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♪. jack: welcome to "barron's roundtable" where we get behind the headlines and prepare you for the week ahead. i am jack otter, 2023 has been an up-and-down year with investors as stock surge in inflation and high interest-rate spook the market. there giving barron's a first look at her tips on where to put your money in the new year, then barron's publishing are closely following an annual list of favorite stocks, andrew bary handling the market this year will review his topics for 2024, later is it time for macy's to pick an offer and sell our panelist will debate the fate at the end of the show. we began as always with three things investors to be thinking about right now, market ended the week higher after the dow hit an all-time high closing out a record for the third straight day with all the major embassies up more than 2%, investors are thinking a critical question how to position their portfolio if rates are headed lower if

economy can avoid a recession, we have some stocks and sectors to consider. demand for fossil fuels is not going away anytime soon we seen some of the energy industry in expecting more in the oil patch in the near future. on the "barron's roundtable", andrew bary, carleton english and jacob sonenshine. jerome powell must put on a red suit and a fake beard because he gave the market exactly what everyone was looking for, the dovish pivot, what happened. >> it was a great christmas present for the market and you could not have asked for any more he talked about progress on inflation and the fed indicated they may cut rates by 2 - 3 times next year end the markets are expected even more they are discounting that short rates are five and a half or 4% by the end of next year. the bond market took off with the ten year treasury close to 5% now it's under for that's great news to people with mortgages you cannot mortgage rates getting close to 6.5% and

lower soon. >> the biggest beneficiaries were stock to have a talk about and a bullish way for a while. >> is all the major average of n rocking recently, 5% this past week and up 20% in the october lows, speculative groups are doing well, banks which are been under pressure had another great week, real estate investment and many of the interest rates and the sector of the market are doing well. jack: magnificent seven not so much be met they read the market during the 2023 but they took a breather microsoft is lower in google lower and alphabet and apple didn't do very much either. you see the rotation into the group that have not been working from those that have been. jack: what about the speculative stocks and in general does it worry you are people too bullish. >> i would not worry a lot of them haven't done much at all if you look at staples and banks and healthcare and utilities, their flat to down and even with the s&p 500 up almost 25% it could be a good amount of room

for those to run going into 2024. jack: jacob the following yield environment higher yielding stocks are a classic play, utilities are following the script to the t. >> they started to pop like intervention down for the year they're starting to show the sign of life ten year treasury down, if that continues the dividends for the xlu utilities and etf are around 4% the dividends are going to look more attractive when rates come down. con ed looks interesting. a lot of the utilities are allowed by the state that they operated to continue to grow earnings as they grow assets with the renewable energy. con ed with the dividend yield of 4% the better balance sheets and utilities i know they will grow their dividend in the dividend growth is going to be more attractive as rates fall. jack: better tax treaty on the dividends and bonds. if we can avoid a recession that is good for cyclical stocks. >> industrial standout, new all-time highs this week. i think about caterpillar number

one. it is expected to see stable to slightly higher volume growth going forward for the next few years it sells a lot of machinery to energy companies and other types of companies so it's very cyclical but the other thing with caterpillar denigrate balanchine generates more than $9 billion in free cash flow every year end buying back stock. get some eps it's trading by 13 times earnings which is nothing compared to the s&p 500 this is a stock if rates fall and the market continues to be confident about earnings for cyclical, cat will do well. jack: carleton let's talk about the oil patch that's an interesting place. >> atop 28 there was an agreement but were not moving away from fossil fuels anytime soon we seen m&a activity and are predicting more. jack: as someone who covers m&a a lot at the boring year end tell you had these deals is tough to keep them straight. exxon mobil and pioneer chevron skipping a pest, had a smaller

deal with an 11 billion-dollar deal, we expect to see more as we noted there will be a demand for oil, the energy transition at least a decade away. and we expect to see some of the big players were the medium players want access to oil-rich areas like the premium basin, the good have to buy that some of the smaller drillers operating one or two rigs, the scale does not make sense so they will be scooped up. jack: which one are going to get scooped up that's the question. >> ton of options among the publicly traded companies like a permian resource, southwestern energy but again there are tons of assets out there that you can expect to scoop up in 2024. jack: were almost out of time but who has the deep pocket, conocophillips is a big player that hasn't had a big bite. >> that had by but not the latest wing but over the last year maybe they will be on the sidelines. i would take a look at devon energy, diamondback marathon oil not quite as big but still big players in the space.

jack: it'll be fun to watch. lower interest rates might help us. inflation is slowly cooling and the fed has signaled great cuts coming into the new year, saira malik will share how to navigate the economic environment with 2024 investor playbook.

