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Markets (^GSPC, ^IXIC, ^DJI) are climbing, but some investors are shifting to a more defensive stance.
Crossmark Global Investments CEO and CIO Bob Doll joins Wealth host Brad Smith to explain why he’s favoring high cash flow and profitable names like Visa (V), Mastercard (MA), and Goldman Sachs (GS).
To watch more expert insights and analysis on the latest market action, check out more Wealth here.
You say you're continuing to position defensively. How is that kind of defensive positioning playing out in specific names and walk us through how you're doing?
Sure. Uh, S&P 500 is up 1,000 points in the last month plus. And so we think it makes sense to be a little more defensive again. Uh, we are focused maniacally on cash flow. Uh, therefore, what's the multiple of a stock to cash flow? And we want profitability. So return on equity. We combined those two things, we think that's a defensive positioning. Generally leads us to more quality companies, for example. Uh, our favorite sector has been and remains financials. Uh, this sector is cheap relative to the market. Uh, a lot of the lending this cycle took place outside the banking system and private areas. And so we think that's going to mean we're in pretty good shape from a balance sheet standpoint for many of the financials. And the biggest beneficiaries of the deregulation environment in which we find ourselves. Uh, so that's a bit of a highlight. The kinds of names we're buying, um, I would highlight the financial service companies, Visa and Mastercard. Now these are not exactly cheap financials as many of the others are like many of the banks, but these companies are machines. Um, they uh, they crank it out, um, their their growth and transaction volume continues to defy gravity almost. Um, uh, these companies are gaining market share especially outside the US. So further geographic penetration, and that gives us double-digit growth. Uh, again to repeat, I wish they were cheaper from a multiple standpoint, um, but, uh, we, we think they will remain defensive stocks. If you want a more quote traditional financial Brad, I'd take you to a Goldman Sachs as an example. Um, this company is executing technology advancements, including AI. Um, they're, they're watching their costs carefully, expanding into new businesses and restructuring as they go along. We think this is a good one in that mix.
Yeah, that's really interesting because you're talking about in Goldman Sachs, wealth management and investment banking business. Uh, but then on the other side with Visa and Mastercard, talking about a little bit more of the everyday transactions that consumers might continue to make. What are you making of the health of the consumer? And where else in the portfolio that health of the consumer could pose, uh, risk? And then on the other side of perhaps a relief of economic uncertainty not panning out as bad as, I guess we had anticipated it might on the early onset of some of the tariff announcements, what we could see in that relief from consumers as well.
Yeah, I think that, uh, we expect the consumer, which has already slowed some to slow more. As you've been reporting, the soft data, uh, consumer surveys, business surveys have really struggled, fallen off a cliff as it were. And that's often a presaging what's going to happen to the hard data. We've not seen much deterioration there. Our guess is there's more of that to come as the consumer weakens, as the job market weakens some. Um, you're coming on, on Walmart and what they had to say behind the numbers. Uh, so we think we're going to see more weakness in the, in the consumer. And that's therefore means the overall economy probably slows.
