Bill Miller on various sectors
Bill Miller discussed various sector performances in a recent interview with CNBC. According to him, pro-cyclical sectors are the better investment choices in the present scenario.
He said, “We tend to go where the absolute valuations look attractive to us. Things like airlines, for example. Or where there’s controversy. So things like specialty pharma. Those are areas attractive in the overall market.”
The cyclical sector has a sizeable correlation with the different phases of the business cycle. The defensive sector has little correlation with the business cycle. When the business cycle starts to recover, we see expansion in economic activity. The corporate earnings also pick up at that time, and fund managers shift their investment towards the cyclical sector. Bill Miller believes the business cycle will pick up in the upcoming years, and cyclical stocks will perform better than defensive stocks.
Bill Miller has made big investments in the airlines, housing, financial (XLF), and technology (XLK) sectors. Stocks such as American Airlines (AAL), Southwest Airlines (LUV), Marriott International (MAR), and General Motors (GM) are good examples of cyclical stocks. He also believes that the financial sector will be a great beneficiary of the Fed’s gradual rate hike process. He thinks that if the Fed hikes the rate several times this year, savings won’t see a positive rate of return. So investment in the pro-cyclical sector is a good investment opportunity in the present scenario.
In the next part of this series, we’ll analyze Bill Miller’s view on Delta (DAL).