They say it pays to follow the smart money, and one member of that group just dropped two big-name stocks.
Paul Meeks, portfolio manager at Independent Solutions Wealth Management, who is best known for running the world’s largest tech fund during the dot-com bubble and subsequent collapse, recently cut Mastercard (NYSE: MA) and Visa (NYSE: V) as he reworked his investment strategy amid the coronavirus pandemic and its related risks to the market.
“They do require to get a lot of swipe fees, a lot of face-to-face transactions in places like hotels, bars and restaurants and I just don’t see that happening,” Meeks said.
Meeks argues that the two credit card giants were already getting too pricey before the coronavirus even emerged, with Mastercard up 58% and Visa up 42% in 2019. So far this year, however, both are down by -14% and -11%, respectively.
“A lot of people don’t realize that in most tech indexes, in which active managers like myself compare ourselves, Mastercard and Visa are very large stakes,” Meeks said. “I’d rather exit until things get better, and put our money in something that’s going to do better during the coronavirus and after the coronavirus.”
Meeks says content delivery network (CDN) company Akamai is a good buy now given that it benefits from the surge in e-commerce, particularly to Amazon (NASDAQ: AMZN), seen since the pandemic forced shoppers to stay home.
Akamai is “speeding the internet,” Meeks said. “They’re boosting internet security. Two very good themes.”
Meeks isn’t the only one who’s bullish on Akamai. RBC Capital’s Mark Mahaney last week boosted his estimates for the company to reflect “our more bullish view of internet traffic and accelerated adoption of remote access, of which we believe Akamai would be a direct beneficiary.”
For a good long-term play, Meeks likes Taiwan Semiconductor and believes that it is well positioned in a competitive environment.
Taiwan Semiconductor posted better-than-expected Q1 earnings last week, reporting revenue of $10.31 billion, a 45.2% year-over-year increase. The company said that its results benefited from strong demand for both high-performance computing components used by cloud companies, and “the continued ramp of 5G smartphones.”
But beyond these names, Meeks doesn’t see too many opportunities in the market.
“I need to feel better about the consensus being realistic about when our economy in the United States gets back to full strength,” Meeks said. “I don’t believe we’re in a V-shaped recovery. Unfortunately, I think this big [market] rally that we’ve had since March 23 is base on believers in the V-shaped recovery. I need them to be more realistic, and then I’ll be more realistic about adding money to portfolios.”