York lunch or
Speaker 1: there's probably hundreds of investors. I wonder if people were
Speaker 1: really pushing back on the profitability. It doesn't seem the
Speaker 1: lack thereof the lack thereof the lack thereof So okay,
Speaker 1: you know, one of the things that's been driving the
Speaker 1: market this year and arguably pushed it down in the
Speaker 1: fourth quarter last year, or some of the not non
Speaker 1: earnings things, some of the geo political issues, you know,
Speaker 1: and one of the things is trade for example. So
Speaker 1: I mean, I know, we're our folks are over in
Speaker 1: China right now. How important is that still to the
Speaker 1: market to get something done with China, something meaningful. I
Speaker 1: think it's incredibly important. And here's what I would say.
Speaker 1: We've had a real repricing of the US China risk,
Speaker 1: not just the tension around trade, but also the overall
Speaker 1: relationship between the two countries. You know, in the last
Speaker 1: three months, certainly that was a downward pressure on the
Speaker 1: market in the fourth quarter. We don't want the market
Speaker 1: to become complacent about this though. Uh. If we get
Speaker 1: an agreement that's not substantial or that doesn't really dig
Speaker 1: get some of the deep issues between the two countries,
Speaker 1: then we're going to be constantly revisiting, um the relationship
Speaker 1: and trade for many quarters to come. So look, as
Speaker 1: I think about the next couple of weeks, Uh, we
Speaker 1: need to see something that is you know, more than surface.
Speaker 1: We need to see something that's more sustainable. It seems
Speaker 1: that both the US and China are looking to sit
Speaker 1: at the table together for sustained periods of time, So
Speaker 1: that's encouraging. But if something doesn't manifest, I'd say the
Speaker 1: left tail on this trade is pretty big, um, and
Speaker 1: you could see some of the steam come out of
Speaker 1: the market, all right, So that potentially could be a
Speaker 1: wild card. I'm curious about a call that you made
Speaker 1: recently in a report that you helped call her where
Speaker 1: you still see a value in having a substantial allocation
Speaker 1: to government bonds even at yields that are this load.
Speaker 1: Do you stand by that? Why? Look, this is about
Speaker 1: overall portfolio construction, like look on an equity strategist, but
Speaker 1: I come from a macro background, and I understand that
Speaker 1: at this point in the cycle you need to have
Speaker 1: a pretty good balance between risk and reward. And uh,
Speaker 1: we're recommending still an overweight to equities and to US
Speaker 1: and emerging market equities in particular, but also to sort
Speaker 1: of balance out your portfolio by saying, you know, it
Speaker 1: makes sense to own treasuries at this point in both
Speaker 1: the business and a market cycle. Where like, what ma Charity,
Speaker 1: So we've had a pretty big move in the last
Speaker 1: week and have two weeks so no value is a
Speaker 1: little less exciting than it had been. So she's saying,
Speaker 1: short en up. That's basically yeah, that is exactly what
Speaker 1: I'm saying, Um, you know that, and that this move
Speaker 1: actually says, you know, sending different signals to different risk,
Speaker 1: ASCID markets, etcetera. But that doesn't mean we shouldn't own
Speaker 1: treasure rays as a balance the to the equity part.
Speaker 1: Given the dovish tilt by the FED, we've seen a
Speaker 1: lot of the risky assets performed well, the high old bonds,
Speaker 1: emerging markets. What is your view on some of that
Speaker 1: pushing out on the risk curve a little bit. Given
Speaker 1: the performance that we've had you know, it's frustrating a
Speaker 1: little bit because you think about the last decade and
Speaker 1: we've wanted to get to a period where the market
Speaker 1: was obsessing less about fed moves, fed language, fed body
Speaker 1: language and and all sorry yeah, and overall central bank tone.
