5 Stock Picks From Top Money Managers

Oracle has been talking all this year about its opportunity in generative artificial intelligence and the cloud, which has obviously helped the stock. But when the company reported earnings recently, it missed the Street consensus guidance for the next quarter, and it triggered the biggest one-day decline over the past 20 years. But if you listened to founder Larry Ellison and CEO Safra Catz at the recent Oracle Cloud World user conference, they are signing big AI and cloud deals.

Until now, there have been three monster players in the cloud—
Amazon.com
[AMZN],
Alphabet
[GOOGL], and
Microsoft
[MSFT]. But we are increasingly hearing that Oracle, which has low single-digit market share, is becoming a credible fourth player in that market.

Oracle sees high single-digit sales growth rates through 2026, with expanding operating margins. Earnings should grow at a 10% or better clip for the next few years, and the stock trades for less than a market multiple.

The recent postearnings selloff took out a lot of the froth in the stock price. The company has gone from never having billion-dollar sales deals to signing new ones for the cloud business every quarter. And remember that AI is all about data—and it is the biggest database company on the planet.

Why Beaten-Down V.F. Corp Could Come Back

Jenny Van Leeuwen Harrington, CEO and portfolio manager, Gilman Hill Asset Management

VF Corp.
[VFC], while not a household name, is the owner of many name brands, such as North Face, Timberland, and Vans. It has a venerable 120-plus year history and has paid a dividend for 82 consecutive years.

While it might seem surprising to suggest an investment in a consumer-products company at a time when the U.S. consumer is weakening, the reality is that VF Corp. shares are trading down nearly 90% from their high, and we believe that a worst-case scenario is overly reflected in the share price.

During the first quarter of 2022, VF Corp. started to show up on our dividend screen, and it now has a 7.2% yield. It has an extremely talented management team and a high-functioning board of directors. In the next few years, it should see earnings growth rates in the midteens. Meanwhile, this year’s $2.03 per share of earnings very comfortably covers the current $1.21 dividend.

In 2022, VF Corp. cut the dividend, freeing up cash to reinvest in the business. We think this was the right call. We have high confidence in the safety of the dividend as well as the likelihood that it will grow nicely in the future.

Moreover, with the shares trading at less than 10-times earnings at the time of purchase, we expect to see reasonable capital appreciation in the form of multiple expansion. Although the stock is down from when we initiated our position in August, we would be buying more today if we didn’t already have a full position.

ConocoPhillips Stock Can Help Offset Inflation

Bill Nygren, portfolio manager, Oakmark Funds

If someone had a well-diversified portfolio of a few million dollars and they came upon an extra $100,000, I would suggest they add natural resources, which can address one of your biggest risks—exposure to persistent inflation. I don’t know how to put a probability on it, but neither political party wants to run a balanced budget, so the risk of uncontrolled, higher inflation is always there.

Natural-resource companies, like oil and gas producers, are a much smaller weighting in the
S&P 500
than they are in gross domestic product. That’s because their price-to-earnings multiples are so low. Energy stocks in the S&P 500 trade for about 11 times estimated 2024 earnings. The S&P 500 trades for closer to 18 times.

Typical of the values available in oil and gas would be a company like
ConocoPhillips
[COP]. Over the next decade, at an oil price of $80 a barrel, ConocoPhillips is going to generate enough cash to distribute about 130% of its entire market capitalization back to investors while growing its business by 50%. Oil is currently $86 a barrel, so there is some cushion.

The cash comes back through a combination of dividends and share repurchases. I don’t really care how the cash comes back as long as it comes back.

Think about Conoco like a bond. With a 10-year Treasury bond yielding [almost] 5%, you are getting 50% of your money back over 10 years, along with your principal. At $80 with Conoco, investors get 130% of their money back and are left owning a company 50% bigger than the one they started with.

One of the best features is that this stock is likely to do well if the rest of your portfolio doesn’t.

The Argument for Adding Alts to Your Portfolio

Paula Campbell Roberts, chief investment strategist for private wealth, KKR

In the current macroeconomic environment, we expect lower public market returns and elevated correlations between stocks and bonds, which means the 60/40 portfolio will likely be unable to generate the 8% return that it has historically.

Investors need a new playbook to preserve and expand their wealth, and we believe leaning into alternative investments can be an effective way to do that. Alternatives can help investors achieve a number of goals, including portfolio diversification, boosting returns, and/or generating income.

I suggest investors with an unexpected windfall consider investing it in private equity if their goal is to maximize profit and they are comfortable giving up some liquidity. PE funds can offer high risk-adjusted returns driven by the fund sponsors’ ability to create value in their portfolio companies. If downside protection and inflation hedging are top of mind, funds that invest in real assets such as real estate and infrastructure are strongly positioned. For income, areas of private credit—like asset-backed finance investments, which are secured by hard assets like mortgages—also offer compelling yield with an element of downside protection, while diversifying away from corporate credit risk.

While historically, alternative investments have only been available to accredited investors, new vehicle structures have made alternatives accessible to a broader range of individual investors. We believe they will become even more important to investors as they continue to navigate the current landscape.

Intel and Intuit Can Gain Back Lost Ground

Todd Ahlsten, chief investment officer, Parnassus Funds

I like to focus on great American companies, and I have two ideas to share. The first is
Intel
[INTC]. It fell behind in technology and is about 45% off its 2020 highs. Patrick Gelsinger, the CEO, joined Intel about 2½ years ago, and he’s embarking on a five-year turnaround that is starting to bear fruit. Intel is going to be very aggressive about ramping up its technology, and that should help it regain its position.

The stock is at $36, and I think it can go past $50 in the next three years, and potentially much further than that. We think Intel’s best days may still be ahead of it.

My second choice is
Intuit
[INTU], maker of QuickBooks, the backbone of small and medium-size business, and TurboTax, the platform for consumer tax. We think Intuit is a secular midteens earnings per share grower for a long time and another great American company.

One thing that makes it interesting is that it is an established business that has a unique way to monetize artificial intelligence. Generative AI can be incredibly valuable for small and medium-size businesses. Intuit is rolling out Intuit Assist to make high-value suggestions to their customers. If you want to invest in AI but you don’t want to have a scary valuation, Intuit is a good way to do that.

The stock peaked at $700 in 2021. Now it’s at $517 a share, and we think it can grow earnings 15% a year for the next three years. So we believe the stock can achieve its all-time highs and go past that.

—Interviews conducted by Al Root, Eric J. Savitz, and Amey Stone.

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