LIVE MARKETS-Investors should consider big banks and companies in AI food chain, says Hightower's Link
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INVESTORS SHOULD CONSIDER BIG BANKS AND COMPANIES IN AI FOOD CHAIN - HIGHTOWER'S LINK
Investors looking for opportunities in the current environment should consider the U.S. financial sector, particularly big banks, and companies in the infrastructure of artificial intelligence, said Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors, in a Reuters interview.
Markets are grappling with uncertainty from the ongoing Iran conflict as well as a continuing pullback from leading technology companies - including the so-called Magnificent Seven stocks such as Nvidia NVDA.O, Microsoft MSFT.O and Meta Platforms META.O - which have been at the forefront of investment gains in recent years.
The biggest traditional U.S. banks - such as Bank of America BAC.N, JPMorgan JPM.N and Citigroup C.N - provide attractive opportunities at the moment given their diversified financial revenue base and the sheer size of the excess capital they have on their balance sheets, according to Link.
"We just got very positive regulatory rules that were relaxed last week so now these companies are going to be able to actually lend more and even increase dividends and buybacks even more. These stocks got crushed with the whole private market concerns even though they don't have nearly the exposure," Link says.
Furthermore, Link recommends companies involved in the food chain of artificial intelligence, particularly industrial firms building out data centers and those repairing the aging U.S. power grid such as GE Vernova GEV.N, Vertiv VRT.N and Quanta Services PWR.N.
"I would avoid the Mag 7 right now," Link says. "I'm not saying for the long term. I'm just saying they're in the penalty box because they're using all their free cash flow to fund capital expenditure. And the whole reason you own technology companies is for the free cash flow and it's going down. It's not bad but the group is over-owned and there are other places to invest."
Link urges investors to sell assets in Europe given their exposure to the energy crisis and buy investments in Brazil. She also recommends noncyclical sectors such as companies in animal health: Elanco ELAN.N, IDEXX Laboratories IDXX.O and Zoetis ZTS.N.
"About 78% of Americans have a pet and we are spending more money on animal health than we ever did before," Link says.
(Chibuike Oguh)
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