hey, you should try new robitussin honey medi-soothers for long-lasting cough and sore throat relief. try new robitussin lozenges with real medicine and find your voice. you know? we really need to work on your people skills. jack: two weeks left in 2023 a year which the fatcat the most aggressive rate campaigns in history with the yields down from the highs in the fed signaling cuts in 2024 how should investors best position themselves for the year ahead. joining the chief investment officer saira malik with the first look at her firms 2024 and vesting playbook.

good to see you again sarah. >> great to see you jack. >> investors were bowling sending stock soaring with sticks rate cuts next year, your view is different from a consensus however,. >> were definitely past the peak when it comes to inflation and interest rates in the santa claus rally has been picking up steam for three reasons due to the fed inflation and academy, the fed recently signaled they are done with rate hikes, inflation has been moderating and the economy has been slowing but not to a degree where recession is animate this complicates a set up as we enter 2024 orchids are expecting six rate cuts starting in march 2024 i think that's optimistic. in order to start rate cuts that early we will needed economy into recession and inflation below the stated target of 2% and hovering above 3% on inflation. >> do you think the 3% can get down to the target of 2% and can

it do so without having that recession. >> the last mile for inflation is going to be challenging for the fed we may need a recession to get there we are predicting one in the second half of 2024. the other issue going into 2023 how much of the gains have been pulled forward into this year were entering 2024 with s&p evaluations of over 20 times earnings that's pretty expensive from an historical point of view that's why we prefer fixed outcome over equities in 2024. >> i would ask you about the fixed income but what do you do with the 60% of your portfolio in equities, you like dividend paying stocks in this environment? >> we like companies that valuation support and were economically resilient and less volatile during the downturn, these are companies that don't just pay a dividend but they have such strong balance sheet and cash flow that they tend to increase their dividend over time and another segment is

infrastructure and reits are trading at a discount at historical evaluation that they tend to perform well when the fed pauses and cuts rates elongated posit were expecting should be positive for reaps an infrastructure because it has utilities, waste management in a less resilient to economic slowdown. jack: were looking at the chart of pro lodges which is your pick what you like specifically about that company and also a lot of concern about real estate in general but the office sector as a lot of us are working from home for the week what you thought. >> commercial real estate tends to be less than 5% ever reit benchmark is not a lot. specifically it's an industrial rates, the benefiting from e-commerce on shoring and near shoring regular manufacturing back to the united states a

strong balance sheet and the net operating growth we think they can grow on the same basis of over 10%. jack: let's circle back you mentioned fixed income you are bullish and you particularly like municipal bonds so has the market november was an incredible month did they run too far too fast you still like them. >> this is the beginning of the rate trade if we go back to october we had the tenure at 5% now it dropped significantly since then and that's triggered the rally across equities and fixed income. if you look at melissa polities we have a lot of long-term trends high saving rates for states, large rainy day fund and taxes are most likely only going to go up and melissa pull our tax advantaged. jack: we only have a little bit more time but i want to ask you about your view overseas. it is interesting because you like emerging markets but your bucking the trend a lot of people say europe is so cheap the uk is cheaper than it's ever been relative to anything else but you're not real bullish on

the non- u.s. markets. >> were more bullish on emerging than international because you can get more bang for your buck and some of the emerging markets outside of china. on the near shoring and bringing manufacturing closer to the u.s. i think mexico has an advantage, brazil which fights inflation for a long time is further along the curve but most important is the dollar when the dollar weakens that's a tailwind for non-us stocks i think the dollar bull market is behind us as the u.s. moves to a slower economy and we will eventually get the rate cuts i'm just as suspicious about the rate cuts that the market is forecasting. sean.jack: you packed a lot in. we thank you for coming. each year we compile a list of new stocks, ou

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jack: 2023 is coming to a close is time for barons to name the favorite stock picks, the analyst is watch closely by investors and for good reason the 2023 addition giving an average return of 31% year to date that six and a half points ahead of the s&p 500 it is the cover story this week and andrew bary will tell us his top picks. congratulations, you beat most mutual funds this year, very well done. looking ahead you have an eclectic mix of stock picks are there any through lines or anything they have in common. >> many have been laggards in the past like laggard stocks for the next year and most are behind the market it's been a value i'd say. jack: let's jump in with the two tech pics one magnificent seven alphabet and google and then ali baba similar sectors but different operating environment.

