Mitch Steves is an Analyst at RBC Capital Markets primarily focused on networking equipment and semiconductor companies. In 2016 and 2017, he was noted as a “Rising Star of Wall Street Research” according to Institutional Investor magazine in three categories: Telecom & Networking Equipment, Semiconductors and IT Hardware/EMS.
He started at RBC in 2011 and launched coverage in 2015. Earlier, he held positions at Gleacher and Company covering hardware and networking equipment and worked as an investment banker at Cowen and Company. He holds an economics degree from the University of California Berkeley.
In this 4,885 word interview, exclusive to the Wall Street Transcript, Mr. Steves reveals the future value of the current trends in the semiconductor sector.
“I think one of the biggest trends is deep learning and AI — artificial intelligence. The second one would be IoT — internet of things — and self-driving vehicles.
Those three are the bigger ones. And I’d say structurally too, I think the landscape in semis has changed quite a bit.
If we look back 10 years and I told you that there’s going to be a whole bunch of private semiconductor companies that were going to attack the server and PC markets, I think I would have been laughed out of the room.
But that’s kind of where we are today now because essentially what’s happened is that TSMC (NYSE:TSM) has surpassed Intel (NASDAQ:INTC) from a manufacturing-capability standpoint.”
One of the biggest trends identified by Mr. Steves is Artificial Intelligence or AI:
“On the manufacturing side, you’re definitely going to have it. In the future, robots will essentially be doing a lot of the manual labor that just shouldn’t be done by humans long term.
Anything that’s a rules-based product is going to be done by a computer in the future. That’s the best way I could describe it. If there’s a step-by-step way of doing something, that’s eventually going to go to a robot or AI.”
In addition to picking winners in the AI sub-sector, Mr. Steves also identifies potential acquisition targets:
“TWST: Do you foresee in the next couple of years more merger and acquisition activity in the sector?
Mr. Steves: I do think we’ll see that. I think we’ll see that particularly in the spaces that are not overly high tech. A good example of this probably is the analog space that probably needs to consolidate even more.
You’ve got small-cap companies like Semtech (NASDAQ:SMTC) that are $3 billion in size, but they could easily be purchased by a larger analog player.
I think even Maxim(NASDAQ:MXIM) is probably a little bit bigger, but they could be consolidated as well.
You’ve got several other kinds of smid-cap names there that have good products. One that we don’t cover that is a good example of a solid company is …”
Read the entire 4,885 word interview and get all the best recommendations from this award winning semiconductor stock analyst, only in the Wall Street Transcript.
Hans Mosesmann is a Senior Research Analyst and Managing Director at Rosenblatt Securities Inc. Prior to joining the firm, he was an electrical engineer who spent a decade working at chipmakers Texas Instruments and Advanced Micro Devices before moving to Wall Street in 1996.
Mr. Mosesmann covers such companies as AMD, Intel, Micron Technologies and NVIDIA. Mr. Mosesmann spent a decade at Raymond James Financial covering the semiconductor industry.
Earlier, he worked as an equity analyst for several technology- and growth-company-focused boutiques, including Needham & Co., Volpe Brown Whelan and Soundview Securities, as well as Prudential Securities.
Mr. Mosesmann received a Bachelor of Science degree in electrical engineering from the University of Florida and an MBA in finance from Loyola University of Maryland.
In this 4,127 word interview, exclusively for the Wall Street Transcript, Mr. Mosesmann reveals his current outlook for semiconductor stocks and his top picks.
“My two top picks this year and for the next several years actually would be Advanced Micro Devices (NASDAQ:AMD) and Xilinx (NASDAQ:XLNX).
AMD historically goes through these processor cycles versus Intel (NASDAQ:INTC), where they’re able to gain important market share, as they did in 2006 when they captured 25% of the x86 market from low single digits in the previous three or four years.
And so we are in that cyclical process again, and in today’s case, AMD has a very, very good product line of processors that go into notebooks, desktops and servers.
