[SPEAKER_01]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.
[SPEAKER_01]: Independent Thinking, shared success.
[SPEAKER_01]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.
[SPEAKER_01]: Here is KPP Financial Portfolio Manager, Luke Guerrero,
[SPEAKER_02]: Good afternoon, fellow investors, and welcome back to another episode of Invest Talk.
[SPEAKER_02]: I'm your host, Lou Guerrero, and today is Tuesday, December 23rd, 2020.
[SPEAKER_02]: Five, it is, in fact, the second to last Tuesday of this year.
[SPEAKER_02]: Each and every show I do, each and every time I say it, I am shocked.
[SPEAKER_02]: and how quickly the year has moved.
[SPEAKER_02]: And from a trading perspective, I mean it's almost over at this point.
[SPEAKER_02]: You know, we got a couple short days coming up.
[SPEAKER_02]: You got liquidity which tends to be drier this time of year.
[SPEAKER_02]: And before you know it, it's going to be 2026.
[SPEAKER_02]: And just as people do within their lives, we at Investock, we at KPP Financial, decided to take a little time to reflect on what 2025 brought us.
[SPEAKER_02]: And in this reflection, we have the idea of creating an Investock holiday special, which dropped on our YouTube channel just last week.
[SPEAKER_02]: It was, in my opinion, a pretty fun end-of-year episode to record where Justin and I looked back at the biggest market themes of 2025 and highlighted some of the lessons that we learned and what we can take from a knowledge perspective into 2026.
[SPEAKER_02]: So that sounds interesting and I hope it does.
[SPEAKER_02]: Go check out the Invest Talk holiday special free on our YouTube.
[SPEAKER_02]: Just search Invest Talk with 2T's and while you're over there, don't forget to subscribe and turn the notifications on.
[SPEAKER_02]: Now, in just a bit, we'll talk about today's market performance and run down those show topics for you.
[SPEAKER_02]: But first, let's tackle this color question.
[SPEAKER_00]: Hello and best talk.
[SPEAKER_00]: I am calling with a question on the company Bristol Myers-Squib.
[SPEAKER_00]: The symbol is BMY.
[SPEAKER_00]: I'm looking to get your opinion and their thoughts on
[SPEAKER_00]: what a good entry point would be for the stock and we'll be listening to your podcast for the answer.
[SPEAKER_00]: Thank you.
[SPEAKER_02]: BMY Bristol Myers-Squib is a 113 and a half billion dollar market cat bio pharmaceutical company so they develop and market drugs in oncology in the cardiovascular
[SPEAKER_02]: It's got quite a bit of debt, about $55, $51 billion in debt outstanding.
[SPEAKER_02]: It's about a 4.61% dividend yield, which is in line with where it's been over the past couple years.
[SPEAKER_02]: But performance has been lacking, at least over the past few two weeks, and really, I mean, relative to the market, and it's industry for the better part of the past through years.
[SPEAKER_02]: I mean, in 2023, it's down 28.7% so it underperformed the market by 52, and it's
[SPEAKER_02]: Underperform the market last year by 13, it's down 4% year to date, underperforming its industry by 31.8%.
[SPEAKER_02]: And then spite of this, right over the past three months, it's had positive performance.
[SPEAKER_02]: 20.86% is what it's up over the past three months.
[SPEAKER_02]: So you saw a pretty huge pop recently on the back of, well, good news from its phase
[SPEAKER_02]: While also, you know, having a bit of relief compared to competitors in terms of the cost pressures that it's facing.
[SPEAKER_02]: But, from a technical standpoint, I mean, rather than strength has been pretty weak going back all the way to April.
[SPEAKER_02]: Right, profitability is supposed to be positive in 2025, but they had a bit of a rough year in 2024 return on equity negative 39%.
[SPEAKER_02]: I mean, look at the volatility here in earnings.
[SPEAKER_02]: At the same time, revenue growth really slowed down as well.
[SPEAKER_02]: You had an explosion coming into the pandemic.
[SPEAKER_02]: 2024, 48 billion in revenue, it's supposed to fall to 47.9 billion this upcoming year.
[SPEAKER_02]: And net income.
[SPEAKER_02]: However, supposed to be positive again, where again, it lost income, or rather had negative net income last year.
[SPEAKER_02]: So.
[SPEAKER_02]: What I see is a company that is struggling to find a direction that pops certainly on good news from it's Alzheimer's drug and that trial, but what is the catalyst going forward?
[SPEAKER_02]: Is there a catalyst in the short term?
[SPEAKER_02]: Is there a catalyst on the horizon?
[SPEAKER_02]: I'm a little hesitant for this company that has underperformed over the past three years that's struggling a bit to get real revenue growth sustainable revenue growth.
[SPEAKER_02]: to pop in the short to medium term because the industry at large is having issues with cost pressures and certainly you're seeing this volatility in this company that these need to believe now might not be a good time.
[SPEAKER_02]: So for now, I'm going to keep it on my watchlist that is Bristol Myers-Squib, Tiger B and Y.
[SPEAKER_02]: Well, we've got a lot of ground to cover in the next 45 minutes or so, but it all starts off with my main focus point, which concerns this topic, pre-positioning for the January effect.
[SPEAKER_02]: Judy, you're in tax selling.
[SPEAKER_02]: Smoke App stocks in the storeically outperformed in January.
[SPEAKER_02]: We'll explain why the January effect happens in a high-light specific Smoke ABTFs.
[SPEAKER_02]: Investors might want to consider buying before the calendar flips.
[SPEAKER_02]: Also, a couple more important stories, including one on mortgage rates, and how in spite of them falling, I wonder, still are not selling.
