As investors debate whether to buy, hold or sell U.S. chipmaker Nvidia, one value investor is staying away. “Nvidia is a great company with really good short-term and medium-term prospects,” David Katz of U.S. investment advisory firm Matrix Asset Advisors told CNBC’s “Street Signs Asia” on Thursday. “Our problem with Nvidia is that we think the stock is fully valued.” Katz, who manages the Matrix Asset Advisors Value Fund and is also the firm’s CIO and president, expects the chipmaker to face competitive pressures over the next one to two years. “We think it’s a great company, but we don’t own the stock right now. We wouldn’t get into the stock. We think the stock could probably be lower in a year or two than it is today,” he said. “There are better ways to make money where the risk is much lower,” he added, naming several stocks he likes right now. Cisco Systems Technology giant Cisco Systems — which provides network and security services as well as data centers — is one of the names on Katz’s list. He said the company has been doing well recently but has had a “miserable” couple of years. Cisco’s revenue fell 13% in its fiscal third quarter, but earnings still beat expectations. Shares of the tech giant are down about 7% year to date and 7.8% over the past 12 months. Katz sees Cisco as a “second or third derivative of artificial intelligence,” with its networks becoming more in demand as internet traffic increases. He also expects the company to see an acceleration in business from its $28 billion acquisition of security software maker Splunk. “We expect the business to pick up speed for the first time in a long, long time, and at a price-to-earnings ratio of 12.5, there’s a lot of upside,” Katz said. “Right now, technology stocks are trading at 30 and 40 times earnings. The markets are at 22 times earnings. So you’re getting Cisco at a much, much better price.” According to FactSet data, 7 of 28 analysts covering the stock recommend buying or overweighting it, while 21 recommend holding it. Their average price target is $53.51, implying a potential upside of around 14%. Coffee chain Starbucks is another favorite of Katz, who says it offers an “addictive product (with) global power.” He said the stock trades at 22 times expected earnings and offers “a great business at a very good price.” Starbucks reported weaker-than-expected quarterly results and revenue in late April, citing falling sales and store traffic. Company executives had previously blamed sluggish sales on boycotts directed against the company’s stance on Israel. “The problems of the last quarter were self-inflicted by management errors. We believe they will get that under control,” Katz said, adding that he expects a management shakeup — possibly a new CEO. Starbucks shares have fallen 17.6% year-to-date and nearly 20% over the past 12 months. Of 35 analysts covering the stock, 14 rate it “buy” or “overweight,” according to FactSet data. The average price target of $88.50 gives it about 11.5% upside. ‘Cheap’ Financial Stocks Also on Katz’s radar are large regional financial firms such as Bank of New York Mellon and PNC Financial Services, which offer “more upside.” Large banks, he explained, “have a very understandable commercial real estate portfolio,” unlike smaller or midsize regional banks. “Big banks had a very good first quarter and very good prospects,” he said. “So these stocks are at a price-to-earnings ratio of 11. The market is at a price-to-earnings ratio of 21. So we think they’re cheap.” — CNBC’s Amelia Lucas contributed to this report.
