Brandon Pizzurro, GuideStone Capital Management Director of Public Investments joins the Yahoo Finance Live panel to discuss the latest market news.
- This is Brandon Pizzurro, GuideStone Capital Management Director of Public Investments. You were just listening to Brian kind of break down the numbers. What's your reaction here?
BRANDON PIZZURRO: Yeah, good morning. Thanks for having me. So absolutely, inflation is the talk of the town this morning. I'm sure plenty of your guests have touched on it thus far.
One of the things I think you need to think about in the inflation debate is really what part of that is reflation, so some of those things like car rentals and airfare versus actually inflation? We're of the mindset that some of this inflation is going to be stickier.
You know, if you had a word cloud of all the inflation discussions you've had over the last couple of months, transitory, of course, would be the one right there in the middle. And we believe that while some of it is transitory, some of that reflation, some of this actual inflation seems to be more structural and potentially long-term.
For example, do you think you're going to go to your average retail department store and find that they're rolling back prices or that you're going to go to your restaurant and they're going to be reducing prices six months from now? More than likely not. They're going to have to keep those margins up because obviously, there's also margin pressure from wage inflation.
So a couple of things to think about there. But like you said earlier, markets don't seem to be overreacting to the news today.
- On the issue of wage inflation though, it does feel like this is something that could be with us for some time, especially given the conversations that we've had with a lot of businesses who say, look, we're having to pay more to hire. We're holding off on raising prices right now but it's inevitable down the line.
How are you looking at that specific factor in the larger context of inflation?
BRANDON PIZZURRO: Yeah, great point. And it does have to come to a head at some point in time. Like you said, with wage inflation kind of continuing to tick up and as those companies are about to pass some of those things along to end consumers, one of the ways that you'd want to position yourself, of course, is into businesses and companies that have those wider moats, meaning that they have an ability to defend their business, the ability to raise prices. You know, from an investment standpoint, that's where you typically want to have a safe haven perspective there. But that's certainly something that's got to give at some point in time.
Margins are at roughly 10-year highs for the average S&P 500 company. And that's something that is going to continue to erode as wage inflation continues to tick up. You know, you can't go anywhere these days without seeing a "looking for people to be employed here" type of sign. And that is something that people are going to have to increasingly up their game in terms of what they're paying people to lure them in.
- I want to get your take on the meme stocks here. We're seeing GameStop down about 18%, almost 20%. Still up 77% for the week. I know you also have your eye on Clover Health investments-- ticker is CLOV. That's down 11% today. What's your thought on this whole situation?
BRANDON PIZZURRO: What a wild ride it's been this year with some of these meme stocks here. You know, they rear their ugly head. And then they just kind of go back and remain dormant somewhat, and then come back up again.
So it's something that, as active portfolio managers, we have to constantly think about these names are part of the benchmarks and something that we're benched to. As you know, with the reconstitution in the Russell index, is they're going to be graduating into other benchmarks that will then wreak havoc there, potentially, if they have the same amount of volatility.
You know, but one thing I would say is, though, when you're investing and you have these type of names in your benchmark, there's going to be days where it cuts hard when you're not massively overweight GameStop, or have exposure at all, or Clover Health, or whatever the name of the day is.
But something that you have to consider is that, by and large, these names are highly volatile, they're being run completely off of fundamentals. You know, they're just a skew from where reality really is. And as long-term investors, you just have to plow through it and take the pain on certain days. But long-term, we believe we'll prevail.