[SPEAKER_09]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.
[SPEAKER_09]: Independent Thinking, shared success.
[SPEAKER_09]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.
[SPEAKER_09]: Here is KPP Financial Portfolio Manager, Luke Guerrero.
[SPEAKER_01]: Good afternoon, fellow investors, and welcome back to the Tuesday February 24th, 2026 edition of Invest Talk.
[SPEAKER_01]: My name is Luke Guerrera, I'm a portfolio manager at KPP, and I'm also your host over the next 50 minutes.
[SPEAKER_01]: I do take that responsibility.
[SPEAKER_01]: I don't take it lightly.
[SPEAKER_01]: I know that this show for a lot of people is a way for them to catch up on the news, hear the stories that matter, and most importantly get their finance and investment questions answered.
[SPEAKER_01]: So to that end, before we talk about today's market performance and run down our show topics, let's tackle our first caller question now.
[SPEAKER_06]: Justin Luke, looking to get some Brazil exposure,
[SPEAKER_06]: EWZ, what do you think?
[SPEAKER_06]: And I too late to dive on into a small position of my portfolio.
[SPEAKER_06]: Thanks for the help.
[SPEAKER_01]: EWZ is the I shares MSEI Brazil ETF.
[SPEAKER_01]: So what it is is it is a index of a large and mid-cap companies from the B3 exchange in Brazil.
[SPEAKER_01]: that they apply on these companies.
[SPEAKER_01]: One of them having to be in complying with Rick requirements from the U.S. Internal Revenue Code.
[SPEAKER_01]: Another being no single issuer will exceed 25% and that all issuers of the way above five percent do not go above 50.
[SPEAKER_01]: So there are some diversification limits in there.
[SPEAKER_01]: It has about 48 holdings and reconstitutes I believe quarterly, which means those things won't always hold, those limits are enforced on rebounds, which is why right now the top 10 names, will they make up about 67 or sorry 62% of the portfolio?
[SPEAKER_01]: Now, one of the reasons why a lot of investors have been moving towards Brazil in particular is, well, it is a solid emerging market, and what we've seen over the past year is international
[SPEAKER_01]: especially when compared to U.S. markets, and so understandably, one might want to get exposure to Brazil, to India, to all these other markets that are positive stories.
[SPEAKER_01]: Now, any time we're looking for an E.M. emerging market portfolio, ETF, rather.
[SPEAKER_01]: It's going to be a bit expensive.
[SPEAKER_01]: There's one 59 basis points is in the range of acceptable, right?
[SPEAKER_01]: This is not going to be the same type of Vanguard US large cap fund that you're getting five basis points.
[SPEAKER_01]: You're going to pay.
[SPEAKER_01]: The reason you're going to pay is well, all of these ETFs generally don't purchase ADRs.
[SPEAKER_01]: They participate in local markets.
[SPEAKER_01]: It gives them the widest possibility of companies.
[SPEAKER_01]: It gives them the better liquidity.
[SPEAKER_01]: It gives them all these things.
[SPEAKER_01]: And that's expensive.
[SPEAKER_01]: It is expensive to attack these asset classes.
[SPEAKER_01]: I don't think that you have missed the train on Brazil, or EM markets, rather emerging markets, I just said EM markets, which would be emerging markets.
[SPEAKER_01]: Or international either.
[SPEAKER_01]: I think that the factors that are driving those things, diversification away from US dollar-denominated assets, less gapy differences in exchange rates, and general demand shifting will likely drive returns in the future.
[SPEAKER_01]: So if you're trying to get exposure to Brazil,
[SPEAKER_01]: EWZ, the I-Share's MSCI Brazilian TF, is a good way to do it.
[SPEAKER_01]: Thanks for the call.
[SPEAKER_01]: We got a lot of ground to cover in the next 45 minutes or so, and one of the first things, rather the main thing, is our focus point, which concerns this story.
[SPEAKER_01]: And really, it's a good, say away from our last question, it's the great American stock Exodus.
[SPEAKER_01]: We'll be talking about how U.S. markets, slowly in a way they've lost their crown.
[SPEAKER_01]: They're falling behind in their national markets and what could signal an epic shift towards global investing?
[SPEAKER_01]: Also, got a couple other stories to bring, including one on why tariffs aren't shrinking the U.S. trade deficit, another on AI productivity, and whether or not anything is really appearing in the data, and should be a time at the end of the show, we'll touch on how, given the recent Supreme Court ruling on tariffs, how likely is it that businesses are going to get refunds?
[SPEAKER_01]: We also have plenty of voice bank questions to answer, including one on Union on the business cycle, and another on Block Inc. to your XYZ.
[SPEAKER_01]: As well as some questions that came in from the comment section of the Invest Talk YouTube channel, and hopefully some live calls throughout the show.
[SPEAKER_01]: We're going to do a quick break.
[SPEAKER_01]: Our first break.
[SPEAKER_01]: Please remember you can call any time and leave your questions on the Invest Talk and Voice Bank.
[SPEAKER_01]: In fact, if you're listening via our live stream or on AM1220 in the Bay Area, you can pick up the phone and dial 88899 charge to get your question answered live.
[SPEAKER_01]: Up next, we'll talk about today's market activity.
