Finding ‘Real’ Assets & Earnings in a Volatile Market: XOM, NEE, MSFT

0:00Welcome back to opening Bell and a happy Thursday to you. We are ready to get ready for this trading day We are moments away from the opening bell Tiffany McGee CEO and CIO at Pivotal advisors is with me And obviously we've seen the markets of gyrate lately and particularly over the last 24 hours now as oils moved higher We did hear from Scott Besson saying that U.S. has allowed Iranian oil out of the golf and you know also may Unsanction Iranian oil just trying to alleviate a little bit of the worries pertaining to oil But there's definitely escalation in the frustration not only of Iran Israel in the U.S But also those Gulf states those Arab Gulf states. So what do you think is happening here with this Iran war and how it's affecting our stock market here at home Morning Nicole. Thanks for having me so listen I think there are a couple of different factors kind of affecting the markets The the major headline clearly is

1:00The war in Iran So listen, you know oil prices are rising when we look at in addition to the Fed what we're really seeing happening You know oil or prices are rising and so it's really giving us inflation Reescalate re escalation risk, right? So supply disruptions of course with the oil due to the war You know energy feeds into everything right transportation production And so we're getting a new source of inflation pressure at the same time that we're trying to fight the old one Understood so at this point now, were you surprised to hear anything from the Fed yesterday? Did any of it surprise you yesterday? No, I don't think there were any surprises You know what will we think about like who our clients are pivotal it's mostly institutional investors And so I think that the Fed's decision really kind of confirmed what institutional investors are kind of already Position for you know inflation is sticky and the Fed is a bit stuck, right? And so we also saw you know PPI coming hotter so this pipeline inflation is still building and again We just talked about oil prices and and the Fed is holding right which is really signaling caution not confidence

2:04And so no no major surprises, but I do think that you know this this situation is to war In in the Middle East is really I think you know power said it nicely Repeatedly that this but the the main theme here is so much uncertainty All right, so when you think about the headwinds versus the tailwinds and I want to get to some of your picks Which include energy picks more tailwinds or more headwinds on Wall Street? I think it's kind of a push pull of both right and so I think that you know for us as institutional investors You know, we're really not trying to time the market or or pick the best picks We're really trying to build portfolios to be resilient through Different types of conditions. So I think the answer is it's a combination of both Okay, that being said also it's worth noting that the goal that Goldman Sachs Jan Hatsius after the Fed meeting Did conclude two rate cuts this year is still their base case even though a lot of folks are thinking one cup this year one cut next year

3:08I wanted to add in that call from Jan Hatsius from Goldman So let's get to your energy plays. I know you have both Exxon mobile and next sterile first with Exxon mobile. Why this name? Yeah, so I think you know generally We're thinking about diversification, right? And so it's really not optional and today's volatility It really is a survival strategy And so when we think about the different companies that we're that that we're looking at we're looking for resilience for looking for Income and we're looking for for optionality. And so we think about Exxon, you know, we've got this bias towards quality. We favor companies with strong balance sheets consisting earnings pricing power And so that you know for us Exxon is is is a good pick, right? So we think of it as a bit of like an inflation heads cash flow durability And really it's an under-investment supply, right? So we want to one exposure to real assets that benefit from Constraints supply and not just growth narratives And then where does next sterile thinner if in how was it different than your Exxon play?

4:14Yeah, so I mean we're really thinking about next era as far as inflation link pricing to got stable demand it really kind of fits this institutional our institutional client income needs And you know these are kind the kinds of assets that institutions really rely on when visibility is low And then for some of our clients They're You know way before things are going things are going on the release there They want their investment portfolios to really be aligned with with their with their mission And so next this terror energy is a pick that Is really is it is an alternative energy source and so we've had that and some of our client portfolios for for years Understood and Microsoft of the mag seven. This is your pick And some people are saying how the mag seven now many of these names are even value plays Where do you envision Microsoft? You know, do you see it as sort of a value play and how much higher can it go?

5:14Absolutely, you know, we're in again, we're we're we're picking stocks right now We're really thinking about high quality Compounders and selective tech right and so yes, Microsoft is definitely one of our selective What one of our selective tech picks and why it's got a strong balance sheet And into your point really is a value play pricing power And real earnings not just story stocks and so if you're going to own gross It's got to be self-funding gross And yes, we do think that ultimately by Microsoft can go higher Yeah, understood so you do have some tech in there you have some energy I saw Eli Lilly with some news today on its weight loss shot You know when you think about some of the other areas whether it's health care and dust drills or are there sectors that you like Yeah, there there are sectors that we like but again our overall strategy is really diversification Again to kind of whether any policy any

6:14You know any administration and really kind of setting that strategic asset allocation And then making tactical shifts and moves along the way And so yes, we we do like energy we like tech We we do like pharma But we tend to not try to not try to kind of Hickoff sectors really to kind of think more broadly and think about how we can We can manage risk And then also kind of capture those opportunities So for us the name of the game is just kind of full diversification Yeah, I know you were saying you're looking this my last question just for high quality companies Good earnings durable earnings and balance sheets And also maybe you know you think about the current economic picture How do you determine on the balance sheet what seems to be working in your opinion Yeah, I mean, I think it's really you know deep due diligence right so we we don't we're really trying to again We had the spine this bias towards quality And but we're also avoiding kind of these like over levered these companies that have over

7:18levered exposures and then also reduced dependency on multiple expansion That's you know like investors kind of paying for higher valuations. We really want you know real returns And real growth All right, Tiffany McGee pivotal advisors. Thank you so much. Great to see you appreciate it