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Miami Herald
20-07-2025
- Business
- Miami Herald
Stocks and Markets Podcast: Prairie Operating CEO on energy business
Ed Kovalik wants you to know the importance of petroleum. "I always remind people that everything in their daily life is made in some way, shape, or form with a petroleum-based product," he said. "The computers that we're using right now to talk to one another, with the makeup that our wives wear, the surfboard my kids use at the beach," Kobalik added. "They're fossil fuels and everything, fossil fuels, everything. I think the only thing I've ever seen that's as prolific is corn," Don't miss the move: Subscribe to TheStreet's free daily newsletter Kovalik, chairman and CEO of Houston-based Prairie Operating Co. (ticker: PROP) shared his experiences with Chris Versace, TheStreet Pro portfolio's lead manager, during the July 16 edition of TheStreet Stocks & Markets Podcast. "We're energy-dense form of energy," he said. "The only competitive form of energy is nuclear. And nuclear is going to take decades to work itself out of the regulatory quagmire that it's in and get built going to see demand for fossil fuels increase every year." Fossil fuels play an important role in meeting the ever-growing demands of AI data centers, he said. Goldman Sachs Research forecast in February that global power demand from data centers will increase 50% by 2027 and by as much as 165% by the end of the decade compared with 2023. More Economic Analysis: Federal Reserve prepares strong message on long-term interest ratesMassive city workers union approves strikeAnalyst makes bold call on stocks, bonds, and gold "Low-energy-dense forms of generation like solar and wind are not going to take over the industry," Kovalik said. Kovalik, who came out of the investment banking world, said he fell in love with the industry during the first generation of shale companies that emerged in the early went on to work in private equity and merchant banking, investing in mostly upstream exploration and production across all the basins in the US. "We started Prairie two years ago, really with a very focused mission to create a pure play under levered, high growth, DJ basin focused smidcap company," he said, referring to the Denver-Julesburg Basin centered in eastern Colorado. "And so that was really in response to what we've seen over the last decade, which has been a massive amount of consolidation in our industry." Today there are far fewer public oil companies, he said, and far fewer small-cap companies, in particular. "There are no growth-oriented small-cap companies," Kovalik said. "And so we really wanted to create an investment alternative that looked like that." "So, it's fair to say that you've seen the trials, the tribulations, the rewards, throughout economic cycles and what commodity prices have done," Versace said. "So, you're well aware of the bigger opportunities and mindful of the risks." "Yeah, 100%," Kovalik said. "In that period of time shale has been through an entire evolution from the first days of drilling to today. From a pure operational technological perspective, a lot of innovation has happened in the industry, where we're able to drill much better wells than we did 25 years ago." M&A is a pillar of the company's strategy, he said, noting that Prairie Operating recently acquired the assets of Edge Energy for $12.5 million. Related: Stocks and Markets Podcast: Why Now Is the Time to Buy High-Yielding Small-Cap Stocks "When we purchased the Bayswater assets, for example, we hedged 85% of that production on a three-year roll-forward basis," he said. (The $603 million deal closed in February.) "I think we locked in our oil-price hedges at $68 (per barrel) and change and our gas hedges above $4 (per 1,000 cubic feet), and so we're big believers in taking that risk off as we drill wells, which we're doing every day." "We'll continue to hedge as we bring those new wells [into] production," Kovalik said. "And so that's the biggest risk." "We've talked a little bit about the oil market, the opportunities with Prairie," Versace said. "But, for someone who's new to the story, Ed, what are the one or two risks that you and the rest of the management team continue to focus in on, or [that folks should be] mindful of?" "The] big elephant in the room is commodity price risk," Kovalik said. "And you can't be an oil company without assuming that risk. We hedge for that. So we're certainly not believers in the idea that people ought to buy Prairie stock as a way to expose themselves to oil prices." "You can do that yourself without we do is we try to eliminate that risk to the best of our ability." Related: Fund-management veteran skips emotion in investment strategy The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
