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A little ‘commodity explosion’ is to be expected: Sarge986 LLC President

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Stephen Guilfoyle, Founder and President of Sarge986 LLC, joins Yahoo Finance’s Alexis Christoforous to discuss strong U.S. reports on manufacturing data.

Video Transcript

ALEXIS CHRISTOFOROUS: Let's welcome back the Sarge, Stephen Guilfoyle, founder and president of Sarge986 986, for his thoughts on the market. Good to see you, Sarge. So I'm curious to get your thoughts on this. What do you make of investors' seeming preoccupation with the rise we've been seeing in the bond market when it comes to yields?

STEPHEN GUILFOYLE: Well, the point we have to watch is where the 10-year rises above the dividend yield for the S&P 500. That's right around 1.48%. So, obviously, stocks become a little less desirable in general. I mean, you can go sector by sector, but in general when the yield rises above that level. But it got there quick, but then it slowed down a lot. So if it can do so-- I don't know. If it can mosey along a little bit we might be able to keep both stocks and bonds in our portfolio in the percentages we've set aside going ahead of time.

But I mean, I still think most investors-- most stock investors, equity investors-- need to keep at least one thumb, one finger in each-- each hole in the dike because you can't tell me that we're going to be getting out of tech to the degree people think we're going to be getting out of tech. I don't believe in the rotation that they tried last week and they're trying again a little bit today. I do think this is a buying opportunity for tech stocks. But you also have to play the reopening. So you have to spread yourself pretty thin, which means you also have to keep a nice cash balance.

ALEXIS CHRISTOFOROUS: So then let's talk about how you're spreading things out in the portfolio. Has that rise in bond yields-- I mean, it did hit 1.6% on the 10-year-- that was a one year high-- before pulling back a little bit. Have you made any changes to your portfolio based on the activity you're seeing in the bond market?

STEPHEN GUILFOYLE: Well, I was already long some of the financials. I was already long JP Morgan, Wells Fargo, and US Bancorp, which hasn't performed as I expected. But we'd already longed those names ahead of time because I expected some increase in the yields-- I expect some steepening of the yield curve. So I haven't changed that. I have beefed up my reopening play a little bit in terms of industrials and retail names. I got long Target on a dip this morning. I got long Kohls this morning before the open. Berkshire B is one of my big names right now because I see that not only as a conglomerate that it is, but also, it's a big railroad. I think it's the number one or number two railroad in the country.

And if cargo starts moving, if fossil fuels-- I know they're evil-- but if fossil fuels start moving, if all kinds of commodities start moving-- and we do expect a little bit of a commodity explosion here-- well the railroads are going to carry them. So you want that exposure. You can go just a straight Union Pacific or a Chessie. I've always liked Chessie. I'm not in it right now. But I like Berkshire B because it covers a lot of the bases for me and Mr. Buffett does-- well, he hasn't always done a nice job lately but over the long haul he's done a better job than I have in picking companies.

ALEXIS CHRISTOFOROUS: You mentioned Target. You got in today, you say, on the long side. The stock's getting hit, though. I guess that's because they didn't give guidance. Do you think investors are overdoing it a little bit there? Because there's a lot to like in that earnings report.

STEPHEN GUILFOYLE: Right. Let me see where it is right now. OK, it's just around $176. So I'm up, like, $0.50 right now on where I bought it. Yes, investors did not like that they didn't offer guidance. And that's fine. But you know what? I think Cornell is a pretty good CEO. He's about to join my short list, along with Lisa Su and Yin Sen Wong and a couple of others, of CEOs I think are just really spectacular at their job.

I'm a Walmart guy. I'm a Walmart loyalist. And I'm long Walmart also. But you know what? Target is forcing itself into that space alongside Walmart with me where I have to be long Amazon, Walmart, and Target. And it-- right here, this is the bottom of a flat base for Target. I'm sure you're not looking at a chart. But 176-ish is a real important spot the Target. If it holds that spot technically it's going to be fine. If that spot breaks, then we're probably looking at-- we can be looking at an 8% decline or so.

ALEXIS CHRISTOFOROUS: I am looking at a chart right here on yahoofinance.com, Sarge. So tell me, I know that you've liked AMD, you've like Nvidia--

STEPHEN GUILFOYLE: Oh, yeah.

ALEXIS CHRISTOFOROUS: --for a while now.

STEPHEN GUILFOYLE: I still do.

ALEXIS CHRISTOFOROUS: What are your positions-- Yeah. What are your positions there?

STEPHEN GUILFOYLE: OK. I think you still have to be long the software names, even though-- if you like Salesforce-- let's see where it is now. So you're probably down on the day on this one. Yeah, sure I am. But I'm not down on Salesforce because I'm buying it forever. But that right now, I think-- and with the takeover Slack, it's of course giving you a little bit of a maybe a discount because margins will be lower, but I love that name going forward. I still love Amazon. I think Amazon's going to rule the world one day along with Microsoft. Satya Nadella is another CEO I'd like to add to that list.

ServiceNow. How great of a job has Bill McDermott done with that company? Palantir. Oh, they're all piling out of Palantir, right? I'm like, yeah, OK. Bring it on. All right? So I've been buying Palantir for about a week and a half as they've been-- as they got through their lock-up period, expiration period. And I believe-- I have the Zscaler-- just reported the other day. It's fantastic earnings. Zscaler is my pick for cybersecurity. I'm not going to get out of that one.

And the chips. Chips are scarce. What they do is scarce. Crypto's cool again so now there's even a greater scarcity of chips. So you're going to have to be in the Nvidia's, in the AMDs. Intelius had to pay a big fine or something. I'm long that one, too. I have to read that after we get off the air. And I like Qorvo because I like Apple and they're kind of married.

ALEXIS CHRISTOFOROUS: We love when you stop by with all your picks. You give us so many tickers to consider here. Stephen Guilfoyle, good to.