Fads vs. Fortunes: Jeff Gitterman on Finding Long-Term Winners in a Changing Market

A key investment strategy for outperforming the markets.

Well one day way to do so is with thematic investing.

Now this approach does focus on identifying powerful long-term macro tech or societal trends, often called mega trends, and investing in the businesses poised to benefit from them.

Thematic investing aims for returns that beat the broader market benchmark by identifying structural growth engines before they are fully priced into the market.

And when it comes to the market's hottest trade in AI.

Fund might invest across the entire value chain.

This does include the hardware makers or semi chips, the software developers or large language models and agent AI and the infrastructure providers or data centers.

Yet the timing timing the market is challenging, and some themes turn out to be short-lived fads rather than permanent structural shifts.

Well joining me to break this down is Jeff Gitterman, Managing Director at Gitterman Asset Management.

Good morning, Jeff.

Great to have you here.

Thank you so much for joining me.

Thanks for having me.

So let's dive into thematic investing at a time when we're looking at markets at all-time record highs.

So how do you actually separate the fads from the themes?

I think when you look at AI, we know it's not a fad.

We're all in on AI.

We're going to fight this to the end of time.

So I think you can look at that and say it's definitely not a fad.

And then you look at what layers onto that like energy infrastructure needed for AI.

So also not a.

We need a lot of energy infrastructure.

You can also look at the fact that especially in the US, our infrastructure is aging.

Europe even worse, very aged infrastructure.

All that investment, water as a theme, these themes are really, in our opinion, everlasting climate change issues especially.

So when you look at it, I think it's very easy to say that there's a basket of thematic issues that you can pretty much count on aren't going away anytime soon.

Yes, and on this Monday morning there are a lot of competing headlines as you have also pointed out, and we are looking at the Dow Jones Industrial Average hitting an intraday record.

So how do you actually translate some of these trends into profits?

So the interesting thing is you first have to look at passive ETFs, and you've got passive ETFs that are just buying the broad basket of stocks, and are they starting to get overvalued?

Are they starting to Get overhyped, overpriced potentially certainly so one of the things that you can do to be a little bit more defensive is pull out some of these themes that really are catching fire in some respects hate to use that pun, but definitely getting a lot of investor interest because investors are starting to get a little weary of are my passive ETFs, have they run a little bit too high at this point.

So if you can pull out themes like water infrastructure.

Structure, energy, these are all themes that you can strip out and invest in directly either through private or public markets, and it gives you a little bit of defense if all of a sudden the mag 7 roll over.

It also gives you a lot of potential if these trends are just going to continue to run.

We can't do AI without a massive multi-billion dollar investment in infrastructure, so having some money there just makes.

A lot of sense.

Yes, and I do want to ask you about finding these super cycles.

So which emerging themes right now would you say are driving the biggest investment cycles right now?

We look at a commodity super cycle right now because what we've seen is a long period of underbuilding, undermining, and underdevelopment because demand was slow and what you're having now is demand is off the charts because of AI.

You need a lot of precious rare earth minerals.

You need a lot of rare earth metals, and we've been underinvesting in mining and distribution and all of that and also China's been cornering the market on that.

So we see a potential super cycle in the commodity market.

When you look at water, I wouldn't even count it as a commodity.

We just don't have enough water.

We don't have enough water in the Colorado River, we don't have enough water for all the building and infrastructure of housing that we're doing.

We don't have enough water for all the AI buildings. that we're doing so you can kind of pull that out of a commodity super cycle, but you can invest in a lot of things along the commodity super cycle, especially rare earth metals right now, because all the need for that in both military application and AI application.

And of course when you're talking about commodities, I do want to ask you about oil.

We have about 60 seconds here, so on the heels of that interim US Iran deal, we are looking at oil futures drop sharply.

So what do you expect moving forward?

Yes, I mean they might have dropped sharply, but at the same time there's still a backup at the Strait of Hormuz.

You're not going to see gas prices drop precipitously as you saw oil prices, and people are still paying a lot more for oil in the paper market that you're seeing trading in the market.

So I think you've got a rough story for oil for the next couple of months at least, and there's still a lot of details to iron out in this peace treaty.

So let's see what happens, but I don't think.

You're going to see oil precipitously come down at the pump, certainly for the consumer, so we've got to deal with inflation for at least the next 6 to 12 months, most likely due to higher energy prices at the pumps.

Yes, absolutely, Jeff, because even though a deal is signed at the end of the week, potentially we still have the energy infrastructure to deal with as well.

So a lot to keep in mind.

So thank you so much, Jeff, for sharing all of your Thanks for having me.

Thank you.