joining us now to talk about his outlook for the remainder of the year as well as several
top stocks to watch is randy watts the chief investment strategist of o'neill global advisors
thanks so much for joining us today randy thanks for having me again alyssa 2020 has no doubt been
a roller coaster ride and it is not over yet so with the uncertainties that are out there
how should investors take a step back and approach their portfolios for the rest of the year i would
say right now the market's been volatile and it's been volatile because investors are dealing with
three uncertainties the first uncertainty is that covid cases are ramping not only in the us
but really around the world in particular with europe and so i think there's fears of
additional lockdowns which are already happening in europe there's fears of that happening in the
u.s and it's causing investors to question the economic recovery both here and abroad second
there is the uncertainty of a fiscal stimulus bill many people including myself believe we do need
another stimulus bill in particular to help small business which is suffering a great deal during
this pandemic and then the third uncertainty is the election and i think the biggest fear there
is actually not what about who wins but rather will there be a clear outcome on november 4th
to refresh viewers the market actually fell 8.4 percent in 2000 from election day november 7th
till december 15th which is the day after gore conceded after the supreme court had its
ruling on the election and i think people are worried that if there's not a clear winner on
the 4th of november we could be in an extended period of time where the outcome is not known
well so it sounds like investors are going to really need to be nimble for the remainder of the
year but also maybe taking a step back and looking at stocks that could potentially weather any storm
that is on the horizon so let's take a look at a couple of stocks that are on your radar randy uh
what about in the big cap tech space what do you have your eye on well you know we still do like
growth stocks and we like stocks that we think can grow regardless of the environment whether covet
slows the economy again or if there is an economic recovery and we try to really favor stocks
that are leaders in their space so uh two stocks that we like the first one i should mention i own
is microsoft so microsoft reported its quarter this year this past week it was a very very good
quarter across the board they handily beat both revenues and earnings the company has been growing
its earnings at a double-digit rate for the last three years and we see that continuing for the
next several years now the stock has pulled back a little bit this week because the forward guidance
for fiscal 2021 was a little bit below what inspector what investors expected in particular
in the personal computing area but we believe investors are not really buying microsoft for
personal computing they're really buying it for for its expansion into cloud
that being said it's a it's a very strong stock it has a data graph rating of 81 it has a composite
rating of 94 and it's got a relative strength rating of 82 so those are all metrics within
the o'neill system that we that we really like the company's trading about 27 times earnings on
fiscal year 2022 which is the uh june of uh uh 22 fiscal number which we don't find to be you know
overly expensive relative to the market and we think uh this is a real leader that should really
be included in people's portfolios yeah when you take a step back and look at the monthly chart for
microsoft i mean the long term out performance is very apparent here and at ibd it's it's actually
one of our long-term leaders in that portfolio based on that relative strength that you mentioned
and very strong fundamentals so do you think a stock like this uh buying on a pullback seems
like an appropriate opportunity we think it's a stock that growth investors really need to have in
their portfolios and there's really two reasons why first is as we mentioned a minute ago it's
very strong in cloud azure which is microsoft's cloud service business grew 48 in the past quarter
they're a strong number two to amazon there's a lot of corporations that don't want to use amazon
services microsoft's been gaining share and we think that's going to continue the second kind
of bigger picture element with microsoft is that it's in the long term it's transitioning from a
business that was driven by uh really enterprise licensing and consumer licensing of of software
to a subscription model business and that's going to make their revenue stream actually much more
steady over time and then finally one thing i should mention as well is they have a new xbox
coming out on november 10th we think this is going to do very well especially in the current covent
environment where people are spending more time at home so we think there's a lot of drivers for
this stock and we also think there's a positive long-term transformation occurring right a great
fundamental story there and can you talk about nvidia that's another name on your list clearly
a leader in the chip space like microsoft nvidia is a leader in its space it's also a company
that's undergoing a transformation it's done two acquisitions recently first is melanox which is
a company that makes semiconductors for high-speed computer networking and second it's in the process
of buying arm holdings uh from softbank and their arm is really a leader in ships for smartphones so
i think what's most important about nvidia is that it's expanding its addressable market if
you look at just the data center market a year ago they were talking about a total addressable
market of about 50 billion by 2024 they think that addressable market will grow to 100 billion
in addition through the arm acquisition they're going to be expanding into smartphones
they're already a leader in gaming and they're actually a leader in artificial intelligence
and we think both of these acquisitions is going to help arm there so while the stocks had a big
move it's growing very very rapidly we think it can have basically 20 plus revenue growth each
of the next several years and it's a name that we think investors should could should consider for
exposure in the semiconductor space one thing i should also mention is like microsoft it's
got very strong ratings it's got a data graph rating of 91. it's got a composite rating of
96 and it's got a relative strength of 96. so uh very positive in the o'neill metric system
yeah and uh when you're talking about the business and the diversification that it that it's seeing
really branching out with this acquisition what risks are there for investors clearly there's also
a huge opportunity and those who have been in the stock this year have seen that firsthand but what
should investors be aware of in terms of the risks with this chipmaker i think the two biggest risks
for nvidia are first that they're still waiting on governmental approval for the arm acquisition
so it's possible that doesn't get approved and then they would have to walk away from that
deal that would be a negative i think the other negative is the they're a company that outsources
the manufacturing of their semiconductors they're particularly reliant on taiwan semi uh and so i
think there's some issues of whether they could be capacity constrained on certain chips going
forward and that could also hurt sales and earnings all right well uh we have seen some
bumps in the roads that uh this year in terms of the economy but there's a consumer play that's
on your radar that you think is a standout uh can you give us a little bit of insights on that sure
so this is a little bit of a of a mid cap play so it's a smaller stock than the last two not quite
as well known it's yeti yeti makes uh coolers and thermoses for the consumer they're very very
high-end products surprisingly they've actually been helped by covid and that's because people are
doing more quote unquote staycations and what that often means is doing outdoor sports near their
homes whether it's hiking or biking or going on a picnic and that actually plays quite well to yeti
in addition they're expanding geographically into areas like the uk new zealand and australia and
so we think this is a growing high-end consumer brand that can continue to grow its revenues at a
double-digit pace they've been seeing an expansion of margins and we think earnings which are up very
strongly this year they're about 130 percent this year can grow north of 20 over the next couple
of years we think that's a pretty interesting name if you look at its s what it's trading out
on estimates it's about uh 30 times it's a 2021 estimate and like microsoft and nvidia it's got
very strong o'neill ratings so it's got an 84 data graph rating and 97 on the composite and
a 92 on relative strength and again at o'neill we want to not try to guess what the trend is going
to be we want to follow and respect an existing trend all three of these stocks are leaders in
terms of relative strength and all three of these stocks rate really highly on our data graph system
yeah which means that not only are they standouts from a share price performance perspective but
those fundamentals as well and what's really driving the company forward in terms of growth
absolutely absolutely and we still want to stick with growth stocks i know a lot of
investors have been piling into more cyclical more value related stocks but we really want to
stick with growth until we see that clear turn in the economy uh while the economy's obviously
improved sequentially uh q3 versus q2 it's still you know down from where it was pre pandemic
uh and so we really want to stick with growth for now all right randy well it's a pleasure as always
thanks so much for sharing your perspective today we really appreciate it thank you
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