They have an architecture that is actually better at the moment than what Intel has, and in AMD’s favor, they have a process technology leadership because now they’re using TSMC (NYSE:TSM) as a foundry.
Intel unexpectedly, if you look back several years ago, has had difficulty with process technology. They recently indicated that their three-year expectation is for them to grow their overall sales in the low single digits but incorporates what we believe are important declines in their microprocessor business.
So they are basically admitting or acknowledging that AMD is going to be gaining share. This is a tremendous opportunity, and it could double the size of AMD over the next several years.
AMD is also in a position to gain market share in the graphics market versus NVIDIA (NASDAQ:NVDA). They have kind of a dual thrust in terms of gaining share in markets where they have little or not meaningful market share.
And all these businesses are quite profitable. There are also new generations of game console introductions that will benefit AMD next year from Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT).
And recently, over the past week or two, the Department of Energy announced the first major exascale supercomputer, called Frontier, that will come online in 2021 and will support 1.5 exaflops of performance, which is six or seven times faster than the number-one supercomputer today.
Frontier will be based on both AMD CPUs and AMD GPUs with the help of Cray (NASDAQ:CRAY) supercomputer.
Read the full 4,127 word interview, exclusively in the Wall Street Transcript.
Hamed Khorsand is an Analyst at BWS Financial Inc., which he founded in 2000. At first, the firm published a weekly newsletter and then managed money for individuals. His research focus led to BWS to purely providing equity research. He graduated from University of Southern California.
In this 2,662 word interview, exclusively for the Wall Street Transcript, Mr. Khorsand develops his expectations for the semiconductor industry.
“I think data centers, what has been lately catching people by surprise is how it has slowed considerably given expectations. And I think a lot of that has to do with just people thinking that there’s never a slowdown in purchasing when it comes to data centers.
In fact, what’s happening is data center operators are now considering transitions to faster connectivity within the data center. And I think that’s bringing on some pause and some consumption of what was already bought, on-hand inventory at the data center. This I think is a more of a recent event that’s been occurring. I think people are still waking up to the possibility of what’s happening on this front.”
One stock that might evade the slowdown is “Semtech (NASDAQ:SMTC). That company has multiple portfolios of products, but one of them is for the automotive industry. That would be one stock that I do cover that is related to the auto industry.”
An area of great demand is the “10-gigabit Ethernet, what is basically changing the Ethernet ports on every computer. And we’re slowly going through that transition now.
Every computer that we’re used to — and if you look back, every desktop or most of the laptops, you have this Ethernet port, and we’re used to it being in 1-gigabit. What they are able to do is provide you a 5-gigabit or 10-gigabit that was capable.
And so you get more bandwidth for your computer.
Along with this new upgrade cycle that we’re seeing in wireless gateways, that’s going to either 11ax or what they’re calling Wi-Fi 6, that is incorporating this new multi-gigabit Ethernet into those gateways.
So now you could use a faster link without changing anything because it’s already done for you. And this industry is already slowly moving that way with different product releases, as far as the notebooks are concerned, desktops are concerned. You see that with some of these wireless gateways are coming out with them. So that’s what I think was a big deal.”
Get the rest of the 2,662 word interview with Hamed Khorsand, exclusively in the Wall Street Transcript.
Bobby Edgerton is a Co-Founder of the Capital Investment Companies and has served as an executive officer of the companies since 1984. He is also the firm’s Chief Investment Officer and has been in the financial services industry since 1979.
After winning the North Carolina State High School Golf Championship, Mr. Edgerton accepted both a basketball and golf scholarship from Wake Forest University and graduated with a B.A. in business and finance.
After graduation, he attained a rank of First Lieutenant in the U.S. Army Signal Corps, where he commanded a thousand-man training company at Fort Gordon, Georgia, during the Vietnam War. During his amateur golf career, Mr. Edgerton played in four United States Amateur Championships.
