WEBVTT - Point View's Dietze Likes: Financials, Energy, Lat Am (Audio)

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<v Speaker 1>Global business news twenty four hours a day. If Bloomberg

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<v Speaker 1>This is a Bloomberg Business flag from Bloomberg World Handquarters.

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<v Speaker 1>I'm Charlie Pelota. Another move law for US equities. We've

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<v Speaker 1>got thirteen minutes to go ahead of the clothes here.

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<v Speaker 1>Stocks are falling as heightened political and security risks rattle

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<v Speaker 1>emerging markets, adding to the anxiety surrounding the outlook for

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<v Speaker 1>US interest rates. The SMP five hundred indecks down now

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<v Speaker 1>fifteen points at one seventy one, a drop of seven

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<v Speaker 1>tenths of one percent. We've got the down Jones Industrial

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<v Speaker 1>Average down ninety three points, a drop of five tens

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<v Speaker 1>of one percent. Naz stack is down fifty three points,

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<v Speaker 1>a drop of one percent. The tenure down to thirty seconds,

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<v Speaker 1>the yield one point five five percent, Gold down seventeen

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<v Speaker 1>sixty the ounce the thirteen twenty four, a drop of

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<v Speaker 1>one point three percent. And crude oil West Texas Intermediate

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<v Speaker 1>down two point nine percent, declining a barrel to forty

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<v Speaker 1>six dollars. And see, I'm Charlie Pellett, and that's of

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<v Speaker 1>Bloomberg Business Flash. This is taking stuff with Dathlee Hayes

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<v Speaker 1>and Grim Box on Bloomberg Radio. Hi'm Alex Brinka and

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<v Speaker 1>for Kathleen Hayes today. Um, and now we are looking

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<v Speaker 1>for great investment opportunities. Here with a few from his

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<v Speaker 1>book of tricks is David Deet's founder, President and chief

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<v Speaker 1>investment Strategies at Point View Wealth Management, who helps oversee

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<v Speaker 1>about two hundred and fifty million dollars from Summit New Jersey. David,

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<v Speaker 1>where are you finding opportunities these days? Well, we're looking

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<v Speaker 1>at areas which are out of favor, have not performed well.

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<v Speaker 1>The evaluations look attractive, and really there's some reason for

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<v Speaker 1>a callus for better opportunities ahead. The first one I

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<v Speaker 1>would highlight is financial services. Um, there's no bubble there,

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<v Speaker 1>despite the other marketing industries near record highs. In fact,

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<v Speaker 1>this is the one group that has never really recovered.

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<v Speaker 1>And why are they being held back? The first one,

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<v Speaker 1>of course, the first reasons is the low interest rates

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<v Speaker 1>is keeping a lid on their pricing on their loans.

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<v Speaker 1>And certainly by two by Friday at this time, we'll

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<v Speaker 1>know a little bit more about perhaps the trajectory of

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<v Speaker 1>interest rates. Most people think industrates are going up eventually,

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<v Speaker 1>this may be a great opportunity to take positions in

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<v Speaker 1>financial services stocks, particularly banks, to take advantage of potentially

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<v Speaker 1>high strates going forward. Thanks, are we talking US firms? Yeah,

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<v Speaker 1>we're We're we're us focused here. Um, we think there's

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<v Speaker 1>playing opportunities on this side of the pond. One we

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<v Speaker 1>would site is Bank of America. Bank of America has

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<v Speaker 1>one of the best franchises in this country, with a

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<v Speaker 1>coast to coast network of banks uh in all fifty states. Um.

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<v Speaker 1>They cover the gamut from investment banking to retail banking

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<v Speaker 1>and loans and dealing with high net worth investors needs.

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<v Speaker 1>Yet this is a stock to selling it just two

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<v Speaker 1>thirds of tangible book values, suggesting is worth more dead

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<v Speaker 1>than alive. And we think ultimately, if people see a

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<v Speaker 1>path forward on interest rates, people will develop more interest

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<v Speaker 1>in Banks America Aside from fundamentals, Are there other catalysts

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<v Speaker 1>you are considering? What I mean? Morgan Stanley comes to

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<v Speaker 1>mind with value Act getting involved. There are there other

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<v Speaker 1>kind of potential upside catalysts that that play into your

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<v Speaker 1>investment decisions? Yeah? Absolutely, they got The banks got off

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<v Speaker 1>to a bad start this year because of concerns of

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<v Speaker 1>the quality of their energy loans. But since we've seen

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<v Speaker 1>energy prices advance about eight from their Fabruary low, I

