Contrarian investing, or being greedy when others are fearful as Warren Buffett says, is a difficult concept for most US equity investors.
“When you’re working for a large bank like Oppenheimer, you’re being compensated well and you are really treated with respect. And there’s just that platform that is amazing. But I wanted to do my own thing, to invest in myself and my own business.
So, I founded Tecumseh Partners. And what Tecumseh Partners does is advise biotech and financial firms on valuation, communication, and strategic positioning.”
Hartaj Singh, Founding Partner, Tecumseh Partners
Hartaj Singh is a Founding Partner of Tecumseh Partners, advising biotech companies on valuation, strategy, and investor engagement. He also writes The Biotech Capital Compass, a newsletter focused on biotech market trends.
Mr. Singh’s 30+ year career spans biotech equity research, hedge fund investing, and consulting — previously at firms like Oppenheimer, BTIG and Lehman Brothers.
With an MBA from Duke and a background in computational neurobiology, Mr. Singh brings a science-driven approach to biotech investing.
“There’s a lot of medical tech that’s exported to China.
So, I think wherever there’s a manufacturing-intensive CDMO model — and I believe WuXi (OTCMKTS:WXXWY) and other firms participate there — those could have some initial headwinds.
Firms that really depend on a global supply chain as a way of operating, for example those firms with Chinese fill and finish or API sources — those could be really impacted.
And then I’m not a medical device analyst, but I do imagine that there’s probably going to be some counter tariffs from China back to the United States.
So, if there’s anything from the drug side, more likely medical device and diagnostics that are going to China, they will probably get hit.
And then the second portion of this is from a biotech perspective.
There has been a lot of licensing acquisition both from the U.S. going to China and China going across the United States.
And that might slow down. Things may cool considerably in terms of boardroom appetite for cross-border deals.”
The contrarian investing thesis for biotech and pharmaceutical companies is a wide area for Hartaj Singh.
“High quality names — and in biotech, what I mean by high quality, is that I think of it as mentally picturing a diamond.
And a diamond has four points when you’re looking at it.
And for biotech, the top point of that diamond is revenues, the bottom part is earnings.
To the right is future competition and to the left is the pipeline.
So, I think companies where you can check those boxes, for example, like a Gilead, like a Regeneron, or like a Vertex (NASDAQ:VRTX), with good revenue growth, and good earnings growth.
Neither of them is perfect — to the right, not a lot of competition in the future, or muted competition, at least in the next five, 10 years.
And then to the left, a good pipeline. These companies check those boxes.
On the smaller cap side, United Therapeutics (NASDAQ:UTHR) definitely checks that box.
There’s a Chinese company we like called Akeso (OTCMKTS:AKESF).
They kind of hit the four points of that diamond.
So, I like those companies because they’re just quality names and you can buy them and keep a low cost base even if they’re being impacted by this tariff volatility.
We also like U.S.-centric commercial companies.
Most commercial-stage biotech companies have 70% to 90% of their revenues from the U.S., which shields them from much of the tariff risk.
So, you actually do away with all that tariff stuff.
Once people get a little bit of time to calm down and away from this tariff volatility, biotech will become a very attractive sector, because the vast majority of commercial companies have more than two-thirds of their sales in the United States.
What’s not to like about that setup?
We also like strong balance sheets and near-term probability, near-term catalyst, PDUFA events.
So the biotech model for large caps and small-to-mid caps won’t be really impacted once this tariff induced volatility calms down.
Because if your clinical catalyst works, or you get a drug approved, or your sales are better than expected, that stock will work, and we like that.
So as an example, we like this company called Avadel (NASDAQ:AVDL).
They’re the second company launching into narcolepsy and with just a very strong execution on the launch of their product called LUMRYZ.
It’s a strong specialty pharma model.
They’re second to Jazz (NASDAQ:JAZZ).
But McKinsey published a study just a few years ago showing that even second-to-market companies captured 25% to 40% market share.
We like Regeneron, in our diversified U.S.-heavy revenue base.
You look at Eli Lilly (NYSE:LLY), people talk about obesity and diabetes.
But the thing is, this company is going to grow multiple double-digits for the next two, three years.
What’s not to like about that?”
Contrarian investing can also be applied to large cap, dividend paying drug companies.
“If you look at the larger cap side, you can definitely see an aging population.
These biopharma companies are looking at Alzheimer’s, arthritis is still big, cardiovascular disease.
But Alzheimer’s and cardiovascular disease especially.
Biogen (NASDAQ:BIIB) and Lilly have made very large investments in Alzheimer’s.
Sales maybe aren’t doing great right now, but once they start picking up, as we saw with biologics 10, 20 years ago in oncology for example, it becomes a huge area for investment.
So, I like to look at Alzheimer’s, cardiovascular disease.
Novo (NYSE:NVO) and again Lilly are seeing therapies for weight loss and an aging population.
The obesity epidemic, GLP-1 growth for Lilly, Novo Nordisk, ripple effects in NASH, sleep apnea, CV — for the larger biopharma companies that’s the area of interest I’m looking at.
For rheumatoid arthritis, there are seven approved anti-TNF medications, and even the seventh one is doing about $1 billion to $2 billion in sales.
I believe that’s the UCB (OTCMKTS:UCBJY) product.
So, when you have a large area like obesity, you can have four, five, six companies do very well in the long run.
And then lastly mental health.
In that area, increasing demand for neurology, even smaller companies are going there.
On the small cap side, when I look at VCs, AI is the rage.
In biotech, AI is just another tool for us. We’ve been doing what’s called “in silico drug development”; that is drug development on a silicon chip.
That’s been a term for 40, 50 years as opposed to in vitro, or in vivo.
So in a petri dish or in a living thing.
In silico drug development will catch a pretty rapid tailwind with AI.
We’re already seeing that.
And the smaller companies, VCs are going to look at that not just in terms of, for example, designing drug molecules or finding diseases where current drugs could be more useful.
But in advancing X-ray techniques and imaging techniques.
Imaging is actually very amenable to AI.”
A contrarian investing case study can be made for Moderna.
“We were long Moderna in 2020, 2021.
Then we downgraded in 2022, and we held there until early 2024 when we upgraded again. But that was based on the idea that their sales, which they thought would be $3 billion, $4 billion last year, would continue that way. And actually, sales numbers just keep on coming down for Moderna.
If the pandemic hadn’t occurred — and Moderna hadn’t generated $15 to $16 billion in vaccine revenue at its peak — then 2024’s $3 billion-plus revenue run rate would actually look quite impressive.
They did their IPO in late 2018. So now, seven years later, it grew to $1 billion to $2 billion in sales, and getting closer and closer to breakeven.
Companies like Vertex, Regeneron, Genentech — how long did it take them to become breakeven?
Closer to 10 years.
We actually did that analysis when I was at Oppenheimer, published that note that it takes biotech companies about 10 years from the point of an IPO to becoming breakeven.
Moderna is right on track.
I think the nucleic acid vaccines will do great.
And they will continue to get more products approved in therapeutic vaccines.
At some point the current negative sentiment will shift and this will become a pretty big buying opportunity.
But right now, first and foremost, the company has to prove that their revenue estimates can’t keep on coming down.
They’ve got to show us a few quarters and one to two years of increasing revenues and getting products to market.
And I do think Moderna management is among the best.
But there’s been a little bit of overpromising, and underdelivering over the last two, three years. What they need to do now is underpromise and overdeliver.”
Get all of Hartaj Singh’s contrarian investing picks and pans exclusively in the Wall Street Transcript.
Bear markets often cause substantial losses for US equity investors particularly in highly volatile technology and biotechnology stocks.
Jeremy A. Ellis, CFA, a Portfolio Manager/Analyst at Campbell Newman Asset Management, emphasizes dividend growth stocks.
Jeremy A. Ellis, CFA, Portfolio Manager/Analyst at Campbell Newman Asset Management,
“…Our investment philosophy is that a company’s dividend policy is tangible evidence of management’s confidence in future earnings growth.
Our focus there is really on the policy, not necessarily the yield.
We view this as a total return strategy, where we view that dividend policy as a signal from management that is more insightful than their verbal or written commentary, because it involves a non-retrievable cash payment to shareholders.
When we are doing our research, we’re really looking for companies with growing earnings.
We believe that the payment of a dividend, along with the expectation that it needs to be increased every year, imposes an important discipline on management, and that makes them better allocators of shareholders’ capital and ultimately promotes more consistent and predictable earnings over time.