In this exclusive 2,209 word interview in the Wall Street Transcript, Mr. Edgerton uses his vast investing experience to identify some new stocks that will super charge your portfolio.
“Back in the 1970s, when I got started, it was Firestone, it was WD-40 (NASDAQ:WDFC), Champion spark plug and obviously no tech.
But now of course, technology keeps changing and advancing, so technology changes everything. When you look at Shopify (NYSE:SHOP), when you look at Netflix (NASDAQ:NFLX), Zoom (NASDAQ:ZM) and Facebook (NASDAQ:FB), they have changed the world so fast in 10 years.
I follow what Sequoia Capital and other venture capitalists bring public. Some people have a passion for managing money, which I do.
I can’t put people’s retirement plan in venture capital money and startups, but I do follow them. And Kleiner Perkins and Sequoia, they have the ability to nurture new companies that are going to change the world.
I have a heavy concentration in tech. I’ve always liked cash-rich, debt-free companies, whereas a lot of companies choose to have a lot of debt, but the Googles (NASDAQ:GOOG) and the Apples (NASDAQ:AAPL) don’t like debt.
Google has $4 billion in debt, but their cash is $120 billion. For the longest time, Apple didn’t have any debt. They don’t have any net debt. Now, their net cash is about $115 billion. Facebook has $40 billion in cash. They have no debt.
You don’t go broke with a lot of cash and no debt.”
Get all the new stock picks from Bobby Edgerton by reading the entire 2,209 word interview, exclusively in the Wall Street Transcript.
Pedro Marcal is the Director of International Equities and a Portfolio Manager at Foresters Investment Management Company, Inc. — FIMCO — and joined the firm in May 2018. Previously, he was a portfolio manager of global and international products at Fred Alger Management, where he worked for more than five years.
Before that he was a portfolio manager at Allianz Global Investors and its predecessor, Nicholas‐Applegate Capital Management, for 18 years where he focused on international equities, including developed and emerging markets. Mr. Marcal has been in the investment management industry since 1994.
He has a B.A. in economics from the University of California at San Diego and an MBA from UCLA.
In this 4,245 word interview, exclusively in the Wall Street Transcript, this experienced portfolio manager details his investment philosophy and top picks.
“We seek capital appreciation by focusing on those companies undergoing positive change that isn’t fully recognized by the market. We use a team of sector analysts to do in-depth fundamental research on companies. Philosophically, I would say that there are three key beliefs underlying our approach.
First is that stock prices are driven by earnings and cash flows. So the higher the earnings and cash flows, potentially the higher the stock price.
This relationship is coupled with the belief that markets are inefficient, and one of those inefficiencies is how investors recognize business change. We seek to invest in companies that are undergoing a material, positive change.”
One positive near term cycle is identified by Mr. Marcal:
“Actually, a large part of this new product development cycle is driven by the gaming platforms. We are about to enter another gaming cycle where, by 2020 probably, you’re likely going to start to see new Microsoft (NASDAQ:MSFT) and Sony (NYSE:SNE) gaming consoles.
On top of that, you have Google (NASDAQ:GOOG) launching a cloud-based gaming initiative, for lack of a better term. So people no longer sit down at home and watch TV for a couple hours. Instead, they watch YouTube videos and play games on their phones during their commute and have a wider range of entertainment options.
I think there’s a big transformation that’s taking place in this marketplace, and how these games are being monetized for their respective owners is particularly intriguing.”
To get the stocks benefitting from this new economic cycle and other identified investment trends, read the entire 4,245 word interview, only in the Wall Street Transcript.
Jay Rhame is CEO and a Portfolio Manager at Reaves Asset Management. He was named to the post on January 1, 2019. He is a member of the portfolio management team, serves on the risk management committee and is Co-Portfolio Manager of the Reaves Utilities ETF.
Mr. Rhame joined Reaves Asset Management as a full-time employee in 2005. Previously, he was an energy and utility analyst and one of the firm’s traders.
