Three stocks to benefit from the latest round of stimulus checks

Chris Versace, Tematica Research Chief Investment Officer, joins Yahoo Finance’s Alexis Christoforous to discuss volatility in the tech sector and rise in consumer sentiment.

Video Transcript

ALEXIS CHRISTOFOROUS: I want to stay with the markets and bring in Chris Versace. He is chief investment officer at Tematica Research. Excuse me. Happy Friday to you, Chris. We made it. Would love to get your thoughts first on the tech sector. Lots of volatility going on there. We are now lower today. But do you think that this is the way it's going to be for these growth stocks, at least through the spring?

CHRIS VERSACE: Well, I think we have to separate, really, tech stocks into two groups first. There are those companies that are more startup-y, need to go out and raise incremental capital from time to time. And at the margin, their borrowing cost is going to be higher. On the other hand, there are other companies that are extremely well positioned, capitalizing on a number of thematic trends that we follow and are cash flow positive, meaning that they don't need to tap the markets.

So I do think this bifurcation is going to play out as we go through the next couple of months, and really, as we get into-- it's hard to say-- I can't believe I'm saying this, Alexa-- the March quarter earnings season. I think when we see these other companies that are cash flow positive, doing just that, generating positive cash flow, great earnings, not relying on tapping the markets for capital, I think then we're going to start to see this bifurcation really take hold.

ALEXIS CHRISTOFOROUS: I want to talk about the latest, this stimulus bill now coming out of Washington. Who do you think might be the biggest beneficiaries of that, and how have you changed your portfolio, if at all, because of it?

CHRIS VERSACE: Sure, so if we take a look at some of the comments coming out of the December stimulus, Visa spoke at a conference earlier this week, saying that they immediately saw a pickup in spending in January. It did shift more towards debit card spending than credit card spending. That tells me that consumers are trying to keep a tight rein on what it is that they're spending, not get overextended. So I think if we continue with that when these new latest rounds of checks hit, we'll see more of that.

But I think that we're also going to start to see a little more restaurants, some physical retail brick and mortar store sales start to pick up, as states continue to ease their restrictions and more people get vaccinated. So I think that sector that's been really hard hit over the last several quarters, they're probably setting up for a really good second quarter. And remember, they're going to have phenomenal year over year comparisons.

ALEXIS CHRISTOFOROUS: For sure. Yeah, probably year over year comparisons we've never seen before. Are there specific names that you are looking at to benefit the most from this new stimulus? These checks are going to be going out to millions of Americans over the weekend.

CHRIS VERSACE: Well, I'll share three names with you. And to begin with, right away, whenever we think about consumer spending, and of course, benefiting from the accelerated shift towards digital shopping, we have to throw Amazon in there. We simply have to. But the two other ones that I would have people take a hard look at here, I like them, and I'm going to continue to like them.

The first is Costco Wholesale. One, it really helps consumers stretch their spending dollars, but two, the real secret to Costco is the warehouse nature of the business and the membership fee structure. As they continue to open up more warehouses, and I believe they're targeting 13 more over the coming quarters, it just points to continued favorable comp store sales, as well as continued increases in this high margin membership fee revenue that they have. So, continue to love Costco, and it's pulled back nicely here-- a great chance to jump in that.

And then the other one is going to be Chipotle. I know you guys have been talking about it quite a bit over the last couple of days with the quesadilla rollout. I think it's simply the latest in product innovation from the company. They've done a great job under new management, bringing temporary items in, including one of my personal favorites, which is the cauliflower rice. But when we think about the Chipotlanes that they have and the opening of the economy and people continuing to shift their spending towards healthier fare, Chipotle is a win-win-win all the way around.

ALEXIS CHRISTOFOROUS: And they also just rolled out that cosmetic line, that temporary cosmetic line, limited edition, with ELF. Can you believe it? And it sold out, like, within minutes. So, I don't know. Go figure.

CHRIS VERSACE: I got to be honest with you. I heard that news, and I did what I just did. I laughed, and I shook my head.

ALEXIS CHRISTOFOROUS: Well, shake your head all you want, but it actually sold out. Before we let you go, real quick, I know the last time we spoke, you were hot on 5G. Are you still hot on 5G? And where within that space are you playing?

CHRIS VERSACE: Sure, so we like, I mean, all aspects of 5G, but the one that's easiest for consumers to play in on is probably going to be on the 5G smartphone upgrade cycle. There's some questions over chip capacity. Look, that's probably going to be a one, two, three-quarter thing.

But when we hear companies like Broadcom saying that year over year, their wireless chip business is going to be up 30% to 40%, we see Qualcomm coming out and reiterating its guidance for the current quarter that's above the consensus forecast, we continue to like it absolutely. And we would say Qualcomm is a great way to play it. Skyworks, SWKS, is another.

ALEXIS CHRISTOFOROUS: All right, Chris Versace at Tematica Research, thanks so much. Enjoy the weekend.