Stock pullback presents opportunities for clients without exposure to tech: Hightower's Saperstein

Speakers

Richard Saperstein — Founding Principal and CIO of Hightower Treasury Partners

Scott Wapner — Host

Summary

Tech Cash Flow Disconnect: Saperstein highlights a divergence where the market is punishing Hyperscalers for high Capex (pricing Free Cash Flow), while ignoring that their Operating Cash Flow (OCF) is increasing at an accelerating rate. He argues the reinvestment is necessary for future dominance.
The "Saperstein Switch": He is actively trimming Municipal Bond allocations to increase exposure to equities, specifically targeting the pullback in technology.
Software Strategy: While bullish on software, he prefers the ETF (IGV) over picking smaller winners to avoid "taking on water" from AI disruption risks, though he remains confident in large-cap domain experts like Salesforce and ServiceNow.
Short-Term vs. Long-Term Bifurcation: He concedes that for immediate, short-term performance, investors should rotate into non-tech sectors (Energy, Financials, Pharma), but insists that long-term compounding remains with the Hyperscalers due to superior growth and margins.

Trade Ideas

Ticker	Direction	Speaker	Thesis	Time
ENERGY /US BANKS /US CONSUMER /HEALTH CARE	LONG	Richard Saperstein Founding Principal and CIO of Hightower Treasury Partners	Saperstein admits, "If we really want performance now and we own Oil, Pharma, Bank, we want to diversify Consumer into those sectors for more near-term performance." There is a "passing of the torch" rotation occurring. Capital is moving from Growth to Value/Cyclical. To capture immediate alpha while tech consolidates, one must own the sectors benefiting from this rotation. LONG (Tactical). Use these sectors for short-term hedging against tech volatility. The rotation reverses quickly if tech earnings surprise to the upside; economic slowdown hurting cyclicals.	2:48
MSFT /AMZN /META /GOOG	LONG	Richard Saperstein Founding Principal and CIO of Hightower Treasury Partners	Saperstein notes that for these four Hyperscalers, "Operating cash flow is rising year over year... and they're plowing it back into the business." He points out the market is penalizing them for lower Free Cash Flow (due to Capex). The market is myopic. It sees high spending as a negative, but Saperstein views it as a "conscious allocation" to build necessary AI infrastructure. The "Second-Order" thinking is that this massive Capex creates an insurmountable moat and future returns, making the current pullback a buying opportunity for long-term investors. LONG. These companies have cash flows growing faster than the rest of the S&P 493. Continued market rotation out of growth; returns on AI Capex taking longer than expected to materialize.	0:51
IGV	LONG	Richard Saperstein Founding Principal and CIO of Hightower Treasury Partners	When asked about the software sell-off, he says, "Investors should look at IGV... buying that whole IGV." He explicitly advises against buying individual smaller names because it is "dangerous." Software is in the "crosshairs" of AI disruption. While the sector will grow, individual stock picking is risky because some legacy companies will fail. Buying the basket (IGV) captures the sector's recovery and AI adoption without the idiosyncratic risk of a single company being displaced. LONG. Use the ETF to play the software rebound. Broader tech sector correction; high valuations in software relative to rates.	3:26
CRM /NOW	LONG	Richard Saperstein Founding Principal and CIO of Hightower Treasury Partners	He points to "Operating cash flows of ServiceNow, CRM... It's going up as these prices of the stocks go down becoming more attractive." While he prefers the ETF for the broad market, he notes he is "selective in the larger cap companies" that have "domain expertise." The divergence between rising OCF and falling stock prices creates a valuation entry point for these specific category leaders. LONG. High-quality large caps are being unfairly dragged down with the broader software slump. Enterprise software spending slowdown; AI displacing seat-based pricing models.	4:20