Portfolio manager gives new tech stock pick he’s excited about

Key Concepts

Market Performance: Dow, S&P, NASDAQ, Russell, Transports indices performance.
Volatility: VIX index and its current level.
Airport Infrastructure: Focus on U.S. airport infrastructure and potential improvements.
Government Contracting: Companies involved in government contracts, particularly with the FAA.
Lidos Holdings: A specific company discussed as a potential investment.
Valuation, Earnings Growth, Stock Price Momentum: Criteria for stock selection.
Free Cash Flow: A key financial metric.
Forward P/E Ratio: A valuation metric.
Artificial Intelligence (AI): Mentioned in relation to Lidos Holdings' services.
Federal Reserve (Fed) Meeting: Impact of the upcoming Fed announcement on the market.
Interest Rate Cuts: Market expectations for rate cuts.

Market Performance and Volatility

The markets are showing strength on Wednesday before Thanksgiving. The Dow is up 345 points, the S&P is up 51 points, the NASDAQ is up 195 points, the Russell is up 21 points, and the Transports are up 135 points. Volatility, as measured by the VIX, has decreased significantly over the past few days, moving from 20 to very close to 17, indicating a low level of fear in the stock market.

Focus on Airport Infrastructure and Investment Opportunities

Today is a "get-away day" with many people traveling. Airports like Hartsfield-Jackson Atlanta International are experiencing increased activity, and U.S. airport infrastructure is a topic of discussion. The segment highlights a stock pick that could benefit from improvements in airport infrastructure and aviation safety systems, as the government works with the FAA on air traffic control and safety.

Lidos Holdings: A Government Contractor for FAA Modernization

Josh Wayne, Portfolio Manager for the Cornerstone Mid Cap 30 Fund, discusses Lidos Holdings as a potential investment. Lidos Holdings is a government contractor primarily focused on FAA modernization, TSA, and the Department of Defense. The company's strategy involves government efforts to streamline and outsource critical services.

Key Investment Criteria for Lidos Holdings:

Valuation: The stock is considered to have an appropriate valuation.
Earnings Growth: The company is expected to grow earnings.
Stock Price Momentum: The stock exhibits positive price momentum.
Free Cash Flow: Lidos Holdings generates a significant amount of free cash flow.
Forward P/E Ratio: The forward P/E ratio is noted at 16, which is considered appropriate.

Wayne describes Lidos Holdings as a company that is "not very sexy" but "inviting investment." While they touch upon AI in some ways, they are not marketed as an AI play. Instead, their core business is providing government services, and they are experiencing nice organic growth and generating copious amounts of free cash flow, making them "very shareholder-friendly."

Impact of the Federal Reserve Meeting on the Market

The upcoming Federal Reserve meeting on December 9th, with the announcement on December 10th, is a significant event for the entire market. A week prior, the market was pricing in only a 30% chance of a rate cut. Currently, that probability has risen to about 80%, which has coincided with a market rally. Wayne emphasizes that the market is expecting a rate cut, and while it's not 100%, it's approaching that level, making it a "key moment."

Conclusion of Market Activity

The markets are closing higher. They will be closed on Thanksgiving Day and will reopen on Monday. The segment concludes with well wishes for a happy Thanksgiving.

Synthesis/Conclusion

The video highlights a strong market performance leading into Thanksgiving, with low volatility. A key investment opportunity is identified in Lidos Holdings, a government contractor poised to benefit from FAA modernization and infrastructure improvements. The company's financial health, characterized by strong free cash flow and reasonable valuation, makes it an attractive prospect. Furthermore, the market's anticipation of a Federal Reserve interest rate cut, with an 80% probability priced in, is seen as a major driver of recent market rallies and a critical factor to watch in the coming days.