16-07-2025
- Business
- Yahoo
Stock Market Today: Stocks Sag to Flat as Trump Reportedly Mulls Firing Powell, Walks Back Idea
Stock Market Today: Stocks Sag to Flat as Trump Reportedly Mulls Firing Powell, Walks Back Idea originally appeared on TheStreet. Updated 12:14 p.m. EDT Trump Mulls Firing Fed Chair Powell A dull day for stocks abruptly became a wild one on reports that President Trump planned to fire Federal Reserve Chairman Jerome Powell. The president then walked back the idea. The decision apparently came after Trump with Republican lawmakers on Tuesday. The timing is unclear. For one thing, his decision to fire would have to be for cause and almost certainly would land in the courts. 💸💰 💰💸 At a press availability, the president said he wasn't planning to fire Powell. Trump has been frustrated that the Fed hasn't cut its short-term interest rate despite the president's persistent demands. The latest gambit to remove the Fed chair is complaints about cost overruns on a new Fed building not far from the White House. Powell has said that he will finish out his term as chairman at the end of May 2026. At last check all three major indexes were little changed. The Dow Jones Industrial Average had given up a gain of 113 points; it had fallen as many as 264 points when the news broke. The 10-year Treasury yield was at 4.487%, flat on the day. Updated 11:20 a.m. ET Taking a breather Stocks were generally flat Wednesday as some of the biggest stocks took a breather from recent highs. Goldman Sachs () reported its best trading profits in its history, but the stock fell more than 4%. Big technology was showing some weakness after big gains since April. At 11:19 a.m. EDT, the Standard & Poor's 500 Index was off 11 points at 6,229. The Dow Jones Industrial Average had given up a gain of 113 points and was off 102 points to 43,922. And the Nasdaq Composite Index was down 71 points to 20,606, a day after hitting an intraday peak of 20,836.04. The Nasdaq 100 Index, dominated by big tech, was off 120 points to 22,764, thanks to weakness in () , Microsoft () , Facebook parent Meta Platforms () and even mighty Nvidia () . Apple () , Google parent Alphabet () and Tesla () were higher. Broadcom () , not typically seen as a Magnificent Seven stock, was down 0.9% to $278.58. Only four of the 11 S&P 500 sectors were higher: Health Care, Real Estate, Communications and Financials. Perhaps the market was due for a pause after the huge gains seen in the quarter. Bitcoin was up $3,337 to $119,741 after slumping basically an equal amount on Tuesday. Surprising opposition emerged to stall several crypto bills. Sarge Guilfoyle Parses the Inflation Data for Tariff Clues To kick off Stock Market Today, TheStreet offers up the analysis of Stephen "Sarge" Guilfoyle, who writes for TheStreet Pro. Subscribers to TheStreet Pro benefit from the insights of Guilfoyle and a team of veteran traders, fund managers and analysts. Investors acted a bit surprised by a slightly warm-to-the-touch June consumer price index. Was consumer-level inflation warmer than expected in June? No, it was not. Was it warmer than it was in May? Yes, it was -- at the headline level. June CPI printed at month-over-month growth of 0.3%, which was in line with the consensus view, but up from 0.1% growth in May. On a year-over-year basis, headline inflation crossed the tape at growth of 2.7%, also in line with expectations, but also up from May's 2.4% print. The major concern on Wall Street and probably on Main Street after those numbers were published by the Bureau of Labor Statistics, was whether or not this uptick, which was expected, was the result of trade tariffs. Is inflation, as predicted by many academic and private sector economists alike, feeling the impacts of the president's policy of imposing tariffs on trading partners as both a negotiatory tool and a means of providing the fiscally strapped federal government with a new stream of revenue? Honestly, from these numbers, the answer is not yet clear. While headline inflation may be up 2.7% on a year-over-year basis, it's only running at 1.8% annualized rate since January. This administration did not take their oaths of office until January. Tariffs on imports from most nations were not announced until early April and then the reciprocal part of those tariffs, above the baseline, were put on hold. So, is