[SPEAKER_00]: When you tell your friends about Investork and they ask you why you listen, let them know there are many reasons and one is Parallel Investing from KPP Financial and Investorkos Justin Klein.
[SPEAKER_00]: Parallel investing means Justin invests right alongside KPP financial clients.
[SPEAKER_00]: He makes the same trade for KPP financial on the same day at the same price and the same percentages as KPP clients.
[SPEAKER_00]: There's no front running and no special treatment.
[SPEAKER_00]: In this way, Justin and KPP financials share the same risks and the same potential for success.
[SPEAKER_00]: Parallel Investing aligns the interests of Justin and KPP Financial with those of his clients.
[SPEAKER_00]: Justin, Klein and Luke Guerrero are ready to answer your questions about Parallel Investing.
[SPEAKER_00]: And you can learn more anytime at Investalk.com.
[SPEAKER_00]: Luke Guerrero is here, and he's ready with answers to your financial investment questions.
[SPEAKER_00]: Call in Vestock, 888-99, chart.
[SPEAKER_01]: 888-99 chart is the number.
[SPEAKER_01]: If you're looking to get through to me live sometime in the next 50 minutes, but until we get our first call, talk a little bit about the market today.
[SPEAKER_01]: U.S. stocks trading higher and ingest off of their best levels, the Dow is up 76 basis points, S&P 500 was up 77 basis points, Nasdaq was up 1.04% Russell 2000 up 1 point.
[SPEAKER_01]: 2%, but about sectors will take mostly higher as Apple and Tesla, the best performers amongst that group.
[SPEAKER_01]: Other performers included software, semis, financial data, cruise lines, airlines, home builders, under performers included banks, insurers, payment names, department stores, energy, steel, and logistics.
[SPEAKER_01]: On the bonsai treasuries mixed, we did see some curve flattening yields up about two basis points on the short end,
[SPEAKER_01]: same time dollar index was up 10 basis points.
[SPEAKER_01]: Yeah, the end weakness actually being the big focus in FX markets.
[SPEAKER_01]: Gold finished down 90 basis points.
[SPEAKER_01]: Silver was up 1.1% and crude oil and down 1% reversing some of the earlier strength we saw towards the beginning of the trading session.
[SPEAKER_01]: The big story though, software balancing with some semblance of a reprieve surrounding all of this
[SPEAKER_01]: From anthropic, the big takeaway has seemingly revolved around partnerships and collaboration rather than replacement.
[SPEAKER_01]: You also have some pushback to get some of the more dire industry macros scenarios in the satrini report that was such a big overhang on risk sentiment yesterday.
[SPEAKER_01]: And so tech out performance, you know, it was helped by that.
[SPEAKER_01]: It was helped by as well the semi space with a focus on AMD's compute deal.
[SPEAKER_01]: With Meta, looking at data, February Consumer Confidence printed at 91.2, out of consensus, and approved from January's upperly revised 89, the labor market differential improved a bit, helped by more respondents seeing jobs as a plentiful.
[SPEAKER_01]: And speaking of jobs, ADP weekly private payrolls at 12.75,000 per week, a fourth straight increase in the highest since November.
[SPEAKER_01]: We also got the Richmond Fed manufacturing index, which dipped to negative 10 worse than the negative 2.5 consensus and January's negative 6.
[SPEAKER_01]: But if had speak, we saw Chicago's ghoulsby said inflation progress has stalled and said it is said it is, you know, not obvious rate policies even restrictive.
[SPEAKER_01]: The same time, but late as Boston cautioned the Fed may not be able to offset structural pressures on employment, the interest rate.
[SPEAKER_01]: So you have these competing factions emerging as the chairmanship is set to change in a May.
[SPEAKER_01]: Looking at for the rest of the week, the president, of course, giving a state of the union address this evening expected to talk up the economy and highlight new affordability measures.
[SPEAKER_01]: We will see no data on Wednesday.
[SPEAKER_01]: Initial claims will be out Thursday morning, while Fed's at Bowman is also scheduled to speak and Friday brings at PPI and construction spending.
[SPEAKER_01]: All right, let's transition back to answering some questions.
[SPEAKER_01]: This one came in earlier to our Invest talk a YouTube channel and it says, good insights and so many topics compressed in less than 30 minutes.
[SPEAKER_01]: Can you please share your expert thoughts on PSIX for an entry point?
[SPEAKER_01]: Let's take a look at PSIX, which is PSIX Power Solutions International.
[SPEAKER_01]: What it is, is it is a small cap industrial name that designs engineers and manufacturers and sells emission certified engines.
[SPEAKER_01]: With the past 52 weeks, it's been trading at very different levels.
[SPEAKER_01]: It's around 80, what did it finish today?
[SPEAKER_01]: Let's see, my computer's being a little bit slow here.
[SPEAKER_01]: It does take a second.
[SPEAKER_01]: That is the problem with a live show.
[SPEAKER_01]: Sometimes your internet does not comply as much.
[SPEAKER_01]: We'll close today at 95.55%.
[SPEAKER_01]: Just about a year ago, it's actually trading at about $2.
[SPEAKER_01]: So it's had quite the surge over the past 52 weeks, up 190.4%, 3%.
[SPEAKER_01]: Now it services the construction space, oil and gas, material handling, airport, ground transport, agriculture, and you know, it's it's story that has primarily and fundamentally changed over the last two years.