[SPEAKER_02]: We also will touch on Wall Street's newest way to make some money off of the tariffs, so that is a betting on the tariff refunds.
[SPEAKER_02]: So that's an interesting story we'll bring to you today.
[SPEAKER_02]: As well as, talking about gold and silver, they hit fresh record highs on geopolitical tensions.
[SPEAKER_02]: How might that shape up in 2026?
[SPEAKER_02]: We also have some questions that came in from the comments section of the Invest talking YouTube channel.
[SPEAKER_02]: There's also some voicement calls ready to play, including one on stock screeners, and another on American Airlines group, ticker, A, A, L. As always, we welcome your finance and investment questions now or any time throughout the show.
[SPEAKER_02]: But we are going into our first break.
[SPEAKER_02]: If you're listening live, via our stream or possibly on a M1220 in the Bay Area, pick up that phone and dial 8899 chart to get through to me live.
[SPEAKER_02]: While we're waiting, we're headed into a break, but when we come back, we'll talk about today's market activity.
[SPEAKER_08]: For the holidays, KPP Financial is excited to introduce a high-value limited time offer.
[SPEAKER_08]: The holiday estate bundle.
[SPEAKER_08]: It's specifically designed to help new households quickly establish a solid foundation for their financial and personal legacies before the year ends.
[SPEAKER_08]: When you begin a financial relationship with KPP Financial and complete your onboarding by December 31, 2025, you'll receive essential estate planning documents as an added benefit and it's all powered by our trusted partner, Truston Will.
[SPEAKER_08]: Learn more about the holiday estate bundle now at investtalk.com and while you're there, fill out a portfolio review to get started.
[SPEAKER_08]: And now the phone lines are open and waiting for your finance and investment questions 88899 chart.
[SPEAKER_08]: 2025 is almost out the door, but you've still got finance and investment questions and just in
[SPEAKER_02]: 88899 chart is the number if you want to get your question in before the holiday break, but when we start kicking things off by talking about the markets, today US stocks closed mostly higher, that was up 16 basis points S&P 548, Nasdaq up 57 Russell 2000 though finishing down the opposite way down 69 basis points on the day.
[SPEAKER_02]: In fact, the SMP log, a fresh record close, but you're seeing breadth was a bit negative.
[SPEAKER_02]: The Equal8SMP lag, the cap-weighted version by more than 60 basis points.
[SPEAKER_02]: Breaking to down, big tech was mostly higher in video one of the best performers amongst that group, while semi-sindustrial metals, exchanges, and media, faired well as well.
[SPEAKER_02]: Under performers included transports, chemicals, restaurants, food and beverage, homebuilders, pharma, and staple retailers.
[SPEAKER_02]: Treasuries have been mixed, due to the curve flattening with yields up about two to three basis points primarily focused on the front end.
[SPEAKER_02]: Dollar index was down at 30 basis points, and gold finished up 80 basis points, hitting a fresh record high above that $4,500 and outs level, crude oil, ended up 60 basis points, reversing some of that earlier decline that we saw after the latest headlines out of it then as well.
[SPEAKER_02]: Overall, though, I mean, I mentioned it at the top of the show this time of year tends to be quiet.
[SPEAKER_02]: So you saw a rather quiet session with low volume ahead of tomorrow, where
[SPEAKER_02]: On Christmas Eve, there's always an early close so the market does close at about 1 p.m. Easter.
[SPEAKER_02]: Today's economic data offered a bit of a mixed macro takeaway.
[SPEAKER_02]: You had stronger hard data with GDP and ADP private payrolls, but it also had weaker soft data.
[SPEAKER_02]: You had consumer confidence in the Richmond Fed Index, showing a bit of softness.
[SPEAKER_02]: On net.
[SPEAKER_02]: What did it do?
[SPEAKER_02]: Well, they did push the Fed rate cut expectations in a bit of a hawkish direction.
[SPEAKER_02]: The market's now pricing in just 41 basis points of rate cuts through year and 2026 down over 10 basis points in the past two sessions.
[SPEAKER_02]: The Santa Claus rally positive seasonality into year-end, probably some of the biggest key upside catalysts.
[SPEAKER_02]: Well, from a tax standpoint, again, you have the one big beautiful bill coming into effect next year.
[SPEAKER_02]: You have tax refunds, you have potential stimulus.
[SPEAKER_02]: All of this really driving the market considerably higher.
[SPEAKER_02]: A little bit south Venezuela tensions remain in focus, the media report, indicating more US special ops aircraft and troops have moved into the Caribbean this week.
[SPEAKER_02]: So certainly, any movement there could shape oil markets and move broadly into other sectors, diving a little bit into the data, because it was a busy morning, so we won't mention everything.
[SPEAKER_02]: But ADP weekly private payrolls, which showed a four week average of 111, sorry, 11.5,000 down from last week, 17.5,000.
[SPEAKER_02]: The big story first read of Q3 GDP was 4.3% while the head of the consensus of 3%.
[SPEAKER_02]: GDP price index up 3.7% ahead of the 2.9% consensus while the core PCE prices number was about 2.9% well in line.
[SPEAKER_02]: Elsewhere December consumer confidence missed to the prior years was revised higher and the labor market differential narrowed a bit of the one year inflation expectations fell month over month.
[SPEAKER_02]: Not much on tap for the rest of the week, it is a holiday shorten week, and with volume solo, not much really movement from this data, regardless.
[SPEAKER_02]: Alright, let's tackle our first YouTube question of the day, and it says, I'm confused as to what to enter an investable asset that says, I enjoy listening to your show.