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<v Speaker 1>think some of the concerns there has dissipated. Second, of course,

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<v Speaker 1>banks have been your traditional source of dividends, but they've

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<v Speaker 1>been held back because of the need to get permission

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<v Speaker 1>from regulators and past these so called stressed us. Well,

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<v Speaker 1>at the beginning of the summer, all US banks pass

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<v Speaker 1>the stress staff, and their plans to return capital of

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<v Speaker 1>the shareholders in the form of buy backs and dividends

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<v Speaker 1>were all validated by regulars. So I think you could

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<v Speaker 1>easily see a situation where the banks start to pay

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<v Speaker 1>back a lot more of their earnings, and that's going

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<v Speaker 1>to attract investor interests. David Deeds just comparing JP Morgan Chase,

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<v Speaker 1>for example, in Bank of America, the yield a dividend

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<v Speaker 1>yield on Bank of America under two percent, the yield

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<v Speaker 1>for JP Morgan Chasing a nearly three percent. Shares of

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<v Speaker 1>Bank of America down eight and a half percent this year.

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<v Speaker 1>JP Morgan Chase basically unchanged. Why would you favor one

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<v Speaker 1>over the other. Well, because the book value on Bank

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<v Speaker 1>of Americas is two thirds of tangible book value, while

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<v Speaker 1>JP Morgan's is one point three. So I think there's

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<v Speaker 1>a lot of room for ketchup. In Bank of America

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<v Speaker 1>the price the earning free issues. There's somewhat similar suggesting

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<v Speaker 1>that Bank America is paying out a much lower uh

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<v Speaker 1>percentage of their profits in the form of dividends. Again,

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<v Speaker 1>I can see ketchup. So here again investing the laggard

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<v Speaker 1>for a catchup and try and outperform in that manner.

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<v Speaker 1>Outside of financials wherelse are you looking? We like energy?

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<v Speaker 1>Yeah we do. I mean, you know, one of the

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<v Speaker 1>reasons people are fraught within decision now is you've got

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<v Speaker 1>the stock market indessees knocking on all time high levels.

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<v Speaker 1>But of course that's not the case in energy. Anyone

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<v Speaker 1>who needs to know why, Hey, in Arizona you can

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<v Speaker 1>buy gasoline at a dollar eighty one a gall at

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<v Speaker 1>the pump just a couple of years ago, where we're

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<v Speaker 1>about five dollars a gallon. So energy is the the

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<v Speaker 1>anti bubble um And of course economics one oh one.

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<v Speaker 1>So just here's what happens um second year in a

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<v Speaker 1>row of a downtrend in capital expenditures, the number of

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<v Speaker 1>drilling rigs has been flashed basically, UM people have been

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<v Speaker 1>laid off left and right. The banks don't want to

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<v Speaker 1>lens the air anymore. So production and supply is propty.

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<v Speaker 1>So we think we're going to get in to a

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<v Speaker 1>situation now that energy prices about half what they were,

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<v Speaker 1>where that supply demand starts to stabilize and ultimately starts

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<v Speaker 1>to move up. And so we're looking for first class

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<v Speaker 1>energy companies to take advantage of that trend? Are we

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<v Speaker 1>talking old services companies, drillers, explorers? Where do you sign

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<v Speaker 1>the most opportunity? You know, I think across the board.

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<v Speaker 1>One company that we're highlighting here is Baker Hughes. Baker

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<v Speaker 1>Houston's at fifty two dollars to share. Now last year,

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<v Speaker 1>late last year, Haliburn took our run at it. Remember Halibern,

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<v Speaker 1>Baker Hughes, Slamberget, and Weatherford are the big four and

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<v Speaker 1>oil services. So you had the number two and number

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<v Speaker 1>three wanting to get together um to form a much

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<v Speaker 1>bigger competitor to Slamberge. Haliburn offered seventy dollars to share

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<v Speaker 1>for this doctors now fifty two, so you know what

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<v Speaker 1>they thought was fair value. Unfortunately the deal did not

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<v Speaker 1>go through for anty trust concerns. If I think it

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<v Speaker 1>highlighted value, a lot of people who were in a

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<v Speaker 1>short term for that merger have left. And so if

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<v Speaker 1>you're an energy bowl as we are, longer term, we

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<v Speaker 1>think Baker Hughes is an attractive way to play the

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<v Speaker 1>improving investor cast flow into the energy space. When you

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<v Speaker 1>talk about Baker Hughes, the yield there at one point

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<v Speaker 1>three percent, would you consider buying one of the major

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<v Speaker 1>integrated oil companies like Royal Dutch shell shares they're paying

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<v Speaker 1>about seven and a half percent. Well, you know, we

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<v Speaker 1>we liked the sector overall. Again, companies like Royal Dutch

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<v Speaker 1>Total VP they're also under pressure because they're non domestic.

