Tech, Energy Bright Spots for Stock Pickers: Barron's Roundtable

  • Samsung, Micron Technology, Applied Technologies among choices
  • ‘Very cheap’ commodities favor Occidental, Hi-Crush Partners

Some of Wall Street’s most influential investors are eyeing energy and technology plays as the bull market hums on.

Asked for their best stock picks as part of Barron’s 2018 roundtable discussion, Jeffrey Gundlach, Abby Joseph Cohen, Delphi Management founder Scott Black and other panelists championed technology and energy companies they see profiting from rising tides in those industries.

The investors convened as U.S. stock markets are at record highs and less than a month after President Donald Trump signed a major corporate tax cut into law. But while the market may be richly priced now, bargains still proliferate if you look in the right places, the panelists argued.

Four of the nine participants highlighted companies tied in some way to semiconductors, from Samsung Electronics Co. -- Cohen’s pick -- to Lam Research Corp., favored by Black, which manufactures semiconductor processing equipment used in making circuits.

“People are still living in the past. They retain a notion from 1995 to 2000 that semiconductor-equipment manufacturing is wildly cyclical and a bad business," Paul Wick, lead manager of the Columbia Seligman Communications & Information Fund at Columbia Threadneedle Investments. He pitched Micron Technology Inc. “In fact, the chip industry has become much less volatile."

‘Powerful Trends’

William Priest, co-chief investment officer for Epoch Investment Partners, said Applied Materials Inc. “is at the center of all these powerful trends we’ve been talking about today -- artificial intelligence, the growing impact of technology across industries."

The secular trend buoying semiconductor companies should even benefit Samsung, says Cohen, Goldman Sachs & Co.’s senior investment strategist. The company has suffered from geopolitical and domestic issues facing South Korea, but strong demand for its products elsewhere in Asia should help it avoid some of the other drivers weighing South Korean companies down. “Samsung is primarily an export company," she said.

Cohen also highlighted Occidental Petroleum Corp, a company she thinks could be a beneficiary if commodity prices rise and the energy industry benefits from tax reform. The company is "a niche player in the exploration and production industry," she said. Cohen added that the company’s improving balance sheet, its presence in midstream chemicals business and its dividend yield could drive the stock higher.

‘Very Cheap’

“Broadly, commodities are very, very cheap," DoubleLine Capital co-founder Gundlach told the magazine. The investor sometimes dubbed the bond king said he likes shares of Tortoise MLP Fund, a closed-end fund that owns energy master-limited partnerships and has a yield close to 9 percent, as a careful way of playing a bet on rising oil.

“If yields go up, it is likely that this commodity thesis is playing out," he said. “But if interest rates go down -- and I have a hard time seeing a big rally in rates -- I’ve got a feeling that the yield starvation around the world remains with us, and perhaps that supports the price" of the Tortoise MLP fund.

Delphi’s Black took a more indirect approach to the energy game, highlighting Hi-Crush Partners LP (HCLP), which he called an "industry leader" in mining fracking sand. Demand for energy "is driving demand for sand," he said, and the company has better economics than its competitors.

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