[SPEAKER_00]: On radio, on YouTube, streaming live on investtalk.com, and for our podcast subscribers, this is invest talk, independent thinking, shared success.
[SPEAKER_00]: Invest talk is made possible by KPP Financial, a registered investment advisor firm, serving clients throughout the United States.
[SPEAKER_00]: Here is KPP Financial Chief Executive Officer, Financial Advisor, Justin Klein.
[SPEAKER_08]: Good afternoon fellow investors and welcome back to Invest Talk.
[SPEAKER_08]: This is our Tuesday.
[SPEAKER_08]: March 10th, 2026 edition of Invest Talk, and a lot is happening in today's markets.
[SPEAKER_08]: There's good news than there's bad news and just thought a website all around across various asset classes across various companies and various sectors.
[SPEAKER_08]: And so this is a challenging
[SPEAKER_08]: flat to down on the year, but some sectors doing extremely well like materials and industrials, now energy.
[SPEAKER_08]: I've been other sectors not doing well at all, like tech, like financials, like consumer discretionary.
[SPEAKER_08]: And this is not a coincidence.
[SPEAKER_08]: There are underlying factors
[SPEAKER_08]: And that's what you're seeing will be called in markets, massive divergence, excuse me, this divergence, there is divergence, yes, dispersion, that's the better word, dispersion is the better word.
[SPEAKER_08]: And so if you're stuck in an index, that can be challenging.
[SPEAKER_08]: It's yeah, you're kind of been going nowhere for the better part of four plus months now.
[SPEAKER_08]: So what do you do?
[SPEAKER_08]: How do you navigate
[SPEAKER_08]: by giving you the keys to the castle.
[SPEAKER_08]: Now, it's not easy, it's not just a key, but it's the principles.
[SPEAKER_08]: It's the understanding of how the markets are operating on their other trending and how you should position your portfolio based on your own risk tolerance, level your goals, and we're going to give you the tools each every day to make those decisions.
[SPEAKER_08]: Yourself, if you're not hiring an advisor like myself, then you're going to need to do it yourself.
[SPEAKER_08]: you know, you probably want to turn to a professional, but that's not what the show necessarily is about.
[SPEAKER_08]: It's about showing you the way it's about you picking up the pieces and having to discipline to execute on the right strategy for you.
[SPEAKER_08]: So that's what this hour is about, going to answer your finance and investment questions.
[SPEAKER_08]: I'm going to give you data and perspective
[SPEAKER_08]: And with that said, we're going to get into the Mark performance in just the Bay of also give a rundown of what we're going to discuss throughout the hour, but as usual, we'll tackle this first call of question now.
[SPEAKER_04]: Hello, I had a question about Ticker L E A, the company is Lear.
[SPEAKER_04]: I currently hold a 1% position and want to see your insight as to whether you should add to it, hold or sell it.
[SPEAKER_04]: Thank you.
[SPEAKER_04]: Bye.
[SPEAKER_08]: Looking at Lear, this is what we would call an OEM part-spanifacture for the out-of-industry.
[SPEAKER_08]: So what do they make?
[SPEAKER_08]: They make automotive seats, electrical distribution systems and modules, as well as subsystems, components, and software for the car industry.
[SPEAKER_08]: And so you're thinking,
[SPEAKER_08]: basically car seats, not car seats for babies, but the actual seats that go into most cars.
[SPEAKER_08]: So they have a very solid business, but six billion dollar market cap.
[SPEAKER_08]: So I would say it would be considered midcap.
[SPEAKER_08]: So we said earnings this year.
[SPEAKER_08]: So so we have 13% and then 17% next year the problem is that the earnings expectation trends are
[SPEAKER_08]: But if you look at the chart, it bottoms back in liberation day and has been slowly marching up.
[SPEAKER_08]: An earnings last quarter, finally grew for the first time in five quarters and it grew at the fastest pace in over two years.
[SPEAKER_08]: So overall, that is a good thing.
[SPEAKER_08]: If a decent balance sheet, not a ton of debt, reasonable amount of debt,
[SPEAKER_08]: Free cash flows at about 500 million on a six billion dollar market.
[SPEAKER_08]: That's a pretty strong free cash flow yield.
[SPEAKER_08]: You really can't be mad about that.
[SPEAKER_08]: No, what are they doing with that cash?
[SPEAKER_08]: Well, they're buying back shares.
[SPEAKER_08]: I like that.
[SPEAKER_08]: They're paying a dividend that the dividend is sustainable.
[SPEAKER_08]: The pair ratios only about 37%.
[SPEAKER_08]: Not too bad.