[SPEAKER_02]: was thinking about a portfolio review, but confused as to what to enter an investable assets.
[SPEAKER_02]: Most of my assets are already invested, mutual funds index funds, reeds and stocks.
[SPEAKER_02]: Cash in my money market is what I would call investable, but this is a small part of my portfolio.
[SPEAKER_02]: So investable assets includes really things that you are, invested in real estate assets, stocks, bonds, money market funds,
[SPEAKER_02]: Treasury bills, anything that is an investment is what we're talking about when we're saying investible assets.
[SPEAKER_02]: You're obviously for this purpose.
[SPEAKER_02]: If you're looking to do a portfolio review in your curious, what do I put in here?
[SPEAKER_02]: Well, I mean, from our perspective, illiquid things like real estate stuff like that, you can talk to us about that.
[SPEAKER_02]: But what we're really talking about is your brokerage accounts, your IRAs, your Roths, 401Ks, all this information that really is what you should be judging when you think about holistically managing a portfolio.
[SPEAKER_02]: going off on a little bit of a tangent here.
[SPEAKER_02]: I mean, we oftentimes have clients say, well, you know, I think I'm taking on too much risk here.
[SPEAKER_02]: And going through their suitability for risk, I have to remind them that when you think about your portfolio, you don't think about things in isolation.
[SPEAKER_02]: You don't think about, okay, this is the real estate exposure I want, then completely ignore it when you're thinking about where to allocate your funds and other aspects of your portfolio.
[SPEAKER_02]: It has to be a holistic approach.
[SPEAKER_02]: Your total risk exposure is predicated and based upon all of the assets you're invested in across everything.
[SPEAKER_02]: Most people tend to be far more conservative.
[SPEAKER_02]: And therefore, in case, especially relative to their brokerage accounts, number one, just because people tend to go and target at funds, which inherently are more conservative than what they're going to do when they invest in individual stocks or ETFs.
[SPEAKER_02]: but also because the options are lower within their 401k.
[SPEAKER_02]: And so if you save yourself, you know, I have a risk tolerance that wants to put me in mid-caps, some international names, but I feel like over here I'm a little bit too invested in there.
[SPEAKER_02]: You have to remind yourself, well, in my 401k, maybe I'm 30% in bonds.
[SPEAKER_02]: It is, this question was obviously directed about our specific portfolio reviews, but,
[SPEAKER_02]: I think it's relevant to everybody out there.
[SPEAKER_02]: It helps you.
[SPEAKER_02]: It should help you frame an idea of how you should be thinking about your portfolio and managing all of those assets together.
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: Actually, that was from our YouTube channel.
[SPEAKER_02]: Hopefully they checked out our holiday special.
[SPEAKER_02]: Well guys and gals.
[SPEAKER_02]: We don't have much time left in 2025.
[SPEAKER_02]: We don't have more, many shows left in 2025.
[SPEAKER_02]: But while we're still here, we're gonna continue to work on that singular objective to help make you a better and more informed investor.
[SPEAKER_02]: That being said, we are headed into another break.
[SPEAKER_02]: My main focus point is still coming up.
[SPEAKER_02]: It's about the January effect.
[SPEAKER_02]: What it is, what it means, isn't even real.
[SPEAKER_02]: And most importantly, we'll be answering more of your finance and investment questions.
[SPEAKER_02]: Here on Invest Top.
[SPEAKER_08]: Every investor is working to build a secure financial future.
[SPEAKER_08]: How they get there and when they get there, that depends on many factors.
[SPEAKER_08]: The more you learn about how the market works, the better your chances for success.
[SPEAKER_08]: So don't forget to call, in Vestalk, 888-99 chart.
[SPEAKER_02]: Every January, the same question comes back to Wall Street.
[SPEAKER_02]: If there's something special about the first few weeks of the year, that gives stocks a built-in boost.
[SPEAKER_02]: That idea, known as the January effect, suggests stocks tend to rise early in the year after being sold down in December.
[SPEAKER_02]: Now the traditional explanation centers on tax loss harvest, where investors, sell losing positions before year end and buy them back once the calendar flips.
[SPEAKER_02]: Another long held belief is that year and bonuses and other allocation changes hit the market in January, creating a burst of broad buying pressure.
[SPEAKER_02]: on paper, sounds neat, sounds logical.
[SPEAKER_02]: Which is exactly why it's been repeated for decades, but when you actually look at the data, the story becomes a bit less convincing.
[SPEAKER_02]: So, thoroughly 90s, January has produced gains only slightly more than a half the time, barely better than a coin flip.
[SPEAKER_02]: Even during the powerful bull market that followed 2009, January performance was evenly split between gains and losses.
[SPEAKER_02]: That alone challenges the idea that January some kind of dependable launch pad for stocks.
[SPEAKER_02]: What has shown up more consistently is a short-lived effect in a smaller stocks, particularly in the first one to two weeks of January.
[SPEAKER_02]: Small cap stocks tend to be inherently volatile.
[SPEAKER_02]: They are less liquid and more heavily impacted by year-end selling pressures.
[SPEAKER_02]: So when that selling pressure disappears after December 31st, prices can rebound quickly, even without any fundamental changes.
[SPEAKER_02]: In other words, it's not that January creates strength, but that December temporarily suppresses prices.
[SPEAKER_02]: Small caps also attract investors looking to rebalance portfolios earlier in the year, especially those seeking higher risk or catcher performance.
[SPEAKER_02]: That helps explain why any January strength is usually front-loaded and tends to fade pretty quickly.
[SPEAKER_02]: This also answers why the effect has weakened over time.