Speaker 1: And you know, the frustrating thing here is that we
Speaker 1: are still incredibly focused on every bit of news we
Speaker 1: get from policymakers. There was a former boss of mine
Speaker 1: that used to say, uh, markets stop panicking when policymakers
Speaker 1: start panicking. And I think that's what we've had a
Speaker 1: little bit over the last three to four months. The
Speaker 1: shift to dovishness has made markets feel more confident. But
Speaker 1: I would sort of note, you know, we don't we
Speaker 1: don't expect we're going to be in a contraction in
Speaker 1: the US economy or the global economy. We're still in
Speaker 1: pretty good shape. And I think the balance of risks
Speaker 1: around the next rate move UH is not being appreciated
Speaker 1: by the market. That's a nice way of saying the
Speaker 1: markets pricing and cuts when we don't think that's likely
Speaker 1: in the near term. Kate, since we are here at
Speaker 1: the Quinnipiac Game Forum with all of these students here,
Speaker 1: what advice would you give someone starting out in finance. Yeah,
Speaker 1: I think the biggest piece of advice I would give
Speaker 1: is to stay really open minded. Our industry is changing.
Speaker 1: The way that we invest today is so different than
Speaker 1: we did it ten years ago or twenty years ago. Uh,
Speaker 1: the kinds of information we incorporate into our investment process. Uh,
Speaker 1: the flexibility you need to have. And so you know,
Speaker 1: I'm completely blown away by how many students are here
Speaker 1: and their passion for investing already. UM, but as if
Speaker 1: they think about their careers, they need to stay really
Speaker 1: open minded. UM as this industry changes. I've pivoted a
Speaker 1: couple of times. I'm sure I still will in the
Speaker 1: balance of my career. UM. And to be really willing
Speaker 1: to sort of disrupt your own process. Don't get stuck
Speaker 1: on analyzing a stock or an asset class in a
Speaker 1: very specific way. Be really will to take into new information.
Speaker 1: Kate Moore, we always love having you on. Thank you
Speaker 1: so much for being with us. Kate Moore is chief
Speaker 1: was equity strategist for Black Rock with nearly six trillion
Speaker 1: dollars of assets under management. Boy, the SMP is up
Speaker 1: year to date. It seems like you know everybody's making money,
Speaker 1: but one sector of the market that is just getting
Speaker 1: cloberts healthcare just news, you know, I guess most recently
Speaker 1: news that the Trump administration is renewing is it's pushed
Speaker 1: to eliminate obombacare. To get a sense of kind of
Speaker 1: what is going on in healthcare and how to view
Speaker 1: the sector going forward, to welcome Aaron Gibbs. Aaron is
Speaker 1: a portfolio manager at SMP Advisory Services. She joins us
Speaker 1: here in New York at the Quinnipiac Game Conference. Aaron,
Speaker 1: thanks so much for joy us. So this seems like
Speaker 1: a secular concern and overhang for this sector. How should
Speaker 1: investors approach healthcare? So what you really need to do
Speaker 1: is break it down in between the industries, because a
Speaker 1: few of the industries are what's really dragging down the
Speaker 1: entire sector, specifically all the managed care companies. So your
Speaker 1: company is like your stevs and um uh senting anything
Speaker 1: that has a lot of exposure to Medicaid that's been
Speaker 1: really hurt um. Now, there are some areas like biotech
Speaker 1: that are really don't have so much to do with
Speaker 1: the big headlines. It's more about, you know, failing drug trials.