the worst still to come? Could be. Then again, tariffs are known as demand killers. In and of themselves, they only produce inflation if behaviors remain constant. On the other hand, if these tariffs are ultimately successful in improving the lot of the lower- and middle-class labor force in the U.S., that too would ultimately be inflationary. That does not mean that we do not want the less fortunate among us to better participate in the economy. At The Core... Core June CPI landed at month-over-month growth of 0.2%, which was actually cooler than the consensus view, which was for growth of 0.3%, but also up from 0.1% growth in May. On a year-over-year basis, June Core CPI inched up to growth of 2.9% from May's 2.8% pace, but that was less than the 3% economists had in mind. So, are tariffs to blame for this slight uptick in consumer level inflation? Not really. Prices for apparel, which is a heavily tariffed category, was up 0.4% month-over- month, but is still negative (-0.5%) on a year-over-year basis. That's outright deflation. The Durable Goods CPI, which is closely tracked and is also a heavily tariffed category, showed growth of less than 0.1% month over month and just 0.6% year over year. No impact from tariffs visible there, unless one is intentionally blind to the data for political purposes. Where the upward pressure on June consumer prices was visible was really in energy, which is non-core. On a month-over-month basis, gasoline and fuel oil prices were both up 1% or more as were prices for electricity. Whereas electricity is concerned, that's a supply and demand issue not easily solved. Big tech is notably working on creating new sources for the production of electricity outside of the public grid. Those stories are in the news every day. In fact, going through the minutiae of the data in some detail, we can see that broadly, upward pressure in June consumer pricing came from the service sector, which has absolutely nothing to do with tariffs. Core prices for services, ex-housing were up 0.4% month over month and are running at a 4.6% annualized pace. So, yes, inflation did perk up, a little, in June. Inflation brought on by the implementation of higher tariffs, while certain to damage corporate margins, has not landed on the public. Yet? That's still a tale to be told. The Current Month What's in store for July? Looking at the Cleveland Fed's inflation nowcasting model, for July headline CPI is running at growth of 0.2% month over month and growth of 2.7% year over year. That would be a deceleration from June on the monthly print and in line with June on the annual print. Cleveland also currently sees core July CPI crossing the tape at month-over-month growth of 0.2% and year-over-year growth of 3.0%. That would be in line with June on the monthly print, but an acceleration on the annual print. What does Hedgeye's model say? Well, I will not give away their data as they are running a business and I rely upon their modeling, but I will give you the gist of it all. The Hedgeye team sees year-over-year headline inflation cooling just a touch in July. But the team warns that this will be a temporary reprieve and that the trend is leaning toward acceleration over the second half of 2025. Yields & Fed Funds Futures On Tuesday, in response to the data, bond traders sold U.S. Treasury debt securities across the slope of the curve. The yields for both the Two-Year Note and Ten Year Note gave up five basis points a piece as that Ten Year paper paid 4.48% by day's end. Readers will see that the long bond now pays more than 5%. On Wednesday morning, Fed Funds Futures trading in Chicago are now pricing in a 97% (up from 93% twenty-four hours ago) probability that the Federal Open Market Committee sits on their hands on July 30. There is still a quarter-point rate cut priced in for Sept. 17, though that probability has dropped to just 52%. There is also a 61% likelihood still being priced in for a second quarter-point rate cut prior to year's end. Marketplace An odd day. Really. Equities took the CPI news harder than many realized in real time. The S&P 500 gave up 0.4% on the day, while the Nasdaq Composite gained 0.18%. That was largely due to the news that both Nvidia NVDA and Advanced Micro Devices AMD would be permitted to once again sell Biden-era compliant chips to Chinese customers. What I am not sure if I find alarming just yet, is that the equal-weight S&P 500 gave up 1.38% on the day. That's a legit beat-down. Take a look at this comparison between the S&P 500 and the equal-weight S&P 500: The two versions of the S&P 500 have