[SPEAKER_02]: Markets are far more efficient today with algorithmic trading and quantitative models designed to exploit and neutralize predictable patterns.
[SPEAKER_02]: If a seasonal edge were truly reliable, it would be what is called arbitrage to weigh almost immediately.
[SPEAKER_02]: That's why many professionals now view the January effect as market folklore and not really a usable investment strategy.
[SPEAKER_02]: Psychology still plays a role, but it's inconsistent and most importantly hard to trade with confidence.
[SPEAKER_02]: Investors often start the year with optimism, fresh goals, a willingness to take risk, but sentiment alone doesn't guarantee returns.
[SPEAKER_02]: This is especially true in an environment dominated by passive flows, index rebalancing, and automated execution.
[SPEAKER_02]: So when January rallies do occur, well, they tend to reflect broader momentum already in place rather than a calendar-driven catalyst.
[SPEAKER_02]: Strong December's often lead to stronger January's, not because of tax effects, but because bullish trends tend to persist, at least in the short-to-medium term.
[SPEAKER_02]: For investors wondering whether the January effect still works, the honest answer is that it's not reliable enough to anchor investment decisions.
[SPEAKER_02]: Now that doesn't mean that January can't be strong.
[SPEAKER_02]: But it does mean that the reason isn't because it is the month of January.
[SPEAKER_02]: In SmallCap value, any early year bounce is usually tied to liquidity normalization and position resets, not a repeatable anomaly.
[SPEAKER_02]: ETFs that focus on SmallCap value can capture that exposure, but they also carry higher volatility and risk year round.
[SPEAKER_02]: Most importantly, when you're talking about things that have happened like this, the key is not to chase.
[SPEAKER_02]: Chasing a short-term seasonal trade without understanding the broader market context,
[SPEAKER_02]: Well, it often leads to disappointment.
[SPEAKER_02]: This goes back to what has been said on this program, each and every day.
[SPEAKER_02]: Know what you want.
[SPEAKER_02]: Understand the dynamics that are driving the assets that you're invested in.
[SPEAKER_02]: Have a reasonable, sensible story for why you're invested in those stocks.
[SPEAKER_02]: Oftentimes, we get people calling in about meme stocks.
[SPEAKER_02]: Things they have just heard about.
[SPEAKER_02]: Without understanding the underlying fundamentals, the products, the business, the sector, what is really driving the prices?
[SPEAKER_02]: The most durable lesson, or really just the more durable lesson from the January effect, isn't about timing.
[SPEAKER_02]: It's about discipline.
[SPEAKER_02]: The market rewards consistent strategy.
[SPEAKER_02]: It rewards risk awareness and it rewards patients far more than it rewards calendar-based superstition.
[SPEAKER_02]: So, if you say to yourself, does the January effect sound too good to be true?
[SPEAKER_02]: Can I buy stocks on the first day and guarantee myself higher-expected returns?
[SPEAKER_02]: The answer is, and something sounds too good to be true?
[SPEAKER_02]: Probably is.
[SPEAKER_02]: Well, guys, I don't know about you, but I am excited for 20, 20, six.
[SPEAKER_02]: And we have a lot planned for this show for this program, for the content that we are delivering to you guys each and every day.
[SPEAKER_02]: But I wanna remind you, we cannot grow this family without your help.
[SPEAKER_02]: So, if you enjoy the show, please head over to iTunes, head over to Spotify, leave us a regular review, and don't forget to tell at least one person.
[SPEAKER_02]: But their New Year's resolution for 2026
[SPEAKER_02]: For the next invest talk, we'll be playing the 20-25 holiday special.
[SPEAKER_02]: Justin and I looked back at the year that was 25, and look ahead to 20-26.
[SPEAKER_02]: We talked about the question of the year, and we had a couple of funny stories, at least.
[SPEAKER_02]: I think we're funny.
[SPEAKER_02]: The invest talk holiday special will be airing for all of you tomorrow.
[SPEAKER_02]: That being said, I'm Luke Guerrero and ready to take your calls now at 80-899 chart.
[SPEAKER_08]: The new year is almost here, and it's a safe bet to assume you might have, finance and investment questions, for Justin Klein and Luke Guerrero.
[SPEAKER_08]: Especially if you are wondering about potential tax implications.
[SPEAKER_08]: So what are you waiting for?
[SPEAKER_08]: Call in Vestock, 888-99, chart.
[SPEAKER_06]: Hello, my name is Daniel, and I am Colin from Maryland.
[SPEAKER_06]: And I am calling in regards to American Airlines, Pickers symbol 880.
[SPEAKER_06]: And I'm calling to get your perspective on it.
[SPEAKER_06]: This is a stock that I've had for several years now.
[SPEAKER_06]: I have purchased it at different price points to the point where my average cost is now just under $15.
[SPEAKER_06]: And now that the stock is over $16.
[SPEAKER_06]: I'm just wondering if this would be a time to sell it.
[SPEAKER_06]: and invest that money elsewhere or with this be a stock that would be worth holding on to if there's any possible future potential for it.
[SPEAKER_06]: This stock makes about 8% of my total up or full deal.
[SPEAKER_06]: Some just curious, I know I've heard in the past that you guys are not big fans of airlines or travel in general.
[SPEAKER_06]: But I just wanted to get your opinion on it.
[SPEAKER_06]: Thank you very much.
[SPEAKER_06]: I look forward to the answer on the podcast.
[SPEAKER_02]: So it's an easy one.
[SPEAKER_02]: So now it's even to why.
[SPEAKER_02]: Just to give you a little bit more knowledge here.
[SPEAKER_02]: But there's a reason why we don't like airline stocks.
