Banks look cheap, but biotechs frothy
With Q1 earnings results flooding Wall Street, investors are scouring for the best money making opportunities. Mike Murphy, founder and CEO of Rosecliff Capital shared what he sees on the Financial, Energy and Biotech sectors.
FINANCIALS
The financial sector is a favorite of Murphy’s and it has nothing to do with interest rates. The standouts for Murphy are Bank of America (BAC) and Citigroup (C) but for different reason. He said the key factor for Citi is ‘litigation costs are getting lower.’ A big selling point for Bank of America is its wealth management unit, Merrill Lynch, which he said is trading at a discount to its book value’ while Morgan Stanley’s (MS) financial advisory aspect is also not ‘getting enough credit right now.’
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ENERGY
As falling oil prices find a bottom, Murphy believes opportunities will arise but warns to tread with caution. Murphy notes the Energy Select Sector ETF (XLE) is already up nearly 6% in the past month and is keeping a watch on how companies like Schlumberger (SLB) and Halliburton (HAL) post earnings. Halliburton reports on April 20. Schlumberger’s Q1 results were ahead of forecasts after one-time items.
BIOTECH
Biotech is a sector that’s been on fire but Murphy is cold on is the space. The money manager notes he’s not shorting the space but staying away citing the iShares Nasdaq Biotechnology (IBB); he says the area ‘has gotten a bit ahead of itself.’’ Murphy cautions investors are setting themselves up for disappointment chasing for the next breakouts like Celgene (CELG) and Gilead Sciences (GILD) - ‘a lot of those companies aren’t going to live up to expectations so that’s one area I would avoid right now.’
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