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<v Speaker 1>People are very leery of European stocks. As a result,

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<v Speaker 1>you're getting better dividends. So I mean, the interesting thing

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<v Speaker 1>is you're getting under one percent for a ten year

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<v Speaker 1>English sovereign bond in Royal Dutch, headquartered in in uh

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<v Speaker 1>London is paying seven percent. What am I missing here?

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<v Speaker 1>That looks like an attractive area for a portion of

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<v Speaker 1>your money U S investors, But are there other opportunities

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<v Speaker 1>outside of domestic equities? That you are looking. Yeah. I

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<v Speaker 1>mean one area that we like is emerging markets. Of course,

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<v Speaker 1>you know Latin American stocks, TENNY stocks, they had just

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<v Speaker 1>went gang busters in the first decade of the century,

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<v Speaker 1>but over the last six years they have slowed down dramatically,

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<v Speaker 1>but the fundamentals are still intact. One is they've got

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<v Speaker 1>the younger demographics, so there's much better growth potential there. Um.

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<v Speaker 1>The second, of course, the valuations. We're struggling with some

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<v Speaker 1>of the highest valuations we've seen the last twenty years,

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<v Speaker 1>but the price earning multiples in the emerging markets is

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<v Speaker 1>about ten or eleven, so they're very attractively priced. Um.

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<v Speaker 1>The one area that we're particularly focused on is Latin America.

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<v Speaker 1>Why is commodity based If we're right on our energy call,

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<v Speaker 1>and I think that goes to other commodities like copper

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<v Speaker 1>and iron ore devil buy some stability there right now.

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<v Speaker 1>Of course they're under the cloud because of political turmoil.

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<v Speaker 1>But what we're saying, for example, in Brazil they're impeaching

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<v Speaker 1>the president. Um. Those um, you know, non free market

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<v Speaker 1>forces are being pushed back a little bit, and so

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<v Speaker 1>we think the valuations are attractive in some of those

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<v Speaker 1>areas and can provide a place to put your money

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<v Speaker 1>in this very low interest rate environment, and you're very

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<v Speaker 1>fearful for the high valuations on US domestic stocks, David

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<v Speaker 1>diets I was taking a look courtesy of your research

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<v Speaker 1>at the Fidelity Latin America Fund. The symbol there is

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<v Speaker 1>f l A t X and U to dated something

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<v Speaker 1>more than thirty. Is it too expensive now? No, I

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<v Speaker 1>don't think so, because since two thousand and ten is

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<v Speaker 1>down thirty notwithstanding that recent gain versus about SMP. But

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<v Speaker 1>just drilled down into some of the fundamentals that David

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<v Speaker 1>n yield on that portfolio courtesy Warning Star is four

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<v Speaker 1>point eight percent versus just two point three percent the

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<v Speaker 1>SMP five hundred, and the price to earning creation that

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<v Speaker 1>portfolio versus the SMPS nineteen now ad mentally more volatilely there.

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<v Speaker 1>But for those fearful of the higher valuations in the

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<v Speaker 1>sky high prices here, we think that if you like

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<v Speaker 1>dividend yield, cheaper valuations, this is a home for a

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<v Speaker 1>portion of your money. Thanks very much for spending time

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<v Speaker 1>with us. David Dietz is the founder of the President

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<v Speaker 1>and the chief investment strategist for Point View Wealth Management,

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<v Speaker 1>helping to manage more than two hundred and fifty million dollars.

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<v Speaker 1>Based in Summit, New Jersey. He's speaking about investing in

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<v Speaker 1>energy stocks such as Baker, Hughes, Schlumberge, and Halliburton, as

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<v Speaker 1>well as bank stocks a Bank of America, JP, Morgan, Chase,

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<v Speaker 1>Wells Fargo, and he also likes Latin America with the

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<v Speaker 1>Fidelity Latin America Fund f l A t X. This

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<v Speaker 1>is taking stock on Bloomberg. I'm PIM Fox. I want

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<v Speaker 1>to thank my co host Alex Barrinka. Thanks John, Are

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<v Speaker 1>you kidding? It's wonderful to have you. Alex Barrinka of

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<v Speaker 1>Bloomberg News knows everything there is to know about initial

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<v Speaker 1>public offerings. We're going to take you through to the

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<v Speaker 1>close on Wall Street next