Ultimately, what we’re trying to do is deliver a strategy that participates strongly in up markets and protects in down markets and outperforms our benchmark, which is the S&P 500, over a market cycle. ”
Bear market protection is built into the Jeremy Ellis investing philosophy.
“The research that was done by the team on dividend growth found that when a company initiates a dividend, fewer increase it the next year, and fewer increase it the third year after that.
But by the time you get to five years, it really starts to become institutionalized in the company philosophy, and imposes an important discipline on management that makes them a better allocator of shareholder capital and promotes that consistency in earnings growth that we’re looking for.
So, that’s how we break down the universe, with that dividend factor really being the most limiting and differentiated factor for us.
From there, we do have a valuation overlay, where we look at a company’s price-to-earnings ratio on next year’s earnings, and we look back over 20 years, so we can get some different market cycles in there.
We’re looking to buy companies at 70% or less of that 20-year peak, so we’re making sure we’re not paying peak earnings and we have room to grow over the market cycle.
Ultimately, we’re building a concentrated portfolio of 25 to 35 high-quality stocks that have delivered consistent growing earnings and a consistent growing dividend.
We build that on a bottom-up stock picking basis. We want this to be a best ideas portfolio. We’re letting the high-quality stocks drive where we go in terms of the portfolio construction.”
Bear market dividends provide a downside cushion, and this has led Jeremy Ellis recently to financial stocks.
“…One area that has become built up over the last two years is the financial sector, where we’re carrying an overweight position relative to the benchmark, and that’s through the collection of a number of high-quality businesses.
What we’re looking for there is high-quality recurring business models that can deliver strong growth with consistency, and we tend to avoid areas that have strong macroeconomic sensitivities or significant credit risk.
If you look at our holdings there, our largest position has been Arthur J. Gallagher (NYSE:AJG), that’s one of the leading insurance brokers in the industry.
They help clients understand the risks that they have as a business and help place insurance.
Importantly, they aren’t taking the underwriting risk themselves, and instead are taking a commission on the insurance placed.
They’ve been benefiting from being in a high-risk insurance market and overall insurance premiums going up.
We’ve obviously seen property levels going up, we’ve seen overall for corporates a lot of excess risk needing to be placed, and they benefit from that.
So, that’s our largest holdings, but if you look across our financial sector, we have a number of businesses that fit the profile I discussed.
We have both MasterCard (NYSE:MA) and Visa (NYSE:V) in the payment space, who continue to benefit from strong consumer payments over time globally.
But they continue to diversify their businesses into not only going after the commercial opportunity as that becomes more of a digital card-based business, as well as adding more services to their businesses.
And so, you’re seeing them be very strong, consistent growers.
We also have both S&P Global (NYSE:SPGI) and Moody’s (NYSE:MCO).
The first thought for many is that those are the rating agencies.
They are the two largest rating agencies, but both of them have diversified their businesses greatly over the last number of years into different data and subscription services type business models, where now over half their business for both companies come from those diversified recurring sources.
We also have both Nasdaq (NASDAQ:NDAQ) and Intercontinental Exchange (NYSE:ICE), which owns the NYSE.
Similarly there, I think the first reaction by many is those are exchange trading businesses, but similar to S&P Global and Moody’s, both have diversified greatly over the last number of years, and similarly have greater than half their business models coming from recurring nature type businesses.”
Bear market protection also leads Jeffrey D. Lent, a Partner at Torray Investment Partners and the Portfolio Manager for the Torray Equity Income strategy, to stocks with growing dividends.
Jeffrey Lent is also the Co-Portfolio Manager of the Torray Fund (TORYX) and the firm’s concentrated growth strategies.
“We’re looking for recurring, non-cyclical revenue. I think everyone says that, but we solve for the recurring by running that regression analysis on the revenues, earnings and cash flows, to find companies that are producing positively sloped but consistent outcomes.
When a company’s data plots are all over the place, we question the quality of the business model.
I don’t want to say we’re dogmatic, but we’re very much guided by that process, and that’s very key to understanding our firm and our three different products, which all have a track record of outperforming when markets get dicey, as the time period we’re in now.
That’s when we really shine, and you really see the value of our process and insistence on these robust but steady fundamental outcomes.
Sticking to that process — and I think you see it across the portfolios — that’s really our differentiating factor.”
The bear market stock picks from Jeffrey Lent are idiosyncratic.
Jeffrey Lent, Partner, Torray Investment Partners, Portfolio Manager, Torray Equity Income.
“One is a non-traditional piece of paper, it’s a preferred, and it is not owned for any of the things that I just described — steady, robust, recurring, non-cyclical revenue — it is owned simply as an incredible hedge against the likely largest risk of an equity income or a fixed income stream, which is higher interest rates.
The company is Sallie Mae, and they issued probably 25, 26 years ago now a preferred stock (NASDAQ:SLMBP).
I own it for its terms.
I don’t own it for the business, I don’t own it for the name, I’m not trying to have a credit quality upgrade to get paid.
This piece of paper is priced at three months SOFR, plus 170 basis points.
That’s the coupon, and your coupon will clearly rise as three-month interest rates rise.
It trades at a discount, it’s $75 on $100 par, so you’re getting it at $0.75 on the dollar.
And that math, that SOFR plus 170 basis points right now at a $75 price, is getting you a 9% or 10% yield.
In this world, with all of the concerns that we have right now, straight up higher interest rates based on inflation are probably the biggest threat to future income streams.
I’ve owned that paper for a long time.
It has never really produced the capital appreciation I would have expected, but the coupon has gone straight up the last three years, since 2022.
We all had that miserable year of 2022 when the Fed was raising interest rates every meeting.
So, its coupon went from $1.84 at the end of 2021 to $6.40 in March of 2023.
It was the perfect hedge in the biggest threat dynamic that I can think of for the portfolio.
I own that simply as an anchor to windward.
If higher interest rates are going to threaten the economy and cash flows, I want to own this paper for that time period and for that possible downside outcome.
So, I’ve owned it for a long time.
I do somewhat ignore the credit rating, but I feel very comforted because the common is doing well, the company is buying back stock and raising their dividends, so I feel somewhat insulated being in the preferred.
But I own it simply for those straight math terms that are on the paper; that’s the reason we have this in this portfolio.”
Bear market insurance is also provided by another lesser known dividend growth stock.
“This one is Royalty Pharma (NASDAQ:RPRX), and it’s very much like a private equity company.
They make investments in future pharmaceutical royalty streams, so they will partner with biotech and pharmaceutical companies on a certain product or molecule and invest in the probability of a positive outcome from the development of that drug, and then they will participate in the future royalties that it produces.
The founder has a background in investment banking.
His team has the biomedical research backgrounds.
What we need them to do is pick the right molecule, pick the right drug program, and then price it correctly.
Innovation and R&D are expensive and very risky. Different stakeholders — academics, foundations, biotech and pharmaceutical companies — approach RPRX looking for capital in exchange for royalties on either existing or future products.
Stakeholders prefer to partner with RPRX because it is non-dilutive and does not leverage their balance sheet.
RPRX evaluates and selects deals based on their due diligence.
So, there are two things that Royalty has to get right: Pick the right molecule, and pay the right price for that future royalty stream.
The CEO has a long, very successful track record of doing just that, paying the right price.
He was an investment banker at Lazard, and so he gets the future cash flow discounting pricing correct, and his team guides him to the different drug development opportunities.
The real unspoken attraction here is, these guys get to legally use non-public information, inside information, and as shareholders of RPRX we get to benefit from that — because behind the protection of an NDA, they get to go in with their drug company partner and look at all of the data that isn’t publicly available to public pharma or biotech investors.
So, they get to see all of that while they make their offer of Royalty capital.
They can’t then go buy the stock or do anything like that.
There’s nothing nefarious going on.
But they get to see a lot of things that a public investor in that same company doesn’t get to see as they make their capital commitment, and that’s really unique, very private equity like, but with the overlay of a very specific biotech specialty.
Private equity has high returns, number one.
Biotech has high returns, number two.
But with the added knowledge and experience and capability of pricing these things, they have a very high success rate.
It’s a $15 billion-ish market cap company, and there are less than 100 people working there, so it’s a highly lever-able business model.
They don’t use leverage, that’s not my point, but it’s highly scalable.
They can do this over and over and over again, as long as they have capital, and they have a very good track record of doing this.
And the dividend is growing at a very nice clip right now.