largely performed in line with each other this year. That said, see that downturn at the extreme right for the red line? Yeah, that. Small to midcap stocks were pounded. The S&P 600 gave back 2.1% and is now down 4.06% year to date. The Russell 2000 surrendered 1.99% for the day and is now down 1.13% year to date. The S&P 400 (mid-caps) is still up a mere 0.14% for 2025 after being roasted for a loss of 1.8% on Tuesday. This obviously put the whammy on breadth. Oh, the KBW Banks were also slapped around (-2.42%) after the group kicked off Q2 earnings season. Ten of the 11 S&P sector SPDRs closed out the Tuesday session in the red, led lower by the Materials XLB, which were down 2.05%. All ten of those sector funds gave back at least 0.75% for the day. Only Technology XLK for obvious reasons, closed in the green as the Philadelphia Semiconductor Index tacked on 1.27%. Losers beat winners by a 4-to-1 margin at the NYSE and by a rough 5-to-2 at the Nasdaq. Advancing volume took a 47.5% share of composite Nasdaq-listed trade and just a 29% share of NYSE-listed activity. Aggregate trade increased by 8.7% on a day- over-day basis across NYSE-listings and by 4.9% across Nasdaq-listings. Volume also expanded across the membership of the S&P 500. So, a new "day one" bearish reversal of trend, Sarge? Nope. Why not, Sarge? Simple. The Nasdaq Composite (and Nasdaq 100) still managed to close in the green. Close, but no cigar. Then There Were Four Or is it three? On Tuesday evening, the U.S. reached a trade deal with Indonesia, as that nation joined the ranks of the U.K. and Vietnam (and sort of, maybe, China) in coming to an agreement on trade with the Trump administration. As part of the deal, Indonesian exports to the U.S. will be hit with a 19% tariff, down from the 32% that the president had threatened the Asian nation with, in a letter last week. U.S. goods exported to Indonesia will not be tariffed. In addition, Indonesia has agreed to purchase 50 Boeing BA 777 jets, spend at least $15 billion on U.S. energy and spend at least $4.5 billion on U.S. agriculture. The timing of these purchases was not specified. In Other News... - Pres. Trump and Sen. Dave McCormick announced $36 billion in investments for data center projects and another $56 billion for energy projects in the state of Pennsylvania. - Former interim CEO and CTO of OpenAI Mira Murati was apparently able to raise $2 billion in funding for her new AI start-up, Thinking Machines Lab. Her idea is to build "multimodal AI that works with how you naturally interact with the world" through conversation and sight and "the messy way we collaborate." Investors include Nvidia, Advanced Micro Devices, ServiceNow NOW and Cisco Systems CSCO. Economics (All Times Eastern) 07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 6.77%. 07:00 - MBA Mortgage Applications (Weekly): Last 9.4% w/w. 08:30 - PPI (Jun): Expecting 0.3% m/m, Last 0.1% m/m. 08:30 - Core PPI (Jun): Expecting 0.2% m/m, Last 0.1% m/m. 08:30 - PPI (Jun): Expecting 3.2% y/y, Last 3.0% y/y. 08:30 - Core PPI (Jun): Expecting 2.8% y/y, Last 2.6% y/y. 09:15 - Industrial Production (Jun): Expecting 0.1% m/m, Last -0.2% m/m. 09:15 - Capacity Utilization (Jun): Expecting 77.4%, Last 77.4%. 10:30 - Oil Inventories (Weekly): Last +7.07M. 10:30 - Gasoline Stocks (Weekly): Last -2.658M. The Fed (All Times Eastern) 10:00 - Speaker: Reserve Board Gov. Michael Barr. 2:00 p.m. - Beige Book. 6:30 - Speaker: New York Fed Pres. John Williams. Today's Earnings Highlights (Consensus EPS Expectations) Before the Open: ASML (5.22), BAC (.86), GS (9.55), JNJ (2.68), MS (1.97), PNC (3.56), PGR (4.35) After the Close: SNV (1.26), UAL (3.81) At the time of publication, Guilfoyle was long NVDA, AMD, CSCO equity. This commentary was previously published on TheStreet Pro. To receive articles like this each day from Stephen Guilfoyle, Doug Kass, Helene Meisler and other investing pros click here to subscribe. Stock Market Today: Stocks Sag to Flat as Trump Reportedly Mulls Firing Powell, Walks Back Idea first appeared on TheStreet on Jul 16, 2025 This story was originally reported by TheStreet on Jul 16, 2025, where it first appeared. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
16-07-2025
- Business
- Yahoo
Veteran fund manager makes bold move on Nvidia price target
