Clayton Allison’s Diversification Picks: XOM, AVGO, ETN

0:00All time now to spotlight the forces impacting the broader market joining us for insight is Clayton Allison portfolio manager prime capital financial Clay Thank you so much for joining us. Let's talk about the big picture in these two market forces. Obviously one of them seems to be oil when we sit above A hundred or around a hundred dollars a barrel that's a reverbeats across the market Take me through what you're paying attention there in the shop that can come from that. We've obviously come off today of those levels But what do you notice? Yeah, thanks Diane. Thanks for having me and yeah We are watching the energy markets quite closely obviously pretty much something changes every day now especially over the weekend And we are kind of tracking how Limited the traffic and the straight-of-formos is and what that kind of has to do with the broader AI super cycle that's going on We think that these are two broader themes that are powering the markets entirely One on the energy side and then two on the AI infrastructure play side as well since it's the largest

1:00Infrastructure built out largely in history and they don't really just run independently of each other They do have overlapping exposures and they kind of play off one another And we'd like to have companies that are playing on both sides of those and where they converge ultimately So how do you think about positioning a portfolio when you're concerned and you know many market participants other PMs concerned about inflation risk Right And at the same time the AI boom is still happening I mean, we've gotten video kicking off their gtc this week. So I'm sure they're going to be talking that up Tell me your thoughts Yeah, and just like any other PM It's very difficult and very tumultuous involved you know volatile times like we're seeing right now That's why you really like to lean back on high quality companies that have larger secular tailwinds On one side of fit on of the plate right now with energy we'd like to hold you know Major oil integrated companies like Exxon mobile their type of companies that can whether these types of energy disruptions

2:01Given their vertical integration And then other companies such as Broadcom is one that we like on the AI connectivity side with data centers And then where they kind of converge on both sides of the of the plate is the fact of energy and power management And that's one where we really like eating corp that we've had for quite a while in our portfolios But they're going to be managing the power management systems that go into those data centers to make sure they run smoothly So it's really having a broad scope and diversification across the portfolio of high quality companies rather than taking Pod shots here and there I get your thought on Exxon mobile, but I'm curious to know Why you like that better versus say a smaller you know exploration company or subset of companies I Think it's once again due to their global diversification and being You know widely diversified across the entire energy chain from upstream to downstream rather than just being Focus on drilling and ENP for that instance

3:03It kind of does whether our portfolio is a little bit more anchors that volatility rather than getting whipshot purely by the price of oil That you would largely see in a you know predominantly drilling company And then why Broadcom versus Nvidia Broadcom is more of a networking connectivity and we're a big fan of the custom silicone going on right now They have a huge backlog with relationships with google microsoft open AI Where they are building that custom silicon and now right now They're also one of the leaders and cpo's or co-packaged optic switches Which is moving essentially data from chip to chip via light rather than copper wires Which is a huge bottleneck when it comes to compute processing power and meta is actually leveraging that in scale right now So rather than just being a more GPU and chip centric plate We're looking more for the nervous system of AI connecting all these GPUs together rather than just the GPU themselves Clayton, let me ask you this. I'm curious to know if you're in the camp where your base case is

4:07With regard to the war with Iran that this is going to be short live 4 to 5 to maybe 6 weeks on the war is that your base case? I think it's hard to have any type of base case. I can't sit here and pretend that I'm a geopolitical expert by any means That is obviously what the administration is guiding to now Once again, there are irrational actors at play you have to assume That Iran will do whatever they can to maintain any levers that they can and that enables them to try to drag out the conflict longer than maybe 4 to 6 weeks like the administration is pushing forward But if there can be a concerted effort to get the straight reopen That you know timeline could adhere to what the administration is talking about But I think you know it's up in the air as to what the actual timeline will be Okay, volatility has come down some today the vix sitting at 23 But still would be considered elevated. Are you expecting an extended period of volatility Clayton? I would any time geopolitical tensions escalate and energy markets come into play like this

5:13I think more times a night you are going to see Obviously protracted periods of volatility now once again if we get any type of inkling that the conflict in the straight And with Iran starts to taper off any we would definitely see that volatility peel back quite substantially and quite rapidly Okay, and I want to step back and look at the three names you mentioned you mentioned broadcom You mentioned x-on-mobile you mentioned eaten they touch networking energy Power infrastructure when we look at that as a basket What's the takeaway that you want to leave us with Clayton? Especially to take away is that energy markets can obviously wish up very heavily And we think that this is more of a supply shock But they are a heavy input into the AI super cycle infrastructure build that is going on And you have to be playing both sides of this and making sure that you're diversified across the entire industrial supply chain And that's where we like Essentially energy supply to power management to AI connectivity and having our you know portfolio diversified across that entire spectrum

6:17All right Clayton. We'll leave it there for today That's Clayton Allison portfolio manager prime capital financial. Thank you so much Clayton You