[SPEAKER_08]: And they're trading out of enterprise value to even around five.
[SPEAKER_08]: So I think it's a track to leave value.
[SPEAKER_08]: Its profitability metrics are not amazing, we're turning equity around 10 and a half.
[SPEAKER_08]: But pre-pandemic, their profitability was much, much higher.
[SPEAKER_08]: So,
[SPEAKER_08]: I think things could trend back to a higher profitability regime.
[SPEAKER_08]: I would love that.
[SPEAKER_08]: That would make the multiples that this is trading at expand.
[SPEAKER_08]: And then you'd probably get back to enterprise value, even multiples in the pre-COVID was closer to the high single digits, now we're at five.
[SPEAKER_08]: But overall, I like the trend in the chart.
[SPEAKER_08]: It has pulled back to 100-day moving average.
[SPEAKER_08]: I like the balance.
[SPEAKER_08]: So I think the biggest risk here is that its business is cyclical, and those estimates are coming down, but autosales are hanging there.
[SPEAKER_08]: And so generally, I'm going to give it a modest thumbs up.
[SPEAKER_08]: Not my favorite name within the space, but certainly has a track to be valued.
[SPEAKER_08]: Say that.
[SPEAKER_08]: Don't hope you've heard us talking about our third annual Invest Talk Market Manus instead of basketball brackets, we will be watching companies perform head-to-head in an epic showdown.
[SPEAKER_08]: Invest Talk Participants can compete to a $1,000 grand prize and demonstrate their market prowess by locking in the stock victory predictions.
[SPEAKER_08]: Now, if the contest winner also falls our index talk YouTube channel, we will be bumping that prize up to 1500.
[SPEAKER_08]: So if you're ready to test your skills in this unique competition, just don't wait.
[SPEAKER_08]: Join for free.
[SPEAKER_08]: It's free to join by visitingivesttalk.com to submitting your bracket predictions.
[SPEAKER_08]: Now, the clock is ticking.
[SPEAKER_08]: Just head over to the website.
[SPEAKER_08]: Once again, it ends the submission deadline ends on March 18th at 1159 p.m.
[SPEAKER_08]: So make sure you fill out, fill it out before that time.
[SPEAKER_08]: And we have a lot of ground to cover over the next 45 minutes or so.
[SPEAKER_08]: And time permitting, we're going to get to all of it.
[SPEAKER_08]: Our main focus point is the oil shock.
[SPEAKER_08]: How a $120 crudeish reshaping the energy investment strategy.
[SPEAKER_08]: And question is, how should you think about this immense amongst your portfolio allocations?
[SPEAKER_08]: Also, we're going to dig into how AI is potentially upending the tech monopolies.
[SPEAKER_08]: What are the dynamics that are putting a lot of the major tech players on their back foot?
[SPEAKER_08]: And potentially breaking their grips.
[SPEAKER_08]: on certain markets and could potentially hamper their long-term profitability in a major way.
[SPEAKER_08]: So we'll dig into that.
[SPEAKER_08]: In addition, we want to touch on tax season.
[SPEAKER_08]: What does it pro say when it comes to their clients, what are the do's and don'ts?
[SPEAKER_08]: We'll talk about that.
[SPEAKER_08]: And then if we have time, if we have time, we'll dig into what are the building risks in today's market?
[SPEAKER_08]: Not just the war, but also AI, and then broader credit fears.
[SPEAKER_08]: How would that all collide?
[SPEAKER_08]: So we'll talk about that once again, if we have time.
[SPEAKER_08]: We also have questions as always from the voice bank around traveling investors, as well as met life.
[SPEAKER_08]: And then we have questions that came in to be the comment section of the Invest Talk YouTube channel.
[SPEAKER_08]: But most importantly, we'll be your live call.
[SPEAKER_08]: So if you're listening live, four to five, either on the AMTL 20 in the Bay Area, you can call right now, or if you're listening on the live stream on our website, you can do the same.
[SPEAKER_08]: So we are here for it.
[SPEAKER_08]: phone lines are always open and up next, I'll be talking about today's market activity.
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[SPEAKER_01]: Parallel investing means Justin invests right alongside KPP financial clients.
[SPEAKER_01]: He makes the same trade for KPP financial on the same day at the same price and the same percentages as KPP clients.
[SPEAKER_01]: There's no front running and no special treatment.
[SPEAKER_01]: In this way, Justin and KPP financials share the same risks and the same potential for success.
[SPEAKER_01]: Parallel Investing aligns the interests of Justin and KPP Financial with those of his clients.
