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Portfolio manager on FAANG stocks: 'If you've got some profits, you should seriously look at taking them'

As the market moves to recoup losses from last week, Victoria Greene from G Squared Private Wealth joins The Final Round to discuss the day's correction and the outlook for the coming months.

Video Transcript

SEANA SMITH: But for more on today's rally and really what we've seen in the markets over the last several months, we want to bring in our first guest. We have Victoria Greene. She's founding partner and portfolio manager at G Squared Private Wealth. And Victoria, just help us make sense of what we've been seeing over the last week, today's rally, and where you think we're heading from here.

VICTORIA GREENE: You know, I think that a day, a week, a month doesn't really a market make. So I look at this and say it's a blip. Is three days all we're going to get in a correction? Probably not.

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September is historically a weak technical month, as well as an election pattern. Typically September and October are weaker months. So we look at this and say you might see more volatility. Obviously, there's a lot of upheaval potentially happening on the market.

Is tech actually finally rolling over? It looked like it for three days. Found a little bit of footing definitely today. But we certainly think the growth-value divide kind of starts to favor value at some point, because growth is just so stretched.

SEANA SMITH: Well, that's interesting, there, Victoria. So you think that this is the start of a bigger rotation into some of those value names? Because we've been talking to some analysts, some market watchers here over the last couple weeks. And they were saying that we need a little bit better economic data in order to really see a full rotation into some of these value names.

VICTORIA GREENE: Right. And eventually, this market is going to have to hand off from a Fed-based market to an actual economic-driven market, because right now the Fed has driven everything. And it's don't fight the Fed and stay in your stocks and deal with volatility. But I'm saying at some point, you hit the irrational exuberance or the mania and you have to look at it and say I love these stocks. I love Microsoft, Amazon, all those guys.

But are they worth what the prices are right now? And that's the question. So we look at it. And we're always prudent. It's not a profit till it's actually in your pocket.

So we say, hey, maybe take some of these gains. Look for something a little cheaper, a little more defensive. We know we're hitting a stretched market, a crazy run. And we just say, hey, look at other pockets of the market. See what might fit a little better than just seven names.

SEANA SMITH: And Victoria, when you're talking about those pockets of the market, what specifically are you looking at? Are you looking at financials? Are you looking at materials? Are you looking at industrials? Or any specific names, I guess, that's on your radar?

VICTORIA GREENE: Yeah, right. And so one name we like that's a tech name, but it's a value name-- and nobody else likes it. And I get it, because it's big, old, and ugly, is we like IBM. It's got a 5% dividend. It trades about a 10 PE. It's a great company, newer CEO, acquisition of Red Hat, really pivoting towards cloud.

Everybody forgets about Watson, which they've been working on AI almost longer than anybody. We look at that stock, we say I'm going to clip my 5% dividend. I really think it's a great turnaround story. I mean, the stock has done nothing for five years. But you look at this and say, hey, this could be a really great place to sit and wait if we go sideways in this market.

We also like a couple of the tower REITs. They're good dividends. I mean, 5G is amazing. You realize with 5G, you're actually going to be able to download a movie in like two seconds.

People don't realize how big a deal 5G is going to be. So all of us are probably going to run out and buy new iPhones and buy new Samsung Galaxies so that we can actually access the 5G. But it's great revenue sources.

Another name we look at as kind of a defense industrial we like, L3Harris. It's kind of a techy industrial name. They do a lot in the systems. And they're just a great name, because even if we see a defense budget cut, we maybe aren't going to buy quite as many multibillion dollar airplanes, but we still need our systems to work well. And that's where they excel.

And a little bit it's a Space Force play. It's a little weird saying it's a Space Force play. But it's a new branch. We know they're going to invest in it. So we look at that company and think they're well positioned for above average and above pure growth.

And lastly, kind of a growthy name we really like is CrowdStrike. Their Falcon Threat Assessment is phenomenal. It processes 3 trillion events a week in its AI base. So they look at CrowdStrike.

And look, we all are working from home right now. And we're all terrible with passwords. So this whole work-from-home has made enterprise software and especially security software so important, because you know you've got your passwords written down somewhere or you use the same passwords for everything. I mean, none us are great at that.

So you look at that and you see a huge investment by companies in cybersecurity. And because they're AI-based and cloud-based cybersecurity, really great installation and very dynamic. So we think there are great names to look at beyond just the FAANGs. And look at something with a little more value and a little more upside.

RICK NEWMAN: Hey, Victoria, that's an interesting list of names you're bullish on. What are you bearish on? What should people be avoiding?

VICTORIA GREENE: We look at this and say financials and energy, I think, are going to continue to struggle. They're great. But we look at those a little more value trappish, because interest rates, right? They're not going anywhere. I've seen people now start to refer to it as lower forever instead of lower for longer. So we think you've got to be a little careful in financials.

As well as you can't ignore these red flags they're waving about all those loan defaults they are seeing on the horizon. We've been in this weird bubble, where nobody is really defaulting, but nobody's making payments. And at some point, something's going to give, right?

And we think the banks could definitely be under some pressure there. You're seeing lending requirements tighten. That just might make it a little bit more difficult to make money.

And then energy-- we like energy names. We like clipping our dividend if it's a safe dividend. But I think energy has got a lot of attractiveness and a lot of traps in there. So if you're going to go bottom feeding on energy, I think you need to know what you're looking at, understand the balance sheets and cash flows, understand their hedging, and make sure you're really comfortable.

And then I really do warn on the FAANGs. I think if you've got some profits, you should seriously look at taking them. As well as if taxes change, wouldn't you rather maybe take it this year than if they change tax laws and capital gains laws? So that's another way to look at potential profit taking that may happen in 2020. And maybe it's good for you to start looking at that and actually taking your profit versus running it up or down.