[SPEAKER_01]: And now a data center power generation company supplying these large custom engineered standby and prime power systems to these hyper scalers.
[SPEAKER_01]: as well as these data center operators.
[SPEAKER_01]: Pretty small company in terms of company size, only about 700 employees, and in terms of market cap, after this big run-up, sitting at about $2 billion in market cap.
[SPEAKER_01]: Now, Q1225 set a record at the time, revenue is up 42% year over year, but what's really driving this business is easy to see.
[SPEAKER_01]: It's this simple and powerful thesis,
[SPEAKER_01]: Data Centers, as I'm sure you all know, need power.
[SPEAKER_01]: And this company is certainly supply and they need lots of power and they need it immediately.
[SPEAKER_01]: And utility grid connections, they can take years.
[SPEAKER_01]: Natural gas power generators, sets, and power systems from PSI will they provide interim and backup power for this buildout wave.
[SPEAKER_01]: And then you have the other part of it, oil and gas.
[SPEAKER_01]: Their engines are used extensively in well-head gas compression and pipelines.
[SPEAKER_01]: When you have industrial transportation markets, they're legacy business, not doing so much, right?
[SPEAKER_01]: That's essentially flat here and makes up, oh, 25.7% of the revenue.
[SPEAKER_01]: So really not much going on there as well.
[SPEAKER_01]: Now with this run up, you'd expect it to be trading at a pretty high valuation.
[SPEAKER_01]: It's like trading about 14.3 times, 14.3 times price to forward looking earnings.
[SPEAKER_01]: And so that's understandably very attractive.
[SPEAKER_01]: Their average has been 9.7 over the past five years, a high of 39.
[SPEAKER_01]: And so the question is, you know, it's recovering a bit from a steep drop off.
[SPEAKER_01]: It ran up to 103, and then dropped down about 59, that's up to 95.
[SPEAKER_01]: It's up 8% today.
[SPEAKER_01]: It's not set to report earnings again until April.
[SPEAKER_01]: But what I'm seeing here is, it's a grower.
[SPEAKER_01]: It certainly is a grower.
[SPEAKER_01]: Revenue in 2020 was a 417.6 billion.
[SPEAKER_01]: It's projected to be 71, sorry, 701 million next year.
[SPEAKER_01]: 842 million, that was 417 million in 2020.
[SPEAKER_01]: The same time margins have expanded as well.
[SPEAKER_01]: I'm not seeing a lot that I don't like here if I'm being honest.
[SPEAKER_01]: So given,
[SPEAKER_01]: You know, where it stands and spite of this run up, given the growth that we've seen in recent years, this transition into what it wants to do versus what it did.
[SPEAKER_01]: The fact that it's still trading pretty cheap, I actually like it.
[SPEAKER_01]: That is PSIX, power solutions, international.
[SPEAKER_01]: Thanks for watching.
[SPEAKER_01]: It's like we still have time to maybe play it one voice mail now.
[SPEAKER_02]: Hey, Luke, you're just in Jake here from North Carolina.
[SPEAKER_02]: It's had a question about your investment philosophy overall, and are you applied that to your clients and investment accounts?
[SPEAKER_02]: The firm that I work for uses the business cycle has our framework for when to buy, when to sell, what to buy, what to sell.
[SPEAKER_02]: And that was just curious as to the degree of which you use the business cycle to inform you of your investment decisions.
[SPEAKER_02]: your managed client accounts or otherwise.
[SPEAKER_02]: Thank you very much looking forward to hearing on the show.
[SPEAKER_01]: You know, this is such an important question because for anybody, their investment philosophy underpins everything they do not just for themselves, but for their clients as well.
[SPEAKER_01]: So I want to just answer in 30 seconds.
[SPEAKER_01]: When we come back from the break, we will answer this question as well as talk about our main focus point and answer plenty more questions before the day is done.
[SPEAKER_01]: This is in best talk.
[SPEAKER_01]: If you have a question
[SPEAKER_00]: In the early days, in Vestock was Jerry Klein and Steve Peasley.
[SPEAKER_00]: Now the torch has been passed and a new generation of hosts is on the job, Justin Klein and Luke Guerrero.
[SPEAKER_00]: So when you've got finance and investment questions, don't forget to call, in Vestock.
[SPEAKER_00]: 888-99, chart.
[SPEAKER_01]: Before the break, we got a great question.
[SPEAKER_01]: And I really appreciate the color asking that because this really gets to the core of what we do at KPP.
[SPEAKER_01]: Now, you mentioned the business cycle.
[SPEAKER_01]: And that's actually a great starting point because we incorporate that thinking too.
[SPEAKER_01]: But our philosophy goes a bit deeper.
[SPEAKER_01]: We believe.
[SPEAKER_01]: And we think the evidence is shown that successful long-term investing comes down to three things, understanding where we are in the economic cycle, understanding high quality businesses trading at reasonable valuations, or rather identifying them, and then having the discipline to stay the course.
[SPEAKER_01]: In a KVP, we're what I'd call these evidence-based investors.
[SPEAKER_01]: We don't chase hot tips.
[SPEAKER_01]: We don't try to time the market on a day-to-day basis.
[SPEAKER_01]: And we try to not let emotions drive decisions.
[SPEAKER_01]: What we do is we look at the data.