[SPEAKER_02]: And it's not that we don't like travel stocks.
[SPEAKER_02]: I mean, there are some hotel companies that we like.
[SPEAKER_02]: There are some transportation companies that we like.
[SPEAKER_02]: But airlines are a terrible business.
[SPEAKER_02]: They're incredibly expensive.
[SPEAKER_02]: Their impulse costs are incredibly volatile because jet fuel is one of American Airlines's largest costs, one of any airlines' largest costs.
[SPEAKER_02]: And so when oil prices fall, there's a bit of margin relief that's positive for the stock when oil prices rise immediate pressure on earning expectations.
[SPEAKER_02]: It is incredibly cyclical.
[SPEAKER_02]: It is dependent upon people having disposable income to travel.
[SPEAKER_02]: and there can be headwinds that come out of nowhere that just make them very difficult businesses.
[SPEAKER_02]: Now, American Airlines specifically, it's $11 billion market cap company.
[SPEAKER_02]: It's got $36 billion in debt.
[SPEAKER_02]: It's interest coverage ratio, which is the amount of ebit earnings before interest in taxes.
[SPEAKER_02]: It has relative to interest expense.
[SPEAKER_02]: It's 0.37.
[SPEAKER_02]: They're underwater relative to their interest expense.
[SPEAKER_02]: It has been a terrible performer going back to 2019.
[SPEAKER_02]: Absolutely horrendous.
[SPEAKER_02]: It's down 10% this year.
[SPEAKER_02]: It is up over the past three months.
[SPEAKER_02]: There's a huge turnaround after management commentary on demand, on costs, on margins.
[SPEAKER_02]: But they're bad businesses.
[SPEAKER_02]: You have a finite amount of capital at 8%.
[SPEAKER_02]: 8% is a lot for any individual name and you're portfolio anyway, especially one as volatile as American Airlines.
[SPEAKER_02]: Now you're at a game, I'd put my money elsewhere.
[SPEAKER_02]: That's American Airlines Group, ticker A, A, L. Looks like we got our first live call, Jake from Kansas City, how can we help you?
[SPEAKER_07]: Well, I was calling about field dynamics.
[SPEAKER_07]: I've heard you mentioned a couple of times on the show.
[SPEAKER_07]: Kind of wanted to touch base on them.
[SPEAKER_07]: It had a pretty good run lately.
[SPEAKER_07]: Is it played out?
[SPEAKER_07]: Is it time to get in?
[SPEAKER_07]: What are we thinking on this one?
[SPEAKER_02]: Yeah, so steel dynamics is a steel and metals company.
[SPEAKER_02]: So they're a vertically integrated producer.
[SPEAKER_02]: They have steel mills.
[SPEAKER_02]: They have metals recycling.
[SPEAKER_02]: They also have steel fabrication that is more of their construction focus.
[SPEAKER_02]: Over the past three months, pretty strong performance.
[SPEAKER_02]: Up 29.64% up 55.34% year to date, up 53% over the past 52 weeks.
[SPEAKER_02]: Now, at the same time, you're seeing revenue be all over the place where they had huge growth coming out of the pandemic, but it's tapered off a bit ever since that, but, you know, net income has been volatile as well.
[SPEAKER_02]: And this is something that tends to happen in a cyclical name such as this, right?
[SPEAKER_02]: It tends to happen in a cyclical industry overall.
[SPEAKER_02]: But I think that skill dynamics, although it's a solid company, obviously, it's a solid company.
[SPEAKER_02]: It's trading at about slightly below.
[SPEAKER_02]: It's high over the past five years, price to forward looking earnings.
[SPEAKER_02]: Net income again hasn't been growing.
[SPEAKER_02]: Revenue hasn't been growing.
[SPEAKER_02]: It's your turn on equity is only about 13.5% this year.
[SPEAKER_02]: And there's just a lot that is going on
[SPEAKER_02]: The industry.
[SPEAKER_02]: Now, this company specifically, they've had consistent dividend growth, which is great.
[SPEAKER_02]: They've had a aggressive share buybacks, which is floated the price of this company as well.
[SPEAKER_02]: But this is a typical cyclical stock.
[SPEAKER_02]: It outperforms when growth expectations rise.
[SPEAKER_02]: It sells off very quickly in times of an economic slowdown.
[SPEAKER_02]: Then you add in, right?
[SPEAKER_02]: You have a global over supply fears, especially from China that can pressure US steel stocks.
[SPEAKER_02]: How much of an effect are tariffs going to have there?
[SPEAKER_02]: is going to bring a decision on whether or not the tariffs are legal in the first place.
[SPEAKER_02]: And so to me, it's a little bit run up here.
[SPEAKER_02]: So although it is probably one of the better steel companies, given its run up, given its valuation concerns, for now I would say keep it on your watch list.
[SPEAKER_02]: That is steel dynamics, ticker, STLD, thanks to the call.
[SPEAKER_02]: All right.
[SPEAKER_02]: What's to talk about now?
[SPEAKER_02]: Mortgage rates have, well, they've fallen, right, to their lowest levels in about a year.
[SPEAKER_02]: But the housing market remains stuck because millions of homeowners, they're walked into those sweet cheap loans that understandably they don't wanna give up.
[SPEAKER_02]: Roughly 30 million households.
[SPEAKER_02]: or more than half of primary mortgage holders.
[SPEAKER_02]: Have rates at or below 4%.
[SPEAKER_02]: Thanks to buying or refinancing during the ultra low rate period from 2022 about 2021.
[SPEAKER_02]: So even with these recent declines, stage mortgage rates are roughly double what those owners pay, making it move financially unattractive for anyone who does not absolutely have to relocate.
