BD8's Barbara Doran: Not a believer in the small cap trade right now
Speakers
Barbara Doran
— CEO and Chief Investment Officer, BD8 Capital Partners
Mike
— Host
Summary
Barbara Doran of BD8 Capital Partners discusses her market game plan on CNBC's Closing Bell Overtime. She plans to keep core Mag-7 exposure, avoid small caps and staples, and look for stock-specific opportunities such as JPMorgan on weakness. She also expects international and emerging markets, including China, to continue attracting investors, while high S&P valuations could drive volatility and profit-taking.
- Stocks paused amid political headlines, earnings, and a cooler inflation report.
- Financials and payment networks faced pressure from a proposed credit card cap.
- Barbara Doran plans to keep core Mag-7 exposure but expects ordinary, not outsized, returns.
- She rejects the small-cap trade, citing unprofitable companies and AI/tariff inflexibility.
- She says to stay away from consumer staples and pick individual stocks within sectors.
- JPMorgan's selloff is seen as an opportunity, but more near-term profit-taking is possible.
- She expects international, emerging-market, and China outperformance to continue.
- High S&P 500 valuations may create volatility despite strong earnings growth.
Ideas
Keep Mag-7; earnings growth still real.
Doran plans to keep the core Mag-7 because their earnings growth is real and sustainable and should still produce good returns, though not necessarily the outsized returns of prior years. She views periodic selloffs in these quality names as opportunities to get back in because the story remains good.
Stay away from consumer staples.
Doran says to stay away from consumer staples while favoring individual stock picking elsewhere; staples are not part of her current game plan.
Avoid small caps; many unprofitable, AI-poor.
She is not a believer in the small-cap trade despite the Russell 2000's recent strength because too many small caps are unprofitable, lack the resources to compete in AI, and lack flexibility to avoid tariffs or reconfigure supply chains.
JPMorgan selloff: wait, then buy.
Doran sees JPMorgan's post-earnings selloff as an opportunity because the story remains supported by the economic outlook, but she warns that its valuation was above its historical mean and that high valuations invite profit-taking, so more near-term sell-through is possible before getting back in.
High S&P valuation invites profit-taking.
She notes the S&P 500 entered the year at a high 22x valuation, which makes the market vulnerable to volatility and profit-taking; while she believes the strong earnings-growth story, high valuations need only an excuse for investors to sell.
International markets likely keep outperforming US.
She expects emerging markets and developed markets abroad, which outperformed the US last year, to continue outperforming as investors hunt for laggards outside the US.
China now investable; investors will return.
Doran thinks China has gone from volatile and uninvestable to investable, and that investors will allocate there because it is where much of the action and cheaper opportunities are.