[SPEAKER_01]: Justin, Klein and Luke Guerrero are ready to answer your questions about Parallel Investing.
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[SPEAKER_01]: In the early days, in Vestock was Jerry Klein and Steve Peasley.
[SPEAKER_01]: Now the torch has been passed and a new generation of hosts is on the job.
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[SPEAKER_08]: Let's go take a quick look at the markets today, was a volatile day overall, and you had the S&P down about 14 points, about 0.2% on the day, and then the NASDAQ, eaked out a small gain of 1.1 basis point on the day.
[SPEAKER_08]: So,
[SPEAKER_08]: Overall, a very flat day.
[SPEAKER_08]: A lot of volatility underneath the surface, though, if I pull up a heat map of the markets.
[SPEAKER_08]: Just wants to load for me.
[SPEAKER_08]: There we go.
[SPEAKER_08]: In video up one percent, you had some pretty decent losses out of other software names.
[SPEAKER_08]: Things like Palantir and Adobe and into it.
[SPEAKER_08]: those certainly struggle that they're getting a nice little bounce as of late oil sold off on what looked to be a headline around US military ushering ships through the streets of Hormuz but that tweet was later deleted by the White House so it's still unclear if that is going to reopen or not.
[SPEAKER_08]: You had some health care names certainly sell off.
[SPEAKER_08]: You had some of the finance space, sell off as well, especially around the insurance industry and the exchanges.
[SPEAKER_08]: There we go.
[SPEAKER_08]: I'm talking about CME as well as ice and a continental exchange.
[SPEAKER_08]: Those were down pretty decently.
[SPEAKER_08]: And you did have some green out of some of the semi-connected names like Intel up over 2%.
[SPEAKER_08]: on the day, some of the product manufacturing businesses like land research and applied materials around semiconductor equipment, caterpillar, did well on the day.
[SPEAKER_08]: So it was certainly...
[SPEAKER_08]: A mixed bag overall Bitcoin was up 1.6 on the day, crude finished down 11.9% though off its lows.
[SPEAKER_08]: Once again, I think you're going to see a lot of whip sign over the next of the coming days to see how this is resolved.
[SPEAKER_08]: If it's going to resolve in the short term, the odd thing is that it seems that Trump will only talk of if he sees the market or the prices go up considerably.
[SPEAKER_08]: I think if you start to get back above $100 a barrel,
[SPEAKER_08]: you could see tensions kind of calm down.
[SPEAKER_08]: But if it doesn't, well,
[SPEAKER_08]: this could drag on for a little while.
[SPEAKER_08]: And that's kind of my read.
[SPEAKER_08]: Goal finished up two and a half percent, 2.7% on the day.
[SPEAKER_08]: The dollar was down, 0.3% on the day.
[SPEAKER_08]: And you saw yields up 67 basis points on the long end of the curve.
[SPEAKER_08]: So you saw treasuries sell off as well.
[SPEAKER_08]: So a lot of volatility underneath the surface.
[SPEAKER_08]: Even though it's a flat day, there was a lot of movement.
[SPEAKER_08]: It wasn't like,
[SPEAKER_08]: most stocks or most sectors were flat.
[SPEAKER_08]: Almost everything was up or down and decent amount, but net net, you have a flat day.
[SPEAKER_08]: And this is kind of a product of what's going on in the option market to be frank.
[SPEAKER_08]: And you continue to see that dispersion in markets where your own indices, you're kind of just trading water.
[SPEAKER_08]: And if you're a position poorly overweight tech, for example, in general, then you're getting a sell off,
[SPEAKER_08]: software today.
[SPEAKER_08]: So pretty interesting market that we have here, not a shock.
[SPEAKER_08]: We're a little over two months into the year.
[SPEAKER_08]: And
[SPEAKER_08]: the headlines galore and I don't expect that to change as we, you know, get to the mid-June.
[SPEAKER_08]: So what I said early January that the Republicans and Trump know that historically, and this is not a political statement, it is simply fact that 90% of the time, the mid-terms are bad for the incumbent party and the Republicans hold the House Senate and the White House.
[SPEAKER_08]: policies forward or through, they need to act on it before the midterms in case things don't go their way, which once again, based on history, that's the case.
[SPEAKER_08]: And so that's why I said very early on with it.
[SPEAKER_08]: I think it was in the first two weeks of the year that
[SPEAKER_08]: This is going to be a year of chaos and change, and whether for good or bad, depending on how you look at it, but ultimately that means markets are going to be battling with these headlines, and that's what you continue to see, and that's what you should expect throughout 2026.
[SPEAKER_08]: Now, we're moving into a break.