Speaker 1: So it's it's tough to say that. You know, this
Speaker 1: is all of healthcare at the sector is just getting
Speaker 1: hurt by the headlines. UM. A couple of weeks ago,
Speaker 1: they were actually being helped by some of the Medicare
Speaker 1: for All on the Democratic side. So we've got this
Speaker 1: whiplash constantly going back and forth. Ultimately, that leads to
Speaker 1: a lot of uncertainty about any managed care providers. I'd
Speaker 1: say the one safe spot for most of it is
Speaker 1: big pharma. Uh. They are just slow and steady. Their
Speaker 1: profits tend to be so large that they're not going
Speaker 1: to be massively hit by changes in Medicare or you know,
Speaker 1: a few million people here they're subscribing. Uh. And so
Speaker 1: that is one safety area. And another area that we
Speaker 1: still like are the life sciences, the technology, the analytics. UM. Again,
Speaker 1: people are still going to be using those products, and
Speaker 1: that's one area of really high growth that hasn't been
Speaker 1: hit even half. It's hard. Yeah, I understand the reluctance
Speaker 1: to bed on policy and politics. It seems like that
Speaker 1: is a rather fickle type of assessment. But here we
Speaker 1: are the health insurance industry. Health insurance stocks have lost
Speaker 1: about forty billion dollars of market value in the past
Speaker 1: month based on some of the news that we've been hearing.
Speaker 1: At what point do you say, all right, this is
Speaker 1: pricing in a lot of bad stuff. It kind of
Speaker 1: seems like a buy right now. So not right now,
Speaker 1: and so particularly looking at any of the health insurers
Speaker 1: managed care that that entire group um right now, we
Speaker 1: don't see a bottom just yet. Certainly the valuations were
Speaker 1: looking interactive. They're trading well below their three year averages.
Speaker 1: In fact, the actually the health insurers have the second
Speaker 1: highest expected earnings growth out of the healthcare sector. So fundamentally,
Speaker 1: at least the expectations still to date are looking very good.
Speaker 1: But obviously that can change dramatically if any of these
Speaker 1: come into play. So I'd say until some of the uncertainty,
Speaker 1: until some of these headlines start dying down, we can
Speaker 1: still see some more downside. I would not say that
Speaker 1: this is necessarily the point to get in, uh, particularly
Speaker 1: those companies that have large exposure to Medicaid. It's interesting
Speaker 1: least a quota that forty billion dollar number. I was
Speaker 1: actually taken aback about how much some of the sectors
Speaker 1: within healthcare have actually traded off on this concern that
Speaker 1: there might be a rollback of Obamacare because with the
Speaker 1: Democrats now controlling the House, it just didn't seem very likely.
Speaker 1: But the markets certainly put some some stock into that. Well,
Speaker 1: I mean a lot of it was just sort of
Speaker 1: the decline that we had in the beginning of March,
Speaker 1: so that was just more of the general market. If
Speaker 1: you just looked at the past week where this has
Speaker 1: actually become part of the headlines, it's really just the
Speaker 1: managed care that has been down in the past five days.
Speaker 1: So if you break it down between like market, what
Speaker 1: some markets going on in healthcare, it's it's really just
Speaker 1: been the past. It's been the managed care companies, biotech, pharma,
Speaker 1: a lot of these companies, life sciences. They've actually been
Speaker 1: holding up pretty well for the past five days. You know,
Speaker 1: you talked about biotech and how it can be really
Speaker 1: hit or miss right depending on a lot of these trials.
Speaker 1: How do you even assess that unless you've got you know,
Speaker 1: a doctorate in US in in research and medical research.
Speaker 1: I mean, and even then, uh so, truthfully, so we
Speaker 1: we are value investors and I also have a quantitative background.
Speaker 1: So yes, biotech is actually one area that I tend
Speaker 1: to avoid because how can I possibly manage or estimate
Speaker 1: or value rate in the company when they're supposed to
Speaker 1: lose money for three years and then babe, they hit
Speaker 1: it big. So yeah, I actually think this is one
Speaker 1: area that I I highly recommend that it needs to
Speaker 1: be a fundamental analyst really with a PhD. Actually have
Speaker 1: a couple of friends that are in that space that
Speaker 1: all have PhD and D it's crazy exactly, and so
Speaker 1: they're the ones that I go to advice when it
Speaker 1: comes to biotech, not a quant like me. So I'm
Speaker 1: not going to give any DIK stock picks on bios.
