The Capitalist Investor - Episode 50 Anyone watch Dave Portnoy’s One Bite Pizza Reviews? In the spirit of Dave’s review system, we’re going to do our own Barstool Pizza Ratings—but for stocks. Listen to this episode of The Capitalist Investor to see how we rate different sectors of the stock market based on how we think they’ll perform. Don’t miss this fun episode!Outline of This Episode[1:27] Pizza ratings for stocks[2:08] Cloud stocks[3:07] Home improvement[4:19] The big tech space[5:40] Large-cap stocks[8:11] Small-cap stocks[10:03] Healthcare[11:48] Consumer staples[15:08] Utilities[16:11] Energy[19:03] Travel[23:30] Our favorite pizza!Big Tech Score: 7.1For big tech, we’re talking stocks like Microsoft, Apple, Google, Amazon, and Facebook. I’m giving them a score of 7.1. Why? If you look at the expected earnings growth in 2021, it’s 20%. The other 995 names in the Russell 1,000 are expected to grow at 37%. But the other stocks are expected to grow at twice the pace. The big 5 are still quality. They will likely grow and we expect them to at least market perform.Large-Cap Stocks: 7.65There’s always a question mark here, especially given that Biden will be at the helm. But it’s hard to move away from large-cap stocks. They’re the names that people know. We expect Biden’s presidency to be good for large-cap stocks and those that are multinational. Dividend-paying stocks outperformed the S&P 500 throughout most of the Obama years. But they’ve underperformed since—so there might be an opportunity there in the large-cap space. What do we think about small-cap stocks? And healthcare? Listen to find out!Consumer staples: 5.9–6.5Proctor & Gamble, Walmart, Kraft-Heinz, Pepsi, Coke, etc. have rallied recently. We may have a second lockdown to buy time for the vaccine to come out—so everyone ran out and bought toilet paper again. Derek gives consumer staples a 6.5. I’m not a big fan of consumer staples and think they’re way too rich. They have low single-digit earnings growth, so I give them a 5.9.Side Note: Very few details have been released about the vaccine. But we do know that this specific vaccine needs to be stored at -96 degrees and can only sit at room temperature for 6 hours. There will be administration challenges because doctors’ offices or the local Walgreens can’t do it. It will require special facilities to administer. They’ll hit front-line workers and highest-risk people first. By the time everyone else gets it, it may be a solid year.What do we think of utilities? Keep listening to hear our thoughts.Energy: 1.0–6.5The energy sector = a dead zone. It’s been awful for your money. It used to be a 15% weighting in the S&P 500, now it’s at like 2%. We can’t get excited about it. We give consumer staples and utilities a lower rating. We’re still in them, just underweight. Derek gave it a whopping 1.0.We are done with oil and gas. Clean energy is still a small percentage of this sector. But we do expect it to pick up under Biden. It’s so bad that it HAS to get better at some point—so I give it a 6.5. I might go bottom-fishing in an energy name right about now. The yields are there. We can’t imagine it going much lower. Maybe with a weakening dollar, it does halfway decent.Travel: 5.9–7.1Travel stocks such as airlines, hotels, Expedia, bookings, etc. have risen pretty aggressively this week (Nov. 9th, 2020). After the news of the vaccine, travel stocks soared. We think it’s a knee-jerk reaction. Derek is 100% sure that there is pent-up consumer travel demand—but zero demand for business travel (which accounts for 12% of air travel). Airlines have some serious headwinds ahead of them.The JETS ETF is down 35% from its peak, but TSA traffic is still down 65% so those numbers don’t jive. There won’t be business travel anytime soon. People are becoming comfortable doing business on Zoom. So people will second-guess flights just to sign a deal. The game has changed permanently. They will be volatile over the next six months. A pullback is coming. Derek gives them a 7.1 and I give them a 5.9 over the next 6 months. In three years I’d rate them a 7.1.BONUS: Listen to hear what the best pizza joints are in Cleveland + some bonus locations in the U.S.Resources & People MentionedBOOK: Unknown Market WizardsDavid Portnoy’s One Bite Pizza ReviewsConnect with Derek GabrielsenTwitter: @DerekGabrielsenFollow Derek on LinkedInSend Derek a message hereCheck out Derek’s YouTube channel!Connect With Mark TepperTwitter: @MarkTepperSWPFollow Mark on LinkedInSend Mark a message hereThe SWP Connect YouTube ChannelSend your questions and comments to us at info@SWPConnect.comSubscribe to The Capitalist InvestorShow Notes by PODCAST FAST TRACK https://www.podcastfasttrack.com