[SPEAKER_08]: You may call now, at 80, 90, 90 chart.
[SPEAKER_01]: KPP Financial is excited to announce the third annual Invest Talk Market Madness Contest.
[SPEAKER_01]: Invest Talk Participants can compete for the $1,000 grand prize.
[SPEAKER_01]: So if you are ready to test your skills in this unique competition, do not wait.
[SPEAKER_01]: It's free to join the fund.
[SPEAKER_01]: Visit InvestTalk.com and search Market Madness.
[SPEAKER_01]: Then submit your bracket predictions to enter.
[SPEAKER_07]: I'll just show you this is all from Gatorsburg, I'm traveling overseas right now and then Shelby Sager and it is a place for a lot of innovation here.
[SPEAKER_07]: Do you have any recommendation you would give a stock investor or to look out for when you're traveling overseas instead of something and you guys do this specifically is there like something.
[SPEAKER_07]: You're on the loop down to some investors and yeah, I'm curious about the answer and I'm looking forward to listening to it on the show.
[SPEAKER_07]: And I wish you all good luck.
[SPEAKER_07]: Thank you, bye-bye.
[SPEAKER_08]: Well, traveling to a place like Southeast Asia can open your eyes to businesses that are growing that you may not have on the ground, be able to have on the ground.
[SPEAKER_08]: Research in.
[SPEAKER_08]: uh... that's probably the only thing that i can think of you know when you're in america you're you're kind of blind to
[SPEAKER_08]: the companies that made Dominate in particular regions of the world that you're not familiar with.
[SPEAKER_08]: And in many ways are under invested.
[SPEAKER_08]: That's kind of what's happening now where there's just under allocation to foreign markets because people just know that big players and the big players are typically US companies that are global.
[SPEAKER_08]: But there are smaller names, niche names, that
[SPEAKER_08]: have a strong foothold in different sectors and within different countries.
[SPEAKER_08]: And maybe some of those are our public.
[SPEAKER_08]: And so that's what I would be looking out for.
[SPEAKER_08]: That's pretty much it.
[SPEAKER_08]: There's no other real leg up beyond you know, because there's information.
[SPEAKER_08]: that it's public is typically easily found, especially with AI now, widely disseminated, but true on the ground research is rare.
[SPEAKER_08]: So that's the way I would be thinking about finding investment opportunities in the places that you are traveling.
[SPEAKER_08]: And safe travel student.
[SPEAKER_08]: Now you probably know by now, we get questions from the comment section of our Invest talk.
[SPEAKER_08]: YouTube channel.
[SPEAKER_08]: Here's one that came in earlier.
[SPEAKER_08]: ProCAP are C3 says thanks Justin for helping my mother on her portfolio review.
[SPEAKER_08]: I'm looking at stock ERO as a copper play with solid revenue growth and an income growth that looks attractive.
[SPEAKER_08]: Only concern is the just jurisdiction location in the minds.
[SPEAKER_08]: I would love to hear what you guys think.
[SPEAKER_08]: I love this question because it is certainly underappreciated as to where the minds of any mining company are located, because
[SPEAKER_08]: if you get volatility, political volatility in those jurisdictions, especially in Central, South America, Africa, you can quickly see certain minds be taken by the government in the most extreme cases, but even just the right to operate revoked.
[SPEAKER_08]: So make sure that you are looking at that.
[SPEAKER_08]: Like you said, it's a mineral company itself, copper gold and silver in their geography, geographical breakdowns, excuse me, is in Brazil.
[SPEAKER_08]: So you're gonna be heavily tied to the volatility of the Brazilian economy.
[SPEAKER_08]: Now the good thing here is that as the business or as
[SPEAKER_08]: the demand for raw materials or scarce resources increases the resilient economy and other economies that are rich in resources.
[SPEAKER_08]: They're going to likely do better.
[SPEAKER_08]: When economies do better, well, the political volatility tends to calm down because people's lives generally improve.
[SPEAKER_08]: Now that's not always the case, but it's usually the case.
[SPEAKER_08]: And so as Brazilians, stocks have gone up and the value of the underlying assets here have gone up, then you're starting to see once again political volatility at beta a little bit.
[SPEAKER_08]: So I like the trends here.
[SPEAKER_08]: I would worry a bit about the jurisdiction that it operates in, but there's definitely worse than Brazilians.
[SPEAKER_08]: My biggest worry, though, is that it seems to be only in Brazil.
[SPEAKER_08]: Yeah, that would be my biggest worry, is that it looks like the minds are only in Brazil.
