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Stocks mixed as investors await Powell, stimulus talks

Yahoo Finance’s Alexis Christoforous and Brian Sozzi discuss what’s moving the markets today with Momentum Advisors Chief Investment Officer, Allan Boomer.

Video Transcript

BRIAN SOZZI: Let's start on the market resilience. We've seen this market continue to push higher, despite the erratic behavior out of the White House, despite earnings estimates on the Street past their peak, so they are flattening out, and despite another few weeks of layoffs from really major companies. Do you think this resilience is warranted? And what do you think the next move could be?

ALLAN BOOMER: Good to see you again, as well, Brian. Thanks for having me. I think there's a couple of glimmers of hope here. We saw the ISM service index come out with a reading that was better than last month. It was above 50 again, which indicates an expansion. I mean, that's good news.

We're seeing this K-shaped recovery. When I say K, I mean, there's certain industries that are doing really well, that are recovering well, I should say, and then there's other industries that, like the airlines, which are continuing to struggle. And so I think, you know, with the prospect of stimulus happening perhaps after the election, there's some hope that things will be OK.

ALEXIS CHRISTOFOROUS: Allan, I want to talk about some specific stocks you like in this environment right now, and one of them is Target actually trading at 23 times forward-looking earnings. Sounds a little rich to me. What do you like about Target at this level?

ALLAN BOOMER: Great. Well, thanks for bringing up that stock. It's a good one. What I like about Target-- you know, the market trades at about 20 times earnings. I've never seen a bigger dispersion between the high PE stocks and the low PE stocks. There are stocks in this market trading at 1,000 times earnings.

You know, I describe a PE as the number of years it will take for an investor to recoup his investment if the company were to pay all the profits to the investors, right. And so 23 years compared to 1,000 years for other companies seems very, very attractive. So what I like about Target is that there have been a number of major retailers who closed, and Target is kind of becoming the, you know, the marketplace for a lot of communities.

Like, when I look at my town in New Jersey, there were really three parking lots in my town that were filled up during COVID. It was a supermarket, it was Home Depot, and it was Target. And so I like that it trades at a reasonable multiple. I also liked the dividend yield on Target as well.

BRIAN SOZZI: Funny you mention Target, Allan. Just yesterday I tried Target's new Shipt same-day delivery service. It's phenomenal. I mean, it's really one of the best services out there.

But let's stay on stocks. There's only so much political stuff we can handle here right now. Verizon. It's a company we know very well. It is our parent company. Why bullish on Verizon?

ALLAN BOOMER: I like Verizon because, again, you look at the valuation. Verizon trades at 12 and a 1/2 times next year's earnings. They also have a 4% dividend yield. In an environment where the 10-year treasury yields under 1%, income is really scarce, and this stock has kind of not participated in a lot of the, you know, the big rally that's been going on that's been dominated by the tech stocks, the mega-- mega-cap tech stocks.

And I think in 2021 in an environment where we might get some stimulus, I just think that value stocks are going to do better. And I look at Verizon, and they're really just a staple. I mean, they're in the high end of the wireless business.

And I think people really value their connectivity today. They also recently did an acquisition that positions them well at the low end of the business as well. So I think Verizon is a great company to own.

ALEXIS CHRISTOFOROUS: Hey, Allan, what do you like right now in big tech? Because a lot of folks are saying that these big multinational tech companies could get hit hard if we see a blue wave and corporate taxes rise coming out of Washington. You've also got some lawmakers who are still hell-bent on breaking up big tech. Is there anything there that looks attractive at the moment?

ALLAN BOOMER: Yeah, I agree that there's some-- some regulatory overhang over the big tech market. I also think, you know, there's a secret kind of technical issue that not a lot of folks are paying attention to. You know, you've got mutual funds that are capped at owning, you know, no more than about 5% of their fund in these-- in these companies.

And today, the top five companies are something like 23% of the S&P 500. So with that aside, I like Google. I think Google's a great business to own. They trade at what I'm going to call a reasonable multiple, especially amongst big tech. They're in the low 30s on the PE basis.

And I just think they're positioned in every business where you want to be in a COVID world. They're in digital ads. They're in search. They're in enterprise cloud. My kids are at home right now using Google classroom to communicate with their teachers. So you know, again, I think Google's a great business. They also are positioned well for 5G, so they've already developed a 5G handset, and you know, we're just waiting for the 5G spectrum to come out, more broadly.