Veteran fund manager makes bold move on Nvidia price target originally appeared on TheStreet. Relax, people: Jensen Huang says there's nothing to worry about. The Nvidia () CEO was looking to assure the U.S. government that it did not need to be concerned about the AI-chip superpower's technology being used by the Chinese military. 💵💰Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰 "We don't have to worry about that because the Chinese military — no different to the American military — will not seek to build on top of each other's technology," Huang said in an interview with CNN. "They simply can't rely on it. It could, of course, be limited at any time." The U.S. government, under both the Biden and Trump administrations, has implemented and progressively tightened restrictions on the sale of advanced AI chips to clients in China, citing national security concerns. "If you just think about the number of supercomputers that are in China, built by amazing Chinese engineers that are already in operation, they don't need Nvidia's chips or American tech stacks in order to build their military," he said. He said that export controls had been counterproductive to the ultimate goal of U.S. tech leadership, and that half the world's AI researchers are in China. 'We want the American tech stack to be the global standard. ... [In] order for us to do that, we have to be in search of all the AI developers in the world,' he said. More Nvidia: Analysts revamp forecast for Nvidia-backed AI stock Nvidia stock could surge after surprising Taiwan Semi news Nvidia CEO sends blunt 7-word message on quantum computing Huang, who recently met with President Donald Trump and government and industry officials in Beijing, said Nvidia was filing applications to sell the Nvidia H20 GPU again. The H20, a less powerful version of Nvidia's Hopper architecture H100 GPU, was created to meet U.S. export-control regulations while still enabling Nvidia to maintain a presence in the Chinese market. This news was music to the ears of a lot of people in the investment community, including TheStreet Pro's Chris Versace. "This should not only remove an overhanging question as to the future of Nvidia's China business but restore revenue that was written off as lost due to government restrictions," the lead portfolio manager of TheStreet Pro portfolio said in his July 15 column. China generated $17 billion in revenue for Nvidia in 2024, roughly 13% of the company's total revenue, Versace said. In response to the news, he lifted his Nvidia price target to $200 from $185 and reiterating his One rating. "We are also thinking this is a positive step in smoothing U.S.-China trade conversations as the two countries work on a larger trade deal," he said. President Trump is slated to announce $70 billion in artificial intelligence and energy investments, Versace said, which lends additional support for the price target increase. In a related development, Versace said CoreWeave () , a key Nvidia customer, will commit as much as $6 billion for a Lancaster, Pa., 100-megawatt data center that could be expanded to 300 MW. 'We suspect there will be similar announcements from other companies as part of Trump's larger announcement, much the way we saw with the Stargate announcement in January,' he said, referring to the joint venture that plans to invest up to $500 billion in AI said these announcements should affirm expectations for AI and data center demand in the coming quarters. Connecting the dots, Versace said that would be "a positive demand driver for not only Nvidia and Marvell () shares, but also Eaton () , United Rentals () , and others." Several investment firms issued research reports on Nvidia, including Bank of America Securities, which raised its price target to $220 from $180 and affirmed a buy rating on the shares. The Department of Commerce allowing Nvidia and AMD () to resume artificial intelligence chip sales to China is an incremental positive for both companies, the firm said, according to The Fly. B of A said the move expanded the addressable opportunity in AI for U.S. chipmakers by as much as 10% and improves the U.S.'s ability to dominate the global tech stack. Piper Sandler maintained an overweight rating on Nvidia after the company said it expects to be granted licenses to resume H20 chip sales to China. During the April quarter, the company posted $4.6 billion in sales for H20 and left an additional $2.5 billion on the table due to the ban, the firm said. Piper said the estimated impact from the ban in the July quarter was around $8 billion in sales. The firm said that it suspected strong demand for these chips would have continued had the ban not been in fund manager makes bold move on Nvidia price target first appeared on TheStreet on Jul 16, 2025 This story was originally reported by TheStreet on Jul 16, 2025, where it first appeared.