It’s just under 3%, but they’ve raised it several times, and they’re buying back stock.
That’s another attribute that’s quite prevalent in the Equity Income portfolio — buybacks. I like businesses and management teams that are understanding of and capable of paying the owners of the business, paying the shareholders either by retiring shares or paying and raising their dividend.
I like that mindset.”
Find out all the bear market stock picks from these two highly efficient portfolio managers by reading both interviews, exclusively in the Wall Street Transcript.
Nicolas Owens, Industrials Equity Analyst, Morningstar Research Services
Tariff beating stocks may be the best bets for investment for the rest of 2025, here are three from Morningstar Analyst Nicolas Owens.
Nicolas Owens is the Industrials Equity Analyst for Morningstar Research Services, LLC, a wholly owned subsidiary of Morningstar, Inc.
He covers the Aerospace & Defense sector, including Boeing, Airbus, major North American commercial airlines and defense contractors, and key suppliers to the aerospace industry.
“I cover commercial aerospace, defense contractors, and major North American airlines. Included in that are a handful of companies that are suppliers to military and aerospace names — like Hexcel (NYSE:HXL), Heico (NYSE:HEI), and TransDigm (NYSE:TDG).
I’d say the biggest change on my coverage in the last year is that I took over General Electric or GE Aerospace (NYSE:GE) from my colleague who covered it as a conglomerate.
That is the major global franchise in jet engines and that’s more or less all they do anymore because they’ve broken themselves up.
So that’s the biggest recent change in my coverage…
Tariffs are mostly a concern for commercial aerospace, and companies like Bombardier (OTCMKTS:BDRBF) that makes business jets in Canada, and we have yet to see them stick.
So, I haven’t made any changes to my forecast.
And I recently spoke with Bombardier and they haven’t made any changes to how they’re running the business until they know more about what tariffs are going to stick.
Then the third bucket would be — and this certainly has caused investor uncertainty and the stocks to trade down on the defense sector — just uncertainty about budgeting, which is, in a way, normal.
There’s usually some budget uncertainty in the early couple months of the year of a new administration; kind of back and forth with Congress and funding.
But you have an added layer now with Elon Musk and the cost cutting measures under DOGE that people don’t know exactly how, or what, will play out.
Basically, that is one of the major reasons that the defense stocks have traded down recently after having performed quite well for several years.
And we think some of them are looking kind of interesting.
They don’t usually get this cheap.”
The cheap Tariff beating stocks include Huntington Ingalls (NYSE: HII), General Dynamics (NYSE: GD), and Northrop Grumman (NYSE: NOC).
“…Among the cheapest names on my list right now, the very cheapest is Huntington Ingalls (NYSE:HII), which is rated five stars.
And that is likely trading down with the other defense contractors.
So, 99.5% of its revenue comes from the Defense Department, but it also has a specific set of issues around its ability to book revenue in submarine shipbuilding at a profitable rate.
And that is going to be addressed in a new contract that they sign with the Navy, along with General Dynamics (NYSE:GD), sometime this year.
That stock has traded down quite aggressively over the last couple quarterly releases.
The next handful of companies, including Bombardier, which is cheap because of tariffs, are these major defense contractors.
And the two names that I would highlight are Northrop Grumman (NYSE:NOC) and General Dynamics.
They’re both very solid operators with interesting business portfolios.
There’s continued or ongoing uncertainty around defense budgets and the potential changes to how contracting and procurement might evolve under the DOGE or other news.
But the companies say they welcome changes to the defense contracting process.
And I don’t actually believe that the Trump administration is interested in lowering defense spending overall.
We’ve seen some headlines about memos being prepared to look at 8% cuts of the defense budget, but that is just a normal process of identifying programs that might be able to give way to fund other things that the administration wants to do.
I do not expect the net budget to shrink there.
And so, Northrop and GD are interesting because they don’t often get as cheap as they are today.
They could be at an interesting entry point.
I think we’ll know in the next three to six months what some of the fallout, or lack thereof, of these concerns will be.”
Tariff beating stocks are evaluated more on long term contractual demand rather than local wars requiring weapons inventory replenishment. Nicolas Owens identifies these stocks.
“…How investors get excited if we are sending some rockets and artillery shells to Israel or Ukraine doesn’t really track to how these companies make most of their money.
Most of their money comes from long term development contracts, which are things like ballistic missiles, submarines, F35s, long range bombers, that type of blockbuster program.
And the phrase “deterrence” is really important.
The whole idea is if your enemy or the potential aggressor can see what you have and they can see what you’re building, and they will think twice about causing trouble if they see that what you have and what you’re building might be more or stronger than what they have.
And when you’re in a military conflict, the spending shifts or can shift, especially if it’s a prolonged conflict, from long term development projects like the Next-Generation Bomber, to things like munitions, staffing, fuel.
Like, if you look at Desert Storm, they spend enormous amounts just moving gasoline to the front line.
So that’s the risk or the concern that investors should have if there is some kind of prolonged conflict.
And that’s why I said that it’s not cut and dried that military conflict is good for defense contractors.
They make more money more reliably during peacetime developing for peacetime that is, let’s say, prolonged by developing the things that are meant to deter aggression.
And that is the Trump administration’s policy.
They want to end the conflicts in Israel and Europe and they want to continue to build a credible, strong deterrent to, most prominently China as the global near-peer or potential aggressor.”
Read the complete interview to get all the insights and stocks picks from Nicolas Owens of Morningstar.
Chris Snyder, Research Analyst, Executive Director , Morgan Stanley
The Trump Tariffs are the largest single market dislocation since China joined the World Trade Organization.
Chris Snyder, CFA, is a Research Analyst and Executive Director at Morgan Stanley, covering U.S. multi-industry, which includes a wide range of verticals. Mr. Snyder and his team are known for their in-depth thematic work on U.S. Reshoring.
“…If you look at my companies, they continue to show pretty steady growth in that mid-single-digit range.
The reason my capital goods coverage has bifurcated versus manufacturing output is because these companies are efficiency providers and this is why we are positive on U.S. Industrials.
The only reason a customer upgrades a capital good is to drive some sort of efficiency.
That could be energy savings in the case of HVAC, it could be labor productivity in the case of automation companies.
All these companies have some efficiency value-add.
It’s usually cutting out electricity or cutting out labor.
And if you look, electricity and labor have inflated 30% versus 2019.
From the customer standpoint, when you’re doing your ROI and payback analysis, it’s just better than it used to be, because the costs you’re offsetting have now gone up 30%, and they’re still continuing to inflate at a faster rate than history.
Essentially, my companies are providing more value to the world and that’s a good thing.
Providing more value generates demand and allows more margin to accrue to them.
For example, if the paybacks on your HVAC system just got cut in half, I’m not going to let you take all of those economics.
I’m going to get a little taste myself.
Then, the second reason, and this is what our team is the most known for, is U.S. reshoring.
The U.S. industrial economy hasn’t grown in 25 years; since China joined the World Trade Organization in 2000, the industrial economy hasn’t grown.
That includes the capex that we’re putting into it to grow the fixed asset base and it also includes the production, like the widgets coming out of these facilities.
My companies have been fighting a zero-growth market for 25 years.
I believe that this is changing for a variety of reasons, and we see growth returning to the industrial economy.
That will allow our coverage to collectively grow topline and earnings at a faster rate than history.”
Trump Tariffs will benefit the US stocks that Chris Snyder and his team at Morgan Stanley covers.
“I certainly think industrials are well-positioned for tariffs.
If you step back, and you could say every end market, if the prices of the goods have gone higher, then the demand for those goods are less; that’s just the elasticity.
And it’s fair to say the same thing about industrials, but relative to, say, consumer or these other verticals, industrials have a very positive offset.
And that’s just that protectionism in tariffs, I believe, will drive more investment into the country, and that benefits my companies.
For example, the U.S. is about 55% of the revenue in my coverage.
The companies are multinationals, but the U.S. is their home market.
The U.S. only accounts for about 16% of global industrial production.
So, we’re just shifting activity to where they have the best market share, where they do the best margins.
That’s the positive offset, and I think it’s going to bring more investment into the country, not only for the companies that build this stuff, but also the companies that service the production or sell into that production thereafter.
That’s because you build these facilities, but then they’re here and that brings a long tail of opportunities after the initial capex or investment cycle.”
Chris Snyder and his team at Morgan Stanley believe the USA is will benefit from the Trump Tariffs with its unique consumption economics.
