Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG) are the top stock picks from David C. Hartzell Jr., President and CEO of Cornell Capital Management.
He currently serves on The Business Week Alliance/Market Advisory Board and the Barron’s “BIG MONEY” panel of experts.
He is an ex-officio member of the board of directors of the FBI Citizens Academy Foundation; the board of directors of the Chantal Avin Rosin Foundation; the board of directors of the Western New York Innovation and Entrepreneurial Group; The Charles Schwab Technology Advisory Board; The New York Society of Security Analysts; the CFA Institute; Chairman of the board of Clarence Industrial Development Agency, or CIDA; President of the Clarence Chamber of Commerce; and the Chairman of the Erie County Industrial Development Agency, or ECIDA, Leadership council; and is the former Supervisor — Mayor — of Clarence, New York.
“I tend to avoid the newest technology stocks. I learned my lesson back in 2000. Now I buy technology stocks that are a little older like Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOG) or Apple (NASDAQ:AAPL) that have been around a while and have proven themselves, rather than trying to find the latest, greatest 10 baggers, as Peter Lynch would call them.
I tend to be a little more conservative. My clients tend to be a little older and skew a little more conservative. So I’m a little more conservative as well and I buy stocks after they have proven themselves…
Valuations are always high with a Microsoft or a Google or an Apple. But we really sit down and take a look at this. I call them second-generation techs.
First generation would be the stuff that’s on the cutting edge.
Second generation like a Microsoft or Google — something that’s been around for a while and proven itself.
The valuation usually is going to be higher than an old-line industrial and such. But I think the question with every money manager is: Do you want to pay that extra valuation? If the equities in question and their criteria don’t fit our system, we won’t pay for that extra valuation. But, with some stocks we will.
For example, we won’t buy Facebook (NASDAQ:META) even though a lot of managers do. We thought the valuation was just too high. So we definitely reject stocks that other people are buying based on our own internal research…
If you go back to 2000 when we were trying to evaluate tech companies and there were just so many, one of the things I learned is, it’s just so difficult to separate the winners from the losers because every company looks so good on paper.
Their pitch is great, their MBA-toting, Stanford-educated CEO is young, enthusiastic and has a rich, full head of hair.
Their product is the next best thing since sliced bread.
Everybody looks good on paper, but can they cut it in this cut-throat tech world we live in? A lot of times, picking out the winners from losers is almost an impossible task in the technology sector.
It is very, very difficult.”
Facebook (NASDAQ:META) is not the only stock that Mr. Hartzell recommends avoiding. Two stocks that Mr. Hartzell bangs the table for are Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT).
“Let’s use Google, for example.
You get Google and it’s almost like Kleenex.
If you want to find out about something, you go to Google, as does everyone else in the free world.
Google — the search engine — is such a cash machine that allows the rest of Google to experiment in a lot of other tech niches and nooks.
They have a whole slew of products that the public doesn’t even know about that they’ll break out over the next 10 years, kind of like Apple does.
Google is a company we absolutely love for their focus on their core business and their commitment to innovation that will drive profits in the future.
We love Apple for their innovative, consumer friendly, high-quality products.
Everything Apple does, they just do really, really well.
On the other hand, you can buy 100 small tech companies, or 1,000 small tech companies, and you never know which one is going to be productive, or even if the company is going to survive to the next generation.
So, why do I like tech?
I think that with tech you can make a moat that people can try to breach but it can be very, very difficult.
If you look at Google search, Microsoft tried for years to get Bing off the ground and failed miserably. Nobody uses Bing, and everyone’s tried to crack Google’s moat.
But no one’s been able to. Google equals search, period.
So, with tech, your chances of success increase as long as you are the first in, you’re an innovator, you can keep your product fresh and your company is constantly and unremittingly consumer friendly.
You can really dominate your space, unlike a consumer products company that sells napkins and always faces relentless price competition.
Of course, you have to be great, and things change.
So, as a money manager, you have to be willing to move to the new frontier whatever that happens to be.
You need to know who’s dominating their space.
But as long as you stay on top of things, it’s an exciting place to be, much more exciting than value stocks, which is what we originally staked our claim to when we started our company back in 1989.”
The message from Mr. Hartzell is to stay away from Bitcoin but believe in the United States of America.
“First of all, I would say, don’t buy Bitcoin.
I think Bitcoin is air.
If Bitcoin went to zero tomorrow, it really wouldn’t surprise me.
I don’t know why people get involved in that.
I think it’s the whole Robin Hood mentality: get something for nothing — which of course in the stock market never happens. So I would say first of all avoid Bitcoin.
Two, I would say: Don’t be afraid of 2023.
Because if you look at the economy right now, even though you read a lot of gloom and doom and fear, if you’ve talked to anyone who owns a business, the big problem is finding people.
Unemployment is so low.
Most businesses now that have come out of COVID are humming along and are making money and just recently the Federal Reserve said that they haven’t peaked with the raising interest rates, but they’re starting to back off, so the whole hand of the Fed that was on the market is starting to ease and rate increases won’t be as big as they were in 2023.
We traveled recently to Greece and some of the people there said, “Oh you’re Americans.”
They said, “We love to go to America.
We love America.
We have friends there.
We have friends and relatives in Chicago, and we go there to visit.”
It seems that everyone in Greece has an uncle in Chicago.
“We love going to the United States. We love the United States,” they say.
How nice is that? Sometimes, you don’t hear that in the United States — how good a country we have.
People tend to focus on the negative.
But this is still an amazing economy.
It’s an honest government, honest legal system.
If you get pulled over in your car, you don’t have to worry about the police officer shaking you down, like they do in other countries around the world.
Also, you can mail me $10 right now in the U.S., and you know it’s going to get to me.
Other countries, that doesn’t happen.
I know, because my daughter has traveled all over the world, and we have sent her cash.
Sometimes it gets there, sometimes it disappears into the system.
So this is still just a great country and I think people need to realize that and focus on the future.
The future is bright for America. It really is.”
Get the complete interview with David C. Hartzell Jr., President and CEO of Cornell Capital Management, and learn more about his recommendations Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOG), exclusively in the Wall Street Transcript.