Expect rotation into EV, battery stocks: Kramer

Hilary Kramer of Kramer Capital Research said investors should have cash on the sidelines in preparation of what she calls the 'real rotation' from big tech companies into electric vehicle and battery stocks.

Video Transcript

YAHAIRA JACQUEZ: The S&P 500 and the tech-heavy NASDAQ under pressure this Monday afternoon-- that's in reaction to higher Treasury yields, as investors were worried about the prospect of rising inflation. Here with me to talk about today's market action is Hilary Kramer of Kramer Capital Research. Thank you so much for being with us.

HILARY KRAMER: It's always a pleasure. And it's always an exciting market.

YAHAIRA JACQUEZ: It is. And Hilary, as we're seeing today and recently, you know, markets appear to be waking up to this idea that the post-pandemic rebound might be much stronger than initially expected. How do investors prepare for an environment where we may see higher inflation and pressure on interest rates to rise?

HILARY KRAMER: Most importantly, it's having some cash on the sidelines because we're going to see such a rotation in terms of sectors, and not just a rotation out of maybe some of the big tech names, like, for example, Amazon and Apple, and into cloud software, but, I mean, retail rotation, like rotation in the sense that we could be going from big social media tech to where I think the future is, which is electric vehicles, autonomous driving, battery storage, and then, of course, the post-pandemic stocks because we're already seeing, as you brought up, Yahaira, the Royal Caribbean's Caribbean cruise lines.

You know, even the airlines are catching a bit, even with a 777 having parts of its engine falling from the sky. That's how much the market is believing in this post-pandemic economy, which might not be the strongest economy because of inflation and the fact that we're seeing these rising rates, but just the fact that we're going to live our lives differently.

And so that's why it's the Royal Caribbeans that are starting to-- not starting, but have really, you know, come back and come back so strongly. Some of these big leisure companies are only 15% off of their high of the last 12 months.

YAHAIRA JACQUEZ: You know, going off of that, do you think that this reflation trade has gone too far in terms of equities or do you think that there's-- that we should come to expect this type of growth when things do open up and people start going out and shopping?

HILARY KRAMER: Obviously, the market-- your-- it's a great point. The market is pricing in a recovery. So what happens when we do actually have the recovery? It's pricing in every single person in this country going on a-- you know, on a Princess cruise. And I certainly hope, of course, that it happens.

But what will happen is that when Chairman Powell of the Fed speaks later this week, he is going to say that rates are going to stay really low. He's going to give very positive, optimistic news. He'll keep it muted so that there will be no delay in this $1.9 trillion stimulus-- the time it gets approved might be $1.4 trillion.

But we are in for another 12 months of a stock market that will be frothy, that will seemingly hit highs that no one ever dreamed of. And that's why you are seeing the smart, smart, smart money is almost too smart for itself, because they're busy shorting companies, saying, this is impossible. These are-- this is just-- this company can't keep going higher. You know, the Teslas of the world-- really smart people have lost fortunes shorting Tesla rather than realizing that the trend is your friend.

And that's why let's say you missed NIO, N-I-O. This is an electric vehicle car maker out of China. Let's say you missed that at $4 and you're saying, OK, it's over 10 times higher than there. NIO could be a $1,000 stock. It's basically the Tesla of China, but even more advanced with the way they operate their batteries, and batteries can be taken out of the cars, put in other cars, and the advancements they're making in actual-- the electric vehicle-- the storage of the batteries and the energy, and then in terms of design.

And I just want to bring up that NIO, N-I-O, will be really getting higher in the next week or two because with China having been shut down until the 17th with the new year, the one week of vacation, we're starting to get all this data in. And we're seeing, you know, millions and millions of miles that were driven in China, the demand for cars.

People are out there. We're learning that this ES8, which is the SUV of NIO, N-I-O, this, like, aluminum alloy seven-passenger vehicle, is, like, hotter than ever. So we're in a new world. You cannot be investing looking in the rear-view mirror.

YAHAIRA JACQUEZ: And so given all that and, you know, this new world that you are sort of alluding to, what is your favorite sector right now? Where do you think that people should be going towards?

HILARY KRAMER: OK. So I have two. So for those of you who are aggressive, aggressive investors, I mean, I have game-changer stocks. OK. So that's really where I have cut my teeth the last 25 years-- is on these game-changers. So that's why I like companies like-- there's this Velodyne, V-L-D-R. These are-- MVIS. OK. So these sensors we used to called-- heads-up displays-- basically, holography, you know, that-- the hologram.

So-- and Apple is going to be, you know, taking on this kind of technology. So the future comes out of, again, electric vehicles, autonomous driving, battery storage, the sensor systems that are on a much higher level that are going to demand semiconductors and technology that we haven't seen get inflated in terms of stock price yet.

OK. That's for those that are aggressive, OK? You want to be in those. However, for those that want to be careful, and maybe you want to be in both, you want some dividend yield. And you want some good dividend yield. And you want to remember that we are still-- let's say here in the United States, a country where we have these baby boomers that are retiring faster than ever, companies that I think one should always own are, like PSA, Public Storage, the largest storage company in the country, a 0.5% dividend yield. This is a $41 billion company.

But this-- but the storage, the self-storage business, is massive. It's huge. And of course, all of those storage companies have moving-- have all sorts of other services that they provide. But we're going to see the baby boomers continuing to go-- sort of scale down their lifestyle. We're going to see still a lot of moving taking place.

YAHAIRA JACQUEZ: Well, that stock is up today on a day where others have fallen. Hilary Kramer of Kramer Capital Research, thank you so much for being with us today.

HILARY KRAMER: Thank you.

YAHAIRA JACQUEZ: I'm Yahaira Jacquez. And this is Reuters.