[SPEAKER_01]: We look at earnings-transcender dynamics, factor exposures.
[SPEAKER_01]: Yes, where we are in the business cycle.
[SPEAKER_01]: And what market price action is telling us, to help us build diversified portfolios, that are positioned for what's ahead, what's ahead, and not just what's happening right now.
[SPEAKER_01]: So in practice, what that looks like is we're building portfolios that are tilted towards quality.
[SPEAKER_01]: They're tilted towards value, where the data supports it, we're mindful of one of the things that people don't take into consideration when they build their portfolios risk management.
[SPEAKER_01]: And we're constantly stress testing our assumptions.
[SPEAKER_01]: We're not trying to hit home runs on pie and the sky companies we're trying to compound wealth over time by avoiding those big mistakes by staying disciplined through the full cycle.
[SPEAKER_01]: So to sum it up,
[SPEAKER_01]: I would say we let the evidence guide us.
[SPEAKER_01]: We stay independent so we can stay objective.
[SPEAKER_01]: And we focus on long-term wealth building rather than short-term noise.
[SPEAKER_01]: Thanks to the call.
[SPEAKER_01]: Switch gears, get to my main focus point, which concerns really an important story.
[SPEAKER_01]: We already touched on it on the first question.
[SPEAKER_01]: That's because after more than a decade of US stock dominance, early 2026 is telling a very, very different story.
[SPEAKER_01]: Global equities have outperform the S&P 500 by nearly 8 percentage points in the first year of the month.
[SPEAKER_01]: That marks the strongest relative start for international stocks versus the S&P 500 in decades.
[SPEAKER_01]: Major US benchmarks including large cap and tech heavy indices,
[SPEAKER_01]: Their trailing developed and emerging market peers, investors are responding quickly, pouring more than 50 billion into international equity ETFs in January, a load.
[SPEAKER_01]: That represents the largest monthly inflow on record for international focused ETFs, and the backdrop makes this shift even more notable given how dominant US markets were after the 2008 financial crisis.
[SPEAKER_01]: For years, global capital chased American tech giants and chased their strong earnings
[SPEAKER_01]: But at the time, it appears to be turning, at least in the early stages of 2026.
[SPEAKER_01]: One of the biggest drivers behind this shift is something we have been talking about for some time, the weakening US dollar over the past year.
[SPEAKER_01]: The dollar index has fallen nearly 9%.
[SPEAKER_01]: Against major currencies.
[SPEAKER_01]: A weaker dollar boosts the relative returns of foreign stocks for US-based investors and historically periods of international app performance will they have often coincided with dollar weakness.
[SPEAKER_01]: For global investors, the dollar shifted from a tailwind to a potential headwind.
[SPEAKER_01]: Sentiment surveys?
[SPEAKER_01]: Will they show growing pessimism towards the dollar?
[SPEAKER_01]: Reinforcing this trend.
[SPEAKER_01]: But currency moves are only a small part of the story, valuations abroad.
[SPEAKER_01]: They look significantly more attractive compared to US equities.
[SPEAKER_01]: This can be 500 trades in a forward price earnings ratio multiple, 20 to 22.
[SPEAKER_01]: While many foreign markets trade in the low to mid-teens, some emerging markets, valuations, they're in single digits.
[SPEAKER_01]: So for value-oriented investors, those relative discounts are hard to ignore.
[SPEAKER_01]: Analysts note that currency explains only a fraction of the gains last year.
[SPEAKER_01]: And so, you know, what that suggests is that underlying earnings growth and capital flows.
[SPEAKER_01]: They're playing a larger role.
[SPEAKER_01]: policy decisions are also reshaping global capital allocation patterns, care of changes and shifting trade relationships.
[SPEAKER_01]: That's encouraging foreign governments to strengthen domestic markets countries like India, South Korea are taking steps to attract more local and foreign investment in Europe increased fiscal spending particularly on defense is altering growth expectations.
[SPEAKER_01]: And so the world appears to be moving towards a more multi-polar economic structure.
[SPEAKER_01]: And that structural shift could support international markets for years, not just for months.
[SPEAKER_01]: Still, capital has not meaningfully fled the United States.
[SPEAKER_01]: Four and ownership of US assets remains still historically high.
[SPEAKER_01]: And that underscores America's deep, deep capital markets.
[SPEAKER_01]: So the key investor question is whether this marks a short term rotation.
[SPEAKER_01]: A beginning of a multi-year reallocation toward this global diversification.
[SPEAKER_01]: On the next investor talk, we'll look into this story, housing market revival, construction surge, signals new chapter.
[SPEAKER_01]: Housing starts jump to their highest level in five months, while construction-related stocks are breaking out bullishly.
[SPEAKER_01]: Despite affordability concerns weighing on consumer sentiment, the supply side is showing unexpected momentum as we go deeper into 2026.
[SPEAKER_01]: That's tomorrow.
[SPEAKER_01]: For now, I'm Luke Guerrero ready to take your calls now at 80-80-90-90-90 chart.
[SPEAKER_01]: Dan?
[SPEAKER_01]: Hang on.
[SPEAKER_01]: You will be next.
[SPEAKER_01]: Sorry, Don.
[SPEAKER_01]: You will be next.
[SPEAKER_00]: There are a few things that make KPP financial special.
