Stock winners and losers amid market volatility

Mahoney Asset Management CEO Ken Mahoney joins the Live Show to discuss two stocks to own, which stocks to avoid, and gives investing tips amid an uncertain market.

Video transcript

SEANA SMITH: Markets have been on a roller coaster this week with retail earnings, Fed talk, debt limit negotiations. Those have been the big drivers of action. Let's talk about how to play this. Ken Mahoney is back here with us, Mahoney Asset Management CEO. Ken, so let's start with your two buys. We know certainly tech has been the outperformer since the start of the year. You've got two picks in this space. First up, Nvidia. I thought this is a bit surprising, given the runup that we've seen, over 100% since January 1st. What's going to keep this momentum to the upside?

KEN MAHONEY: Yeah, look, the earnings come out next Wednesday the 24th. Again, I don't have a peek at them, but I think the market is getting behind on their earnings. I mean, this reminds me of that kind of hockey stick growth that we saw with Tesla a few years ago, that valuations matter, but they don't if they're going to grow their top line. AI is a big thing. This is going to dominate. Before, I said, hey, Fed funds and all that's probably the ninth inning. Well, for AI, we're probably more in the second inning, just the beginning of the cycle.

Hey, it will have its ups and downs. Recognize the stock is going parabolic. The tactics that we use as kind of buy and hold, maybe 1/2 to 2/3. And maybe trade around and sell some [INAUDIBLE]. At the end of the day, this is where the leadership's going to be, and I still believe there's a lot more upside with Nvidia throughout the rest of the year, even though the stock's already doubled this year.

AKIKO FUJITA: Yeah, I can't think about how many times have we heard AI in earnings calls, but when you think about those who have been leading, obviously, Nvidia with the chips. Microsoft certainly been a big leader on that front. It's interesting. We heard from Meta this week talking about having to own the entire stack to be able to scale AI and win in this space. How does Microsoft present an opportunity for you in terms of that and the competition that is just gearing up right now?

KEN MAHONEY: Look, Microsoft thankfully is not a one trick pony, right? So it has everything from gaming, all the different verticals, from cloud to all the different software. But you can't go without software with Microsoft. And then in addition to that will be AI. And if you look at Microsoft the last few quarters, they beat earnings and they raised guidance, same thing for Nvidia. So these are companies you always want to look for, those companies that can beat on estimates, raise guidance. And I think Microsoft's going to take a little chunk out of the dominant space for Google Search. Even a small market share goes in the right direction, and you get all those many verticals with Microsoft.

SEANA SMITH: Ken, more broadly speaking, though, when you take a look at the runup in the tech sector, there was a Bank of America fund manager survey out earlier this week talking about how being long tech is one of the most crowded trades right now. Why aren't you worried about those valuations?

KEN MAHONEY: Right, so everybody complains about being narrow leadership. And it is. I mean, that's just the hand that we dealt with this year. I mean, this is the kind of a bull market and a bear market. Pretty much, the Dow is unchanged for the year, and that's up 20%. You can go and hide in PEs of 6 perc-- or PEs of 8, it seems, and they'll still be trading there. Yes, you're paying a higher multiple, but you're getting a higher growth rate.

And to me, again, if it's going be narrow leadership, be with the narrow leadership. If it's not going to spread out, it's not going to have strong breadth the way it's been shown, stick with the leaders. I mean, that's how we've been trained. Look at the best industry, the best stocks in those industry. Yes, they'll be volatile, but you're going to be more than compensated for that volatility.

AKIKO FUJITA: Let's talk about the other two stocks that you've pointed out to avoid. And I want to talk about KRE. This is an ETF for the regional banking sector because, yes, we have seen just the volatility there. It feels like there's starting to be a bit of a differentiation between the regional banks. Is it your sense here that the bottom-- we've hit the bottom, or do you think there's still more cracks to come when you're looking at some of the other names in the space?

KEN MAHONEY: I think there are more cracks to come. The reason I picked out KRE and that's selective, let's say, banks, is, if you wake up one morning, like Pat West or some others, and they're down 10%, you go to KRE. Next thing, they're down 6%. They go down in sympathy. So I just think there's better other opportunities. As I mentioned, AI is all the rage for all the reasons. There's other pockets of strength-- semiconductors, of course. So to be in this space, regionals, you're going to have a strong start. And it's really hard to pick through what's going to make out the other side, which ones are in trouble.

And every time there's a problem with just one of them, it comes back and hurts the region. I think you said earlier, for the week, we had a good week, but you saw it closed at the low of the day. And I think, still, there could be a couple of ones out there. And they always take it out of this ETF, it seems.

SEANA SMITH: Ken, another pick that you suggest that people avoid is Anheuser-Busch. We know that a lot of people have been closely watching the sales of Bud Light, given the controversy and what has happened over the last several weeks. Do you think there's more downside risk ahead, it sounds like?

KEN MAHONEY: Yeah, it can bounce a little bit. I mean, it's gone down so hard. I mean, it was in the high 60s before the controversy started. Below 60, I think it landed sub-60. It could bounce a little bit. It could be a short there. The sales numbers are pretty amazing, 27% week over week. You know, I didn't know it was going to be so sticky, but it is very sticky. And then looking at it, it looks very tempting. Say, hey, the stock was 70, and because of controversy, that will blow over. I'm not so sure it's going to blow over that quickly. It still remains sticky. And therefore, we would avoid that stock, as tempting as it may look, being down so much in the last couple of weeks.

AKIKO FUJITA: Ken Mahoney, Mahoney Asset Management CEO, good to have you on, on this Friday.

KEN MAHONEY: All right, thank you. Have a great weekend.