The bull case for small caps and chipmakers set to benefit from more defense spending

CNBC

7 hours ago

(This is a wrap-up of the key money moving discussions on CNBC's "Worldwide Exchange" exclusive for PRO subscribers. Worldwide Exchange airs at 5 a.m. ET each day.) Investors are looking for opportunities in gold as well as chip stocks to play the expected increase in global defense spending. Worldwide Exchange pick: Barrick Mining Gina Sanchez of Chantico Global sees Barrick Mining having more upside despite a recent pull back in gold prices. She added that it has an attractive valuation, trading at approximately 10.5 times forward earnings. "The demand for gold will likely continue [and] a proxy for that in the equity space is a miner like Barrick Mining," said Sanchez. "It is very well priced, while the rest of the S & P 500 is not. If you think about where we are with tariffs, margins are not exactly back to normal. … Any hit to commodity prices is going to be tough to pass through, you are going to have equities get hit and valuations come under pressure. So I think a cheaper part of the market is going to become more attractive later in the year." Barrack Mining has a dividend of nearly 2% The bull technical case for small caps Craig Johnson of Piper Sandler sees a potential 16% upside for small caps based on the technical moves in the Russell 2000 . "It has made what I would define as a pretty impressive inverted 'head and shoulders' bottom," said Johnson. The Russell 2000 is trading above its 100-day moving average and just below its 200-day moving average. Semiconductors and defense Jordan Klein of Mizuho said typically the defense sector is not a significant source of revenue, but there are a number of names that could benefit from increased spending in Europe and the potential for more spending in the U.S. "One in the analog space is Analog Devices that gets decent revenue from defense," said Klein. "Another name that is diversified is Macom , their defense business is growing very rapidly." Klein said his top picks in the semiconductor space are what he calls "The Three Horsemen:" Taiwan Semiconductor , Broadcom and Nvidia .