Focus on companies that report 'consistent, predictable earning': Prime Capital Investment Advisors CIO

Prime Capital Investment Advisors CIO Chris Osmond joined Yahoo Finance Live to break down what kind of stock investors should look for going into 2021.

Video Transcript

SEANA SMITH: We got 18 minutes to go until the closing bell. Stocks under pressure-- all three of the major averages in the red. Right now, Dow off just around 100 points. S&P off about 0.5% the NASDAQ off 0.6%. You see the NASDAQ, the under-performer today. Sector wise, energy, financials, and industrials are the three under-performers in today's market.

We want to bring in Chris Osmond. He's the chief investment officer at Prime Capital Investment Advisors. And Chris, take a look at the selling pressure today, we were just talking about that weaker-than-expected retail sales report. Is that's what's contributing to this decline, or is there something else also going on?

CHRIS OSMOND: I think that's part of it. I think the other part has to do-- on the heels of President-elect Joe Biden's announcement of his fiscal stimulus plans, once he takes office. I think that's also contributing.

ADAM SHAPIRO: Chris, I really appreciated when you advise your clients that tech's not dead. When I read that, I was thinking of the old "Monty Python" thing, bring out your dead. I'm not dead yet. But when you say that not all tech is created equal, how do I-- I mean, I'm just an average investor-- and this is the case for professionals like yourself-- how do I differentiate between the behemoths like Apple and those where-- you know, finding the value in those that we don't pay attention to on a daily basis?

CHRIS OSMOND: Yeah, I think the secret is really focusing on those companies that have a historical track record of delivering consistent, predictable earnings and really highlight those themes that we saw really start to take in more longer-term, secular-- I should say, taking advantage of long-term, secular trends in the market, and that's that race towards digitization. These themes around artificial intelligence, around machine learning and e-commerce-- these were prevalent before COVID, highlighted during COVID, and even accelerated, and they'll exist long beyond COVID. So I think finding those companies is going to be critical.

SEANA SMITH: Chris, one thing that I want to bring up here, the IPO action that we saw this week. We had Affirm two days ago. Yesterday, we had Poshmark and Petco. All three of those stocks soaring on their public debuts. Does this worry you at all, just in terms of the frothiness in the market and what this could potentially mean going forward?

CHRIS OSMOND: It does. I think that you're seeing a lot of euphoria in the market. There's this disconnect between Main Street and Wall Street, highlighted by the December jobs report, highlighted by the spike in unemployment claims yesterday, highlighted by the weaker-than-expected retail sales today. But the market seems to be overlooking that, all pinning its hopes on vaccine optimism and around that rollout, as well as a second-- or I should say, a third-- stimulus check, which they hope to see soon.

ADAM SHAPIRO: Chris, we had a guest on in the first part of the hour talking about banks and you know, very down on Citibank, which rhymes with another word at Wells Fargo, not so much down on JPMorgan, but not an advocate. And yet, we keep hearing from other analysts, banks, banks, banks. What do you say, as we go through the rest of the year with the banks?

CHRIS OSMOND: Well, I think it's-- you hear a lot about what's different this time around, but history has an odd way of repeating itself. And typically, coming out of a recession, you see those more value-oriented or cyclical sectors, like financials, energy, material, and industrials, really perform well. Now, they're all-- appear overbought, based off their relative strength index over the last 14 days, and look a little vulnerable right now, as earnings announcements come out.

Looking at banks in particular, I think that it's important to look at those that are diversified. You look at JPMorgan, and they're diversified. They have asset management, trading, in addition to the banking services. Those banks that are focused solely on, you know, banking rely heavily on the yield curve, and my preference is to avoid those individually and look for more diversified banking institutions.

SEANA SMITH: Chris, how about the inflation debate that's going on right now in the market, whether or not we're actually going to see it play out this year? What do you think the market's anticipating?

CHRIS OSMOND: Well, I-- the market's definitely anticipating in this reflation trade. You-- you know, I think that part of the reason we're seeing a little pause today is some of the resistance the proposed Biden stimulus plan may get and pushing it through quickly. And that's putting a little bit of pause on this reflation trade.

Ultimately, I think that the market is pricing in more inflation, and we'll potentially see over the course of the year. But there is that concern, given the pent-up consumer demand and the amount of fiscal stimulus that is being pumped into the economy, as well as the monetary stimulus, that in the second half of the year, we could see inflation spike more than expected, but I don't think to the tune that the market's currently pricing in.

SEANA SMITH: All right, Chris Osmond of Prime Capital Investment Advisors, thanks for joining us.