Tech stocks have hit record highs. So has gold.
It’s the ultimate investment tug-of-war: Growth vs. Protection. People flock to tech for the explosive potential, while they own gold to hedge against uncertainty. But after both assets have seen massive runs, what should investors do?
To answer that, we spoke with an investor who understands both worlds: David Burrows, Chairman and Chief Investment Officer at Barometer Capital Management. His strategy is to focus ruthlessly on cash flow.
Cash is power: The new structural theme
For 40 years, falling interest rates made borrowing cheap. The power was with the borrower, funding high-growth companies with little concern for immediate profits.
But since 2020, long-term interest rates have moved higher and stayed sticky. Burrows says this has fundamentally changed the game. “The power is in the hands of the lender,” he told me, in an interview on my Ticker Take channel on YouTube.
The leading companies across all sectors now share one core characteristic: they have an extraordinary ability to grow their cash flow and, in many cases, grow their dividends. They are self-financing and don’t need to borrow. In Burrows’ view, this focus on predictable, growing cash flow is the key to getting rich in a higher inflation, higher rate world.
Brace for volatility, but buy quality
Burrows is still fairly optimistic about tech’s biggest players and the price of gold. But he notes that after such big runs, a pullback in either would not surprise him.
That possible volatility reinforces the need, in his opinion, to own companies with strong, durable cash flow that can weather market dips.
Burrows identifies three groups of companies that meet his cash flow criteria and offer protection against the debasement of purchasing power.
Group 1: Gold operators in safe jurisdiction
In our Ticker Take video on YouTube, Burrows’ singled out Agnico Eagle Mines, Wheaton Precious Metals, Alamos Gold, Kinross, and Pan American Silver. He said the common connection is significant cash flow growth, as their costs are not moving higher nearly as quickly as the gold price.
Agnico Eagle, he says, is a “fabulous operator” that has never cut a dividend in 41 years.
Wheaton Precious Metals is a “streamer,” a safer play where they get a royalty on revenue, providing protection against operational risk.
All operate in safe geopolitical jurisdictions.
Group 2: Tech stocks with pricing power
Burrows’ preferred tech names are successful, mature operating businesses that have pricing power. They generate an ever-growing stream of cash and are committed to growing their dividends. His picks include Microsoft, Alphabet, Nvidia, Broadcom, and Take-Two Interactive.
Group 3: Other champions: Inflation resilience
Beyond gold and tech, his focus on cash flow and inflation protection highlights leaders in other vital sectors. He sees JPMorgan as the highest quality bank in the world, with a great management team and the best tech. He’s also a fan of Banco Santander, as the largest non-U.S. lender, trading at what he sees as an inexpensive multiple. And in Canada, he singled out Imperial Oil, as an energy giant with 40 years worth of reserves in the ground, enormous cash flow. And, for dividend fans, he describes Imperial as a serial dividend payer.
Jon Erlichman is a BNN Bloomberg contributor and the host of Ticker Take on YouTube.