[SPEAKER_02]: This so-called lock-in effect has essentially froze in housing tone, turned over for three years, sharply limiting the number of homes for sale, and keeping inventories well below historical norms.
[SPEAKER_02]: Economists say a surge of new buyers is unlikely, while mortgage rates remain above 6% because higher monthly payments overwhelm any benefit from lower rates at the margins.
[SPEAKER_02]: Elevated home prices, while they're adding another hurdle, and rising costs for insurance and property taxes and maintenance have further eroded affordability for those would be movers.
[SPEAKER_02]: So, it's understandable that forecasters they don't really expect any meaningful relief suit with the mortgage bankers association projecting the 30-year fixed rate will still average about 6.4% in 2026, even after the recent rate cuts by the Fed.
[SPEAKER_02]: Policymakers have to signal the pause.
[SPEAKER_02]: limiting how much mortgage rates can fall in the near term, and so the map is pretty stark here.
[SPEAKER_02]: Right, buying a comparable home today can mean paying more than 70% higher monthly payment, 70% than the typical mortgage from just a few years ago.
[SPEAKER_02]: Some buyers understandably are cautiously re-entering the market as rates drive lower,
[SPEAKER_02]: But prices are softening just a bit.
[SPEAKER_02]: They're softening more asymmetrically, parts of the south, parts of the west where inventories have steadily begun to rise a bit.
[SPEAKER_02]: And an existing home sales are therefore increasing modestly in recent months.
[SPEAKER_02]: And mortgage purchase applications are running ahead of last year, which in a way suggests conditions are improving but only at the margins.
[SPEAKER_02]: Still, economists say broad affordability gains may take years, leaving most discretionary sellers on the sidelines and keeping housing actively subdued until incomes catch up or rates fall much further.
[SPEAKER_02]: Let's keep moving and drop in another listener question now.
[SPEAKER_03]: Just wondering, if you guys use any stock screeners, and if so, what kind of filters do you guys have on there to filter out the companies that you're not interested in?
[SPEAKER_03]: Thanks, have
[SPEAKER_02]: So we have our own internal tools to do stock screening using data that we get from various data sources, facts that being one of them.
[SPEAKER_02]: And we're looking at much stuff to be honest.
[SPEAKER_02]: We're looking at various profitability metrics.
[SPEAKER_02]: We're looking at various relative value metrics, really at momentum metrics, other technical metrics.
[SPEAKER_02]: We're looking at size metrics.
[SPEAKER_02]: We're looking at future forecasts from various data sources.
[SPEAKER_02]: It is an incredibly complex thing.
[SPEAKER_02]: to try and find relevant data, accurate data, in order to help shape your understanding of not only individual companies, but what the market is saying about those companies.
[SPEAKER_02]: Right, each and every day, the market is making decisions.
[SPEAKER_02]: The market being the collective of all peoples by and sell decisions,
[SPEAKER_02]: And it tells you something.
[SPEAKER_02]: Price discovery tells you something about a company just as much as it's generated revenue and its profitability and its future forecasts.
[SPEAKER_02]: And so crunching all this data in a way that we can utilize it, necessitate it as creating internal tools to help us sort what is a massive, massive universe.
[SPEAKER_02]: So,
[SPEAKER_02]: To answer your question, yes, we do screeners.
[SPEAKER_02]: We use screeners, but nothing is publicly available.
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: All right, let's take a look at another question.
[SPEAKER_02]: This one, I think, about a ticker, we got a question about recently.
[SPEAKER_02]: And it is X, Y, L, that is Zylum Inc.
[SPEAKER_02]: So as Hay and Vest talk, I was intrigued by Justin's analysis of water pipeline needs the United States.
[SPEAKER_02]: What do you think of Zylum?
[SPEAKER_02]: They have been consistently growing and have a high PE ratio.
[SPEAKER_02]: What would be a good level to pick this up?
[SPEAKER_02]: Well, Justin talked about it.
[SPEAKER_02]: I talked about it.
[SPEAKER_02]: You know, there is a huge need, huge need for water infrastructure in the United States for various reasons, for many reasons.
[SPEAKER_02]: And this company, what they do is they build pump treatment systems, they have internal analytics, they have smart metering for water and wastewater utilities,
[SPEAKER_02]: And they do this for both commercial, industrial, agricultural, and municipal utilities.
[SPEAKER_02]: About 57% of its revenue comes from the United States, 20% from Western Europe, 15% from the emerging market.
[SPEAKER_02]: So it's pretty well diversified.
[SPEAKER_02]: It's at a solid year of 19.48% year to date up 17.96% over the past 52 weeks, while struggling a little bit over the past three months down about 3.14%.
[SPEAKER_02]: Revenue growth for this type of company has been stellar 10.3% on an annualized basis.
[SPEAKER_02]: And honestly, that's going back six years, even stronger if you just look at it from 2022 from 5.5 billion to about 9 billion this upcoming year.
[SPEAKER_02]: That income is grown at 17.3% on an annualized basis.
[SPEAKER_02]: And what it's really happened here is it's benefited greatly.
[SPEAKER_02]: As of a lot of companies within this industry, from the aging water systems, not just in the United States, but globally, as well.
[SPEAKER_02]: There's been increased demand for lead detection because of how dated some of these things are.
[SPEAKER_02]: For smart metering because of how dated they are.
[SPEAKER_02]: For network analytics and utilizing AI in order to improve these systems.
[SPEAKER_02]: They have a pretty strong order.
[SPEAKER_02]: Back long, they have multi-year municipal contracts, right?
