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Companies using tech to advance their competitive edge are the best bets over the long-term: Technology Portfolio Manager

Technology Portfolio Manager at Jennison Associates Erika Klauer joined Yahoo Finance Live to break down the recent market highs and which companies to look at over the longterm.

Video Transcript

SEANA SMITH: We want to bring in Erika Klauer. She is a technology portfolio manager at Jennison Associates. And Erika, we're looking at gains across the board today. It was a pretty bullish week here for the markets. All three of the major averages up over 1%. From your vantage point, what's boosting investor sentiment?

ERIKA KLAUER: Well first of all, thanks so much for having me. What's really boosting investors' confidence is earnings. Earnings have been, in general, coming in much better than expected, and the outlooks also have been much better than expected. And that's not only for the steady eddie technology plays but also the reopening of the economy-- restaurants, hotel chains. We're seeing very strong indications on bookings for travel. So all of those reopening plays have also seen quite a big boost. So you've seen a pretty broad broadening out within the market strength, which I think is a good sign.

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ADAM SHAPIRO: What advice would you give to all of us as investors? If we wanted to be specific, say, in technology, how to look at who's going to be the long-term winners post-pandemic versus who's been a short-term winner during the pandemic and maybe a couple of months afterward but not long term? What should we look at?

ERIKA KLAUER: That's such a great question. And it's one that we get a lot for our team. And really what we look at are the longer term disruptors, those companies that are accelerating innovation, increasing efficiency within their various industries. And really it's not necessarily a tightly defined technology company, but even companies that are using technologies to advance their competitive edge, to increase innovation, those companies are the ones that we look at over the long term as the best bets.

SEANA SMITH: So Erika, when you're trying to figure out which names are overvalued and which aren't and where you're finding opportunity, yes, it makes sense. But drilling down into the fundamentals, what specifically are you looking at?

ERIKA KLAUER: Well, specifically we'll take it industry by industry. So just two examples that would come to mind would be the transportation industry. And I know you'll be having the Blade CEO on a little bit later. But I'd be very curious to know, for example, from his perspective and from any vehicle makers perspective, where are you with regards to the electrification of the vehicle and also with the autonomous aspect of the vehicle? These are huge untapped opportunities when we look over decades.

And the technology that's required to implement those changes is enormous, and those are really where you might find some interesting opportunities. Another simple area to think about would be health care. That's a very broad based category, but within that you can think about things like telehealth. You can think about electronic medical tools that are, for example, robots that are assisting in surgeries or even looking at artificial intelligence and how they're accelerating drug delivery. These are incredibly exciting big opportunities that are still in very early days.

ADAM SHAPIRO: I'm glad you brought up the Blade CEO because we like to have really cool companies join us. But the other issue with Blade is they're going to go public via SPAC. Lots of companies are doing that right now. So whether you're picking a tech company that's disruptive or a health care company that is on the verge of breakthroughs, what's the danger, do you advise, for clients who think, I got to get on the SPAC, I got to get on the SPAC because we're seeing huge amounts of money via SPAC going and companies coming public.

ERIKA KLAUER: Well I think that clearly what we're seeing right now in the electric vehicle SPAC space is some distribution. A lot of those recent SPACs have gone down pretty considerably. So I would move away from the untested, unproven companies. I would look for incredible stewardship amongst management teams.

But most importantly, I would look for defensible technologies. What is the exact technology that the company is bringing to bear that makes it different from other companies and gives it a sustainable advantage, not just for this quarter, next quarter, but really over a 3, 5, 7-year time frame. And that's really where we find the best opportunities and we find our best results in terms of investment returns.

ADAM SHAPIRO: Seana, I think you're muted.

SEANA SMITH: Sorry about that. It was bound to happen. It always happens once a week, so I got it out of the way early. But Erika, what I was asking you was, when we take a look at the market right now, what's priced in from your perspective. We got that $1.9 trillion COVID relief package. Now President Biden's talking about the potential of a $2 trillion infrastructure bill. How is the market viewing this?

ERIKA KLAUER: Certainly the market is viewing this is very positively in the sense that we have a very accommodative Fed at this moment, and some of the setbacks with COVID vaccine distribution obviously gives the Fed a lot of movement to keep rates low for longer, which is positive. You're seeing companies borrow at very attractive rates. You're seeing M&A deals being done. So I think that's all very supportive for the market.

But if I were to distill it down to one thing that I think hasn't yet been fully discounted by the market and still is many more years of opportunity to come, that would be to really look at how COVID has in a very profound way accelerated the digitization of the economy. And we can look at it from examples of whether or not we ever will go back to a bank to deposit a check-- instead, we're taking pictures of our checks with our smartphones-- to just the fact that we're having this interview on Skype. And companies are doing a lot more remote collaboration, students are learning online.

I think that the transformation of us all and our proficiency in technology, whether it be work, entertainment, finding where we're going to travel, all of that has changed forever. And that, I think, is the place that we ought to look for opportunity going forward.

SEANA SMITH: Erika Klauer, technology portfolio manager at Jennison Associates. Great to have you. We look forward to having you back again soon.