[SPEAKER_08]: So you're heavily tied to that.
[SPEAKER_08]: So I like it, but I rather own a copper producer that has a bit more diversity in its mind production.
[SPEAKER_08]: Thanks for the call or thanks for the questions submitted via our YouTube channel.
[SPEAKER_08]: The next and best talk we'll look into, the story, central bank, pivot, how geopolitical chaos is rewriting monetary policy.
[SPEAKER_08]: Central banks across Asia and globally are being forced into sharp policy re-thinks as Middle East conflict drives oil prices higher and reignites inflation fears.
[SPEAKER_08]: The G7 is discussing emergency oil reserve, reserve releases while policy makers scramble to bounce growth.
[SPEAKER_08]: Concerns with renewed price pressures that story is what we will touch on tomorrow, but for now I'm Justin Klein and I'm ready to take your calls right now on 8 a.m. 9 chart
[SPEAKER_08]: Justin Klein is here and he's ready with the answers to your finance and investment questions call in Vestalk 88899 chart and my focus point today is about the oil shock how 120 dollar crude is reshaping energy investment strategies and you know this is the big news over the last week we know
[SPEAKER_08]: both Brent and WTI hit about a hundred little shy of a hundred twenty dollars per barrel and the conflict is now well into a second week in the middle east and you're seeing critical infrastructure hit both in Iran as well as in the region and
[SPEAKER_08]: does not look like it's changing, despite what President Trump says or the cabinet's currently saying, conflicts continues.
[SPEAKER_08]: And roughly 15 million barrels of oil, about 20% of the global supply is shipped through the streets of Oremus.
[SPEAKER_08]: And it's not just oil.
[SPEAKER_08]: It's also refined products.
[SPEAKER_08]: And so don't think of as just the oil names and the energy names you're talking about,
[SPEAKER_08]: The downstream impact on companies like Follero, who are refiners, what does that mean for their business?
[SPEAKER_08]: You know, there's input costs, but then they're input costs going up, meaning that's the raw material costs.
[SPEAKER_08]: But then how much can they pass on to the consumer?
[SPEAKER_08]: That's a big question.
[SPEAKER_08]: Will they gain market share?
[SPEAKER_08]: It's another big question, most likely.
[SPEAKER_08]: Remember, the group is seven,
[SPEAKER_08]: the seven major economies, they have not tapped their strategic reserves yet as of now.
[SPEAKER_08]: But that could change.
[SPEAKER_08]: So from investment standpoint, expect a lot of volatility.
[SPEAKER_08]: And what's interesting is we talk today about how a lot of energy stocks were down.
[SPEAKER_08]: You'll look at the XLE, down about a percent and a quarter.
[SPEAKER_08]: And it's actually down on the weak, XLE is, I don't know if it's two days, but still.
[SPEAKER_08]: You would think, well, spiking, doubt and improve the prospects for these names and it hasn't.
[SPEAKER_08]: And that's something you have to pay attention to.
[SPEAKER_08]: Now, the way to think about it from an investment standpoint, at least in the short to medium term, is it's just going to be dragged out.
[SPEAKER_08]: Clearly, if it's being dragged out, I think $100 a barrel consistently will be the name of the game.
[SPEAKER_08]: the names that can take advantage of this and they're not hit by outages within the region.
[SPEAKER_08]: Problem with some of the larger names is that they do have exposure to some projects in that region.
[SPEAKER_08]: Versus the domestic producers, the shell producers, well, they've always been, they've been the swing producer for a number of years now, and they can start wrapping up supply, pretty easily, and capturing a lot of that.
[SPEAKER_08]: by margin, and that market share.
[SPEAKER_08]: And so if you're looking to play something within the space, it's probably one of those more domestically focused names.
[SPEAKER_08]: Now if you go by what's again, the Xons and Chevrons of the world, their businesses are more complex to both geographically, but also upstream and downstream.
[SPEAKER_08]: But what does it do to supply chains?
[SPEAKER_08]: And I think that is something most people are not talking about enough.
[SPEAKER_08]: It's not just about oil, but what industrial companies do with that oil?
[SPEAKER_08]: So companies like Petro, think about petrochemical companies.
[SPEAKER_08]: This is feedstock that goes into things like plastics and semi-conductors.
[SPEAKER_08]: to already seen semiconductor prices rise and energy costs, cost energy to go into the production of semiconductors as well as raw oil and the petrochemicals that are needed to produce semiconductors.
[SPEAKER_08]: And that's going to feed into IT hardware.
[SPEAKER_08]: Not just from a production standpoint, but from a shipping standpoint.
