Chips are broken, here's what's replacing them

Zain, great to see you today. >> You too. Thanks for having me. >> Tell me your big thesis when you're watching the rise of China AI, the falling of these semis, how are you thinking about where the money gets to work the hardest? >> Well, we're in a rapid-fire rotation kind of market and I think that's a function of the half-life of regime changes has basically crashed. And you know, there's so much short-term attention span money in the market between systematics and long-short hedge fund community and the commodity trading advisors and the retail trader that these moves happen quite rapidly and I think the latest shift is one or continued away from some of the prior leaders like the like the semis. Prior to that, it was movement away from the hyperscalers. And for whatever reason, there's been this push into more classically defensive areas like healthcare, some of the dividend areas. And then maybe because of the strength of earnings out of the blocks, you've given that lift to financials. But I think these rotations are likely to persist. >> Yeah, I mean, you're pointing out here that over the past year only 12% of S&P stocks have outperformed the index itself. But in the last month, 65% have. What does that indicate to you? >> Yeah, it's another way of looking at breadth. You know, we often look at breadth with percentage of what whether it's a sector or an index overall trading at you know, above 50-day moving average or 200-day moving average. I also looked like to look at that participation. It goes back to and it's unfortunate to use sort of a wartime analogy, but you know, when when there's only a few generals on the front lines, if if the soldiers have fallen back, that's not a very strong front. Even if some of the generals retreat, but you've got more of the soldiers on the front line, that's arguably more of a front. It does tell you though that at the index level, you can have a lot of calm because of these rotations churn under the surface. But there is a lot of rapid-fire pedaling under the surface. To me, it's an environment where in the teeth to this you talked about rebalancing. I think that is such an important discipline right now for investors that might want to consider portfolio-based rebalancing or volatility-based rebalancing as opposed to doing it based on the calendar. Take advantage of these rotations by maybe upping the frequency where you're trimming from some of the winners and adding to maybe where there's been weakness. >> Okay, can you give me some examples? Like which sectors are you looking at that are opportunities right now? >> Well, I I think healthcare continues to show interesting opportunities. Industrials is sort of peripheral way to play the AI boom. Materials is another way to kind of play the the increase in commodity cycle. That said, I think factor-based investing, investing based on characteristics, is a better strategy where at least should be of an overlay to more monolithic sector-based investing. And I think factors like high interest coverage given sticky rates on the high side, um strong balance sheet, ample cash flow, profitability, positive earnings revisions, stability in profit margins. I think that's the better way to approach picking uh ideas in this environment as opposed to the