Interview: Raymond James Chief Strategist Jeff Saut on the Markets, Europe, and the Best Sectors for 2012
The top investor shares his favorite names in tech and energy, and a theory about what the election year will mean to the economy.
He is more than a smart guy; he is a good man, and I'm lucky to count him among my brothers. I often joke that seeing Jeff in December is like Groundhog Day; when he appears, you know that Festivus is around the corner!
Jeff is sitting by my side, and we're having a real-time chat. This is it, as it happens:
Todd: Jeffrey, THANK YOU for being you, and for supporting The Ruby Peck Foundation and the kids. Whataya think of the market here?
Jeff: Performance anxiety will force under-invested portfolio managers to chase stocks "irregularly" higher.
Todd: So, Europe doesn't concern you?
Jeff: The simplest answer I can give to that is that the ECB and the bureaucrats surrounding it don't want to lose their power, and if the euro falls apart, they all lose their power. And therefore, I think they will find a way to buy time and the fix probably takes years; in the near-term, I don't think Europe spins us into a death spiral.
Todd: Couldn't one argue that the leaders in Europe have already begun to fall by the wayside? We've seen power transfers in Italy, Greece, Spain, Slovakia and Portugal?
Jeff: That's true, but the change in leadership has brought people like Mario Draghi and others who actually have an understanding of credit default swaps and have the ability to think outside the box.
Todd: Shifting gears, what sectors do you favor for 2012?
Jeff: I like technology; it's as cheap as it's been in a few decades and has the highest ROE (Return on Equity) of the 10 macro sectors, and it's a second derivative play on increasing per capita incomes in emerging and frontier markets.
Todd: Any names in particular?
Jeff: I like Tango (TNGO), Millcom (MICC), NII Holidings (NIHD) and SBA Communications (SBAC).
Todd: Any other complexes intrigue you?
Jeff: I like energy; some of the ENP C-Corps will be acquired by the MLPs next year because the MLPs trade around 8-9X EBITA and the ENP C-Corps trade between 4-5X EBITA, so the acquisition is almost immediately accretive. The two cheapest names in our universe are Berry Petroleum (BRY) and Comstock Resources (CRK).
Todd: Obviously, the political climate is very charged; what do you foresee into the elections next year with regard to the impact on financial assets and the social mood surrounding the markets?
Jeff: I think the Tea Party has surfaced what Adam Smith wrote about in The Wealth of Nations, where he discussed "the political corruption that prevents prosperity." That was reflected in the mid-term elections when we elected people from the private sector rather than professional politicians, and if you talk to them, they will tell you that they really don't want to be in DC but they feel it's their patriotic duty to try and write the course of this nation -- and that creates a palpable change inside the beltway.
Todd: And, the impact on the markets into the 2012 election?
Jeff: I think the markets are sensing that by electing practical leaders -- leadership that instills the belief that we're moving in the right direction -- it could be very constructive for the equity markets.
Todd: Thanks Jeff! You're the best; we'll see you and Cheryl tonight at Festivus!
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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