In this 3,040 word interview, exclusive to the Wall Street Transcript, Mr. Rhame elucidates how utility stocks can be exciting and profitable for any investor:
“I think the most important thing is these dividends actually grow if you compare them to fixed income. In our portfolio, the average utility has been growing their dividends 5%, 6%, 7% a year, sometimes a little bit higher than that. And that growth is really the key.
What we tell investors is: Obviously, the stock market goes up and down, and sometimes you have very little control of the volatility. But we know that when we invest in companies that are paying a dividend and growing that dividend, they’re creating value. And over time, that value creation should be reflected in the higher stock price.”
A current investment decision provides an example:
“The problem in California was that there were a couple big fires. The way the state has dealt with natural disasters like that is basically the utilities have strict liability.
If a utility pole or wire has caused a fire, anywhere, well, they’re liable for the entire damage. The last two years, the fires have been incredibly disastrous, and damages are likely in the tens of billions of dollars, so Pacific Gas and Electric was forced into bankruptcy.
And that’s really affected every company that deals in California. One in particular, Sempra (NYSE:SRE), is a utility, which includes San Diego Gas and Electric, but they’re a pretty diversified company. They just bought a utility in Texas — in Dallas, actually. They have an LNG export terminal that should be operational in the next several months.
They have a pipeline business in Mexico and some South American assets that they’re actually looking to sell right now.
But you add it all up, and in California, at least the electric utility portion of California is only about 25% of their total assets, whereas the company has had a long track record of very successful growth. They’ve been able to grow their dividend in the high single digits for a long time.
Right now, it may be an opportunity to buy a company that’s been successful for a long time but has come down in valuation because of its exposure to California.”
Get the complete detail by reading the entire 3,040 word interview, exclusive to the Wall Street Transcript.
Brian Yacktman is Chief Investment Officer, Portfolio Manager and a Principal of YCG, LLC. Mr. Yacktman founded YCG Investments in 2007. Prior to founding YCG, Mr. Yacktman was an associate at Yacktman Asset Management, the adviser to The Yacktman Funds. He joined them in June 2004 from Brigham Young University, where he graduated cum laude with a B.S. in economics and an MBA with an emphasis in finance.
In this 4,288 word interview, Mr. Yacktman discusses how he evolved his individual portfolio management company into a financial asset manager with a mutual fund on offer:
“…It is not just about putting up good numbers, but it is how you get there. We believe our approach has shown that ability to produce strong risk-adjusted returns.
I view us as very suitable to investors who are patient and long-term-oriented. In short, we have been able to accomplish these strong risk-adjusted returns by seeking to invest in global champions with pricing power that can grow their volume over the long term.
For that to work out over time requires a patient, long-term investor.”
The Yacktman investment philosophy informs the portfolio construction:
“…40 years ago, to get the capabilities of the smartphone in your pocket would have cost $1 million, but today, you can get it for less than $500.
What is lesser known is that these deflationary forces are happening in industries all around us after you adjust for inflation. Nearly everything is becoming a smaller percentage of someone’s budget.
Food costs are coming down, as are energy costs and commodity costs. They are all facing deflationary pricing. There are very few companies in the world that can buck that trend and maintain a share of our budgets or a share of GDP.
So we want a portfolio that is filled with these global champions.”
Mr. Yacktman illustrates this with one of his stock picks:
“One of my favorite businesses to describe because it explains our strategy so well is Moody’s. Before, I was describing our looking for businesses that are information filters and people filters. Moody’s acts as a powerful information filter.
As you know, Moody’s is selling credit ratings. The industry itself has favorable long-term growth prospects. Because as long as there are businesses in the world, there is going to be the desire to bring down the cost of capital by issuing debt.
Debt issuance has historically grown at least as fast as global GDP. But in the capital markets, bond issuance has grown even faster as it has taken share from banking loans. Moody’s essentially acts as a toll taker on global bond issuance.