[SPEAKER_00]: One of them is parallel investing.
[SPEAKER_00]: This means they invest right alongside their clients.
[SPEAKER_00]: Here's how it works.
[SPEAKER_00]: When KPP financial makes a trade for their clients, just in line makes the same trade for himself and KPP.
[SPEAKER_00]: On the same day, at the same price, and same percentage.
[SPEAKER_00]: No front running, no special treatment.
[SPEAKER_00]: Learn more about parallel investing at investtalk.com.
[SPEAKER_01]: Let's go to Don and sorry for calling you Dan.
[SPEAKER_01]: How can I help you?
[SPEAKER_01]: I think yes.
[SPEAKER_03]: Thank you.
[SPEAKER_03]: I have a bond from Blue Owl.
[SPEAKER_03]: Okay.
[SPEAKER_03]: Oh, good to be well.
[SPEAKER_03]: I've read some things about Blue Owl.
[SPEAKER_03]: considering whatever is going on with them should I be concerned.
[SPEAKER_01]: So for those of you who don't know, blue owls had some issues recently, especially in how it is cutting off people's ability to redeem from their funds.
[SPEAKER_01]: And so that honestly and understandably is
[SPEAKER_01]: are safe in this investment because understandably with bonds right your primary goal with a bond is income but it's also hoping that at a certain point you're going to get that back when the bond matures now is the bond itself able to be traded is my question and is it trading at a steep discount it is not that's what's surprising I actually went online
[SPEAKER_03]: It was still at a premium.
[SPEAKER_03]: I think it was one of three or something like that, which surprised me.
[SPEAKER_01]: I mean, I would say that a bond that is maturing in mid-2027 probably carries pretty low risk.
[SPEAKER_01]: You know, if you
[SPEAKER_01]: We're worried about it.
[SPEAKER_01]: You could you could short the remaining duration exposure, but I don't think that's really necessary.
[SPEAKER_01]: And the fact that there's not a huge discount on this bond means a lot of people aren't offloading it.
[SPEAKER_01]: And so the market isn't really pricing in financial distress here.
[SPEAKER_01]: You know, I wouldn't recommend anybody getting into a newly issued blue alcapital bond here, but oftentimes in the fixed income market, prices can tell you a lot.
[SPEAKER_01]: Now, they bonds typically don't trade as frequently as equities do.
[SPEAKER_01]: The volume is lower, but in times of stress like this, one thing you can do is take a look at how credit default swaps on companies are trading or at credit default swaps are essentially insurance against a company defaulting.
[SPEAKER_01]: but i think in this situation i wouldn't be too concerned because it has a bit of a short duration here probably carries some pretty low risk otherwise the market would really be pricing it otherwise hope that was helpful dawn thanks to the call i hope so yeah i guess that was very helpful thank you very much and you're appreciated yeah have a good day well let's roll in another listener question now hi don't give a new york thank you for all that you do
[SPEAKER_07]: I am calling because if I have a question on two ETFs, I'm looking to do some more foreign exposure, I'm looking at some Japanese ETFs, one is EWJ, the other one is OPPJ.
[SPEAKER_07]: It seems like with the EWJ, it is a blend of value and growth, large cap and the other one is just mostly value and only large.
[SPEAKER_07]: Since I don't really know much about foreign ones, I need to start thinking about the currency exchange of the dollar gets worse or something like that.
[SPEAKER_07]: But all I do know is that everybody's going into foreign stocks.
[SPEAKER_07]: So just looking for the two cents, thinking of what you guys would say about this, but also kind of give me a heads up on what else I should be looking for, and looking forward to the answer.
[SPEAKER_07]: Have a great day.
[SPEAKER_07]: Bye.
[SPEAKER_01]: All right, let's take a look at these two ETFs.
[SPEAKER_01]: The first is EWJ, which is the I shares MSEI, Japan ETF.
[SPEAKER_01]: It accomplishes what a lot of these I shares funds, try to accomplish, offering broad exposure to the Japanese market.
[SPEAKER_01]: Now, it does so at a bit of a cost straight 49 basis point expense ratio with a large fund about 20 billion under management.
[SPEAKER_01]: It is going to be style neutral.
[SPEAKER_01]: Now, it does exclude the bottom 15% of companies, so there is a slight tilt towards large caps here, but in effect,
[SPEAKER_01]: This is just going to give you broad, broad, broad exposure.
[SPEAKER_01]: I mean, the net effect of this is large caps are 91% instead of 73.
[SPEAKER_01]: You're cutting out about 7% small caps, about 10% of mid caps in order to get there.
[SPEAKER_01]: Not really concentrated, top 10 names, only 28.12% total holdings 183.
[SPEAKER_01]: Now the second fund is OPPJ, and OPPJ is the Wisdom Tree Japan Opportunities Fund.
[SPEAKER_01]: It is also a passively managed fund, but it is not silent neutral.
[SPEAKER_01]: All of its companies do operate in Japan that all have to have a market cap greater than 100 million and meet specific criteria for trading volume, but it also takes into consideration certain things like shareholder liquidity market cap, strategic holdings, total shareholder yield and corporate governance and thematic opportunities.
[SPEAKER_01]: It's a bit more expensive, about 0.58% is it's expense ratio, but is it a thematic fund here?