[SPEAKER_02]: That is a big benefit for companies that operate with cities.
[SPEAKER_02]: Those municipal contracts is they tend to be long dated.
[SPEAKER_02]: And really, you know, you have flood control being an issue in parts of the country, you have droughts being an issue in parts of the country, but this is cyclical, right?
[SPEAKER_02]: It's going to be less volatile than construction or heavy industrial stocks because of those built in contracts, but it is cyclical.
[SPEAKER_02]: It is going to be a bit more resilient, but it is cyclical.
[SPEAKER_02]: And so these tailwens are a big benefit here.
[SPEAKER_02]: But, you started to see a bit of a break down from a technical basis.
[SPEAKER_02]: It is still trading pretty expensive 25 times price to forward it, forward looking price to earnings.
[SPEAKER_02]: Sorry, it's tough to talk sometimes.
[SPEAKER_02]: It is pretty expensive, at 26.7 times price to cash, low 3.8 times price to sales.
[SPEAKER_02]: And so with this breakdown that started, you know, probably about a month or so ago, I'm a little hesitant to enter a position right now.
[SPEAKER_02]: I'll keep it on my watch list.
[SPEAKER_02]: Because I certainly think it's a good company and benefits from a lot of trends, but very interested to see what happens in the new year.
[SPEAKER_02]: That is, Zylamink, ticker, X, Y, L. All righty, we got plenty of time.
[SPEAKER_02]: So why don't we tackle another listener question now?
[SPEAKER_04]: Hi, I'm Justin, I'm Milton, good evening.
[SPEAKER_04]: We've been paid from Charlotte, not yet on now.
[SPEAKER_04]: I have a question about the bit of symbol, Henry, Charlie, Alpa.
[SPEAKER_04]: at CA Health Care.
[SPEAKER_04]: I do not have this in my portfolio, but I would like to see the fundamental such drone and what's your take on this one.
[SPEAKER_04]: I'll listen to you on the live so thank you so much.
[SPEAKER_02]: Bye bye.
[SPEAKER_02]: HCA Health Care is a health care services company.
[SPEAKER_02]: So they focus on acute care for hospitals, outpatient surgery centers and emergency rooms and clinics.
[SPEAKER_02]: And
[SPEAKER_02]: They've done a really good job because they are heavily weighted towards some of the fastest growing areas, Texas, Florida, Tennessee.
[SPEAKER_02]: There have been some pretty solid core drivers, inpatient admissions, emergency room visits, outpatient procedures.
[SPEAKER_02]: And so you see a revenue really gross significantly since 2022, from 60 billion projected to be 75 billion this year.
[SPEAKER_02]: That income growing at 10.4%.
[SPEAKER_02]: on an annualized basis, and that's reflected in the stock price, right up 57.93% year to date, up 15.77% over the past three months, up 56.18% over the past 52 weeks.
[SPEAKER_02]: That is a really, really strong performance.
[SPEAKER_02]: Now, it's trading at the upper end of its range over the past five years from evaluation perspective, 1.5 times sales, 15.9 times price, sorry, price to forward looking earnings.
[SPEAKER_02]: It doesn't have a bit of debt, $40 billion in debt, but it is $110 billion market cap company.
[SPEAKER_02]: Now, you know, there are
[SPEAKER_02]: Some issues, right, the rising cost of health care, rising labor costs is certainly an issue, reimbursement rates for Medicare and insurers.
[SPEAKER_02]: When effectively, you know, I say this all the time, offline to just, and I say there are really two industries where the government is incentivized to make it less profitable.
[SPEAKER_02]: One is health care, because everybody understands that rising health care costs is one of the primary sources of inflation for consumers.
[SPEAKER_02]: The other is energy.
[SPEAKER_02]: Right?
[SPEAKER_02]: People complain when they pay too much of the pump that government is incentivized for political reasons to try and drive those costs down.
[SPEAKER_02]: But, you know, this is certainly a company that has these macro-secular tailwinds.
[SPEAKER_02]: You have an aging population.
[SPEAKER_02]: You have population migration to those high-growth states to which it is exposed.
[SPEAKER_02]: But it's run up a bit, obviously.
[SPEAKER_02]: I mean, you can see from this
[SPEAKER_02]: Are people trying to delay selling gains before the end of the year here?
[SPEAKER_02]: Maybe.
[SPEAKER_02]: For now, I'd keep it on my watch list a little bit expensive relative to where it's been.
[SPEAKER_02]: Still a great company in a great location.
[SPEAKER_02]: There's HCA health care ink, to your HCA day.
[SPEAKER_02]: Well, we're headed to New Break, our final break.
[SPEAKER_02]: So if you want to talk to me live, you've got to call in now.
[SPEAKER_02]: Our goal remains the same.
[SPEAKER_02]: Help you achieve your financial freedom.
[SPEAKER_02]: Our work will continue after this break, so get those questions in now at 80 to 99 chart.
[SPEAKER_08]: In the early days, in Vestock was Jerry Klein and Steve Peasley.
[SPEAKER_08]: Now the torch has been passed, and a new generation of hosts is on the job, Justin Klein and Luke Guerrero.
[SPEAKER_08]: So when you've got finance and investment questions, don't forget to call in Vestock, 888-99, chart.
[SPEAKER_05]: And you can just build and build up here, calling about PayPal Holdings, PYPL.
[SPEAKER_05]: So you can really be in for a little bit in the upper of 50s as of right now.
[SPEAKER_05]: And I'm really starting to like it.
[SPEAKER_05]: I wanted to get your thoughts off.
[SPEAKER_05]: This is a very good entry point.
[SPEAKER_05]: The revenue seems so strong.