“It just felt like we came out of a 45-year period where global manufacturing capex just searched for low-cost labor.
Like that’s the motivation, I have to go find it.
The U.S. always loses when that’s the case.
Now, I think it’s increasingly driven by access to technology, capital, and power, and those are parameters where the U.S. will win.
So, I think, collectively, the U.S. is going to take share of capex.
Regarding a lot of these foreign countries, I think there will be a lot of complaints, and obviously foreign countries don’t like the tariffs, but they will continue to serve the U.S. market — they do not have a choice.
The U.S. accounts for about 30% of global consumption.
That’s equal to the EU and China combined. It’s the best demand region in the world.
The other thing that’s less appreciated is that it’s the best margin region in the world.
Certainly, all of my companies do the best margin in the U.S., but we’re talking to our international counterparts and digging up as many numbers on this as we can find.
For the most part, international companies also do their best margins in the U.S.
I think you would struggle to find any other country in the world where foreign companies are doing their best margin in your market.
I think it would be very difficult to find that.
If you think about the U.S., it’s the best demand region and it’s the best margin region.
If you raise the cost to serve it, it’s going to still be an important market that they have to attach themselves to.”
Humanoid robots are one sector poised to benefit from the Trump Tariffs.
“One, we’ve seen a lot of advancement on the HVAC and the cooling side.
Data centers play into that, with things like liquid cooling, and companies like Vertiv (NYSE:VRT) that can sell into the higher density AI data centers.
Also, on the automation side of the house, we published a very big report this week on humanoid robots, which some of our colleagues here at Morgan Stanley, especially on the auto team, have led the debate on.
Obviously, it’s early stage there, but to me that is something that everyone needs to be watching, because it really is going to dramatically change the landscape of global manufacturing.
Point one: If you think about it from a U.S. versus a low-cost manufacturer perspective, it will lower everyone’s cost curve.
But the U.S. factory workers make, say, five, six times as much as Asia counterparts, so the savings is much stronger here.
It is also a structural competitive advantage as we continually squeeze out labor.
Everyone saves.
The U.S. and Europe, and any developed region will save the most.
Point two, which I think is very interesting is, when we think about these humanoid robots, where are they going to be made?
I think they’re going to be made domestically. I think there’s going to be extreme sensitivity around these supply chains, and that’s going to drive more protectionism and investments in the U.S.
Point three is power.
The market is not thinking about this yet but the next thing we’re going to think about in manufacturing is power bottlenecks.
This is where the U.S. really stands out.
Electricity prices in the U.S. are about 25% cheaper than in Europe.
Asia pays about $14 per MMBtu to import liquefied natural gas — LNG — from us.
We pay about $3.50; they’re paying four times as much as we are.
Then, when we think about humanoids, the cost is powering them.
If you compare the U.S. to Asia, right now our workforce, humans, is a lot more expensive.
If you look out into the future and the biggest cost of the workforce is actually the electricity to power them, well, now the calculus has very dramatically changed.
Again, that’s very far looking out, of course, but manufacturing facilities are very long-lived assets.
These are mega-projects.
They take four or five years to build, and then they serve these companies for 30 to 50 years thereafter.
So, when you make these regional capex decisions, you’re very forward-looking, and have an appreciation of where the technology is going and ultimately what that means for the cost profile a decade or two down the road.”
The Top Three Trump Tariff trades recommended by Chris Snyder and his team at Morgan Stanley.
“Of the three stocks right now that we really would be recommending, the first one would be Trane Technologies.
I talked about this theme of being an efficiency provider. I think the value of efficiency has never been higher than it is right now, and there’s no company that plays into that better than Trane.
They are the HVAC technology leader.
They reinvest the most in the business.
They’re always the ones that are pushing the envelope on, on innovation.
When we think about the demand in the market right now, the reason it’s good is not because we’re building a ton of stuff. It’s because we’re seeing very proactive upgrades, because the paybacks have gotten so much better.
Those benefits primarily accrue to the company that is providing the most efficiency.
So we really like Trane.
After that, it would be Rockwell.
Rockwell is the U.S. leader in factory automation.
They’re the cleanest beneficiary of U.S. reshoring, of a Trump presidency and the opportunities that that brings.
And they’re coming out of a cyclical trough.
In fiscal 2024, they were negative 10% organic. We see really nice acceleration, orders turning the right way.
That’s another stock we very much like.
The third one would be Eaton (NYSE:ETN).
Eaton is the leading supplier of electrical systems and solutions in the United States.
They touch every good secular trend you could want.
They sell into reshoring, data centers, utility investment.
They really are checking all the big boxes.
And, particularly on the reshoring side, the power opportunity there is still underappreciated.
Everyone’s focused on data centers consuming electricity.
Data centers account for 4% of U.S. electricity consumption.
The manufacturing economy accounts for 26%.
And that manufacturing industrial consumption has been down since 2000 because we haven’t grown production.
If I’m right, and production returns to growth, structurally, you’re going to start to see the industrial economy pull on the grid as well.
And that’s coming off a much higher 26% starting point.
Then over time, as we layer in things like humanoids and robotics and just more automation equipment, the pull is going to go even higher.
Even on the power side, I still think it’s very much underappreciated. Everyone’s just so hyper-focused on data centers and I think they’re missing this, which is a great opportunity for them, of course.
But I think the manufacturing side is really important because it adds duration to it.
Everyone’s always worried: “What about when data center capex stops growing?”
But we have a very nice kind of off-ramp here that just adds duration to the positive demand story.”
Get the complete interview with Morgan Stanley Executive Director Chris Snyder, exclusively in the Wall Street Transcript.
REITs or Real Estate Investment Trusts provide current cash on cash returns in addition to a piece of increasing real estate values.
Alexander D. Goldfarb, Managing Director and Senior Research Analyst, Piper Sandler.
Essex Property Trust is one of the 3 top picks from Alexander D. Goldfarb. Mr. Goldfarb is a Managing Director and Senior Research Analyst at Piper Sandler.
Previously, he was a Managing Director and the Senior REIT Analyst in the research department of Sandler O’Neill + Partners, L.P.
Mr. Goldfarb joined the firm in 2009 following two years as a Director and Senior REIT Analyst at UBS and five years at Lehman Brothers, where he was a Vice President and REIT analyst.
“Any good real estate person would tell you, it’s never been a better time to own real estate, right?
If you ever find a real estate bear, you know they’re not involved in the industry.
So, that’s for starters.
That said, last year was certainly a tough one for REITs.
They definitely underperformed the broader market on elevated interest rate concerns.
And this year is no different; the 10-year has been volatile so far.
It was trending up towards 5, now it’s pulled back in.
The group was selling off, now it’s rallying.
So, the macro is what’s driving the performance of the stocks, less so the fundamentals.
What’s really interesting, and one of the reasons why we’re so bullish on real estate, is if you look back since the end of the Second World War, every time this country has had a boom-bust in real estate, there’s either been excess inventory, excess availability, some issue in the banking system — and if you look today, we actually have none of that.
Occupancies are pretty healthy.
We have economic and employment growth.
Very little new supply, even in apartments, where there is a massive supply wave that’s coming to an end this year.
The cost of construction is daunting, such that for the most part, it doesn’t really pencil.
Banks aren’t providing construction loans, so anyone who is building is doing it from their own pocket.
And the final element are the banks, which the regulators are not pressing to foreclose, so a lot of lenders are doing blend and extend.
I think initially there was a general view that blend and extend was not a legit strategy, but people have quickly come around to realize that it’s no different than if a freighter runs aground: The owners don’t immediately call in the breakers to rip the ship apart and junk it, right?
They wait for the tide to do its thing.
Will the tide be able to refloat the ship?
Same thing with loans.
Just because a loan may not be compliant with today’s lending terms doesn’t necessarily mean it’s a bad loan if the lender and the operator can see where the income growth of that property is going.
Clearly, there will be bad loans. No NOI, it’s going back to the lender.
But otherwise, the regulators realize that there’s no point in pressing banks to aggressively foreclose or recapture, take back loans if they don’t have to.
And the positive for REITs is, because the REITs tend to be lower levered than the private sector, and they have access to public equity, they’re just in a better capital position to be able to execute their plans and take advantage of real estate that comes to market.”
REITS or Real Estate Investment Trusts are Alexander Goldfarb’s bread and butter.
“Right now, real estate is actually in a great position.
