The hit to the travel industry 'is not a demand issue,' consumers want to travel: Expert

All major indexes are moving higher around Tuesday's opening bell as more states begin to reopen. Ted Chang, Thornburg Portfolio Manager, joins Yahoo Finance to discuss what companies he's keeping an eye on, in addition to what companies he thinks will grow in the coming years.

Video Transcript

[BELL RINGING]

ALEXIS CHRISTOFOROUS: And Tuesday trading is underway at the New York Stock Exchange with the opening bell there. We saw stock futures rallying nicely. That's resulting in a 250 point to the upside for the Dow Jones Industrial Average.

All right, let's say good morning now to Ted Chang. He is Thornburg Portfolio Manager. Ted, thanks so much for being with us today. I'm wondering where you see value in this market right now. I know in your note you said it's all about quality for you right now. What stocks sort of fill that criteria?

TED CHANG: Thanks for having me. That's absolutely right. I'm looking for three things right now in the market, and that's quality, quality, and more quality. You know, the stocks that I think fit that bill, Visa comes to the top of the list, right? This is a stock I think for the long-term investor, two years from now you'll be kicking yourself that you didn't own it or didn't own it at a bigger weight. We've owned the stock for more than a decade in our growth strategies here at Thornburg.

And, you know, they're seeing-- they're seeing pressure in international travel. That much is clear. But they've also called out stabilization in some trends in e-commerce, contact pay-- contactless payment.

So as we emerge from the quarantine and go back into our normal lives, we're going to see new habits form with contactless payments that are going to drive the conversion from cash to noncash even faster, and this is probably the most well-positioned company to take advantage of those trends.

BRIAN SOZZI: Ted, in your estimate-- estimation, when does the recovery-- financial recovery start for Visa? We have a lot of retailers that are about to go completely up in smoke. We saw a lot of the card companies coming out in the first quarter build their reserves. When do you think those earnings bottom and the stock might gain a little traction?

TED CHANG: [AUDIO OUT] calling a bottom is [INAUDIBLE]. And anyone who is good at that, I will gladly hand them my personal wealth. The thing with Visa earnings is the trends that were in place before coronavirus were really strong, cash to noncash. We're just seeing a hiccup in the way-- in people really just not spending money because they haven't been able to, right?

But you see these restaurants saying we think curbside takeout will be a thing that sticks around even as we go back into the new normal. So there are plenty of underlying trends. You know, e-commerce is a very obvious one. Digital goods for video games is another one we're seeing accelerating trend. So various categories will be up and down, but overall, the trends from cash to cashless-- five years from now, I have high, high conviction there will be much more cashless payments than there are today.

ALEXIS CHRISTOFOROUS: Ted, what do you think about the travel industry? I mean, just this morning we heard Virgin Atlantic laying off about 3,000 workers and Norwegian Cruise Lines even wondering whether or not it's going to have enough cash to continue to survive. As an investor, if you're already holding these stocks, what do you do with them?

TED CHANG: It's a great question. I personally love to travel. I know many who do. I know many who, once they're-- they've asked-- been asked, what's the first thing you want to do when you get back to life as normal? Travel's at the top of the list.

So it's not a demand issue, right? And I think it's really important to separate demand and supply when we talk about travel. The demand for travel is high, and it will continue to be high. We just need to figure out as a country, as a world, how we're going to do that the most effectively so that we are safe, first and foremost, and that we are effective in transporting people with efficient cost.

The companies themselves, they-- if you're holding them, you need to really look at-- you need to really separate if and when. When you talk about a company like Visa, that's a question of when. When do we get the spend coming back? It's not if this company will survive, if it has the balance sheet or if it has the cash to make it through.

These other travel companies, the question-- if you're asking if it survives, if it makes through, you're doing a different analysis. And I can't speak for each one of these companies, but that's the analysis that you need to do. It's very different than-- again, the quality analysis you're doing is more of a question of when than if.

BRIAN SOZZI: And Ted, in terms of growth stocks, where else are you looking? What other names have caught your attention?

TED CHANG: So if you take a look at our growth strategies at Thornburg, we're heavily, heavily biased towards the digital and internet economy-- so either enablers of the digital and internet economy or those that have tailwinds from the digital internet economy. So we're seeing plenty of names there that will continue to continue growing and be sustainable throughout any periods.

Now another interesting area we've been adding exposure is in small caps, quality small caps. I can't-- I'm not at liberty to talk about the specific names because we have been active very recently, but there are a number of small caps that, though the benchmarks have gotten their teeth kicked in by large caps over the last decade and year to date, there are very, very good, well-run, well-capitalized companies that have been-- that have been sold out indiscriminately, and we are finding opportunities there.

ALEXIS CHRISTOFOROUS: Ted, what about-- sticking with tech for a moment-- software, enterprise software company? Do you see opportunity there, and can you share any names with us?

TED CHANG: Absolutely. We love enterprise software. It was said-- that was a decade ago that software is eating the world. We're still in the early innings of that, and we are more bullish on that theme than ever. Salesforce, Atlassian, ServiceNow, these are just a handful of names.

And two of them-- two of the three have reported and have sounded very bullish. Management's been very bullish. They're going on the offense. They're seeing-- they're seeing probably less churn in their customers than we expected. They're probably seeing a bit more in cost savings from closing deals on Zooms and virtual sales. So the future couldn't be brighter for enterprise software, despite what you might think of curtailed spend from companies in the immediate term.

ALEXIS CHRISTOFOROUS: All right, I want to check in with Jared Blikre now for a look at what's moving markets here in the early going because, Jared, I see each of the major indexes up better than 1%.

JARED BLIKRE: Yeah, that's right, Alexis. And just taking a look at the NASDAQ 100 heat map here, we can see FAANG stocks nicely in the green. We have tech outperforming today, up about 1 and 1/2%, and that's second to energy. Energy's up 4%. We'll look at some crude oil in a second here.

But just want to go through the NASDAQ 100 sorted by performance. We can see it in the upper left Regeneron is up over 6%. That is the leader. Skyworks Solutions, the chip company, is up 5%. They reported earnings this week. Nice to see them. And then Tesla up nearly 5% as well.

But let's take a look at that crude-oil chart because we've got it with a $23 handle right now. It's June. Coming a long way from the low of $6.50 that we saw a couple of weeks ago. And then for December delivery, we have crude above $30 again. So nice to see that picture shaping up here, Alexis, in the early going.

ALEXIS CHRISTOFOROUS: All right, thanks so much, Jared Blikre. I also want to thank Ted Chang, portfolio manager at Thornburg, for joining us this morning.