We believe that it is indexed to grow volume long term at the pace of GDP or better. Now hanging over its head is that there’s all this global indebtedness. I would argue that some of the best investment opportunities are those when there may be fears in the short to medium term but very clear long-term prospects.
Now, to get down to the specifics about Moody’s as an information filter. Moody’s essentially is charging a very small expense of approximately 7 basis points to rate their bonds. Yet, they save a corporation around 30 to 50 basis points in their annual borrowing costs. So it’s a no brainer for decision-makers…”
To get all of the top stock picks from Brian Yacktman read the entire 4,288 word interview, exclusively in the Wall Street Transcript.
Leo Harmon Jr., CFA, is Director of Research and Managing Director Research Division of the Equity Management Group of Mesirow Financial Inc. At Mesirow, Mr. Harmon serves as Co-Portfolio Manager and Director of Research for small-cap value and smid-cap value equity strategies and provides coverage for bank-related companies within the financial services sector.
Mr. Harmon has more than 25 years of investment management experience as a portfolio manager and research analyst covering a variety of industries with both larger and smaller market capitalizations and has a particular expertise in financial services.
Prior to joining Mesirow Financial, he was a managing director, director of research and portfolio manager for a predecessor company, Fiduciary Management Associates, LLC, where he joined in 2003 and which was subsequently acquired by Mesirow Financial in 2016. Before that, Mr. Harmon was a portfolio manager at Allstate Insurance, Allstate Investments LLC.
In this exclusive 2,997 word interview, only in the Wall Street Transcript, Mr. Harmon details his current portfolio management advice:
“If I am looking over the next six to 18 months, call it an intermediate time frame, we are in a market environment that is probably very near or very close to seeing the best returns behind it. We have had a bull market that celebrated his 10th birthday in March. That is very long, typically, for a market cycle. Most market cycles last anywhere from five to seven years.
We think that the Federal Reserve and other global central banks, in general, have used monetary policy to avoid crashes of risky assets and to extend a market cycle longer than it normally would have been. At this point, those types of policies will have less and less impact going forward.
That is not to say that the Fed can’t cut rates, but the impact of the next couple of rate cuts are much less impactful to the market prices overall than rate cuts we saw earlier in the cycle or the pause we saw in 2016.
Our thought process related to the market is that we are in a much more mature phase of the market cycle. That does not mean that equity prices cannot continue to go higher, but it does mean that they go higher at a much slower pace than we have seen in the previous 10 years.
We may be moving into a market environment over the next three to five years that has a much lower return structure than you would typically expect from equities.”
Read the entire exclusive 2,997 word interview, only in the Wall Street Transcript.
Ted Gardner, CFA, is Managing Director and Portfolio Manager of Salient Partners, LP. Mr. Gardner is a Managing Director and serves as Co-Portfolio Manager at Salient in the firm’s MLP complex. Mr. Gardner formerly served as Portfolio Manager and Director of Research at RDG Capital, LLC, a Houston-based asset management firm specializing in MLP investments.
RDG was acquired by Salient in 2011. Previously, Mr. Gardner served as a research analyst with Raymond James and Associates following MLPs in the pipeline, midstream, propane, maritime and coal industries.
Mr. Gardner is a CFA charterholder and holds a Bachelor of Business Administration from The University of Texas at Austin and an MBA from the University of St. Thomas, Cameron School of Business in Houston, Texas.
In this 2,732 word interview, exclusively in the Wall Street Transcript, Mr. Gardner explores some of his top portfolio picks:
“If you look at one of the largest names in the space, Enterprise Products (NYSE:EPD), it includes oil pipelines, natural gas pipelines as well as natural gas liquids pipelines. They also have petrochemical assets that deliver feedstocks into petrochemical plants and other assets.
It is not unusual these days to have this diversification, particularly among the larger-cap names. We don’t seek an oil pipeline in XYZ basin; rather, we are really looking at whole businesses.