[SPEAKER_08]: If you can't go through the Suez Canal or that region because of conflicts, well, it's going to take a lot longer for products to get to market, even if they are produced.
[SPEAKER_08]: So this does have an impact or likely will have an impact on data center deployment, IT infrastructure projects, and really across the world that mainly obviously in the Middle East and in Europe.
[SPEAKER_08]: And then there's food.
[SPEAKER_08]: About 25 to 33% of global trade and fertilizers, raw materials, segment ammonia, and your rea passes through the streets.
[SPEAKER_08]: So this could impact food prices over the medium term, if you continue to see this conflict being dragged out.
[SPEAKER_08]: So just wanted to give you that big picture perspective, expect a lot of volatility in both directions.
[SPEAKER_08]: But I would actually be buying dips because I don't think this
[SPEAKER_08]: It's going to take a live call from Daniel and Palo Alto.
[SPEAKER_08]: We want to talk about investing in space.
[SPEAKER_03]: Yeah.
[SPEAKER_03]: Thank you, Justin.
[SPEAKER_03]: Long-time listener and calls you and see many times.
[SPEAKER_03]: I'm just in a quick friend of mine.
[SPEAKER_03]: It was, you know, with Adam about, well, I'm one of my space access.
[SPEAKER_03]: I said, well, I need to do some research to get some advice about these ETFs, which might eventually include it, like UFO or the arc base or the others.
[SPEAKER_03]: And just wanted it, I guess.
[SPEAKER_03]: If I could get to your opinion, if you could comment on that space,
[SPEAKER_03]: investment.
[SPEAKER_03]: I don't know what to tell my friends.
[SPEAKER_03]: He's a new investor.
[SPEAKER_08]: Well, the first thing you have to tell and you do investor is most IPOs are bad investments.
[SPEAKER_08]: So getting into it, I mean, if you can get into it before it hits market, then that might be fine.
[SPEAKER_08]: But buying it when it hits market, then you usually, it's too late.
[SPEAKER_08]: The prices are way too high.
[SPEAKER_08]: And then there's a lock up period, usually six months later, and that's when usually the price starts to decline.
[SPEAKER_08]: So the first six months, it kind of hangs in there because there's not a lot of supply of actual.
[SPEAKER_08]: stock, but then supply tends to increase, and it's usually at a very high valuation because the investment banks want valuations to be high, the insiders want valuations to be high, if they're going to sell their shares.
[SPEAKER_08]: And so you the investor or your friend, the investor, usually get a raw deal, usually don't get a very good price, unless you're getting in before it hits market once again.
[SPEAKER_08]: But something like SpaceX, the average person's not getting a hold of that.
[SPEAKER_08]: That's going to big institutions, hedge funds, mutual funds, etc.
[SPEAKER_03]: But what about ETFs?
[SPEAKER_03]: I mean, are there any, you're not, you're large, doesn't it?
[SPEAKER_08]: So you can get, you know, if you like, you talked about ITA.
[SPEAKER_08]: So, you know, there's G, aerospace, there's Raytheon, Boeing, but that's, but that's getting into the defense industry.
[SPEAKER_08]: So that's a little bit more, a little bit,
[SPEAKER_08]: It is not really a pure play space company.
[SPEAKER_08]: I rather own specific names.
[SPEAKER_08]: The think of, I like things like a, more like a helmet, HWM.
[SPEAKER_08]: So I'm not saying by HWM.
[SPEAKER_08]: I'm just saying if I'm gonna buy a name within the space, I rather own something like this that feeds the industry.
[SPEAKER_08]: You're talking about that makes especially products for the aerospace industry.
[SPEAKER_08]: You're talking about engine products, fastener systems, engineering forged wheels, things like that that are specific to the industry that has really high profit margins, good growth, et cetera.
[SPEAKER_08]: Usually, the industry is, you know, the space industry storeically has been just a bad business to be in.
[SPEAKER_08]: Now we'll see when SpaceX comes out, you know, when they audit their books and what it really looks like underneath the surface, we shall see.
[SPEAKER_08]: And, you know, the satellite industry tends to be very, very competitive.
[SPEAKER_08]: I would stay far, far away from anything that is taking individuals to space,
[SPEAKER_08]: I think of like rocket labs, you know, if you go look at RKT, you know, these are our names that just the business is not very good.
[SPEAKER_08]: So, you know, I would probably stay away from something like that.
[SPEAKER_08]: It's a very difficult industry to be invested in to be honest with you.
[SPEAKER_08]: Um, so I would, I would be very careful because there are a lot of, uh, I'm just pulling this up.