Speaker 1: What's interesting, you know, one of the other themes, And
Speaker 1: I agree that's it seems like a casino on those
Speaker 1: biotech stocks, you know, kind of a We saw Biogen
Speaker 1: just with their Alzheimer's drug a couple of weeks ago
Speaker 1: with the stock yeah and that and that pulled down
Speaker 1: the entire industry for that week, right, So it's very difficult.
Speaker 1: One of the other big themes in healthcare that's just
Speaker 1: been there as long as I've looked at the sector's
Speaker 1: m and a um, you know, we see you know,
Speaker 1: going after big farmer companies buying biotech, buying drugs, buying
Speaker 1: pipe pipeline. Is that still a theme that you think
Speaker 1: is prevalent for this healthcare sector going forward. I know
Speaker 1: a lot of big farmer has stopped, has been pulling back. UM.
Speaker 1: You know, they they're somewhat saturated than some of the
Speaker 1: M and A. They're being more particular. UM. Also a
Speaker 1: lot of biodects of finding that they're able to raise
Speaker 1: enough money in private equity in order to I p
Speaker 1: O eventually until they have a viable product line. So
Speaker 1: I don't see that as being as big of a
Speaker 1: trend UM with with the big pharmaceuticals UM. What I
Speaker 1: do see more is the life sciences UH, the analytics,
Speaker 1: medical equipment UM, basically taking some of the human element
Speaker 1: out UH and creating those processes. I see that as
Speaker 1: a big area of growth. We're talking with Aaron Gibbs,
Speaker 1: portfolio manager focused on equities for SMP Investment Advisory Services
Speaker 1: here at the ninth annual Quinipiac Game Conference and just
Speaker 1: give you a sense we're ending the quarter on a
Speaker 1: high note. The NASDAC up about a half a percentage point,
Speaker 1: SMP closing out. It's best quarterly returned since two thousand
Speaker 1: and nine. A lot of people wondering how long this
Speaker 1: can go on. Aaron, I would love to get your
Speaker 1: sense on a broader level of whether there is a
Speaker 1: sense of optimism and whether the technicals seem to indicate
Speaker 1: that this has staying power. So one of the things
Speaker 1: we looked at is that when you've had these really
Speaker 1: great first quarters, what was happening in the year before
Speaker 1: and the thing and you need to take this into context,
Speaker 1: and the big thing is that fourth quarter of last
Speaker 1: year we were down. So when you're this is really
Speaker 1: a rebound quarter, it's not about oh, this is such
Speaker 1: a great economy, we're growing us a fast right, it's
Speaker 1: just undoing the carnage that happened in the prior quarter.
Speaker 1: And when we look at the forecast for this year,
Speaker 1: particularly when we're looking at two and a half profit
Speaker 1: growth for the SMP five, that's below mediocre. So I mean,
Speaker 1: how much you you mentioned a profit growth? I mean
Speaker 1: there's a concern here that obviously the first quarter earnings
Speaker 1: we know across will not be good second quarter also,
Speaker 1: so you might have that earnings recession that people talk about.
Speaker 1: Yet people a lot of investors are hanging had on
Speaker 1: improvement in the second half of the year. Are you
Speaker 1: in that camp as well? Certainly, I mean we're looking
Speaker 1: at contraction in the first half, so I mean i'd
Speaker 1: certainly hope that we'd at least start to see some
Speaker 1: growth in the second half and at least end up
Speaker 1: somewhat neutral. But for for the most part, are our
Speaker 1: expectations are tempered. We're not saying that we're looking for
Speaker 1: a recession or unnecessarily a down market, um, but given
Speaker 1: that we're already up twelve and a half percent this year,
Speaker 1: I don't maybe we'll end today. I honestly, I'd be
Speaker 1: happy if we could just go home like flat for
Speaker 1: the rest of the year. Just lastly, I want to
Speaker 1: wrap up here with the lift I p O. It
Speaker 1: does seem like it his position to open at eighty
Speaker 1: six dollars a share from the actual I p O
Speaker 1: price of seventy two, so a real nice pop there.