Think about rents that are biased to the upside, because replacement cost still exceeds where buildings are trading at and there is no new supply; you have a growing economy; and tenants are much more conscientious about the quality of the landlord.
What that means is that dividends should steadily grow, and asset values should increase.
The hindrance to asset values is rising debt costs, but assuming debt costs stabilize and then the rent streams grow, that’s a positive for valuations.
So, REITs should be able to prove that they have an upward bias and inflation protection about them.
And in an environment like today, where we still have inflation pressure, that should be a positive.
If you look at the Trump policies’ bigger picture — less regulation, more energy production, getting government out of the way — these are all positives.
I don’t think many people would say having government involved in the market is a good thing.
It’s like elementary school; you don’t want the teachers in the playground.
You do want the teachers watching to make sure that kids aren’t fighting with each other, but you don’t want them directing how kids are to play.
And that’s what government should be — make sure that the rules are enforced, make sure that everyone is staying in their lane, make sure that at least the way the markets operate is fair.
But as far as how companies interact, how the private sector works, that’s something that the private market should do.
Pulling government out of that, promoting more energy production, more natural gas, more oil — people forget that tractor-trailers drive, figuratively and literally, a lot of the economy.
You can see it right now, that the push into EVs or windmills or solar ends up adding cost, and it makes the grid more unstable, it makes energy costs higher, it pulls dollars away from other areas that could be put to work in a better fashion.
The interesting thing is, people will say, well, tenants today, they want green buildings, or they want renewable. I disagree.
People want inviting environments.
There’s no one who says, give me a dirty, less efficient building.
People want windows, they want a lot of natural light, they want open landscapes.
They don’t want pollution.
But when you build a building and you make it efficient for operation, and it has all the qualities that the tenants want, that’s the important part, not necessarily a check the box.
As a result, I think under Trump, real estate benefits in that regard, because hopefully it means that there’s less focus on getting a green stamp of approval versus building efficient buildings that tenants want.
Often they may be the same thing, but not always.”
There are 3 REITs that Alexander Goldfarb recommends.
“Our top pick for the year is Essex (NYSE:ESS), and this was done at the beginning of the year, before the L.A. fires, so it’s not related.
The reason why we picked Essex as our top REIT for the year is we like the market positioning.
Very little new supply on the West Coast versus the rest of the country.
Second, you had the continued unwind of the COVID rent moratorium; apartment units are replacing non-cash-paying renters with actual legitimate cash ones.
And then finally, Northern California has lagged since COVID and rents have barely moved, whereas rents everywhere else are up 20%-plus.
So, there’s a lot more upside, especially as tech hopefully this time gets back to work in the office.
So, we like Essex a lot.
There’s another company, Curbline (NYSE:CURB), which is the spinout of SITE Centers (NYSE:SITC), focused on convenience retail.
What’s really impressive about this story, apart from the fact that it was well seeded with capital — $800 million in cash, debt free balance sheet — is rarely in REITland do you see management teams take on an entirely new challenge.
Meaning, this management team said, you know what, SITE is a good company, but it doesn’t have the future that we think can be competitive, so we’re going to create this new company and spin it out of SITE, call it CURB, and focus on convenience retail assets.
And they haven’t said it, but our view, and the market’s view, is SITE is going to be liquidated, similar to what this management team did with RVI a number of years ago.
That really captures people’s attention, because they are truly taking 100% risk.
If they stayed at SITE, they could just clip a coupon on compensation, try their best, and attend NAREIT twice a year.
Here, they’re actually trying to create a whole new company, and that’s something that we generally don’t see often, apart from IPOs.
I think that speaks volumes.
The company is well set up.
Earnings growth north of 10% a year.
Certainly from a balance sheet capital position, well stocked.
And, so far it’s resonated well with investors.
Another name that we continue to like is SL Green (NYSE:SLG).
The management team is highly productive.
Whenever they have announcements, it’s almost always good.
Hard to think of an announcement they’ve had that has not been additive.
And they really have a lock on Midtown office around Grand Central, which is one of the hottest, if not the hottest, submarkets for office in the country — that and Century City in L.A.
So, they’ve really done well in concentrating their portfolio, and they’re benefiting right now as availability rates on Park Avenue have dropped below 7%.
Even in premier office, availability is below 7%.
Rents continue to move upward.
And what’s good for the buildings is that the operating expenses and the leasing costs really don’t change, so all of that accelerating rent just drops to the bottom line.”
REITs are the investment vehicle focus for 2025. Read all the interviews, exclusively in the Wall Street Transcript.
High yield publicly traded companies are available in the current market, for example the Plymouth REIT yields close to 6%.
For example, Jeff Witherell runs the highly regarded industrial Plymouth REIT.
Jeffrey E. Witherell, CEO and Chairman, Plymouth Industrial REIT
“The data will show you that the smaller spaces are performing better than the larger spaces.
And again, there are more users for 50,000 square feet than 500,000 square feet, just by definition.
An example would be Columbus, Ohio.
If you looked at their vacancy rate last year, it was approaching 14%, but 10% of that was the bigger box and 4% was the smaller buildings.
You can see the same with Indianapolis; most of the vacancy is sitting in the larger boxes.
The second part of that is that when a developer builds a warehouse doing speculative development, outside of just the cost of doing it, the developer can make more money by building a bigger building and then selling it.
It’s just that economy of scale in the sense that if they can put $100 million to work in a large building and they can make a profit off of it, it’s probably going to be larger than if they built a 100,000-square-foot building.
There’s a variable cost, obviously, of the construction of a larger building, but your design, permitting, bringing water, sewage, power to the facility, things like that, those are fixed, whether you’re building 200,000 square feet or 1 million.
The speculative development over the last three or four years has been mostly concentrated in the larger buildings — it’s more profitable for them to build those — and that’s where we’ve somewhat overbuilt.
That’s not my opinion, that’s the data.
The data shows that these 1-million-square-foot buildings are sitting empty for extended periods of time, where we are right now.
That should get absorbed over the next several years, and we should be back to a much healthier market for those sized buildings.”
The high yield from Plymouth will be supported by well researched trends in the marketplace.
“At the very end of the year, we announced the purchase of a portfolio of properties in Cincinnati for about $20 million.
That was Phase 1 of the portfolio; Phase 2 should be closing soon, and that is going to add another $20 million of real estate in Cincinnati.
So the second part of that should be closing here momentarily, and then we have a few other things under contract.
This Cincinnati property is a Plymouth property.
It’s a perfect example of what we would call shallow bay, about 260,000 square feet.
There are about 20 tenants in there, and the WALT that I mentioned before is just under three years.
Again, we like the ability to work with smaller tenants, be able to renew them, and then obviously mark-to-market the rent.
The rents in those spaces are going to be below market, and when the renewal comes up over the next two to three years, we’ll be marking those rents to market, so there will be an increase in rent for us.
That’s how you grow the business, and that’s how you increase income and dividends to shareholders.”
David Spreng , Founder, Chairman, President, CIO & CEO Runway Growth Finance Corp.
“Runway Growth Capital was founded in 2015 to be the investment adviser to Runway Growth Finance Corp., formerly Runway Growth Credit Fund Inc., a private business development company that is now publicly traded under the ticker symbol RWAY.
Shortly after inception, I was joined by Tom Raterman, our CFO and COO, and Greg Greifeld, our CIO and Head of Credit.
Over the course of the next 15 months, the balance of the BDC was raised.
We went public in 2021.
Our mission is to support passionate entrepreneurs in building great companies.
We are like venture capital, except VCs invest in equity, i.e., they own a piece of your business, while we invest in debt or make a loan so that your ownership isn’t diluted.
We lend capital to companies looking to fund growth with minimal dilution, primarily in the technology, health care, and select consumer industries.
In turn, we aim to produce superior risk-adjusted returns. We do this through our publicly traded BDC, as I mentioned, RWAY, and our private partnership, LPGP funds.
We operate from office locations in Silicon Valley where I sit, Chicago, New York and Boston.
In October of last year, we announced a definitive agreement for Runway Growth Capital to be acquired by BC Partners Credit, the $8 billion credit arm of BC Partners, a leading alternative investment firm with approximately $40 billion of AUM.
Through careful growth and strategic partnerships, we’ve been able to expand our offerings and continue building a portfolio that totals approximately $1.3 billion of AUM for Runway.”
The high yield is supported by a superior position in the balance sheet.
“We specialize in providing first lien loans.
That means first money out if something goes wrong.
They’re all senior secured debt financings to late- and growth-stage companies with investments typically ranging from $10 million to $100 million.