[SPEAKER_01]: It is a little bit less diversified, not just because it holds 70 fewer names, right?
[SPEAKER_01]: It holds 119, but because the top 10% makes up 57.92% of the portfolio.
[SPEAKER_01]: But you do get small cap exposure, it's about 12%.
[SPEAKER_01]: You even get micro cap exposure, about 13%.
[SPEAKER_01]: So it tilts a bit lower towards the large cap spectrum.
[SPEAKER_01]: I would say, frankly,
[SPEAKER_01]: The way you're looking for is your core Japanese exposure, and when you're trying to get into international markets, I like the idea of doing a little bit of course that light here.
[SPEAKER_01]: And so, I think that for your core exposure, you want that broad diversification that is less thematic, like that first fund, EWJ.
[SPEAKER_01]: But I have no problems with OPPJ either, just understand it's giving you a big overweight to small caps, and is a bit more of a black box to me.
[SPEAKER_01]: that is OPJJ and EWJ.
[SPEAKER_01]: Thanks for the call.
[SPEAKER_01]: The president is certainly doubling down on tariffs.
[SPEAKER_01]: Even after the Supreme Court struck down key levies and the data shows they have not really reduced America's trade imbalance.
[SPEAKER_01]: Instead of shrinking the U.S. goods trade deficit hit a record 1.24 trillion.
[SPEAKER_01]: In 2025, driven by a 4.3% rise in imports, rather than catapulting domestic goods, we saw the opposite.
[SPEAKER_01]: Major exporting economies like Germany, Japan, South Korea, Taiwan, they reinforce their export led growth strategies, governments, their subsidizing manufacturers, cutting energy and financing costs and expanding their credit support to offset the competitiveness, competitiveness, hit from these tariffs.
[SPEAKER_01]: Japan had a hundred and thirty six billion dollar package, which would lean heavily into industrial subsidies while South Korea and Taiwan, injected liquidity,
[SPEAKER_01]: Even they unveiled roughly one trillion euros in spending.
[SPEAKER_01]: Why?
[SPEAKER_01]: Well, they were trying to aim at supporting manufacturing and reducing electricity costs for businesses and these moves.
[SPEAKER_01]: They all start to help explain why global trade flows and growth fell that better than many expected despite tariff escalation.
[SPEAKER_01]: Now economists argue that these policies, they're often financed at the expense of households.
[SPEAKER_01]: They suppress domestic consumption, they reinforce dependence on foreign demand.
[SPEAKER_01]: Germany's current accounts are plus, it remains near 5% of GDP well above, would your European officials consider structurally justified?
[SPEAKER_01]: China's surplus is projected at 4.3% of GDP, while the U.S. current account deficit will that run near 4% roughly double its pre-pandemic level.
[SPEAKER_01]: So if Washington really wants to reduce the deficit, you want to address these large fiscal imbalances at home.
[SPEAKER_01]: That would likely be far more effective than pressuring trade partners.
[SPEAKER_01]: The deeper take away, though, is that entrenched export driven models particularly in Germany and East Asia.
[SPEAKER_01]: They remain politically popular and structurally resilient, making a tear of driven rebalancing, far more difficult than many people hope and many people would lead you to believe.
[SPEAKER_01]: It's keep things moving and get to more questions now.
[SPEAKER_08]: I just know a little component today about cybersecurity, I think Justin mentioned that he does like the space.
[SPEAKER_08]: However, I was looking at some companies and I think a lot of it is pretty expensive and I'm not too familiar with the sector.
[SPEAKER_08]: I do want to discuss systems that's done well for me.
[SPEAKER_08]: My question was, do you think it's better to buy something like CBR and ETS to has a basket of them or just further concentrate and buy a company just like CrowdStrike or CloudFlare?
[SPEAKER_08]: So, take a CRWT or an ETS.
[SPEAKER_08]: I think both of these companies may still be a little expensive, even though it has pulled back.
[SPEAKER_08]: say 15 to 20 percent.
[SPEAKER_08]: Appreciate all your stuff.
[SPEAKER_01]: That's a great question because understandably all of softwares of service and cybersecurity have been on the top of everybody's mind.
[SPEAKER_01]: Why?
[SPEAKER_01]: Because there have been a recent events where Anthropic has announced Claude's abilities and some have extrapolated those to mean certain industries are dead.
[SPEAKER_01]: Microsoft is dead.
[SPEAKER_01]: Software as a service is dead.
[SPEAKER_01]: Cyber security is dead.
[SPEAKER_01]: Now that's crazy.
[SPEAKER_01]: I'll say that first and foremost.
[SPEAKER_01]: I set it the other day that small business is vibe coding things, small businesses in general are you drop in the bucket of revenue, compared to Fortune 500 companies.
[SPEAKER_01]: And no Fortune 500 company is going to have a couple guys using a coding agent to help them secure their entire systems.
[SPEAKER_01]: And so when you tell me that these are the reasons why these names are selling off, I think well that's a bit ridiculous.
[SPEAKER_01]: But
[SPEAKER_01]: Just because things are selling off for a dumb reason doesn't mean you should buy them.
[SPEAKER_01]: They are selling off for a dumb reason.
[SPEAKER_01]: But CrowdStrike is still trading at 71.7 price to forward looking earnings.
[SPEAKER_01]: 60 times price to cash flow.