Speaker 1: It hasn't started trading yet, but that seems to be
Speaker 1: the indications. Do you view the sort of roster of
Speaker 1: I p O s that are slated to come to
Speaker 1: market this year is a good sign for just the
Speaker 1: health of the economy, etcetera. Or do you view it
Speaker 1: as a sign of the market peak in general? If
Speaker 1: we're having more more companies come to market, I think
Speaker 1: that's a good thing. I'm personally I do not recommend
Speaker 1: investors get into LIFT, but overall for general markets purrective, certainly,
Speaker 1: I think that's very healthy, much better than what we've
Speaker 1: been seeing in prior years. Aaron Gibbs, thank you so
Speaker 1: much for being with us. A pleasure having you. Aaron Gibbs,
Speaker 1: portfolio manager focused on equities for SAP Investment Advisory Services
Speaker 1: in New York City. You know what, we have a
Speaker 1: lot of guests on who talk about the future of
Speaker 1: finance and what it might look like, the asset management fields,
Speaker 1: the investment banking business. There's no better way to get
Speaker 1: a sense of that to look at the people who
Speaker 1: are going to be running everything UH in the future.
Speaker 1: And so we are very pleased to be joined by
Speaker 1: students of Quinnipiac Business School, as well as the Dean
Speaker 1: and Professor of Finance at Quinnipiac School of Business, Matthew O'Connor, students,
Speaker 1: John Wentz Alessandra Abbess, thank you all for joining us. Matthew,
Speaker 1: I want to start with you about this conference, which
Speaker 1: is organized by students. If I understand this correctly, what
Speaker 1: do you think is the most important thing that they
Speaker 1: get out of it? So well, first of all, thanks
Speaker 1: for having us on this morning. We really appreciate it,
Speaker 1: and I want to welcome everybody to the quinnipi x
Speaker 1: ninth Annual Game Forum. So there's a couple of things
Speaker 1: that we think are great about game and what students
Speaker 1: really get out of it. The first is we're getting
Speaker 1: them out of the classroom and in front of the
Speaker 1: very best minds on Wall Street, and that is an
Speaker 1: incredible learning opportunity for them. So they can compare what
Speaker 1: they've learned in the classroom and see that it's not
Speaker 1: always exactly the same. And they also see that there's
Speaker 1: a wide range of opinions that are expressed throughout the
Speaker 1: panels and the sessions. So that's a great learning opportunity
Speaker 1: for them. But the second thing that's just as important
Speaker 1: is there's about students here and so they're starting to
Speaker 1: make their network and build their network to make connections
Speaker 1: with each other. So we think that's the second most
Speaker 1: important thing about the Game conference. Networking. You can never
Speaker 1: start early nothing networking exactly exactly here it starts a
Speaker 1: kindergartens exactly. So, Alessander, you are a senior, is that right? Yes? Okay,
Speaker 1: so he's a senior majoring in finance. Uh. What is
Speaker 1: your area of interest here today? What do you want
Speaker 1: to hear? What do you want to see? What do
Speaker 1: you want to understand? I'm really interested in seeing more
Speaker 1: UM and hearing more about the global portfolio management UM,
Speaker 1: merging markets and domestic markets UM. I am the portfolio
Speaker 1: manager of the cunoopiak Endowmond offshoot student run portfolio. And uh,
Speaker 1: is that real money? Yes, that's a real money. It's
Speaker 1: two point five million dollars. Oh, that is real money.
Speaker 1: How you doing doing pretty well? Our growth fund is
Speaker 1: up on the year. And uh, John's gonna talk about
Speaker 1: a value portfolio. Oh yeah, we also have a value
Speaker 1: fund that we run. UM. It's larger, it's larger of
Speaker 1: the two funds. But UM compared to the sm P
Speaker 1: it was up versus eleven for the SMP. So you
Speaker 1: know we're seeing out performance are both funds. So now
Speaker 1: it's going well and you're enjoying it. Well, one thing done.
