Dow jumps as tech companies recoup steep losses

Keith Fitz-Gerald, Chief Investment Officer of Fitz-Gerald Group, joins Yahoo Finance's Zack Guzman to explain why he believes big tech is "still undervalued."

Video Transcript

ZACK GUZMAN: I want to bring on our first market guest here to break all of this down. Keith Fitz-Gerald is chief investment officer at Fitz-Gerald Group. And Keith, I guess we'll start-- since tech's leading the day today, we'll start with Tesla, up at the highs here about more than 10% today. What's your take on the stock split announcement and why this move's playing out? You got Tesla back at $1,515 a share.

KEITH FITZ-GERALD: Well, thanks for having me. I think this is a stroke of genius, but not for the reasons that most people think. What Elon Musk has done is attracted an entirely new generation of stock owners and investors to the marketplace. It's a page right out of Apple's playbook.

It makes the company considerably more valuable from a hope, future, let's build, and let's-get-through-this perspective. But it doesn't, to your point, change fundamentals.

ZACK GUZMAN: Yeah, and I mean, on that front, we've seen this kind of rally here from tech. It had started to look like that momentum was going to roll over and a shift towards cyclicals. Of course, we're seeing talks right now in Washington DC not really make a lot of progress between Republicans and Democrats. Nancy Pelosi giving the update that both sides are miles apart.

Maybe that's why we could see potentially a weakness here in cyclicals. But what do you make of tech right now as we await the developments there?

KEITH FITZ-GERALD: Well, I think that's a great question. I, personally, think tech is still-- particularly the big tech is still undervalued. But my perspective is five or ten years from now. This is not a bet about more iPhones or about software. This is a bet on the digitization of your life.

And if you put it in that perspective, these stocks are still inexpensive-- not cheap, but inexpensive.

ZACK GUZMAN: Yeah, and obviously, when we're thinking about not cheap, you've got to follow where the money is going to go here. We've been talking about cash on the sidelines and what to invest in if that money is coming back to play here in the market as we sit near all-time highs. And on that front, obviously, a lot of investors out there are saying that these companies that didn't necessarily see an earnings hit compared to what we saw in cyclicals, restaurants out there getting hit hard, that they're deserving of higher valuations, even though they're high.

If you're a company like that and you can weather the storm, you deserve some credit on that front. Would you agree?

KEITH FITZ-GERALD: Absolutely, I agree. And here's why-- history shows very clearly that the strongest companies get stronger during turmoil because they invest consistently through it with an eye towards emerging on the other side. Weaker companies, unfortunately, a lot of which survived the Great Financial Recession of '08 and '09, those companies shouldn't be here in the first place. So they're just trying to survive.

It's very different-- a philosophy I call invest in the best, not the rest.

ZACK GUZMAN: On that front, though, I mean, when we talk about cyclicals, you have noted there are some opportunities there regardless, some overlooked names. You can think about financials. They had the rally yesterday, as we saw some strength in the yield on the 10-year, also up today, trading near 0.67%, the yield there on that note.

What are the names you like in the financial sector right now? Because we see JPMorgan, one of those names that's still trading notably lower from where we were pre-pandemic.

KEITH FITZ-GERALD: Well, my two favorite, bar none, are going to be JPMorgan and Visa. Again, because this theme of digitization of your life is not just content. It's not just movies. It's not just entertainment.

It's how companies access and how you interact with your wallet. So companies like JPMorgan and Visa, both of which are active in that space, are still undervalued. To me, the value flips back and forth. It's focused on tech one moment, then it's focused on financials, and back and forth.

There's not much room in between absent a vaccine.

ZACK GUZMAN: Yeah, and when we talk about absent a vaccine, we're talking about stopgap measures here in DC and politicians trying to make sure that the economy doesn't completely fall off a cliff here the longer this drags on. We've been watching that vaccine front for-- hopeful to see something come through. And Russia's vaccine that's still getting put out there despite not having phase three trials aside, it does look like we're going to have to wait a little bit longer.

So what's your take, especially considering the GDP print we got here from Britain, if you back up and look at the-- I guess the carnage across the globe, where we sit as this continues to drag on longer and longer?

KEITH FITZ-GERALD: Well, I tell you what-- personally speaking, it makes me angry. It makes me very angry because there are millions of Americans who want to go back to work, who need to go back to work, who are hurting. We've lost members of our family because of this thing. This is not the time to be political. This is the time to do their jobs, to regard this as a national emergency.

The longer this drags on, the more bifurcated the market's going to become, the more that impacts credit, that impacts borrowing, that impacts housing values-- all of which we really haven't seen, but Britain just did recognize. It's a much smaller economy. But I think that could be, unfortunately, the canary in the coal mine. So you want to tread carefully and lightly.

ZACK GUZMAN: And we're going to be discussing that in more detail later on in the show here when we think about the impact to the American consumer back here at home. And I think that's one of those things that might be getting overlooked here when we see the run ups in some of these more skeptical stocks, when you think about cruise lines and things like that if it does take--

KEITH FITZ-GERALD: Exactly.

ZACK GUZMAN: --Americans much longer to get back here. Interesting to note, though, a new Reuters and Ipsos poll shows that three of ten Americans who lost work during this pandemic said that they're going to have trouble paying for just basic necessities, when we think about food or housing. So that's just putting it in perspective here. Obviously, I'm not sure if those are the Americans that would be getting back on a cruise line here. But it speaks to the real pain that Americans are feeling.

And if that's the case, I mean, anecdotally, you can already hear people talking about pulling back on spending because they don't know what's going to happen even if they have a job. So how does that factor into the health of the overall economy, that so much is controlled here by consumer spending?

KEITH FITZ-GERALD: Well, again, I think if there is a risk, it's this one, because consumer spending accounts for 70%, 75% of our economy. So if consumers get fearful as opposed to hopeful, then the economy really stumbles. In the meantime, it's, again, best, not rest, because that's as an investor, you don't have the luxury of worrying about whether you're right. What you want to do is focus on being profitable.

So my job as an investor is to help people navigate through that, even though I am fearful personally.

ZACK GUZMAN: Yeah, and when you talk to-- you just to kind of put a button on this-- when you talk to your clients out there and you look at where we will go here in the back half of 2020, obviously the short term is anyone's guess. But when we think about navigating all this, you've said tech stocks seem to be the safest place to hang out here. But at the same time, obviously, there's a lot of fears when we're trading at all-time highs when we're talking about the strength of the US consumer looking shaky.

What do you tell them in terms of why would I want to put money to work here now if we don't know what's going to happen in the next month, two months, three months? Why would I want to invest at all-time highs?

KEITH FITZ-GERALD: Because, simply put, missing opportunity is always more expensive in the rearview mirror than trying to avoid risk. Even at today's all-time highs, you've always got those fears. But history shows very, very clearly that money will grow.

The problem is the person looking out in the mirror at you every morning. That's your emotional-- that's your emotional reflex. You get that out of the way, you concentrate on what you know to be true, which is money will go where it's treated best and it will grow over time. If you've got that, you've got it beaten.

ZACK GUZMAN: Yeah, and when we look at the alternatives out there, very little to distract from what we're seeing in some of these tech companies at the moment. But Keith Fitz-Gerald, chief investment officer at Fitz-Gerald Group, appreciate you joining us.

KEITH FITZ-GERALD: Thank you.