Kamen says investors should consider companies sporting strong balance sheets because they will be able to survive the economic upheaval.
FRED KATAYAMA: Mixed markets Friday with the S&P 500 and NASDAQ just below the flat line. Tech stocks once again today underperforming. Let's get to the implications of that. We're joined by Ken Kamen of Mercadien Asset Management coming to us from Yardley, Pennsylvania. Welcome back, ken.
KEN KAMEN: Great to be here.
FRED KATAYAMA: So the big rally that we've seen since March 23rd, is it faltering?
KEN KAMEN: Well, momentum is an interesting thing. Eventually, momentum starts to kind of wane a little bit, and sometimes, needs to take a breath. I mean, this market's really just been on a tear. But unfortunately, it's been on a tear and a very, very small sector, which is kind of health care and technology.
So we're starting to see that broaden out a little bit. So I don't know if I'd say that it's leveling out as much as that it's broadening out.
FRED KATAYAMA: Well, value stocks have outpaced growth stocks this weekend. Are we at a turning point now for this market?
KEN KAMEN: Well, you know, Fred, I've been doing this with you for years now. And I've thought value stocks were at a turning point a lot of times. So I might be a little cautious to say we're at a turning point. But I will go back to the theme that I have discussed with you in the past, which is quality really matters.
And as people are chasing some of these tech stocks and health-care stocks into, you know, valuations that may or may not make sense for the long run, you start having to really look at balance sheets and trying to find things that you can ride out multiple cycles through. And I think that we're seeing that now.
FRED KATAYAMA: Should investors rotate away from tech stocks [INAUDIBLE] depreciated a lot and go over towards value stocks?
KEN KAMEN: I think, absolutely, investors should rotate away from things that just seem to be going up for no rhyme or reason. Because this momentum trade, eventually-- you know, it's great when the herd is stampeding with you in your direction. But, boy, oh, boy, you could be trampled on when it turns on you. So I think homework is very, very important.
So, yes, I would absolutely be telling people that, while you might miss out on some short-term profits and feel-good emotions, the long race is really the one you want to be running, not the short one.
FRED KATAYAMA: And want to be taking profit in the big-name tech stocks.
KEN KAMEN: Absolutely. I mean, we're seeing-- look what Netflix happened today. I mean, it's not that their numbers were bad. They just didn't meet expectations. In these kind of leveled things out a little bit. But it doesn't recognize the fact that they got a lot of next year's growth into this year. So if these things don't act exactly like the algorithms want, they get slaughtered. And that's just not a good place for investors to be.
FRED KATAYAMA: And Ken, if we finally see value outpace growth, is this a good thing or a bad thing for the market? Some say that the market depends on tech stocks for growth in this coronavirus economy. At the same time, some will argue, hey, it's broadening out the rally. Better for the rally.
KEN KAMEN: Well, it depends what you call "the market." I tend to look at the market as things that people saving for retirement and college educations for their children want to have money in some sort of logical semblance of idea of how they're going to make money. If you're saying the market is, you know, this casino attitude of, what's it going to do tomorrow, then it would be a negative.
But I think it's an absolute positive as things broaden out. And I would caution people that, right now, more than ever, you want to be looking at strong balance sheets. Because just cause a company is growing at the moment, given a current environment, if they don't have the balance sheet and the financial wherewithal, to make it to the other side of the virus, it's going to be all kind of short-term profits and maybe longer-term pain.
FRED KATAYAMA: Whereas, you put it, quality stocks.
KEN KAMEN: Quality stocks.
FRED KATAYAMA: All right, thanks a lot, Ken, appreciate it.
KEN KAMEN: Thank you.
FRED KATAYAMA: Our thanks to Ken Kamen of Mercadien Asset Management. I'm Fred Katayama in New York. This is Reuters. Have a wonderful weekend.