Yahoo
16-07-2025
- Business
- Yahoo
Veteran fund manager makes bold move on Nvidia price target
Veteran fund manager makes bold move on Nvidia price target originally appeared on TheStreet. Relax, people: Jensen Huang says there's nothing to worry about. The Nvidia () CEO was looking to assure the U.S. government that it did not need to be concerned about the AI-chip superpower's technology being used by the Chinese military. 💵💰Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰 "We don't have to worry about that because the Chinese military — no different to the American military — will not seek to build on top of each other's technology," Huang said in an interview with CNN. "They simply can't rely on it. It could, of course, be limited at any time." The U.S. government, under both the Biden and Trump administrations, has implemented and progressively tightened restrictions on the sale of advanced AI chips to clients in China, citing national security concerns. "If you just think about the number of supercomputers that are in China, built by amazing Chinese engineers that are already in operation, they don't need Nvidia's chips or American tech stacks in order to build their military," he said. He said that export controls had been counterproductive to the ultimate goal of U.S. tech leadership, and that half the world's AI researchers are in China. 'We want the American tech stack to be the global standard. ... [In] order for us to do that, we have to be in search of all the AI developers in the world,' he said. More Nvidia: Analysts revamp forecast for Nvidia-backed AI stock Nvidia stock could surge after surprising Taiwan Semi news Nvidia CEO sends blunt 7-word message on quantum computing Huang, who recently met with President Donald Trump and government and industry officials in Beijing, said Nvidia was filing applications to sell the Nvidia H20 GPU again. The H20, a less powerful version of Nvidia's Hopper architecture H100 GPU, was created to meet U.S. export-control regulations while still enabling Nvidia to maintain a presence in the Chinese market. This news was music to the ears of a lot of people in the investment community, including TheStreet Pro's Chris Versace. "This should not only remove an overhanging question as to the future of Nvidia's China business but restore revenue that was written off as lost due to government restrictions," the lead portfolio manager of TheStreet Pro portfolio said in his July 15 column. China generated $17 billion in revenue for Nvidia in 2024, roughly 13% of the company's total revenue, Versace said. In response to the news, he lifted his Nvidia price target to $200 from $185 and reiterating his One rating. "We are also thinking this is a positive step in smoothing U.S.-China trade conversations as the two countries work on a larger trade deal," he said. President Trump is slated to announce $70 billion in artificial intelligence and energy investments, Versace said, which lends additional support for the price target increase. In a related development, Versace said CoreWeave () , a key Nvidia customer, will commit as much as $6 billion for a Lancaster, Pa., 100-megawatt data center that could be expanded to 300 MW. 'We suspect there will be similar announcements from other companies as part of Trump's larger announcement, much the way we saw with the Stargate announcement in January,' he said, referring to the joint venture that plans to invest up to $500 billion in AI said these announcements should affirm expectations for AI and data center demand in the coming quarters. Connecting the dots, Versace said that would be "a positive demand driver for not only Nvidia and Marvell () shares, but also Eaton () , United Rentals () , and others." Several investment firms issued research reports on Nvidia, including Bank of America Securities, which raised its price target to $220 from $180 and affirmed a buy rating on the shares. The Department of Commerce allowing Nvidia and AMD () to resume artificial intelligence chip sales to China is an incremental positive for both companies, the firm said, according to The Fly. B of A said the move expanded the addressable opportunity in AI for U.S. chipmakers by as much as 10% and improves the U.S.'s ability to dominate the global tech stack. Piper Sandler maintained an overweight rating on Nvidia after the company said it expects to be granted licenses to resume H20 chip sales to China. During the April quarter, the company posted $4.6 billion in sales for H20 and left an additional $2.5 billion on the table due to the ban, the firm said. Piper said the estimated impact from the ban in the July quarter was around $8 billion in sales. The firm said that it suspected strong demand for these chips would have continued had the ban not been in fund manager makes bold move on Nvidia price target first appeared on TheStreet on Jul 16, 2025 This story was originally reported by TheStreet on Jul 16, 2025, where it first appeared.
