Left Brain Thinking

Brian Dress, director of research at Left Brain Investment Research, discusses how the firm tracks exchange-traded funds as a way of gauging trends across industries and as the market has been going through its current rotation, the ETFs have been confirming positive trends for energy and materials companies. Dress notes that exploration and production companies and pipeline firms are particularly well-positioned right now, pointing out that oil and energy currently hold about half of their normal weighting in the Standard and Poor's 500 but that they could quickly recoup that lost ground.

Noland Langford, chief executive officer at Left Brain Investment Research, says that changing economic conditions are forcing investors to re-evaluate growth, noting that higher interest rates require a discounting of future cash flows, dropping valuations. That translates into a changing of the portfolio, where investors need to focus on issues that have potential longer-run growth, and backing away from some of the hot growth winners from 2021.

Brian Dress, director of research at Left Brain Investment Research, says that current economic conditions -- rising inflation, slowing growth and more -- are making it more important than ever that growth investors look beyond technology stocks and companies with projected future earnings in exchange for more defensive picks that are posting current profits. Dress notes that has meant looking into financials, health-care and energy stocks to find companies that have multiple expansion that -- combined with earnings growth -- can fuel the capital appreciation.

Freddy Garcia, vice president for investments for Left Brain Wealth Management, discusses year-end financial strategies that investors should consider before it's too late, noting that there's real value to using losses to offset gains from big winners, even in cases where you expect the losing stock to become a winner in time. The tax savings can ease the burden from trimming back issues with oversized winnings, Garcia says, and the promising stock can be repurchased down the line. Garcia said year-end also is the time to plan out income needs for the coming year, and to plot through distributions and Roth IRA conversions.

Noland Langford, chief executive at Left Brain Investment Research, says that third-quarter earnings reconfirmed the firm's commitment to both Nvidia and Bath and Body Works, albeit for different reasons. Nvidia has seen both its revenues and stock price grow much faster than anyone anticipated, Langford says, and will see those growth rates slow, but should be able to overcome supply chain issues and other challenges to keep pushing steadily higher, while Bath and Body Works' strong quarterly results should remain healthy as the company continues to benefit from the economic reopening.

Brian Dress, director of research at Left Brain Investment Research, says that Roku -- the firm's "stock of the year" for 2020 -- has seen its stock price struggle this year off a mixed earnings picture, but he says that the company's business model hasn't changed and the medium- to long-term prospects look good, even if the stock struggles in the near term. As a result -- an as opposed to stocks like Peloton and Zillow, where Dress says the investment thesis has changed -- Roku's concerns seem to be temporary, which is why Dress is holding onto the stock and considering adding it to portfolios that aren't exposed to it now.

Freddy Garcia, vice president of Investments for Left Brain Wealth Management, says that investors who hire advisers to help manage their money need to get appropriate help picking and selecting stocks, bonds and mutual funds, rather than simply following cookie-cutter programs. Garcia says that too many investment advisers fall back on the idea that they provide 'planning,' rather than high-conviction investment selections; they play quarterback, he says, and hand the ball off on matching specific clients to ideal investments. As a result, clients who hired an adviser looking for broad financial plans -- including the development of a portfolio -- come away disappointed by returns over time.

Noland Langford, chief executive officer at Left Brain Investment Research, says that while energy prices have gone up dramatically -- lifting the value of energy equities and bonds -- the trends and fundamentals in the business have continued accelerating, and that pace of growth makes the energy sector particularly attractive for income-oriented investors now. That said, Langford is looking to different asset types within the energy sector for durable income; in this interview, he highlights one stock, one corporate bond issue, a preferred stock and an exchange-traded funds as viable choices for investors.

Brian Dress, director of research at Left Brain Investment Research, says that investors looking for growth in a pricey market during times of higher inflation and heightened stock prices should consider preferred securities as a means of diversifying their holdings in pursuit of yield while responsibly taking on interest rate risk. He highlights New Residential Investment's preferred securities, one of roughly two dozen investment ideas generated in the space by Jarvis, Left Brain's proprietary research system.

Noland Langford, chief executive at Left Brain Investment Research, says that rising inflation and lower-for-longer interest rates have forced him and his colleagues to dig deeper and look farther for the kind of high-growth investments he prefers. Even in the best situations, however, Langford says that 5 percent returns are solid and aggressive, and that investors need to be satisfied with that kind of return because the traditional 8 percent yields aren't available. In an environment where '5 is the new 8,' Langford discusses buying high-yield bonds and preferred stocks where investors can lock in decent returns for the long haul.