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Energy, housing infrastructure ripe areas for investing

Jim Rothenberg
Portfolio manager
Based in:
Los Angeles
Investment experience:

KEVIN CLIFFORD: Jim, when you listen to our analysts talk about the potential pathway to energy independence and positive news from the housing industries and positive news from the auto industries, how do you, as a portfolio manager, think about those inputs?

JIM ROTHENBERG: I think you have to look at each industry, and you have to look at where the real opportunities might lie. One of the things that’s pretty clear — for example, in energy independence — is we have a lot of bottlenecks about how you get the energy, which is produced here, to where it’s needed, there.

And so how does the infrastructure get developed that will allow this to be effective and all of these new hydrocarbons to be in the right places? I think there are some real opportunities in that area of infrastructure, and there — by the way — aren’t that many companies who do these things, whether it’s build pipelines, run pipelines, build natural-gas-liquefaction plants and the like.

Everyone hears about fracking; everybody hears about natural gas. But the real issue is, if you go out over the next 10 years, there is a very real probability that North America — so I’m going to use the U.S. and Canada — that North America can be energy self-sufficient. If that were to be the case, that is a world game-changing event. And how it all plays out — both the opportunities that it presents, as well as the changes in manufacturing potential in places like the U.S. and Canada — [is] very significant, because it will change our cost structure relative to the rest of the world.

The other side of the equation — the automotive industry, the housing industry — there, I think you see, there is improvement. But you’re not sure how much of it is just a bounce. So do we have any fundamental advantage in manufacturing cars? I don’t think the answer to that is, “Yes, we do.” But we’ve seen a pop-back. And even in a way, the tragedies of Hurricane Sandy have actually increased the demand for vehicles, because we have to replace all those vehicles that were destroyed.

And so there’s going to be a whole, I think, focus on companies that help with housing infrastructure, build housing and the like, and so the question is “Where do you find the best ways to participate in those businesses?”

Sometimes it’s not always directly in the manufacturers. And so, for example, Home Depot, which, if you think about the housing markets and the like, is a logical beneficiary, since they supply a lot of goods and material both to do-it-yourselfers and to professional builders. So there’s a good example.

And then I would just add that 16-plus% of this economy, probably bordering on 18% of this economy, is health care. And while we always tend to look at it as a challenge and a problem — and there’s too much spending on health care — it is a big business, and there ought to be a lot of opportunities in that business, and so we have a lot of attention focused on how we can exploit opportunities in the health care field.

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