There are opportunities in multiple areas. There is a pretty large infrastructure buildout occurring in the Permian Basin for both oil and natural gas. We have also had some opportunities in the natural gas liquid space. Our approach is holistic.”
Other trends in this sector are analyzed by this highly experienced expert:
“In other instances, you hear of conversations among companies about consolidating projects. What we mean by that is, if you had two or three pipelines being contemplated, none of which have the necessary level of commitment to secure their economics individually, if you put them together in one joint venture pipeline, then you get to your economics.
A good example of this is MPLX’s (NYSE:MPLX) recent public announcement that it would join the Wink to Webster Pipeline project along with Exxon Mobil (NYSE:XOM) and Plains All American (NYSE:PAA), rather than pursue a separate project. These are some of the trends that we are seeing from a return-on-invested-capital perspective.”
Get the full detail from this industry expert by reading the entire 2,732 word interview, exclusively in the Wall Street Transcript.
Ryan C. Kelley, CFA, is Portfolio Manager of Hennessy Funds. Mr. Kelley joined Hennessy Funds in 2012 through the acquisition of FBR Funds. He began his career as an associate in corporate finance at FBR & Co., a leading investment bank, and later joined their institutional equity research team.
Mr. Kelley was named to the FBR Funds Portfolio Management team in 2005. Mr. Kelley received a B.A. in anthropology and geology from Oberlin College, and he is a CFA charterholder and a member of both The Boston Security Analysts Society and the CFA Society North Carolina.
L. Joshua Wein, CAIA, is Co-Portfolio Manager of Hennessy Funds. Prior to joining Hennessy Funds in 2018, Mr. Wein served as Director of Alternative Investments and Co-Portfolio Manager at Sterling Capital Management and as Portfolio Manager at Bellator Capital Partners.
He also worked as an associate equity research analyst at First Union Securities. Mr. Wein received a BBA in finance from Emory University and an MBA from Vanderbilt University. He is a CAIA charterholder and member of the CFA Society North Carolina and the Chartered Financial Analyst Institute.
In this exclusive 3,726 word interview, the two portfolio managers discuss the natural gas sector and how investors can prosper through their mutual fund:
“…They thought 30 years ago, it would be great to have a way for investors to invest across all of the companies that are members of the American Gas Association that are also publicly traded. Back then, there were about 130 companies that were publicly traded gas distribution companies.
Now, we have 49 in the fund, and that’s been part of the story over many years, a story of consolidation.
There are not a whole lot of funds that have been around 30 years, certainly not within the utility space. This fund is a pretty straightforward mutual fund that focuses on natural gas distribution companies.
The fund has done very well over many years. Since inception through April 30 of this year, it’s returned 9.64% per year, and the nice thing about it is that that’s comprised of both dividends as well as stock price appreciation.
And roughly speaking, over that period of time, about a quarter of the total return is from dividends, and about three-quarters is from the stocks themselves doing well.”
The portfolio managers declare that this level of return to investors will continue:
“Right now, in the United States, we are at record levels of natural gas production. Production is up 10% versus last year for instance, and that is above the record levels set last year.
The EIA, the Energy Information Agency of the United States, predicts natural gas consumption will grow to record levels this year, up 9% to 11% by the end of this year. So we are in a very good place as far as the overall industry goes.
Also helping to drive that consumption is a rapid increase in exportation as well.”
Some of the controversy over natural gas production in the US may become less important as the postive aspects of this fuel source become apparent:
“…For many years now, natural gas has been replacing coal, which is the dirtiest fossil fuel. Ten years ago, the usage of the two fuels was about even. About 23% of all the energy consumed in the United States was from coal, and 24% was from natural gas.
Now, natural gas comprises 31% of the overall energy used in the United States, and coal is only 13%.
It has been an excellent way to replace dirty coal.”
Get the full 3,726 word interview exclusively in the Wall Street Transcript.