Three plays that should deliver solid profits, according to this $19 billion asset manager
Bryn Mawr Trust's Jeff Mills sees three plays that may not get you rich fast but should yield solid profits.
First, he would target a group that has reaped big gains since late last year: small caps.
"We still think it has some room, and I think a lot of it comes down to the stimulus that's still in the pipeline," the firm's chief investment officer told CNBC's "Trading Nation" on Wednesday.
He also sees small caps continuing to benefit from pent-up demand created by the coronavirus pandemic and spending power.
"There's $1.5 trillion more in consumer savings today than there was at this time last year," said Mills. "We think all of that in combination leads to better performance from areas like small caps."
The group has been a winning trade on Wall Street. The Russell 2000, which tracks small caps, has soared more than 42% over the past six months. The rally even gained momentum in November when Pfizer and Moderna reported encouraging results related to their respective Covid-19 vaccines.
Despite his bullish case, Mills won't rule out near-term turbulence.
"Inflows have been pretty aggressive into small cap ETFs, so I wouldn't be surprised if we saw a little bit of a pause here," said Mills, a CNBC contributor. "But that kind of momentum, that kind of 99th percentile momentum, tends to be a really good thing for returns looking out over the next 12 months."
His second top play: emerging markets.
"I do think the dollar continues to be supportive there. You have that negative correlation between EM stocks and the dollar," he said.
Mills, who has $18.9 billion in assets under management, is broadly optimistic on the group. The iShares MSCI Emerging Markets ETF is up more than 29% in the last six months.
However, his recommendation comes with a caveat.
"I would watch China a little bit. They're engineering a bit of a slowdown," he noted. "But I actually think that's a good thing to avoid that boom-bust cycle."
Mills considers his third play on real estate investment trusts as contrarian.
"It's a very uncrowded area that benefits from this kind of economic recovery that we're still forecasting," he said.
The Real Estate Select Sector SPDR Fund is down more than 9% over the past year. But over the past month, it's up about 5%.
Mills particularly likes specialty REITs.
"It's now 43% of REIT indexes. So that's things like communication towers, data centers, self-storage facilities — not necessarily the companies you would think of when thinking about REITs," he said.
Mills' investment timelines are typically at least a year. Even though his picks are unlikely to be fast money plays, he believes they should be embraced — particularly as individual investors become a greater force in the market.
"Inflows coming in from retail investors should be at the margin a support here," Mills said.