[SPEAKER_08]: Sorry, rocket labs.
[SPEAKER_08]: Yeah, rocket labs, loses money, very overhyped all of that.
[SPEAKER_08]: Uh, so in general, I think this industry is overhyped.
[SPEAKER_08]: and overbought to expensive.
[SPEAKER_08]: So you'd be very, very careful and I would be looking at the industry and finding names like a helmet to put on my watch list and be ready to pick it up when the centimuth industry showers, which it most likely will over the coming years.
[SPEAKER_03]: Got you.
[SPEAKER_03]: That's very sobering.
[SPEAKER_03]: Thank you, Justin.
[SPEAKER_08]: Yeah, no problem.
[SPEAKER_08]: Thanks for a call and hopefully your friend.
[SPEAKER_08]: Listen to him best talk as well.
[SPEAKER_08]: That's when back to the best talk voice bank in this question came in earlier from California.
[SPEAKER_06]: This is Nick and Hayman.
[SPEAKER_06]: I want to get your opinion on a stock called Joey.
[SPEAKER_06]: The symbol is CHWY.
[SPEAKER_06]: I think they're into ads, food, and stuff like that online and everything.
[SPEAKER_06]: I'm going to get your opinion on thinking about purchasing some of this one.
[SPEAKER_06]: See what you think about it.
[SPEAKER_06]: Thank you very much.
[SPEAKER_08]: are looking at chewy c h w is the c h w y is the symbol and
[SPEAKER_08]: The biggest issue right now is the trend is down.
[SPEAKER_08]: The momentum here is really bad.
[SPEAKER_08]: It peaked around $50 per share back in June, and now it's down to about $25 per share.
[SPEAKER_08]: So about 50% off, it's 52 week high.
[SPEAKER_08]: earnings expectations for this year would be down 50% from $1.4 last year to $52 since this year.
[SPEAKER_08]: So it's the bounce back to 81 since next year.
[SPEAKER_08]: So based on forward looking earnings, even at 81 cents, you're talking about a 30 times
[SPEAKER_08]: You know, poor earnings going forward.
[SPEAKER_08]: Now, I want to know why that is.
[SPEAKER_08]: I'd have to dig into that.
[SPEAKER_08]: Is that something that's a part of flash in the pan?
[SPEAKER_08]: Because if you look at it's free cash flow, it's cash from operations, it's near an all-time high.
[SPEAKER_08]: And it's profitability metrics are very good.
[SPEAKER_08]: Return equity right around 60%.
[SPEAKER_08]: So you certainly like that very little debt on its balance sheet on the fan of that.
[SPEAKER_08]: And enterprise value, you're even looking forward
[SPEAKER_08]: So I, I like the profitability metrics.
[SPEAKER_08]: I liked that they're, I like their cash flow.
[SPEAKER_08]: The cash flow can be a bit misleading if the shares outstanding seem to go up.
[SPEAKER_08]: Although that's, they've been buying back shares since 2024, but they stopped last year so I'd worry a bit about why they stopped.
[SPEAKER_08]: No dividend yield here.
[SPEAKER_08]: So they're definitely a mixed bag.
[SPEAKER_08]: And when I see a mixed bag with a poor chart, I just stay away from it.
[SPEAKER_08]: Now, once again, I think there's some,
[SPEAKER_08]: There's, there's a potential value here, but you need to watch for a trend change.
[SPEAKER_08]: Momentum needs to turn higher.
[SPEAKER_08]: You need to break this downtrend.
[SPEAKER_08]: I'd be watching that 100-day moving average.
[SPEAKER_08]: If it can somehow at some point break above the 100-day moving average, that would be a signal to me that maybe the downtrend is over and those profitability metrics are now taking over.
[SPEAKER_08]: So keep on your watchless, but don't buy it now.
[SPEAKER_08]: Let's go to Chris and Maine looking at PSI, X,
[SPEAKER_05]: Yeah, hey, Justin.
[SPEAKER_05]: I actually own a very small position in this stock and on this recent dip that back down to kind of its December lows, thinking about opening up a little bit of a larger position, just kind of seeing what you thought of in this low 50 level.
[SPEAKER_08]: Well, it's early at support where a bottom and back in November, that is a good sign.
[SPEAKER_08]: The bad sign is that this is kind of the breakout area broke out from this kind of a consolidation period.
[SPEAKER_08]: that started in late 24 and broke out in mid last year mid 25 and that's where that's right around $40 to $45.
[SPEAKER_08]: And the recent lows were kind of around the $50 range.
[SPEAKER_08]: So you're kind of in that range once again.
