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'It's very important that we get the consumer going again': Portfolio Manager

Barry James, Portfolio Manager at James Investment Research, joined The Final Round to discuss the stocks he's watching and what is driving today's market gains.

Video Transcript

SEANA SMITH: Barry, we've seen a little bit of the shift [INAUDIBLE] talking about it, just in terms of the leadership, I guess, outside of today, though, but in the month of December. We've seen investors favor some of those cyclical names, some of the value plays. Where are you seeing opportunity in this market when the leadership seems to change by the day?

BARRY JAMES: Well, you're right. It's like "The Wizard of Oz," follow the yellow brick road. What had been working is what people are continuing to buy. So those big FAANG stocks and the like have certainly been an area that draws interest. As I look at it, I would see that there are opportunities in other areas beyond that.

And that's something that we find in the technology area, like a Cadence Design, which is the precursor to the semiconductors. They do all the design work and software and the like. And they're seeing huge jumps in their top and bottom line in their earnings. And they've just got a lot of cash on hand. And so they're beneficiaries of this time that we have with the COVID.

Some of the others that we see that we like are like Home Depot. I know it's not a surprising name to folks, but definitely have taken on the internet with gusto, about twice the sales on the internet over Lowe's. And the costs have gone up a bit. But they they're making it up with sales. I'm in there and I see lots of people in my local Home Depot.

And then, lastly, would be something that is probably very timely is Generac, which makes generators. As I look at that particular company, we've got like almost a record number of hurricanes this year. We have grid problems, of course, in places like California right now.

So the residential side is a high, high margin for them. And they're-- they're making great sales at the moment. So, again, these aren't the top, top, top tier. I don't see anything wrong with those. But there are some opportunities down below that and maybe they'll be growing opportunities as we go forward.

SEANA SMITH: Barry, you mentioned Home Depot as one you're pleased, Generac, I guess you can tie both of those in with what we've been seeing in housing. And, once again, today, we got the existing home sales number, better than expected, homes continuing to be bought at just record speeds. Do you think the housing market is going to be able to offset some of the weakness, though, that we are seeing in the services area? I mean, how long can that trend continue?

BARRY JAMES: Yeah, it's very important that we get the consumer going again. They're a little reticent, obviously, for many reasons, both with the COVID and jobs, primarily, is the thing that folks are concerned about with, you know, still about half of the people out of work. So as we look at the situation with housing, it's just amazing. With these low interest rates driving people, you know, you can get less than 3% in some places for a loan. And so it's driving a lot of folks to buying houses and the like.

So I went by a local, you know, project here. They haven't even put any houses up, it's just, you know, the roads. And at the front sign that advertises it, it said, sold out. So [LAUGHS] that tends to tell you that, yep, it's going pretty fast right now.

RICK NEWMAN: Hey, Barry, Rick Newman here. I think you should introduce everybody to your dog in the background there. But after that, could you tell us how big a deal is it for markets, if there is no further stimulus bill this year or period?

BARRY JAMES: Yes, I think the market had been building a case that it was going to happen. And that's Champ in the background, by the way. He comes with me to work and I consult him on the difficult issues. But as we look at the stimulus, I think the last week or so, you know, the fall-off that we've had in the market is a direct correlation to that, taking a little bit of the confidence out of investors. I think as we start to see the economy picking up a bit and, certainly, earnings picking up once again, that can replace it.

And, of course, the biggest thing, even more than a stimulus bill, is the Fed. And they say rates are low and money's available. I call it quantitative-- quantitative easing to infinity and beyond because they don't want to take their foot off the pedal at all. And that takes away the interest in any other kind of investment than really stocks. So there is a huge support there, even though risks from a historical basis are pretty high in the stock market right now.