DCLA's Sarat Sethi: Big oil companies are good hedges to have in your portfolio
Speakers
Sarat Sethi
— Managing Partner, DCLA
Summary
Sarat Sethi, managing director at DCLA, joined Closing Bell Overtime to discuss Meta, oil, Nvidia, and market broadening. He favors oil and big oil companies as portfolio hedges against geopolitical volatility and dollar debasement, likes Schlumberger for oil-technology exposure, and recommends waiting for a better entry in Nvidia. He also likes Amazon and Google and sees earnings-driven opportunities in healthcare, industrials, and financials.
- Sarat Sethi is managing director at DCLA and a CNBC contributor.
- Meta's AI infrastructure bull case depends on proving monetization; investors remain skeptical.
- Oil and big oil companies like Exxon and Chevron are viewed as geopolitical and dollar-debasement hedges.
- Schlumberger is favored for adding a technology angle to oil exposure.
- Nvidia is called a high-quality show-me story; Sethi would wait for a better entry.
- Amazon and Google are liked as cash-flow machines with strong levers.
- Healthcare, industrials, and financials are favored for broadening beyond mega-cap tech.
- Venezuela oil investment remains uncertain and not a standalone trade.
Ideas
Meta AI bull case needs monetization.
He acknowledges the bull case that Meta's AI infrastructure buildout could become an AWS-like advantage and outflank incumbents, but says the stock sold off because investors doubt monetization. The key question is when and how Meta converts massive capex into a different business model beyond advertising and user-generated content.
Oil hedges geopolitical and dollar debasement risk.
Sethi wants oil in portfolios because it is a hedge against global geopolitical volatility, and since oil is sold in dollars, it should also benefit from dollar debasement. He notes oil is not near $50 and sees geopolitical risks supporting oil and oil companies.
Exxon and Chevron are portfolio hedges.
He favors Exxon Mobil and Chevron as good portfolio hedges. They benefit if oil prices stay supported by geopolitical risk and dollar debasement, though potential Venezuela expansion is uncertain, long-tail, and dependent on unknown guarantees and political administration.
Schlumberger adds tech to oil exposure.
He also likes Schlumberger because it adds a technology aspect to oil exposure, complementing integrated oil majors with oilfield services and technology leverage.
Nvidia is show-me; wait to buy.
He calls Nvidia a very high-quality company and one of DCLA's largest positions, with earnings and backlog building, but says it is a show-me story and capital has moved away from the Big Seven. He would not buy at current levels and expects a better opportunity to add later as execution and demand become clearer.
Amazon and Google are cash-flow machines.
He likes Amazon and Google within mega-cap tech because he views both as great cash-flow machines with great operating levers, even as he favors diversifying into other areas.
Healthcare, industrials, financials offer earnings power.
He favors broadening beyond mega-cap tech into healthcare, industrials, and financials because those sectors have earnings power; looking at the economy and consumer, he sees upside in selective stocks in those areas.