Though we expect our target range to increase to $30 million to $150 million following the combination with BC Partners Credit.
Our strategy is focused on constructing a high-quality portfolio of senior secured loans to differentiated companies in tech, health care, and select tech-enabled consumer services, including both sponsored and non-sponsored opportunities.
We are a principal preservation, credit first, downside focused private debt manager, prioritizing lending to established businesses with substantial revenues, significant enterprise value, and proven in-demand products or services well beyond the prototype stage.
I can give a couple statistics on the portfolio.
Roughly, our average company is doing well over $100 million in revenue.
It’s been around for more than 15 years and it’s raised more than $150 million of equity capital.
So, we believe these aren’t high-risk startups.
These are very advanced, late-stage, venture backed, and occasionally PE-backed companies.
One might historically think of venture debt as being focused on early-stage companies.
That is not the case.
We do not lend to early-stage venture companies that present equity-like risk.
We’re very much focused on credit first, a considerably safer investment in as advanced companies as we can find.”
New Lake sports a high yield of over 10% at current prices, albeit in a sector that has its issues.
Anthony Coniglio, President, CEO and Director, NewLake Capital Partners Inc.
“We founded NewLake back in early 2019, when we saw the opportunity to provide much-needed real estate capital to this emerging high-growth industry that is the cannabis industry.
What was unique about it was the opportunity to step into an industry that was highly regulated but had a significant disconnect between state and federal law that drove a significant gap in the capital available to the industry.
In particular, we noted that real estate was critically important to this industry — to cultivate, manufacture and dispense — and because of the federal prohibition on cannabis, it eliminated all traditional forms of real estate.
Most real estate carries debt, and those debt provisions include a restriction on leasing only to businesses that are legal, and so cannabis businesses by definition violate all those real estate debt agreements.
Therefore, you had a significant gap in the properties available to the industry versus the needs of the industry.
We thought we could get above-market yields, and indeed we did and continue to get above-market yields that reflect the uniqueness of what we do, the lack of competition, but also there’s an element of risk premium that’s in the pricing as well.
Having been around business for over 35 years now, I’d say there are few stories where the competitive landscape is better six years after you started versus when you did.
We sit here today in January of 2025 as the second-largest owner of cannabis real estate in the United States.
We own 32 properties across 13 states with 12 of the leading cannabis operators in the country, names that people who are familiar with the industry would be well aware of, like Curaleaf or Cresco or Trulieve.
We continue to have what we think is the best portfolio that’s out there, and it’s a testament to the underwriting approach.
And so to summarize, the opportunity set was, there was very little competition providing real estate capital to the sector.
We stepped in, we started the company, we’ve deployed over $400 million, second-largest owner, and quite frankly, many of the competitors that were existing when we started and were developed during our life cycle have fallen away.”
The high yield is supported by extensive real estate investment experience.
“But because we’re also a real estate investment trust, we complemented that with lots of real estate experience.
Some of the readers may be familiar with our Chairman, Gordon DuGan.
He was the CEO of W. P. Carey, one of the largest triple net lease REITs in the world. He left W.P. Carey to run Gramercy Property Trust, and took that business from a roughly $300 million market cap company and sold it to Blackstone for over $7 billion.
He’s been involved in real estate for his nearly 40-year career, as has Peter Martay and David Weinstein, other people on our board, so significant real estate experience.
What we’re trying to do is marry that cannabis experience with the real estate experience, and develop an underwriting approach that combines that expertise. Here are two examples.
One is the deal structure.
We understood this is an emerging industry, and so from the beginning, when we structured our leases, we always included provisions that would anticipate financial difficulty or regulatory uncertainty.
One example would be, we always cross collateralize security deposits and cross default leases amongst the different properties, in a way that makes it easier to preclude default and position us well should there be financial difficulty.
We also look at the jurisdiction.
This is critically important, because we focus on jurisdictions that are limited license.
When you think about cannabis, this is very much a state-by-state business.
The way New York approaches cannabis is different than the way Pennsylvania does, and different from Florida, different from Illinois, etc.
Understanding those nuances is critically important.
We focus on those states where there’s not a proliferation of licenses, the way you would see in Oregon or Michigan or in Colorado, where many of the financial difficulties have been.
It’s a state such as Pennsylvania, where you have to go to a package store to purchase liquor, where there’s a limited number of licenses and those licenses have intrinsic value, and they also create a better operating environment for the tenant, which improves the cash flow profile of the property.
If you improve the cash flow profile of the property, you’re improving the likelihood you get paid rent.
I’m going to leave it there, and say this combination of significant real estate experience with significant cannabis experience and focusing on these limited license states — that has allowed us to preserve and grow value for our shareholders.”
All these interviews with high yield public companies and more are available exclusively in the Wall Street Transcript.
Craig Nicol, Founder and CEO, Graphene Manufacturing Group Ltd.
Craig Nicol is the Founder and CEO of Graphene Manufacturing Group Ltd.
Mr. Nicol has a career of over 20 years in delivering large-scale innovation including leading multi-billion-dollar gas and LNG value chains in Australia and Asia Pacific and managing sales and marketing teams across Asia Pacific working for Shell International.
Mr. Nicol has a bachelor of engineering degree in manufacturing systems (Honors) and a bachelor’s degree in business marketing from the Queensland University of Technology.
Mr. Nicol is a member of the Australian Institute of Company Directors (AICD) and is also the Chair of the Australian Graphene Industry Association (AGIA).
“The first product is a coating which is just being sold around the world and we’re waiting on an EPA approval for the American market.
The graphene coating provides greater heat transfer and also very long corrosion resistance.
One of the longest corrosion resistant coatings in the world.
So generally, we target air conditioning coils, LNG plants, and now electronic products to remove heat.
We can substantially change the heat signature of computers and phones and electronics with that.
And we’re talking to many large manufacturers about that.
The second product is a graphene lubricant.
That is a small dosage amount of graphene in oil which then reduces your friction in your engine, which then reduces your fuel use.
We have been testing this product for some time; it’s fully developed, but we’re just doing final testing.
We’ve been testing this product for about a year and a half and we aim to come out with an update on that shortly.
Generally, we see about 5% to 10% savings in fuel with a very small amount of our product blended in with a very economic price.
So, it’s quite a big opportunity for very large fuel burning companies.
The third product, which we just launched recently, is called SUPER G.
SUPER G is a graphene additive which can go into lithium-ion batteries.
They’re in small doses to increase what is called their rate tolerance, which means they can charge faster.
We’ve been making this product for a number of years and it’s actually half of our fourth product, which is called the graphene aluminium-ion battery or aluminum-ion battery.
Now that is the one that most people want to come and talk to us about.
We’re developing an aluminium-ion battery technology internally with University of Queensland, who invented this particular battery and we have a patent and license around that.”
Air conditioning seems prosaic but in a time when everyone is building data centers, it becomes a growth trajectory for graphene products that expedite the data center process flow.
“…We have a coating which has now been in development for six years that has been proven to make air conditioners more efficient just by spraying the coating on the outside of the air conditioning coil, and then it also makes heat sinks more efficient.
Heat sinks are basically the device that you have in your computers and your electronics just to remove heat so electronics can work at an OK temperature.
And in our model, which is signed off by University of Queensland we can show a 39% reduction in size when our coating is applied, which is a massive reduction in weight and volume for the heat sink.
Or you can keep the same size of the heat sink when you apply our coating and you can instead increase its performance so you can push more heat through, which is what a lot of companies want to do now.
So that’s now we’re working with 15 to 20 large manufacturers globally, all very much leaders in their field.
Generally, America and China are where our manufacturing customers are, and we’re working with them.
Some of them have already got products tested and approved.
Now they’re going into manufacturing testing which is the final stages of testing.
Now we’re obviously keen to see that push forward into significant revenue.
So that’ll be good for us, and then to be able to show that this product can really be in many different sectors.
We recently got the product of the year award for the Australian industry for air conditioning, which is quite a prestigious award.
And then we also got a number of awards in the global data center industry where we’re doing a lot of work with data centers to reduce their energy costs in different locations around the world.
So, there are many applications, but we’re leading with air conditioning.
But I think electronics are probably going to come up faster and probably take over in terms of volume because the amount of interest we’re getting is really quite extraordinary.”
There is an EPA regulatory hurdle in the US, which may or may not be affected by current Federal budget cuts.
“…We make this graphene material, which as I said is a new material.
