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E-commerce is trying to maintain the growth that they saw during the pandemic: Analyst

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Chris Mack, Harding Loevner Global Equity Fund Portfolio Manager joins the Yahoo Finance Live panel to discuss the latest market action.

Video Transcript

- Want to shift over, though, to the way that we can all digest this and invest around it, what it means for your portfolio here, as we have one guest leaning back into financials. Interesting opportunities potentially sitting up there. And for more on that, I want to bring on Chris Mack, Harding Loevner Global Equity Fund Portfolio Manager, here with us.

And Chris, I think, you know, it's interesting because we've seen kind of this debate back and forth when it comes to cyclicals and growth right now, particularly at a junction when maybe fears about higher rates are receding. Obviously, steepening yield curve benefits the banks, but if we're not seeing that, what makes you so bullish on what you could see in financials, and why it's a big piece of the pie for you now?

CHRIS MACK: Sure, yeah. And I think you bring up-- brought up a good point. I think there's often this false dichotomy around value versus growth, right? I mean, we're interested in investing in growth businesses, buying stocks at reasonable prices. And there's no reason why you can't find both. You just have to look a little bit harder. And for us, you know, we find actually, even in a market like the US banks, which are known for that value style, you could go dig under the covers and find smaller banks that are structural growers, something like a First Republic, for example, that's focused on relationship banking. They've been able to grow their assets regardless of the interest rate cycle, and they've been-- you know, by focusing on customer relationships, building over time, expanding where they go. So that's just one example of where we find that combination of growth and value, which is important because you have diversification along the way.

- This comes at a time when we've seen incredible growth from fintech names, especially during the pandemic. I wonder how you square that against some of the traditional banks. If you're talking from an investment standpoint, do you sort of put your money behind both, or you think that traditional banks are the safer play?

CHRIS MACK: I think, you know, you want to have a combination of both, and you want to have-- really focus-- I think the most important thing is looking for financial strength and profitability. You know, fintechs, the innovation is great that's happening for some of them, but you have to be careful that these companies have a strong enough position that they can turn into sustainable profits. So something that would be more of a fintech that is profitable, that is doing interesting things, investing around their competitive advantage is something like PayPal. That's one that's a good, attractive opportunity. Combine PayPal with something like a First Republic or even like a Silicon Valley Bank, or SVB Financial, which is focused on providing corporate services to startups, and that's another relationship bank, you know, that's a good combination for us in terms of an overall diversified approach to harness that innovation.

- Yeah, I remember last time you were on with us you talked about why you like PayPal, too. The other kind of sector you were also looking at was e-commerce and Etsy. Of course, we just wrapped up Prime Day here. Curious to get your take on maybe how e-commerce is shaping up after that event, and what the expectations are to maybe try and match growth that we saw in the pandemic.

CHRIS MACK: Yeah. I think the first thing, and I think you see in the market in the performance this year, is just digesting what is a reasonable growth rate, right? Everyone's trying to figure out what is the right thing to extrapolate, whether it's inflation or e-commerce growth. And I think it's fair to say that last year's performance won't repeat, but what is important is that a lot of these e-commerce companies, Etsy included, took advantage of that opportunity to win new customer relationships, and that's going to serve them well over time.

You have tough year-over-year comparisons just because it was so good. There were no alternatives last year, right? Everything was closed down. And so you're going to have some mean reversion there. But for something like Etsy, they're projecting, even getting past their customized masks, still be able to grow at that, you know, 10%, 15% rate sustained over time. So eventually, I think we'll get to a price where the market will start to appreciate that growth going forward, and it should start to do better.

- Chris Mack, Harding Loevner Global Equity Fund Portfolio Manager, appreciate you joining us today.