[SPEAKER_05]: So much, 100% sure as to why it's being off so much, but I've got to get your thoughts
[SPEAKER_05]: But what you guys do is what I'm looking forward to hearing your answer on the show.
[SPEAKER_05]: Take it.
[SPEAKER_02]: Paypal.
[SPEAKER_02]: Take your PYPL.
[SPEAKER_02]: It's a fintech digital payments company, so think online and mobile payments between consumers, businesses, and each other.
[SPEAKER_02]: Now, the chart tells one story, right?
[SPEAKER_02]: Down 30.39% out year to date, down 31% over the past 52 weeks, really week performance over the past five years with the exception of
[SPEAKER_02]: But I mean, the company is doing a bit better, right?
[SPEAKER_02]: There's margins are certainly starting to improve or turn on equity, projected to be at 24.8%.
[SPEAKER_02]: Transaction volume, total payment volume is growing, number of active accounts.
[SPEAKER_02]: is growing and so what's really happening here?
[SPEAKER_02]: Well what is PayPal hasn't necessarily done a good job of actively monetizing Venmo?
[SPEAKER_02]: They're pushing their credit cards, they're pushing crypto within Venmo, but hasn't really done a good job.
[SPEAKER_02]: And so at a time when online e-commerce is doing really well, why is PayPal not?
[SPEAKER_02]: Frankly,
[SPEAKER_02]: You got a lot of competitors, man.
[SPEAKER_02]: You got Apple Pay, a Google Pay, a block.
[SPEAKER_02]: You got card networks, which are preaching deeper into digital checkouts.
[SPEAKER_02]: And so this is, you know, 2024 was hopefully a turnaround story for PayPal.
[SPEAKER_02]: This is more of a reset here.
[SPEAKER_02]: I mean, it's trading at 10 times price to forward looking earnings.
[SPEAKER_02]: That's nearly the lowest bend in the past five years.
[SPEAKER_02]: But I just think, and this is a name that we did hold it one time, but we don't need more.
[SPEAKER_02]: I think the,
[SPEAKER_02]: The headwinds here a lot, the competitive pressures are a lot.
[SPEAKER_02]: And I haven't seen anything to suggest that it's going to get out of its funk.
[SPEAKER_02]: So for now, I'm going to have to pass on PayPal.
[SPEAKER_02]: Thanks for the call.
[SPEAKER_02]: One quiet new trend on a Wall Street is more of a niche thing.
[SPEAKER_02]: And that is companies that are hedging risk around the president's sweeping tariffs by selling their rights to any future government refunds.
[SPEAKER_02]: This strategy hinges on a pending Supreme Court case that could overturn the tariffs potentially triggering more than 100 billion in refunds at the administration loses.
[SPEAKER_02]: There are companies, like Atlanta-based kids too, which manufacture most of its products in China.
[SPEAKER_02]: As we come one of the first known companies to tap this market.
[SPEAKER_02]: Instead of waiting years for a possible refund, they sold their claims to outside investors and exchange for immediate cash, effectively monetizing uncertainty.
[SPEAKER_02]: Under the deal, the company keeps the upfront payment regardless of the court's decision, while investors only get paid if their tariffs are struck.
[SPEAKER_02]: Down, this company received about 2 million upfront, roughly 23 cents on the dollar for reciprocal tariffs, and just 9 cents on the dollar for separate fentanyl related tariffs.
[SPEAKER_02]: There's CFO described the transaction as a cost recovery action shaped by both legal uncertainty and skepticism about how quickly refunds would be paid even if the tariffs are overturned.
[SPEAKER_02]: That trade resembles other Wall Street innovations, if you will, that have turned uncertain cash flows into immediate liquidity, from lawsuit settlements to lottery annuities, and even David Bowie's royalty bonds.
[SPEAKER_02]: Law firms say demand for these claims searched, soon after tariffs were imposed in April, with hedge funds treating them as special situations uncorrelated with broader markets.
[SPEAKER_02]: Buyers are effectively betting on constitutional law, while its sellers accept a steep haircut in exchange for certainty and faster cash.
[SPEAKER_02]: There's an estimate that the odds of a favorable Supreme Court ruling is about 50-50.
[SPEAKER_02]: And so the time value of money made the deal worth while even if refunds never materialize.
[SPEAKER_02]: Not all companies are participating though, with some executives warning that even an adverse ruling might prompt the administration to find new ways to keep tariffs in place, keeping this market both lucrative, but also a little bit legally dubious.
[SPEAKER_02]: Either way, I think a very interesting way to bring you a story about maybe a different type of investment innovation.
[SPEAKER_02]: I'm the Grey on this completes another episode of Invest Talk, Justin and I thank you for listening and encourage you to tell your friends and family members about our free podcast downloads, which you can get five, seven days a week really on iTunes and Spotify because those episodes are always available.
[SPEAKER_02]: While you're at it, please be sure to leave us a rate and review.
[SPEAKER_02]: Today, show them if you think about your own financial picture, your investments, your retirements, your taxes, your trusts, your wills, and whether it's all really working together.
[SPEAKER_02]: Justin and I would love to speak with you because at KPP Financial we offer no cost portfolio reviews to help bring a little bit of clarity and confidence.
[SPEAKER_02]: Just go to invest.com and click the portfolio review button.
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[SPEAKER_02]: This is Invest Talk.
[SPEAKER_02]: We'll see you on Friday.
[SPEAKER_01]: Invest talk is a trademark of KPP financial because of the nature of the interactive dialogue inherent in the format of this program.
[SPEAKER_01]: It's important for the listener to understand that not all comments made will apply to that.
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