It’s basically carbon.
It’s what’s called carbon allotrope or carbon material.
There are four types of carbon.
There’s diamonds, there’s coal, there’s graphite and graphene.
The graphene is the fourth type, and the others are all quite commonly used.
And graphene, it has basically got all the same properties.
It’s the mother structure of life.
However, it’s a new material.
So, it’s got to go through all of the safety and environmental approvals.
We already have them in place for Australia to help produce and sell here.
And we went through the pretty rigorous nanomaterial laws to do that.
We already can sell into Europe, Canada, China, Mexico, many countries.
Pretty much every country in the world we want to, except America.
So, we’ve already got a partner for distribution in America called Nu-Calgon.
We’ve already launched that with them and they’re one of the largest air conditioning chemical distribution companies in America based in St. Louis, Missouri.
So, what we had done is submit an approval for 10 tonnes about a year and a half ago for the graphene coating, which would have been plenty because there’s very little graphene used in the coating.
And we submitted it as per requirement and then the EPA basically asked us to resubmit, but with an unlimited amount which would suit their regulations better.
So, we had to resubmit and that’s taken us almost a year to be able to put in a different form to resubmit.
And we’ve just done that.
We’re going through the EPA review of that right now.
It’s quite an involved process.
But what that means is we’ll have pretty much an unlimited volume into almost any market.
We’re waiting for that to come in for revenue because then we can then kickstart a revenue with Nu-Calgon and into America.”
Get the complete interview and read the CEO projections about the scale to profits, exclusively in the Wall Street Transcript.
Ajay Mehra, CIO and Founder, Foresight Global Investors
Ajay Mehra is Founder and Chief Investment Officer at Foresight Global Investors.
Prior to founding Foresight, Dr. Mehra was Managing Director and Head of Equities at Salient Partners where he created and managed the firm’s global equity strategy.
Dr. Mehra also was Managing Director and Head of Manager and Fund Research at UBS where he rebuilt the firm’s manager and fund selection platform and advised on over $300 Billion in assets.
Previously, as a Partner and Portfolio Manager at private equity firm Columbus Nova, Dr. Mehra co-managed a global macro fund and a long biased global equity fund.
Prior to that, he was Managing Director and Head of Equity Research for State Street Research, where he was the lead portfolio manager for a Health Sciences fund (selected as the Lipper Best Health Sciences Fund 2003 and 2004) and a Large-Cap fund.
Dr. Mehra first started managing institutional money at Columbia Management Group where he was a Senior Vice President and Portfolio Manager covering Media, Telecom, and Consumer and Healthcare sectors.
He started his Wall Street career at Morgan Stanley where he was the firm’s ranked Consumer Products analyst.
Before coming to Wall Street, he was Assistant Professor of Strategic Management at West Virginia University’s College of Business and Economics. He received B.S. and MBA degrees from Panjab University in Chandigarh, India, and received a Ph.D. from the University of Massachusetts.
His experienced perspective on global markets leads to some interesting investment decisions.
“I think the most important thing is that in the U.S., of course, the markets had this tremendous run with huge multiple expansion and a very narrow market.
So, for most people the question is, should they cash out or should they stay in.
Globally, I would say that there’s a little more sense of cautious optimism because the U.S. is basically almost 70% of the global market capitalization now.
It’s about a quarter of the global economy.
So, maybe some of the global markets can catch up, but that also depends on the dollar.
The dollar has been very strong also.”
The next phase of this current bull market may well be overseas.
“I think the administration’s business friendly approach is already discounted in the marketplace.
I think the uncertainty remains with respect to tariffs.
There’s probably more bark than bite.
There’s some concern about the deportations — what impact it will have on unorganized labor for certain sectors.
But I don’t think it really affects that many companies in the S&P or even the Russell 2000.
It’s just more of a political issue than it is anything else.
And if the government becomes more efficient through DOGE, then that’s kind of a good thing.
But the market’s already discounting a lot of these kinds of good news.
So, if there is going to be an air pocket or some reaction to a government policy, it’s probably going to be more on the downside than on the upside.”
The US dollar is nearly at parity with Euro, Dr. Mehra has strong recommendations based on that.
“I think European markets are really cheap.
They haven’t done well in several years.
I mean, international markets are only up about 3%, 4% this year.
The S&P is up about 25%.
I don’t think most people realize that.
If the new administration tries to weaken the dollar in some way, then that could be very bullish for returns for international markets.
I think Japan still looks very good.
The emerging markets, I’m not too sure about.
Emerging markets are really again dependent on what the U.S. dollar does, but the developed overseas markets I think look good.”
Dr. Ajay Mehra has some alcohol beverage stocks in his near term buy lists.
“I think the beverage stocks, Diageo (NYSE:DEO), Pernod Ricard (OTCMKTS:PDRDF), even the beer stocks, Anheuser-Busch (NYSE: BUD), look good.
I think some of the health care stocks which have not worked this year, the pharma companies like Roche (OTCMKTS:RHHBY) could work.
In Japan, Olympus (OTCMKTS:OLYMY) is a stock that we like a lot.
Hoya (OTCMKTS:HOCPY) is another one which is very good in Japan.
I think it’s a combination of health care, and a little bit of semiconductors.
So, these are some of the things that we’re focused on.”
The returns from these markets are highly dependent on the US/Euro exchange rate.
“U.S. markets have really worked because the earnings growth has been there here in the U.S. and there’s been tremendous multiple expansion also.
You have to realize half the returns in international markets are basically dollar movement.
If the dollar remains so strong, then the returns expressed in dollars — they pale in comparison to the U.S. market returns.
And that’s why they have been reluctant to invest.
Geographical diversification hasn’t paid off.
In fact, even in the U.S., diversification within the U.S. has not paid off.
The U.S. market is basically led by seven stocks.
They are over 30% of the S&P right now.
The average stock in the S&P is only up like 7%-8% this year. The S&P is up 25%-26%.
So even here a lot of stocks present value.
I think Baxter (NYSE:BAX) looks very good, for example, to us in the health care space.
I think some of the energy names, especially oil service names, have really gotten beaten down.
Now we are value investors so we naturally gravitate to some of the value sectors.
If growth continues to work, then obviously value will underperform, but growth had a big run.
So, we think this may be time for value.”
Dr. Mehra sees US based railroad stocks as a potential beneficiary from Trump Administration policies.
“One beneficiary from onshoring is definitely U.S. railroads which have not done anything this year.
The railroads are challenged because the industrial traffic has been slow from autos and coal.
Year to date the railroads are down.
So, if there’s more onshoring here, there’ll be more stuff to move around.
Stocks like Union Pacific (NYSE:UNP), even CSX (NASDAQ:CSX), Norfolk Southern (NYSE:NSC), which have not worked and are actually down for the year, could do well.
That’s one place where I think stuff is not discounted.”
Get the complete picture from Dr. Ajay Mehra by reading his entire interview, exclusively in the Wall Street Transcript.
Patrick Kennedy, Co-Founder of Allsource Investment Management
Patrick Kennedy is Founding Partner at AllSource Investment Management. Previously, he was a Financial Adviser, Portfolio Manager and Alternative Investments Director at Morgan Stanley Wealth Management.
In addition, he worked at Cigna and Travelers. He received an M.S. degree in banking and financial services management from Boston University.
He makes his money making money for his investors and has a clear eyed strategy for the next few years.
“Inflation, for most investors, is kind of a thing of the past — we think that’s inaccurate.
We think that inflation should very much still be on the forefront of people’s minds.
And what the Federal Reserve does next isn’t a certainty to us.
So, a lot of investors think that we’re going to undergo this cutting cycle and it’s going to be loose money again.
In our view, that’s a big risk for the market because the economy is still doing really well with rates this high.
And we think that the Fed doesn’t want to be known as the Fed that let the inflation genie back out of the bottle.
So, we think they’re going to be much more cautious than most people think.”
Patrick Kennedy is developing a new private equity asset for his clients.
“We just started looking at professional sports, I want to say, 18 months ago.
We did some underwriting on the NBA.
The NBA has allowed private equity ownership for some time now.
And the first thing that we really wanted to weed out was, is this just a vanity investment? If it’s just a vanity investment for people to be able to say, hey, I own a piece of my favorite sports teams, we were going to shy away from it.
But when you do the underwriting and look at the fundamentals, the fundamentals are actually pretty sound.
For these big leagues like the NFL and the NBA, most of the revenue is derived from league revenue, which means each team there participates in the overall league revenue, driven mostly by media rights.
