As the first half of 2023 comes to an end, Mahoney Asset Management CEO Ken Mahoney joins Yahoo Finance Live to discuss what stocks to buy and what stocks to avoid as we move into the second half of the year.
Video Transcript
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- It's officially the last trading day for the first half of the year. And following a massive rally in tech, investors are looking for their next best bet. So what should you buy and what should you avoid? Here with some of his picks, Ken Mahoney of Mahoney Asset Management. Ken, it's good to see you again. So let's just start where we're closing out the year or closing out the first half of the year I should say and that's all the focus on tech. Questions about valuation, whether or not they're still a buying opportunity within the sector. What do you think?
KEN MAHONEY: I think there is. It's still our top holdings and what great first half of the year. Happy Friday to you. I mean, think about it, it's the best first half for the NASDAQ in 40 years and think AI is the culprit. All good news around AI and the adaptation of it. I mean, companies are going to be able to help out their top line, reduce costs in the bottom line. I think we're only second or third inning, I know a lot of people think they missed the boat.
But this is one of the biggest disruptors we're going to see in our lifetime, the use of AI. So you saw the leadership, picks and shovels of AI, Microsoft this quarter, AMD, NVIDIA. These are some of the names I think are going to be around for some time and have the benefits of this huge movement we're going to have.
- Why get in on this price point though? I mean NVIDIA alone, if you look at the run up in the stock it's up nearly 190% this year.
KEN MAHONEY: No, we're not suggesting that. It's run parabolic. But the point is that there's still a lot of runway ahead of itself. What's going to happen somewhere when you say, OK, when is this really a bubble? When you find $3 stocks turn to $20 stocks. This is what we saw in the late 1990s.
Woke up one morning, called your company.com and then he values like triple, quadruple and so forth. That's going to happen. But we really do like the picks and shovels of this gold rush that's happening. I think the late 1990s was Oracle, it was Cisco. Well, now this time around companies like Microsoft, AMD, NVIDIA. But to your point, yes, it's parabolic.
You can wait and put some prices below the market, good to cancel orders, try to get filled. Maybe that's probably a better approach. I'm not necessarily saying chase it, but certainly this is not the end of [INAUDIBLE] in this great quarter and there's no more profitability in front of us.
- Ken, your second pick is the total opposite. It's a bit of a contrarian play. It has to do with energy sector, which has certainly been left in the dust this year. What's the best way to play it? And why do you think it's going to turn around?
KEN MAHONEY: Right. So you have momentum going and we know momentum can cut both ways. Energy was a big winner last year. IYE is the symbol here of this ETF, which owns Mobil and Chevron. Pays a 3.5% dividend. And oh, by the way, I still believe there's an OPEC foot somewhere around $65 a share, $65 a barrel where it's hovering between $67 and $70 now. Again, we don't like it. We don't like it-- I'm sorry, we don't like that OPEC is running the way they're running and at any moment they can go and cut a million here, a million there.
But that's where we are right now. Also, our strategic reserves are way, way down. At some point we're going to refill that. So I think the dynamics are this is so out of favor. You collect a decent dividend. I believe there's a pit below it here. Remember, there's a lot of geopolitical risk. I mean, over the last weekend the coup in Russia or the attempted coup. There's still some areas of instability. And any instability starts really getting some momentum. You're going to find oil go higher.
- Let's talk about what are some of the stocks that you're saying stay away from. We're looking abroad for this one in particular. And we've had a lot of conversations about what is the right opportunity, especially in emerging markets. Why is Brazil the one to say you need to take a step and step away?
KEN MAHONEY: Right. Well, I'm coming from you today from Saint Paulo, Brazil. So greetings. One hour ahead of you so. It's a socialist President Lula who came into office a few months ago. Year to date that ETF-- now by the way, this is for a very aggressive account of 15% to 20%. And again, if you look what happened in Venezuela, you looked at other places in South America, all these policies have not worked.
This is a regime that's anti-business unless you're one of the cronies. This is a socialist and it's not going to work. Again, if you do short this stock or short this ETF or short anything around Brazil, use a buy, stop, protect yourself in case it goes against you. But right now, there's such a dichotomy between the way the stock market is performing here in Brazil and also the way the politics are going, which doesn't help, I believe. And again, around the world these sort of policies don't work.
- And Ken, bringing you back here to the US. One of the other pick that you have to avoid right now is Target. The consumer discretionary play, the retailer. Why don't you think we'll see a better second half from the company?
KEN MAHONEY: So we're really not-- really going to like retailers. We think Amazon is still eating a lot of retailer's lunch. And since the pandemic we've all changed, right? So it used to be about buying things and going to Walmart or your favorite store. Now things are changed.
People want to travel. You see airline bookings. You see hotel bookings. You see Airbnb bookings. People are shifting their spending habits away from retail. And of course, Target really tripped themselves up with pride, which is something that a lot of corporations are celebrating. But the way they rolled it out really hurt their demographics. I don't know if they could recover from that.
But certainly you have companies that are beating estimates and raising guidance. Time and time again you're finding retailers missing the estimates and lowering guidance. We don't be anywhere near companies like that because it's like sitting in quicksand. And I suspect this quarter that they're in they're probably miss the estimates-- I'm sorry, miss the numbers and lower estimates. We don't want to be there.
- All right. Ken Mahoney, great to have you here. Target off just about 11% since the start of the year. Thanks.
