‘Left for dead’ stocks tied to economy will beat Big Tech: Jeff Mills


Investors may want to consider putting new money to work in stocks.

This recent upheaval is creating significant investment opportunities in cyclical and value stocks, according to Bryn Mawr Trust’s Jeff Mills.

“[These areas] of the market that have really been left for dead for the better part of two months is really encouraging to me,” the firm’s chief investment officer told CNBC’s “Trading Nation” on Wednesday.

Even though Mills believes more pain could be ahead, he lists energy, materials, industrials and small caps as his top investment picks because they’re tied to the economic rebound and often do well in a rising interest rate environment.

“If you look at the average stock in the Russell 1000 being down about 10% right now,” he said. “Zero percent of energy names are above their 50-day moving average.”

Within energy, Mills is particularly bullish on EOG Resources, a shale oil and natural gas producer.

“That’s our favorite name in the energy space. I think you see the commodities start to stabilize. You’ve already seen energy stocks get beat up in a big way,” said Mills. “So, I really think that’s where you want to be looking here going forward if you have, say, a six to 12 month time horizon.”

Mills, who has $21 billion in assets under management, is weary of the recent momentum in other parts of the market.

“This kneejerk reaction that we had really after the [June] Fed meeting when everyone ran into large cap, into growth, into technology — it’s really this market muscle memory that I don’t think actually lasts,” he said.

While Mills is bullish on cyclicals, one of his largest underweights is Big Tech. His warning to investors: The group’s two month jump is unsustainable because rising rates will whip up major headwinds.

“You had Big Tech respond to this really rapid decline in interest rates that we’ve experienced over the last couple of months. I think that has reached its bottom at this point,” noted Mills, a CNBC contributor.

On Wednesday, the benchmark 10-year Treasury note yield closed up 8 basis points to 1.29%. On Monday, it sank to a 5-month low.

Meanwhile, the major indexes rallied for their second day in a row and are positive again for the week. The Dow, S&P 500 and Nasdaq are about 1% away from their all-time highs.

“It’s interesting that the S&P 500 has bounced four or five times now off of that upward sloping 50-day moving average,” Mills said. “The fact that we saw some strength after Monday right off that technical level makes me feel pretty good.”

Disclosure: Bryn Mawr Trust owns EOG Resources shares.

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2021-07-21 23:27:55

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