It’s a sector showdown.
Five S&P 500 sectors — real estate investment trusts, financials, consumer discretionary, materials and industrials — notched new highs on Thursday, following in the broader market’s tracks after strong earnings reports from Apple and Facebook.
The communications services sector also made major strides, hitting its highest level since it was converted from the telecommunications sector in late 2018.
As the economic reopening picks up, real estate stocks could see even more upside, said John Petrides, portfolio manager at Tocqueville Asset Management.
“I would go with REITs as my favorite here for the income play … as more tenants are coming back and being able to pay their rents,” he told CNBC’s “Trading Nation” on Thursday. “REITs were one of the worst-performing sectors last year and it’s come out of the gate strong.”
Health care, which made its recent high last week, also exhibits “great value,” Petrides said.
“Companies in health care throw off a tremendous amount of cash flow, pay a dividend in a low-yield environment, [their] valuations are relatively very attractive and they have strong balance sheets,” he said. “And, obviously, we have the great accelerator of Covid, and health care’s one of the big beneficiaries of that.”
Three of Thursday’s winners stood out to Nancy Tengler, chief investment officer of Laffer Tengler Investments.
“We’re overweight materials, we’re overweight communications services and we’re overweight financials,” she said in the same “Trading Nation” interview. “But my pick would be communications services.”
With banks “getting smoked by the bond market” on loan demand, “that’s not where I would be focused,” Tengler said.
“We still like names like Google and Facebook,” she said, noting that Facebook shares have “done almost nothing for the last six months” while the company grows sales at 48% on a 26 times price-to-earnings multiple.
“Then I’d throw in the mix Disney, Roku and Comcast. Those are our overweights and pretty significant holdings for us,” Tengler said. “They are also part of the reopening trade and we don’t think they’d run as fast as some of the other more traditional sectors.”
Disclosure: Tengler and Laffer Tengler Investments own shares of Google, Facebook, Disney, Roku and Comcast. Comcast is the owner of NBCUniversal, parent company of CNBC.
