Stocks & Markets Podcast: Freedom Capital’s Maguire Looks Beyond the Mag 7 | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

This article is based on TheStreet’s Stock & Markets Podcast. Hosted by the veteran Wall Street investor Chris Versace, the weekly podcasts are available early to members of TheStreetPro.

Throughout history, humans have revered the number 7.

The digit has been associated with good luck, features significantly in Christianity, Judaism, Islam and Hinduism. And look what it did for Snow White.

Around Wall Street, investors focused on artificial intelligence have rallied around the so- called Magnificent 7 stocks: Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla.

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So Chris Versace, lead portfolio manager at TheStreet Pro, on the recent Stocks & Markets Podcast wondered out loud whether some industries were slowly adopting AI and hadn’t yet gotten the love that investors have put into the Mag 7.

And he posed the question to, and sought related investing ideas from, Ed Maguire, senior director of research at Freedom Capital Markets.

Ed Maguire, Freedom Capital Markets’ director of research, talked under-the-radar stocks with Chris Versace, lead portfolio manager at TheStreet Pro.

TheStreet/Freedom Capital Markets

Providing an example, Versace noted that the portfolio at TheStreet Pro includes Axon Enterprises, “which most folks think of [as] tasers, body cameras, but they don’t necessarily clue into Axon’s software-and-services business, the cloud that they have and how they can drive productivity inside public safety by bringing AI to market.”

Freedom Capital’s Maguire: Aerospace ripe for AI

And he asked Maguire: “Are there areas that you think are ripe for AI adoption that folks aren’t really paying attention to?”

The “entire manufacturing sector … certainly aerospace and defense is an area where you have heavy discrete machinery,” Maguire said. Another is real estate and its subsectors: multifamily, industrial, office space, and public spaces, he said.

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And “the ability to apply technology” is not just “to improve public safety, which is what people associate with cameras, but also [to be able to enhance customers’] experience, helping to, reduce lines or queues at large public venues, to have more anticipatory services that businesses can provide for commercial tenants or people living in their homes,” the fund manager said.

“A lot of these advances proceed very steadily, but you don’t really notice it because it’s a bit of a slow boil.”

Versace asked about particular companies that are best positioned: “I know a lot of folks talk about Nvidia obviously, and to be clear we own Nvidia in the portfolio. But are there other software companies or even other chip companies? … Are there any less obvious needs that folks should be thinking about?”

“In semiconductors, you obviously have the big names like Nvidia (NVDA) and Taiwan Semiconductor,’ (TSM) Maguire said. “But even some of the smaller names, the companies that are enabling the design of systems, like Cadence Design Systems (CDNS) or Synopsys (SNPS) , are really interesting. They play an incredibly critical role.

Maguire: Industrial machinery investment ideas

“When you look at industrial machinery, I think there’s some very interesting names, like Johnson Controls, (JCI) Rockwell Automation, (ROK) or Xylem, (XYL) where you’re dealing with physical infrastructure. And these companies have been thinking a lot about how to apply intelligence to the data that they collect to manage their physical systems.”

Another area Maguire mentions is what he calls smart health. [“The] application of technology to gene sequencing is incredibly powerful,” he said. “Right now, I think the latest estimate is there are about 1,200 publicly traded biotech companies and maybe another 1,200 that are private that are worth looking at. …

“The cost of sequencing the human genome has dropped by like 99% since [the scientist] Craig Venter first sequenced his own genome. [That decline in costs is] really driving some unbelievable breakthroughs, particularly in oncology.

“And I wouldn’t say that there are any specific names because I think you’ve got to be pretty well versed in the science to invest effectively. But I think the impact on potentially life span, even in our lives, is really revelatory and transformative.”

Versace suggested: “So maybe – and I’m not saying that there is an ETF for this – but maybe given your comment, maybe an ETF is a safer way to kind of play it for folks that are kind of interested in dipping their toes in the water but don’t have the resources or the time to really investigate.”

Maguire added that “there’s a similar argument that can be made really across what we largely call health care, life sciences. Advances in diagnostics or robotic surgery [are] pretty well known. … [Many] people are aware of what [Intuitive Surgical’s (ISRG) DaVinci] is able to do.” DaVinci enables surgeons to perform complex, minimally invasive procedures with enhanced precision, dexterity and 3D vision.

“But you also have even just the ability to automate a lot of the processes in the tangled hairball that makes up the U.S. health care system, applying AI to payments, approvals and processes, the administrative aspect of the health care industry,” Maguire said. [“It] offers an enormous amount of potential for value creation.”