>> alphabet could be one of the best bets among the magnificent seven it's a good combination of growth and valuation trends are 20 times forward earnings that they could grow about 50% in the coming year, microsoft has similar earnings growth of 30 times earnings there is risk on the antitrust issue and as well as a.i. but i think the discount is a great franchise. jack: are you worried about ali baba in china anybody going to china is concerning and look what happened to jack ma. >> and severally concerning the sum of that is reflected on the stock is not about almost 20% this year end trending about where was at the ipo ten years ago profits are up five full cents then it still doing pretty well, stocks in the low 70s the u.s. listed stocks, eight times the third of a market cap in cash and if things get better in china or u.s. china relations improve the economy does better this stock could be up 50% in the coming year. >> i want to turn it over to the energy patch we were talking about mna but you like chevron

the most just curious why. >> there been one of the worst performers of big energy stocks down almost 20%, i think it's looking pretty attractive in the 140s is about ten times earnings and a 4% dividend yield there acknowledging they had issues the cfo sent a message out to the staff saying we have to upper game in 2024 and i think it could happen. >> you you also like brookshire hathaway they have a good sleeping night stock, obviously warren buffett has been running for almost 60 years, $150 billion worth of cash and a huge equity portfolio of $350 billion in his good earnings trading 20 times forward earnings and earnings are growing nicely. >> here's the thing buffett is 93 years old you've known him and spoken him over the years isn't that an issue. >> it's definitely an issue charlie munger died in 99. he is a great until shape and he wants to run the company for

three or four more years what happens after him is definitely a question some people were concerned about that and good reason he thinks the stock might go up after his death in the breakup of the company but i think it could drop but it seems pretty capable. >> you have some under the radar picks and get a call them under the hood picks the first one is hertz. you been looking at this for a while and i'm curious to hear what your take is on it now. >> i actually voted and favorably at 18 and now it's at ten is not a good call were doubling down it's one of the leading rental car companies along with avis in the enterprise they dominate the market and they have been hurt by the big push of the ev that got a lot of fanfare when they announced it two years ago it's not going well and repair costs are very high in the value of the cars have been lower than what they expected. it's a pretty cheap stock, eight times forward earnings of the bite-size investor groups own 60% of it, they can buy the whole company i think.

>> the second pick would've been u-haul what is the story there. >> many people don't know u-haul they know the company but not the product it dominates the rental space and their trucks are obviously everywhere is a very well-run company in the original network effects stock and trading from 10 - 15 times forward earnings and it could be accompanied upper charter hathaway may like to buy. sean.jack: let's talk about jams dolan msg is a pick but everybody knows the dolan discount, you're overlooking that. >> msg sports owns the new york knicks and rangers which are the franchises right now in the mba and nhl. jack: in terms of value ranges are having a good year. the next not quite as great. the market capital is 4 billion, the team recently value is estimated at around 10 billion, you're getting a very big discount, people don't think the dolan will sell the company they're worried they will keep it and not doing the maximize

shareholder value, i think somebody can happen a partial sale or a buyback and maybe something happens there, we will have to see, the asset value is a lot. jack: were out of time but give us two senses on pepsi i like the thesis. pepsi has been hurt by ozempic with pop in their snack is been trading forward time earning and they raise the dividend every year. you cannot ten earning growth next year. >> i think it's safe to be bullish on snacks are not going anywhere. >> americans like to eat. jack: thank you for that, macy's has have several bidders in recent years is it time to accept an offer? nexium 24hr prevents heartburn acid for twice as long as pepcid. get all-day and all-night heartburn acid prevention with just one pill a day. choose acid prevention. choose nexium. ♪ students... students of any age, from anywhere.

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macy's has had a lot of suitors over the years and the interesting thing the offer keeps on going down is it time to take the money. >> macy's may want to consider this, at least over the last decade that a bunch of activists or pe firms express interest, eight years ago the real estate alone was worth $21 billion that never made it through star wars they said you should do a sale-leaseback, this past week we got a bid from brigade capital to the tune of $5.8 billion for the whole thi thing, i don't know what macy's should or shouldn't do but when you look at the evaluation coming down and what the stock price has done over long-term i don't think macy's should put off the offer, maybe they want to consider it and see what options are out there right now. >> andrew what is your take, you like value.

>> and keep the company intact, the real estate is harder to pull off now in manhattan commercial real estate is in the tank it's a difficult market i don't think they can turn the juul into apartments or a big office building all that easily, under ten times earnings for the strategy in a difficult market. jack: a pretty crowded intersection i would not want to live there but you have another retail pick. >> nord stream is interesting is basically trading less than ten times earnings and a selection of women side of apparel and with their off-price business, is well-run and is pretty cheap live in nice dividend 4% plus. >> jacob, your actionable idea is a value but a very different sector. >> in supercheap were a lot of things are going on, gilead trading at 11 times forward

earnings it's not a doomed company at all it's trading at 11 times it has sales of hiv-aids drugs that launched a few years ago going to hit $15 billion a few years from now that can grow eps 6% of the dividend yield of 4% live a clean balance sheet if they launch a new drug huge upside but if you don't double digit total return annually. interesting, thank you guys, to read more check out this edition of barron's.com see the rest of andrew's picks, don't forget to follow us on x at barron's online, that is it for us will see you next week on "barron's roundtable". >> from the fox studios in new york city this