When you look at the power of the media rights, you have companies now like Amazon and Netflix that are just getting into this space and bidding up those media rights in a big way.
Amazon has Thursday nights for the NFL.
They have some NBA games.
And then you look at Netflix, they just had Christmas Day games for the NFL breaking all sorts of streaming records.
So that’s a big driving force of those media rights continuing to compound over time.
In fact, if you go back to 2012 and fast-forward to 2023, and you just look at the average growth rate of a franchise in the big four — hockey, football, basketball and baseball — it’s compounded at about an 18% annualized return.
The S&P has given you about 11% in that same time frame.
We think that’s really attractive.”
Uncertainty is always a given but managing uncertainty is Patrick Kennedy’s bread and butter.
“When we’re working with the high-net-worth families we serve, the macro uncertainty this year brings is very much on the forefront.
We’re not saying things are egregiously valued and we should trim a lot, but we are saying things are fully valued at this point.
So, we’re not looking to increase equity allocations at the moment simply because the market’s trading on 23 times forward earnings.
When you look at consensus, I think earnings estimates are supposed to grow at mid-teens next year and profit margins are supposed to expand by mid-teens growth as well.
We think, again, it could happen.
Obviously, most of the people out there think it will happen because it’s the consensus view.
However, when a lot of people are going to one side of the boat, we typically start to become cautious. So, we’re cautious right now on the equity markets.
On top of that, we think a lower rate environment in 2025 isn’t a certainty.
The Fed is going to be much more cautious.
And as Warren Buffett says, interest rates are gravity when it comes to asset prices, especially the stock market.
If we’re in a higher rate environment, that could be problematic for the equity markets.”
High net worth clients have interesting ways to avoid taxes.
“…There was talk about taxing unrealized gains for the ultra wealthy and raising the capital gains tax to 28%.
A lot of that obviously went away when Trump was elected, but those conversations were actively happening.
And now it’s more of a state-based conversation of, well, does California have much higher taxes than, say, Texas or Florida, and does it really make sense to live in a state where you’re going to be taxed 10%, 15% more than you would in another state?
So those conversations happen all the time, but it boils down to where you want to live.
I mean, if you have family in a certain area and your life and your business is in a certain area, it’s very hard to say, hey, we’re just going to uproot that for tax reasons.
Now, there are plenty of things we do to try and help with taxes.
One, we use qualified opportunity zones to defer capital gains.
Essentially, it’s just a way to invest within private real estate.
You take a gain, you move the whole or a portion of the gain into a private real estate investment.
It defers the gain out for at least a couple years.
There’s a proposal on the table right now that could actually kick it out for five years, meaning you wouldn’t owe on that gain for five years out if that proposal went through.
Right now, it just kicks the can for about two years.
And if you hold that private real estate investment for 10 years or longer, you actually get tax-free treatment on that gain within private real estate vehicle as well.
So, it’s a really attractive way to kick the can down the road and earn a tax-free return.
Another thing we use is direct indexing where you essentially build out a portfolio like the S&P 500 by buying all individual stocks for the client. And then we have a manager that will go in and aggressively tax loss harvest all the positions in the portfolio.
The indexes that are available include the S&P 500 or the Russell 1000 or Russell 3000 and many more.
It produces taxable losses every year while tracking the index.
So, there’s plenty of tax strategies that we use actively other than just tax loss harvesting to try and keep taxes down.
And then if a client does ask us, where is the most ideal place to rest my head six months and a day, we definitely have that conversation too, but typically those decisions are driven more by family, business location and that sort of thing.”
Get the complete rundown of all of Patrick Kennedy’s investment techniques by reading the entire interview, exclusively in the Wall Street Transcript.
Patrick Kennedy, AllSource Investment Management
email: info@allsourceinvest.com
Andrew Chanin, Co-Founder and CEO of ProcureAM, sponsor of the Procure Space ETF (UFO).
Andrew Chanin is Co-Founder and CEO of ProcureAM, sponsor of the Procure Space ETF (UFO).
Mr. Chanin created PureFunds and had been a sponsor in the ETF market from 2012-2017.
Mr. Chanin began his ETF career in 2007 working for the specialist firm Kellogg Group.
Mr. Chanin quickly worked his way up from clerk to Lead Market Maker for global and international equity ETFs, helping the company transition from its core American Stock Exchange ETF specialist business to NYSE Arca ETF market making.
In 2009, Mr. Chanin was recruited by Cohen Capital Group to build out the firm’s ETF trading capabilities.
At Cohen Capital Group, Mr. Chanin held the title of Director of International Trading, where he made markets in a variety of ETFs across various asset classes while helping to develop multiple global and international equity/ETF trading strategies for the company’s prop trading division.
“In bringing out a product that was focusing on the space industry, it was really important to us to have an interest in pure-play space companies.
And the way the fund is structured is, we track the S-Network Global Space Index.
And some of the things that they look for are a company’s percentage of revenues derived from space-related businesses, activities and services.
For us, that was an important feature to make sure that the fund had a heavy focus on these companies that were primarily space revenue focused companies, but also realizing that the space industry is one that has numerous players, and some of them may be more diversified but have very major roles.
Up to 20% of the index at time of rebalance can also be allocated towards these more diversified names.
Think of them as your more diversified aerospace and defense names.
In some cases, these are also referred to as primes in the industry.
And realizing that although they might not have the majority of the revenues coming from space, they are doing some pretty incredible things and do have fairly large space businesses underneath their hood.
It also made sense to have some exposure to those companies.
So right now there are over 30 names in the space that are in UFO.
And those names specialize in various areas across the space industry.
And it also has a global focus.
These names aren’t just U.S.-listed names.
They are names from exchanges around the globe that do have, in some cases, either a majority of their revenues from space, or they are major diversified aerospace and defense players.”
The UFO stock index investment in the Space Industry sector is now important as a long term portfolio play according to Andrew Chanin.
“I think the fact that there are adversarial nations looking to become dominant players in space, it ups the ante for any country that wants to have a strong presence there.
And by stepping off the gas and losing focus on achieving various space accomplishments, it’s opening the door for potential adversarial nations to become the leader in space.
And it’s now widespread thinking from the highest levels of the military that space is the new strategic high ground for modern warfare.
And by that, we’re talking about modern weapon systems, missiles, guidance, tracking, even secure communications and other military strategies that are reliant upon space-based technologies and services and communication.
So to the extent that other nations — which currently is the case — are demonstrating and talking to their various space-related goals, it forces the U.S. to take that seriously and to continue to remain competitive.
And many people believe that the winners over the next couple decades of this new space race are going to have a strategic advantage for potentially decades beyond that.
So it’s imperative for those that see the future importance of space and want to have a major presence there that they have a strong focus on the immediate, mid and long term of that planning.
President Trump, during his former administration, saw space as being so important, especially from the military and defense standpoint, to carve out the U.S. Space Force as its own separate distinct military branch.
And I think that type of foresight is also kind of a foreshadowing of the deemed perspective of how important space will be moving forward.
And that it demands its own specific singular focus as well.
Beyond that, all different branches of the military also rely on space for various reasons as well.
So this is something where the first space race was much more of a vanity project to say, “yes, look, we can do it, look at what we’ve done,” and we did it faster than our adversaries.
Now there’s an entire strategic standpoint where losing out on the space race isn’t an option if your goal is long-term survivability, or dominance in any of the theaters of military or even economics and commerce.”
The Space Industry has had a dramatic decrease in launch costs, mainly as a result as new innovations in reusability.
“…With the advent of reusable rockets, we’ve been able to see the costs of accessing space decrease significantly.
So, not only is that exciting for a launch company that’s able to lower costs for their customers, but also seeing the ability for those customers to now be able to justify their various projects or corporate missions, or whether you are a government or a military entity that requires space, being able to now access space at a lower cost opens up a tremendous amount of opportunities.
So the type of company that can now be considered a space company has broadened significantly as well, due to their ease of accessing space.
And that has been probably one of the major drivers that SpaceX has put forward.
Now we’re seeing other companies such as Rocket Lab (NASDAQ:RKLB) trying to utilize similar methods of reusability so that they can also provide low-cost access to space, as well as companies from around the world that are looking to compete in this launch industry.”
Get the complete interview with Andrew Chanin, Co-Founder and CEO of ProcureAM, sponsor of the Procure Space ETF (UFO), exclusively in the Wall Street Transcript.
