Causeway Capital Management CEO Sarah Ketterer joins the IBD podcast this week to discuss macroeconomic factors impacting 2021 market conditions and why she thinks cyclical stocks still have a lot of room to run. Plus, she debunks a few value investing myths. We also look at three stocks on Ketterer’s radar: Sabre (SABR), Fiserv (FISV) and Airbus (EADSY).
Audio Version Of Podcast Episode
Video Version Of Podcast Episode
S&P, Dow Strengthen After Finding Support
After testing support at their 50-day lines on Wednesday, the S&P 500 and Dow Jones Industrial Average powered higher Thursday.
The strong gains extended to the Nasdaq, which remains below its 50-day line. The QQQ ETF tracking the Nasdaq 100, however, surged back above its 50-day line.
The question now is whether this marks a rebound for tech that’s here to stay and a bifurcated market that’s resolved itself to the upside, or, if it’s a temporary rotation that’s part of a continuation of the choppy market.
Seeing all of the major indexes above their 50-day lines and holding that level would be a step in the right direction.
Cyclical Stocks Lead The Way In 2021
But taking a step back, Ketterer isn’t surprised at all by the strength in cyclicals since last November, with big moves sparked by positive vaccine news. She said it’s market conditions like we had in March 2020 that get value investors, or valuation investors as she likes to say, very excited.
Value Investing Myths Debunked
The pandemic-induced market correction allowed the Causeway team to purchase stocks they may not have been able to otherwise, due to their valuations.
There’s much more to value investing than looking for stocks with low P-E ratios, according to Ketterer. She’s focused on strong balance sheets and cash flows, impressive management teams and steady businesses.
Ketterer says her team has been riding cyclical stocks to strong gains and is now reinvesting capital in areas that still have a long runway for growth as the global economy continues to reopen.
Make sure to listen to the full episode to hear more about Causeway’s approach as Ketterer debunks a few value investing myths.
Cyclical Stocks To Watch
Ketterer analyzed several cyclical stocks on her radar as the global economy reopens: Sabre, Fiserv and Airbus.
Sabre’s business travel services were obliterated amid the onset of the pandemic. Ketterer thinks Sabre stock could see strong gains as the global economy gets back on its feet.
From IBD’s perspective, an earnings gap-down below the 50-day line in early May means the chart needs some time to repair before an ideal entry presents itself.
Ketterer sees a long path of growth ahead for Fiserv stock, as well. Fiserv is getting support at its 200-day line. The financial services company boasts a track record of solid, steady earnings growth.
Ketterer says the duopoly in the aircraft manufacturing industry provides Airbus stock with pricing power, and she says it’s better positioned to succeed than archrival Boeing. As travel picks up, so will orders for more new planes.
Airbus stock is currently consolidating around the 30 price level, working on a flat base with a 31.40 buy point.
Want To Find Top Cyclical Stocks?
If you’re looking for the next top stocks primed to make big moves, check out IBD’s Stock Lists page. To get IBD’s real-time assessment of cyclical stocks on your radar, check out IBD’s Stock Checkup page.
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