[SPEAKER_01]: A lot of those software names that sold off were trading at 40, 50, 60 times.
[SPEAKER_01]: Crazy multiples.
[SPEAKER_01]: And so even though I don't think that
[SPEAKER_01]: Large businesses are going to replace sales force, crowd strike with just a couple of dudes who understand cloud code.
[SPEAKER_01]: It doesn't mean that there wasn't a lot of froth in these areas, and that this pullback isn't good because I think it is.
[SPEAKER_01]: Now, your question was, okay, within cyber security, should I buy CrowdStrike or NETF?
[SPEAKER_01]: I think that there's still some shakeout that still needs to come here again, CrowdStrike and names like it are still very expensive.
[SPEAKER_01]: The benefit of buying an ETF, especially in this space though, is getting that diversification into pockets that aren't as expensive.
[SPEAKER_01]: If you had to buy something now, just given out expensive, those names you mentioned were, I would say buy the ETF, but I still think there's still a bit more shakeout to come.
[SPEAKER_01]: But.
[SPEAKER_01]: As these prices become the most reasonable they have been in years, certainly investors who are patient, stand a benefit.
[SPEAKER_01]: Thanks for the call.
[SPEAKER_01]: Let's go with another YouTube comment.
[SPEAKER_01]: So one says, hey guys, can you take a look at SM on the show, a good way to play the energy sector?
[SPEAKER_01]: Question mark.
[SPEAKER_01]: Low P, reasonable debt, low payout ratio on their dividend.
[SPEAKER_01]: And I believe they recently merged with SIVI, about a large holding and it's up 20% already.
[SPEAKER_01]: Let's take a look at what we pull this up on my screen.
[SPEAKER_01]: SM is SM Energy Company.
[SPEAKER_01]: Now what they do is you guessed it.
[SPEAKER_01]: It's an independent energy company that acquires explorers, develops and produces oil, gas, and natural gas liquids.
[SPEAKER_01]: Now recently, there was a merger with Civitus, which closed on January 30th, who was an all stock deal about 12.4 billion.
[SPEAKER_01]: And so, what ended up happening was, well, SM shareholder's own 48% former civil shareholders now, own 52.
[SPEAKER_01]: They've been some decent post merger developments as well.
[SPEAKER_01]: You have the selling of 61,000 net acres of land 260 wells.
[SPEAKER_01]: So the business is attempting to streamline here.
[SPEAKER_01]: What are they, you're marking this for?
[SPEAKER_01]: Well, they're, you're marking it for the debt reduction.
[SPEAKER_01]: They're about $2.8 billion in debt on a $5.4 billion market cap company.
[SPEAKER_01]: And so understandably, that's certainly a good thing.
[SPEAKER_01]: Now, you're today stocks up about 20%.
[SPEAKER_01]: The merger closed, I think, on the 26th.
[SPEAKER_01]: So there's been a pretty good upward movement since then.
[SPEAKER_01]: It is gonna be driven primarily by the oil market, oil price weakness.
[SPEAKER_01]: is gonna mean this name is going to struggle.
[SPEAKER_01]: But in spite of that, I mean, it's still down 33.59% over the past 52 weeks.
[SPEAKER_01]: It looks really cheap to me.
[SPEAKER_01]: Only training about 0.6 price to book value.
[SPEAKER_01]: But my problem with these recent mergers is generally you don't know how the mergers are gonna scale, you don't know how the synergies are gonna work out.
[SPEAKER_01]: You know, certainly the bull case is that these asset sales help pay down debt.
[SPEAKER_01]: You would use a bit of leverage in the company.
[SPEAKER_01]: crude oil if it can sustainably move upward means that this combined free cash flow could be over 1.4 billion annually, but still for me, I would need to see how it's going to shake out in terms of the development of this merger rather this acquisition before I would invest further.
[SPEAKER_01]: That is SM, thanks for watching.
[SPEAKER_01]: This is Invest Talk.
[SPEAKER_01]: I'm Lou Guerrera.
[SPEAKER_01]: We have one goal here.
[SPEAKER_01]: The Met goal is to help you achieve your financial freedom.
[SPEAKER_01]: Our work continues after this break.
[SPEAKER_01]: Our final break of the show, so get your questions in now at 888-99 chart.
[SPEAKER_09]: Luke Guerrero is here and ready to tackle your questions.
[SPEAKER_05]: I would like to know more about the company which I've been tracking for some time.
[SPEAKER_07]: Quick question on a very risky play.
[SPEAKER_07]: It is a company that caught my attention because the ROE is like close to a hundred percent.
[SPEAKER_09]: Invest talk is ready 24-7.
[SPEAKER_07]: And I was just wondering, are there any investment accounts with different banks that you would recommend?
[SPEAKER_07]: Something that may offer a good resources.
[SPEAKER_07]: Call in Vestock.
[SPEAKER_09]: 888-99 chart.
[SPEAKER_00]: Every investor is working to build a secure financial future.
[SPEAKER_00]: How they get there and when they get there, that depends on many factors.
[SPEAKER_00]: The more you learn about how the market works, the better your chances for success.
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[SPEAKER_04]: Hey, this is Ananduke.
[SPEAKER_04]: Thank you for a so much of information that you guys provide.
[SPEAKER_04]: I want to find out about block X, Y, Z, block.
