This five-star money manager shares three stock picks, including one betting on dying American malls

By Philip van Doorn

Thornburg fund manager highlights how Schwab has turned its fortunes around

Round One Entertainment is based in Japan but is steadily and profitably expanding its arcade network in the U.S.

Miguel Oleaga co-manages a $1.9 billion fund that holds only 41 stocks across developed economies. That makes for some concentrated and predictable holdings in large technology-oriented names, such as Samsung Electronics, Taiwan Semiconductor Manufacturing Co. and Alphabet, which owns Google. But Oleaga talked about three other stocks that he holds, two of which may be unfamiliar to U.S. investors.

Oleaga has been a manager of the Thornburg Global Opportunities Fund THOIX since 2020. The fund is rated five stars, the highest rating, within Morningstar's "Global Large-Stock Blend" category. The fund is about one-third invested in U.S. stocks and is benchmarked to the MSCI All Countries World Index. It has returned 11.4% this year, trailing the iShares MSCI ACWI exchange-traded fund ACWI, which has returned 14.4%. But for three years, the Thornburg fund has returned 93%, ahead of the 81.2% return for ACWI and ahead of the S&P 500's SPX three-year return of 86.7%.

The fund's fourth-largest holding is Charles Schwab (SCHW), which Oleaga said has been profiting nicely from the net interest income it generates from its brokerage clients' cash holdings. It is also well-positioned for the rising interest-rate environment, he told MarketWatch. This is because the "cash sorting" problem, which affected Schwab's bank subsidiary when short-term interest rates were higher than long-term rates, has subsided. Schwab's brokerage clients have become less likely to move their money out of their sweep accounts.

Analysts polled by FactSet expect Schwab to report deposits in its bank subsidiary as of Sept. 30 up 2.9% from a year earlier, a reversal from the 3% year-on-year decline a year earlier and the 13% slide from two years ago.

Schwab's stock has pulled back 14% from its 2026 peak in August. Oleaga said this decline reflected investors' concern over the threat of artificial intelligence to the broker's business model and said the reaction had been "overblown."

He also named two companies based outside the U.S. as good plays for long-term investors, each of which has a strong presence in the U.S. market.

The first is Techtronic Industries (HK:669) (TTNDY), which owns the Milwaukee and Ryobi tool brands. The Milwaukee brand is the stronger of the two, Oleaga said, providing "10% to 11% top-line growth" for sales, with a higher profit margin than the Ryobi business.

For investors who want a connection to the AI theme, Oleaga said about 15% of Techtronic's sales are currently coming through distributors to support construction and maintenance of data centers. But he added that this portion of the business "is growing about 45% a year, according to their most recent update." He also said that the company had a "durable competitive advantage" over Stanley Black & Decker (SWK), with a stronger balance sheet and cash flow. Techtronic has the ability to spend on research and development at twice the pace, relative to sales, of Stanley Black & Decker, he said.

The last stock Oleaga discussed was Round One (JP:4680) (RNDOF), which is based in Japan and operates family arcades and amusement centers. The company entered the U.S. market in 2018 with its first location in California. It has been expanding out from there, and now has 61 U.S. locations, many of which have been built in shopping malls.

Oleaga described the arcades as "a Walmart of family entertainment."

"Because they cater to the group and family entertainment dynamic, they will approach an AAA-class mall that has had an anchor store close down. They tend to bring in a lot of foot traffic," he said.

When asked about strong competition from other operators, such as Dave and Buster's Entertainment (PLAY), Oleaga said he favors Round One as a long-term investment because the company's "relatively conservative management team" wants "to be sure to make profits at each location."

He also said that an important difference between the companies is that Dave and Buster's is "a much more levered entity."

"The edge is the Japanese heritage. Consumers like going to arcades," he said. The business can be demanding, "in terms of renovation," he said. "Arcade machines tend to be renovated quickly. Old Machines in Japan can be brought over to the U.S."

The markets

U.S. stock futures (ES00) (NQ00) were mixed, with the S&P 500 SPX on track to reach a new record high. The bond market was closed for Columbus Day.

 
Key asset performance                                                 Last       5d     1m      YTD     1y 
S&P 500                                                               7,811.54   1.15%  2.02%   14.11%  19.21% 
Nasdaq Composite                                                      27,366.17  0.64%  3.92%   17.74%  23.25% 
10-year Treasury                                                      5.237      -7.50  24.90   106.50  120.10 
Gold                                                                  4,194.1    0.64%  -3.36%  -3.19%  1.55% 
Oil                                                                   93.06      4.21%  -8.67%  62.10%  56.25% 
Data: MarketWatch. Treasury yields change expressed in basis points. 

The buzz

President Donald Trump announced an energy ceasefire between Russia and Ukraine that neither side acknowledged, as a deal for Russia to supply the U.S. with diesel fuel commenced over the weekend.

Two attacks on Riyadh's airport killed 14 people and injured more than 300, according to Saudi Arabian authorities who blamed the Iranian-backed Houthis.

Third-quarter earnings season kicks off Tuesday when heavyweight banks, including JPMorgan Chase (JPM), report results.

Starbucks shares (SBUX) rose 1% as CNBC reported the coffee chain will not buy Chipotle (CMG), countering speculation from last week.

Amazon (AMZN) is in talks to acquire AI startup Decart in a deal that could be valued at around $7 billion, according to the Wall Street Journal, citing people familiar with the matter.

Mexican cartels are building luxury fleets by stealing U.S. rental cars.

The chart

The issue of bad breadth is mostly talked about in a stock-market context, but JPMorgan Asset Management's Michael Cembalest points out that only 20% of U.S. states are growing faster than the national average, almost the lowest figure since 1979. That's as the share of the economy from information-processing equipment and software is growing and AI is the only positive trend in construction spending. "That's why the decline in planned data centers is something to watch," says Cembalest.

Top tickers

Here were the most active stock-market ticker symbols as of 5 a.m. Eastern.

 
Ticker symbol  Security name 
NVDA           Nvidia 
GME            GameStop 
TSLA           Tesla 
AMZN           Amazon 
SPCX           SpaceX 
MU             Micron Technologies 
AMD            Advanced Micro Devices 
TSM            Taiwan Semiconductor Manufacturing Co. 
AAPL           Apple 
PLTR           Palantir Technologies 

-Philip van Doorn

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(END) Dow Jones Newswires

10-12-26 0913ET