Miami Herald
11-07-2025
- Business
- Miami Herald
Stocks and Markets Podcast: Why Now is the Time to Buy High-Yielding Small-Cap Stocks
This article is based on TheStreet's Stock & Markets Podcast. Hosted by the veteran Wall Street investor Chris Versace, the weekly podcasts are available early to members of TheStreetPro investing club. York Water (YORW) has been going with the flow for more than 200 years. The company, founded in 1816, is the oldest investor-owned utility in the U.S. and the first to pay investors consecutive dividends. Don't miss the move: Subscribe to TheStreet's free daily newsletter Founded by a group of York, Pa., businessmen who were concerned about fire protection, York Water Co. was a focus of the July 9 edition of TheStreet Stocks & Markets Podcast. Chris Versace, lead manager of TheStreet Pro's Portfolio, and TheStreet Pro's Louis Llanes, senior vice president and wealth adviser at Farther Financial, spoke with Thomas Browne, a portfolio manager of small-cap and midcap stock funds at Gabelli. The key focus of the discussion: small-capitalization stocks and dividends. Small-cap stocks represent companies with market capitalizations typically ranging between $250 million and $2 billion. Due to limited analyst coverage and fewer institutional investors who buy small-cap stocks, these equities may be less efficiently priced. Saxo Bank Group says that "provides an opportunity for savvy investors to identify undervalued stocks that could grow significantly once the broader market recognizes their potential." "It's fun to talk about small-cap stocks, although sometimes I feel like we're the only people who are talking about small-cap stocks," Browne said. "It's been a long time since there was a lot of attention paid to them. But I think that we're going to have our day and it's coming soon." More Economic Analysis: Federal Reserve prepares strong message on long-term interest ratesMassive city workers union approves strikeAnalyst makes bold call on stocks, bonds, and gold "So now what makes you think that?" Versace asked. "But of late there seems to be a lot of focus not even on large-cap stocks, really on these megastocks that have been driving the S&P 500 [and] the Nasdaq. But what gives you hope that these other strategies will come back into favor?" "I think that if you look over the long term - it is more than the last year or two, or five or even 10 - small-cap stocks have outperformed," Browne said, noting that the S&P 500 trades at around 23 times earnings, while small-cap and midcap stocks trade around 16 or 17 times earnings. "So you've got one group of stocks that is very highly valued well above the long-term averages, and another group of stocks that is valued significantly below their long-term averages," he said. "So it seems to me like over time - and it's not going to be this quarter; it may not be this year; it may not be the next two years - that has to come back to the averages." "The real issue is the expectations of growth," Llanes said. "We even have almost negative expectations of growth in the small-cap stocks. We have a huge divergence between the expectations." "And there's a lot of divergence in the small-cap area between high-quality companies and low-quality companies," he added. "And selectivity is important. But it just seems a little out of whack to me - or a lot out of whack to me." Browne said that few people look at the dividends in small-cap companies, despite groups like York Water or American States Water (AWR) , which at 70 years has the longest history of raising its dividend consecutively. Related: Fund manager panel raises eyebrows with market forecasts "If you look at the Russell 2000, it actually yields more than the S&P 500 today," he said. "So, despite all these really positive attributes, people don't look at dividends, generally speaking, in small- and midcap stocks." Llanes said that he thought the markets were going to go through "a digestion period of the new tax rules and how that's going to impact things. "And foreign policy is really affecting a lot of things for a lot of investors, whether it be in the private markets or in the public markets." With the Trump administration's tariff policy aimed at reshoring manufacturing back to the U.S., Llanes asked Browne whether he saw any increases in industrialization investment in the U.S. "In spots," he said. "You are seeing big companies announce projects here in the United States. And we have investments in some companies that are in the construction business who will help those companies build new factories in order to produce in the United States." "You've also seen a lot of talk about data-center buildouts, and that's going to require power," Browne added. "That's going to mean construction of power plants. And so companies that are involved in building those factories and those data centers and the electricity sources to power them - [there's] clearly a good outlook for those." Versace asked Browne to discuss some of the prominent holdings in the funds he manages. Here are some of the points he made: Molson Coors (TAP) "has been through a multiyear restructuring where they've significantly improved the profitability. ... [If] you look at the valuation of Molson Coors relative to other brewers, [there's a] huge discount that eventually we think has to close in some form or fashion." Gen Digital (Norton LifeLock) GEN "has made some good acquisitions over the last couple of years to really consolidate the personal online protection market. And so they have a strong position there. It's not a fast-growing business. It's low- to mid-single-digits, hugely profitable and trades at a really cheap price." Ensign Group (ENSG) "is probably the best-run of the skilled nursing facility companies, ... and their focus is on skilled nursing as opposed to assisted living. That's an area that due to an aging population is going to continue to grow." Wintrust (WTFC) "is a bank here in Chicago who is another very good acquirer and runs the business very well. Great on credit. Really good at making loans. And it trades at 10 [or] 11 times earnings." Related: Veteran fund manager who forecast S&P 500 crash unveils surprising update The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