[SPEAKER_04]: It's been going down for a while now for two, three years.
[SPEAKER_04]: What do you think about the future prospect of the company?
[SPEAKER_04]: Looking into long term, of course.
[SPEAKER_04]: Is it a good price to buy in?
[SPEAKER_04]: Or should we waste a bit more?
[SPEAKER_04]: I know the quarter results are coming out in a couple of days.
[SPEAKER_04]: I'm looking forward to your response.
[SPEAKER_04]: Thank you.
[SPEAKER_04]: Bye.
[SPEAKER_01]: Block is a FinTech company built around these two core ecosystems square, which is their commerce and financial services for merchants, and then cash app, which is their consumer financial services, including these person and person payments, banking, crypto, and buy now pay later via after pay.
[SPEAKER_01]: It's been a range in, certainly over the past 52 weeks, anywhere from 44 to 82 stock closed about 51 on the dot today and you're today, they're down 21.65% of the past three months, they're down 17.56, over the past 52 weeks, they're down 22.6.
[SPEAKER_01]: 3.
[SPEAKER_01]: And that's it, spite of having some pretty solid growth, I'll be at frontloaded growth.
[SPEAKER_01]: They went from 9.4 billion in revenue to 17.6 in 2020 into 2021.
[SPEAKER_01]: But then in 2024 to 2025 revenues supposed to only grow by a hundred million on 24.1 to 1 billion.
[SPEAKER_01]: That is really slow.
[SPEAKER_01]: That is not the 38% they've had on average over the past five years.
[SPEAKER_01]: Now one thing of note is there is a five billion dollar buyback authorization about 1.5 billion has been executed already at least as executed last year.
[SPEAKER_01]: But in spite of that, in spite of that, it's still open the year at 92.
[SPEAKER_01]: close the year round, 60, in spite of all the buybacks, it's also highly volatile, bait at 2.68.
[SPEAKER_01]: And so what's driving this?
[SPEAKER_01]: Well, cash at monetization that is its core growth engine, they reached by 50 million monthly transactions in Q3 of last year.
[SPEAKER_01]: And certainly that is good.
[SPEAKER_01]: And gross profit is accelerating as well.
[SPEAKER_01]: And they frankly have an interesting,
[SPEAKER_01]: Story Moving Forward, including that compelling buyback program.
[SPEAKER_01]: My imagines have been expanded, but growth is slowing now, margins projected to contract into 2025, from 12% net margin to 6.1%.
[SPEAKER_01]: So in spite of signs of life here, the biggest risk, well those credit quality, that's a problem, largely tied to that cash at borrowing, but there's just not a lot of strength here because there's so much darn competition, and so as growth is slowed,
[SPEAKER_01]: Understandably investors are not looking to pay the premium that they have been paying.
[SPEAKER_01]: On average, it's been training at 49.4 times price to afford looking earnings.
[SPEAKER_01]: It's training about 15.2 now.
[SPEAKER_01]: As always, generally, I like to stay away from names into earnings.
[SPEAKER_01]: I think you learn a lot from quarterly reports, you learn a lot from guidance.
[SPEAKER_01]: And so it's tough to make a judgment here
[SPEAKER_01]: before Q4 is quarterly print to see how 2025 ended in their projections for 2026.
[SPEAKER_01]: So for now, I'd keep it on my watch list.
[SPEAKER_01]: Certainly wouldn't be buying into earnings here.
[SPEAKER_01]: Thanks for the call.
[SPEAKER_01]: Well, guys, I will tease something that we may be releasing soon.
[SPEAKER_01]: That is in Vestock.
[SPEAKER_01]: market, madness, which should be releasing soon.
[SPEAKER_01]: Sure, all of you remember our annual competition.
[SPEAKER_01]: See, who can put together the best bracket and the winner?
[SPEAKER_01]: Yet again, we'll get a cash prize.
[SPEAKER_01]: I know we have a lot of fun doing it.
[SPEAKER_01]: We hope you have a lot of fun doing it as well.
[SPEAKER_01]: So stay tuned, because there will be an announcement in the coming days.
[SPEAKER_01]: Already folks, that completes another episode of Invest Talk, I'm Lou Guerrero and I thank you for listening.
[SPEAKER_01]: And I encourage you to tell your friends and family members about our free podcast downloads which you can get any time and items and Spotify.
[SPEAKER_01]: While you're at it, don't forget to watch out for our videos over on our Invest Talk a YouTube channel.
[SPEAKER_01]: If you got a question while you're watching, I'm feel free to leave them in the comment section.
[SPEAKER_01]: One other thing I want to highlight is our practice at KPP of Paralo Investing where we make the same trade for our clients.
[SPEAKER_01]: that we make for ourselves, the same trade, the same day, the same price, the same percentage, no front running, no special treatment, helps to build trust, putting a little skin in the game.
[SPEAKER_01]: That sounds interesting.
[SPEAKER_01]: And you'd like to learn more, head over to investalk.com, and while you're at it, why don't you schedule a free portfolio review.
[SPEAKER_01]: Independent thinking, shared success.
[SPEAKER_01]: This is Invest Talk.
[SPEAKER_09]: Good night.
[SPEAKER_09]: Invest talk is a trademark of KPP financial, because of the nature of the interactive dialogue inherent in the format of this program.
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