00:00 Speaker A
Mike, you say here investors should look beyond tech in their year-end rebalancing. I guess why in your opinion, Mike, why is now the time to diversify? And what would be the risks, Mike, in not diversifying, of staying uh too concentrated in Big tech?
00:19 Mike
Yeah, well of course the risk being too concentrated is the things that have moved the most, if there is a correction or pullback, are likely to be the things that correct the most. So that’s that’s the risk side of it.
00:30 Mike
The other is if you started with a diversified portfolio in January and you haven’t done anything in terms of rebalancing, you’ve been a very good, solid investor and you’ve stuck to your, you didn’t get scared through tariffs or anything like that, then then your your portfolio is just a little bit out of balance now and it’s the end of the year. It’s a good time to look at what’s done well and what hasn’t done well. And I think that the rebalancing aspect from technology and in large US, uh uh US stocks in general or have that large growth bent and looking to things that are a little bit different from that is okay.
01:03 Mike
And so the S&P’s up, you know, uh mid low low to mid teens. Uh international developed markets uh are up, you know, mid 20s this year. Uh and there’s not a lot of large cap US tech in international uh developed uh markets. So, and those stocks still on a relative basis are still cheap. So, I’m not saying sell all of your tech, but be prudent uh about your your overall allocation. Think about what you’re investing for, what return do you need to achieve.
01:33 Mike
Um, take the win in Big Tech if you have it and look for other places to allocate capital to diversify.
01:39 Speaker A
In terms of other places, I know you like, Mike, the financials. You highlight banks and insurance companies as attractive here. How come?
01:47 Mike
Yeah, so so banks have had a good year. We think the uh uh regulation picture or lower regulation picture for them is well intact for the next couple years of the current administration. Um so I we think that they continue to do well. Uh on the insurance side, that’s a sector that has struggled this year, more of a cyclical issue than anything else.
02:08 Mike
These are good quality companies. Progressive you got up on the screen. We own that for for clients. We’ve owned that for a lot of years, extremely high quality company, um trading, you know, 13, 14 times next year earnings with a market at 23 times and uh these are, you know, I’m not saying that this is going to, you know, turn around in the next 30 days, but, you know, these are good price points to pick up good, durable businesses like this.
02:30 Speaker A
And finally, Mike, in terms of what you would avoid, lottery ticket energy companies. What do you mean by that?
02:37 Mike
Yeah, so there’s a lot of the the entire AI value chain is still trying to be, you know, uh determined by investors. And so you see uh investors, you know, starting with the chip companies and or the hyperscalers, the chip companies, and you move down to what is the power source for these data centers is going is going to look like. And there’s a lot of companies in the marketplace right now that arguably started the year towards, you know, microcap or even penny stocks. And there’s, um, you know, there’s a whole complex of, you know, nuclear power companies trading at a couple bucks a share that are up four or 500%. And I would argue that these are more kind of, you know, one-off lottery ticket type of uh speculative uh plays rather than long-term investments.
03:15 Mike
There’s plenty of again, high quality businesses, talk about utilities leading at the at the top of the the hour here, high quality utility companies that are going to benefit from the power trade into AI. Um we’d be careful with the more speculative pockets of the market.