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Delta was ‘our road map’ for understanding how markets would react to Omicron: Strategist

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Victoria Greene, G Squared Private Wealth CIO, joins Yahoo Finance Live's Zack Guzman to examine oil, vaccine manufacturer, and cybersecurity outlooks as Omicron variant fears in the market ease.

Video transcript

ZACK GUZMAN: For more on what it all means for the market, though, and your portfolio, I want to bring on our next guest here, Victoria Greene, G Squared Private Wealth founding partner and portfolio manager joins us once again. And Victoria, good to be chatting with you again here. I mean, when we've been talking about maybe some of these fears being overblown, listen, I mean, a lot of people were down over the last two weeks, looking at it and saying, maybe it's time to take some chips off the table. You've been kind of in the camp of, you buy the dips because things are still holding up. The recovery is still holding up. Are you still just as confident now, as we're seeing this relief rally continue today?

VICTORIA GREENE: Is it too soon to say, I told you so? No, probably a little soon for that one. No, when I look at this is that we did think it was a big oversell. You know, our Black Friday shopping is what I call it, you know, the Friday after Thanksgiving, when the Dow certainly had a nasty day. We did think it was overblown, mostly because we took delta to be kind of our guide path of how the markets may react to this. And I think people were already nervous because Europe was on the verge of a shutdown pre-variant. And then the variant comes out, and oh, my goodness, is that going to push, you know, Germany and Austria a little bit faster into actually looking at lockdowns?

And so, I do think there was just this general fear. And one thing we always try to do is step back from what might be personal fear or political fear and realize the markets just look at data a little bit differently. And if you look at Delta, which is really our only other scary variant out there that we could take as our roadmap, honestly, Delta really became a full blown fear in early Q1. And then over the summer was when it was really hitting us hard, and we started to see infections rise. But the markets were up about 8%, 9% over the summer.

So if you want to take that and say, OK, how did we think the markets were going to react to this, right now, I think you're kind of seeing this bounceback because we don't look at shutdowns. There's still a lot to be known. And I would say, just the other thing, food for thought, obviously, Moderna and all these companies that are creating drugs, you know, they're the ones that are selling their drugs. So sometimes they are going to come out and try to make it sound a little bit scary because they're the ones producing the cure.

ZACK GUZMAN: Yeah, it's been something that we've even asked the heads of those companies about. And also kind of the rollout plans and getting it across the globe would prevent, according to medical experts, a lot of these variants from popping up, and a lot more work to be done on that front.

But when it comes back to, I guess, if you're copying the delta playbook here, it's kind of strange to see maybe some of those names that had been beaten down maybe not coming back as quickly. And I'm thinking about the airlines specifically here. But we have seen oil bounce back. So, I mean, there's a dual path to go here. I mean, which one are you more confident in, in terms of maybe leaning-- to continue to lean into commodities or whether you like maybe some of those reopening plays better?

VICTORIA GREENE: Sure, I lean more towards commodities because I think it's a better cyclical pattern that also helps you offset inflation. I think the airlines, you know, certainly we bought them when they oversold on that Friday, because if you look at air travel, the TSA numbers, you know, if you look at the number of airplanes in the sky, I think flight radar today said they were about the same numbers as 2019. I know there's concerns on business travel and international travel. But if you've been in an airport recently, you know there's no slowdown on the number of people hopping on airplanes right now.

And so I look at oil and gas. And we really like that play right now because I think it's going to play well into the first half of next year. And it's a great way to offset inflation. Historically, energy is one of the most sensitive to inflation. And obviously, energy prices have been a big driver of some of the inflationary concerns. And a lot of the companies we like, their breakeven's about $50-$55 on WTI to cover their dividends. And then they're very cash flow positive. And even though oil did pull back to about the $65 level, about 22% drop from that $85 high you saw on WTI, you've seen a nice bounceback. And companies are still profitable at $65.

Personally, if I get to be the magic genie who choose oil prices, I'd love to see it stay between about $70 and $80 because that way, you have a lot of good free cash flow coming from these oil companies, but it's also not quite as much pressure on the pump. Because you get too high into those hundreds, and suddenly now you're seeing about slowing GDP because you're spending too much on energy. And you're seeing too much get sucked away from other spending in the economy.

ZACK GUZMAN: Yeah, we heard from Stephen Schork earlier in the last hour talking about the propensity to see $90 oil, as maybe some of these omicron fears boil off when we get back to kind of the upswing that was already in play there. So that's one thing to keep in mind. But when we talk about other sectors that have been leading for quite some time, I know you and I have talked about tech. If you want to come out and say, I told you so, I will give you that one.

There is one, though, that we have discussed before. We talked about CrowdStrike before. And that's a name that's basically flat now for the year. You know, let's talk about that one if there's a better opportunity to play tech than just the FAANG names. I know you like cybersecurity. How are you seeing it now?

VICTORIA GREENE: So my poor darling CrowdStrike has had a rough month of it here lately. A lot of the cloud stocks did. You saw cloud pull back pretty hard. And they were pretty sensitive to the tech pullback. They had great earnings, though. They came out. They beat strong. Their customer base is growing faster than anticipated. And they are making money. The tech I'm looking to avoid are the ones that are pure loss plays. So you're looking for future growth, but they're not profitable yet.

CrowdStrike is actually starting to turn a profit. And their growth trajectory and their cross-sell, we still really like. So we remain buyers of CrowdStrike I know Morgan Stanley downgraded them to a sell. But even their price target's 225, so it's obviously a massive sell one way or another that you look at it. I think cybersecurity is still a great place to be. Obviously, that's something that most companies are going to have to continue to invest in. I think that we are all aware now of how vulnerable our data can be and also how devastating and expensive a hack is to fix.

So I do like cybersecurity. You know, I think we look a little bit also at some of what we call old tech or value tech. And I think you just want to be aware of how much you have in the FAANGs. And I know they've worked great, and I think I've said this now maybe two or three years in a row about taking profits off of them. But I think at some point, we do want to look a little bit more value. Value tends to do better in an inflationary environment. And look at different parts of this market.

We have been a little bit of a buyer of the chip stocks that they sold off because quite frankly, I'm just waiting 'til I have a microchip in my head. That's the way chips are going. And they're not going to slow down. We're going to have more and more things that are driven by chips. I mean, you've got a smart microwave, a smart oven. Like, everything's smart now. I think I might be the dumbest thing in my house at this point.

ZACK GUZMAN: No, I'm not going to give you that one. This is where we disagree, Victoria Greene. I appreciate you coming on here to chat with us again, though. You're right on the chips. They are everywhere in NVIDIA, as we said. And we've been tracking one of those names that has been doing quite well. G Squared Private Wealth founding partner and portfolio manager, thanks again for the time. Be well.

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