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Take a step back from reopening trade vs. stay at home trade, focus on disruptors: Direxion Director

Dave Mazza, Direxion Managing Director, Head of Product joins the On the Move panel to discuss the impact of the virus on the markets.

Video Transcript

JULIE HYMAN: Let's bring in David Maza. He's Direxion Managing Director and Head of Product. He's joining us from New York. David, it's good to see you. As we watch this sort of stimulus back and forth, I'm curious what effect it's having on the markets? I mean, certainly we saw the markets go down when the president seemed to indicate stimulus was now going to be off the table, but what's priced in at this point? It's difficult to see.

DAVE MAZZA: Well, you raise a great point. It seems silly to say, of course, the market would love stimulus. But really, what they're looking for is some clarity. I think unfortunately we're at a position here where markets, you know, recently had made at all time highs at the beginning of September. They've struggled in the last few weeks. It's been a bit trend-less as, of course, we have a potential second wave of the virus growing in places like Europe, here at home in the US, cities like New York are now being impacted in ways that seemed far afield.

And of course, what we've been waiting for really for months is more stimulus. We hear Chairman Powell basically begging for it, and because there's only so much that monetary stimulus can continue to do. And unfortunately jobless claims today show that there still is more needed as some are calling this a V-shaped recovery, but it seems a lot more like a K to me and to an increasing chorus of folks.

ADAM SHAPIRO: David, when you say that your core thesis is go long stocks driving technological disruption, I'm not asking you to pick any particular stock, but you know, I'm looking at the news today about IBM focusing on the cloud, and I'm thinking about even Google and Facebook, they're not really disruptive anymore. They're huge, huge companies that swallow the competition. So what do you mean by that? Who is technologically disruptive?

DAVE MAZZA: Well, you raise a good point. Sometimes we think about disruption or innovation meaning something we've never even thought about, a moonshot, if you will. And those are the types of stocks I do think we investors should be looking at and implementing in portfolios, but you raise a good point. We find ourselves in an environment where the largest companies, whether it's the FAANG stocks or even a company like IBM, which has been around for some time, but frankly, has fits and starts but has been innovative [? akin ?] for decades along the way.

It's a challenging environment. But when I say disruption, what I'm thinking about is companies that don't necessarily need stimulus to do well, don't necessarily need anything but the fact that this pandemic has accelerated so much change in our world. It's changed the way we've worked, it's changed the way we live. But again, many of these trends were already happening before. So those are the type of stocks that I'm interested in. Again, when we take a step back and say certainly in the day to day, the reopening trade versus the stay at home trade, I'm more focused on those disruptors. Many of them are tech companies, but others of them are just more tech enabled.

DAN HOWLEY: David, this is Dan Howley, so I guess what companies specifically do you think are in that category? I mean, are you at something like a Zoom, or are you looking at something smaller? As Adam said, you know, Google is part of this conversation, Microsoft, Amazon because of their Cloud Infrastructure, but you know, they're massive. And I mean, if you're looking for something that's more disruptive, it would probably be a smaller firm, no?

DAVE MAZZA: Yeah, no, that's absolutely correct. Well, in some ways, you sort of can't ignore and set aside some of the larger players. So if we think about cloud companies, if you're not focused on Amazon or Microsoft, you're missing the two largest players out there, and you could even include Oracle there, but I'm really focused on some of these smaller names like Zoom video, but that's also become very obvious.

So in our work from home ETF, which is focusing on 40 stocks that are helping disrupt and change the way we work, it has some of those larger names, but a lot of them are companies names folks haven't heard of. So Twilio is a great name, a great emblematic of this. This is the company that, again, is beginning to be a household name, but really what they do is they make it easier for developers to write code on websites to connect with consumers. So if you've ever taken an Uber or Lyft, you're using Twilio when they're contacting you. If you've actually downloaded the New York State contact tracing app or others around the country, they're using Twilio for that.

But another name that's even smaller and less than the radar is a name like Elastic, and what they're doing is actually, again, helping make it easier for developers to embed search across their enterprise or across websites that consumers connect with. So I'm thinking about, again, obvious names makes sense, but we know that many people already have using portfolios. We do need to dip down into the midcaps, down into the small caps to find this disruption.

JULIE HYMAN: And Dave, just real quick, you're doing that, right? You already have a work from home ETF. Now, you've got another ETF that is going to tap into some of these names. Just briefly, if you could tell us about it.

DAVE MAZZA: Yeah, sure, so a work from home ETF focusing on how work is being changed. Our connected consumer ETF, the ticker there is CCON, is focused on how our lives are changing. So we know our lives are more virtual and digital than ever. Top names in this fund include Smile Direct Club, Peloton and eHealth. Those are the type of companies that, again, when we think about what's going to be the lasting change of all these last few months of experience? It's the fact that we now can consume in different ways more virtually and digitally.

JULIE HYMAN: Yeah, you and the ETF industry getting creative when it comes to all of these pandemic based plays. Thank you so much, Dave. Dave Maza is Director Managing Director and Head of Product.