Jeremy Bryan, Portfolio Manager at Gradient Investments, joined CNBC’s ‘Power Lunch’ to share his insights on market outlooks and investment strategies for the coming year. Highlighting the need to avoid stocks with overly stretched valuations, Bryan suggested a trio of investments for what he called a “3 stock lunch,” focusing on companies that offer growth potential without the exorbitant price tags.
First on his list was Alphabet (GOOGL, GOOG), which despite a significant return this year, trades at a relatively modest 23 times earnings. Bryan noted that Alphabet’s growth prospects, particularly in areas like YouTube, make it an attractive buy, even amidst regulatory concerns. He posited that if Alphabet were to be broken up, the sum of its parts could be worth more than its current market valuation, showcasing the company’s underlying value.
Bryan then addressed the day’s market movements, dismissing them as largely inconsequential due to the low trading volume around the holiday season. He advised not to read too much into these fluctuations but suggested that any overreactions could provide buying opportunities.
The discussion also touched on the pervasive influence of interest rates across various asset classes, from tech to small caps and bonds. Bryan pointed out that tech stocks often become a haven when interest rates rise, given their low capital expenditure needs and robust cash flow generation. However, he recommended looking into sectors like waste management, where companies such as Waste Management (WM) and Republic Services (RSG) have seen recent dips, potentially offering value due to temporary economic or interest rate-related pressures.
On the healthcare front, Bryan highlighted UnitedHealthcare (UNH) as an intriguing investment opportunity. Despite potential policy changes under a new administration, he argued that the core business of private health insurance remains robust and indispensable. He expressed skepticism about significant changes like single-payer healthcare, suggesting that UnitedHealthcare’s current valuation presents a good entry point for investors.
When asked about policy changes that could impact healthcare, Bryan acknowledged the long-standing issues with healthcare costs and inefficiencies but remained doubtful about quick or effective legislative solutions. He mentioned the possibility of divesting pharmacy benefit managers (PBMs) but suggested this would only slightly affect his bullish stance on UnitedHealthcare, given the broader context of legislative priorities.
In conclusion, Bryan’s advice was to focus on companies with solid fundamentals and growth potential that have not yet been overvalued by the market’s recent rally. He emphasized a strategy of looking beyond immediate market noise towards companies that could offer value over the longer term, particularly in sectors less affected by or even benefiting from current economic conditions like higher interest rates.
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