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Buy stocks like Whirlpool — not NFTs, asset manager says.

• Henriksen pointed out in a research report last week that CryptoPunks NFTs, a collection of 10,000 distinct digital characters on the Ethereum blockchain, can fetch millions of dollars, yet a "not particularly cool" firm like Whirlpool struggles to attract eight times forward profits.
• Although many of these techniques focus on value stocks, Henriksen claims that there have been comparable inconsistencies in the wide category of growth equities.

Investors should search for stocks like Whirlpool and avoid assets like CryptoPunks NFTs, according to Jeff Henriksen, CEO and founder of Thorpe Abbotts Capital.

Despite the dominant market narratives around inflation, central bank tightening, supply chain problems, and Covid-19, the Virginia-based hedge fund manager said the U.S. economy remains robust, and the improvement in labour force participation is a "very bullish" long-term signal, he told CNBC's "Squawk Box Europe" on Monday.

"One of the things we've been concentrating on is second-order impacts, which a lot of people overlook." Investor reactions to this, and I believe investor reactions to other investors, are the second-order impacts, according to Henriksen.

"What we've seen is a big contradiction and divergence in valuations across the market," he says.

Henriksen pointed out in a research report last week that CryptoPunks NFTs, a collection of 10,000 distinct digital characters on the Ethereum blockchain, can fetch millions of dollars, yet a "not particularly cool" firm like Whirlpool struggles to attract eight times forward profits.

"If you look at some of these CryptoPunk NFTs that are going for millions of dollars on the one hand, which to me makes no sense," he said Monday, "and then you look at a company like Whirlpool, which is not a high-growth business, not super cool like some things, but it's growing mid-single digits revenue, mid-teens return on invested capital, very robust free cash flow generation, huge buyback in place."

"All signals point to them being able to drive cost pressures through, but it can't fetch 8x earnings," says the analyst.

The forward price-to-earnings ratio compares a company's current share price to its predicted future earnings. Whirlpool is a multinational home appliance company based in the United States.

"Headline values may appear high, and there may appear to be all these difficulties," Henriksen explained, "but when I check below the hood, we're discovering disparities, and we want to be long concepts like that, where we believe there is a huge mispricing."

Despite the fact that many of these methods focus on value stocks — those that trade at a discount to their financial performance — Henriksen claims that comparable inconsistencies have happened in the wide category of growth stocks.

Companies like Amazon, Facebook-parent Meta Platforms, Google-parent Alphabet, and Apple are examples of growth stocks, which are predicted to grow at a faster rate than the market average.

Henriksen's fund has been long on Amazon's shares for a while, but he claims its prospects aren't the same as Meta or Cathie Wood's ARK Innovation ETF.

"We believe that a substantial portion of the market still misunderstands the valuation there." "There's a significant gap between what's going on at Meta and what's going on at Amazon, which is being driven by [cloud computing subsidiary] AWS, which is this amazing business and their ability to pass expenses through with rising Prime," he said.

"Long-term valuation isn't really driven by cash flows generated in the next year or two; it's what's going to come in the next 30 years, so when you see something being discounted as if the world is ending for them and you do a rational analysis and say 'you know what, it's not,' I think those are the types of opportunities you want to find."

Amazon's stock is down 5.44 percent year to date, while Meta's stock is down 29.51 percent after missing earnings estimates and delivering dismal forward outlook.

"It may take a while for some of these ideas to pan out, but I believe they do in the end if you're in the appropriate settings where the chances are undervalued," Henriksen continued.