Speaker 1: You're a finance major. Uh, and an accounting minor, And
Speaker 1: I'm wondering, at a time of such flux in the
Speaker 1: finance business, whether it's on the asset management side or
Speaker 1: on the banking side, how does that affect kind of
Speaker 1: how you want to position yourself going into into the business. Um,
Speaker 1: you know, I mean obviously the market today for outgoing
Speaker 1: students going into this field and to finance, it's it's
Speaker 1: very competitive. You really have to know what you're talking about.
Speaker 1: You have to know you know what you're looking at,
Speaker 1: and you have to be able to speak, you know,
Speaker 1: correctly and fluently. And um, I think it's gonna be
Speaker 1: I think it's gonna be difficult going and actually on
Speaker 1: that path and finding what I want to do and
Speaker 1: getting to the point where I want to be at.
Speaker 1: But you know, other than that, I think if I
Speaker 1: it just you know, knows to the grind song like
Speaker 1: I've been doing, and you know, like the like the
Speaker 1: work that Alessandra and I've been doing, I think that
Speaker 1: will ultimately reach my goal of you yep, So so
Speaker 1: diet O'Connor. You know, it seems like when I you know,
Speaker 1: back in my day, it was all about Wall Street,
Speaker 1: all about business school, and now it's tech text, the
Speaker 1: sexy cool thing that a lot of kids going engineering
Speaker 1: and all the kind of how are the business schools adapting?
Speaker 1: So I think they're adapting in a couple of ways.
Speaker 1: Uh so, absolutely right. Tech is critically important, but now
Speaker 1: all of our students are getting a much better grounding
Speaker 1: and in analytics, were introducing things like coding um into
Speaker 1: the business school curricum. We're not expecting them to be
Speaker 1: expert coders, but we want them to be able to
Speaker 1: to understand that and contribute in their firms. So I
Speaker 1: think if we we take the traditional business education, it's
Speaker 1: still critically important, but layer on some of the new things,
Speaker 1: particularly analytics, particularly coding, bring in discussions about fintech. I
Speaker 1: think the students are gonna still be great contributors down
Speaker 1: the road. So, Alessandro, what's been the best performing bet
Speaker 1: that you guys have paid in your portfolio? So, the
Speaker 1: best performing bets so far has been GW Pharmaceuticals. Okay,
Speaker 1: I actually pitched that last semester. We had a one
Speaker 1: twenty entry and we did a trim around. I think
Speaker 1: it was one s. It's it's I'd loved following that
Speaker 1: company at a real passion for it. I researched it
Speaker 1: a lot, and it's paid off straightly. So John's sitting
Speaker 1: in that seat about fifteen minutes ago, was the greatest
Speaker 1: value investor arguably of all time. Bill. Yeah, so Bill
Speaker 1: Miller pick shoes. I guess in fifteen seconds, what was
Speaker 1: the best name so far in your portfolio this year? UM? Overall, todate.
Speaker 1: Microsoft has been a big name in our value portfolio
Speaker 1: year to date. UM. I believe that a lot of
Speaker 1: the tech stocks that we have in the value section
Speaker 1: UM are the outperformers. UM. I believe Microsoft. Your attention
Speaker 1: to Microsoft being a value stock. Matthew O'Connor, Dean and
Speaker 1: Professor of Finance at Quinnipiac School of Business, John Wentz
Speaker 1: and Alessandra Abus, both seniors at the Quinnipiac School of Business,
Speaker 1: thank you all for joining us. Thanks for listening to
Speaker 1: the Bloomberg P and L podcast. You can subscribe and
Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
Speaker 1: you prefer. I'm Paul Sweeney, I'm on Twitter at pt Sweeney.
Speaker 1: I'm Lisa abram Woyit's I'm on Twitter at Lisa abram
Speaker 1: Woyits one before the podcast. You can always catch us
Speaker 1: worldwide on Bloomberg Radio