[SPEAKER_08]: It's hit that twice though and that worries me a little bit.
[SPEAKER_08]: Now what do they do?
[SPEAKER_08]: They design infrastructure and have a great trade systems,
[SPEAKER_08]: of assuming their businesses booming because of AI data center growth earnings back in 2022 was only actually lost money in 2021 and then this was to make $5.61 this year up 13% but that's after being up 77% last year.
[SPEAKER_08]: and then earnings next year will just be up 30%, but those estimates are coming down.
[SPEAKER_08]: And I think that's what's happening here is that the market was pricing in very strong growth, but that growth has certainly slowed.
[SPEAKER_08]: But if it can make $7.31 next year, that would be still a high single-digit multiple with a good balance sheet, high profitability.
[SPEAKER_08]: Problem is their cash flow is not that amazing.
[SPEAKER_08]: Free cash flow is only about 13 million.
[SPEAKER_08]: That has come down considerably from the 75 million that it saw in late 24.
[SPEAKER_08]: 61 million that it was actually 12 months in mid last year.
[SPEAKER_08]: So my question is why is that happening?
[SPEAKER_08]: Why is cash flow rolling over cash operations down to 23 million and that's also rolling over?
[SPEAKER_08]: Uh, so that's my problem here is I need to understand why free cash flow dropping fact fact last quarter it went negative.
[SPEAKER_08]: So I'm talking about, well, turning 12 months, it's still positive, but last quarter it was negative.
[SPEAKER_08]: Why is that any really need to dig into the to the earnings have you done that yet?
[SPEAKER_05]: Uh, very lightly, not enough to really answer that as far as why it actually went negative.
[SPEAKER_08]: Yeah, so if this is more of a flash in the pen, then I would say it's probably going to hold this low and it'd be probably be a good buy, but if there what what is the driver of this is it higher costs is it maybe certain
[SPEAKER_08]: certain customers didn't pay.
[SPEAKER_08]: Why did they're free cash left?
[SPEAKER_08]: They're surging through most of 2024 and 2025.
[SPEAKER_08]: Is it rolling over again?
[SPEAKER_08]: That I would need to answer.
[SPEAKER_08]: If I would comfortable with that answer, it would be a buy because I think it's cheap and that's a good balance sheet.
[SPEAKER_08]: It's in
[SPEAKER_08]: in the heart of AI data center build out.
[SPEAKER_08]: And I think there's some seconds that will continue to be secular tailwinds to that.
[SPEAKER_08]: But if there are other problems that foot here, that's gonna keep their free cash flow negative, well then it's probably gonna break this low and head lower.
[SPEAKER_08]: So I would need to do more research.
[SPEAKER_08]: And that's what I would do.
[SPEAKER_05]: Thank you very much, and I appreciate it.
[SPEAKER_08]: Thanks for the call, Chris.
[SPEAKER_08]: This is Best Doc, I'm Dustin Klein.
[SPEAKER_08]: We have one goal each and every week.
[SPEAKER_08]: They help you achieve your own version of fans of freedom and I work continues after this final break.
[SPEAKER_08]: So good to questions in right now at eight and eight.
[SPEAKER_08]: 99 chart.
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[SPEAKER_02]: Hi, I was listening to your podcast this morning about insurance companies and private credit.
[SPEAKER_02]: And I own a matte life, I've owned it for a long time.
[SPEAKER_02]: I'm up quite a bit on it, even though I know it's down from its high.
[SPEAKER_02]: And according to chat, GPT, it has 17 to 20% in private credit.
[SPEAKER_02]: And I'm just wondering if it's too much for insurance company, if maybe I should get rid of it while I'm still off,
[SPEAKER_02]: a normal amount, and what you guys think.
[SPEAKER_02]: Thanks a lot.
[SPEAKER_02]: Bye.
[SPEAKER_08]: I do think that is a hefty amount, and I would be worried a bit about it.
[SPEAKER_08]: I do think I would get out of it, because if you look at most of the insurance companies that have single-digit exposure to this space, they're chugging along.
[SPEAKER_08]: But it is a tell and that goes to anyone out there that has an ability, you should probably go look up the public company that may be associated with that particular
[SPEAKER_08]: that particular annuity and see if they're rolling over and seeing if they're closer to a 52 week low than a 52 week high.
[SPEAKER_08]: And if they're closer to a 52 week low, that means most likely that they are stuffed full of this private credit and private equity.
[SPEAKER_08]: So I think
[SPEAKER_08]: versus, I'll give you a kind of a bigger one, like an all-state, it's relative, turning to 50, five.
[SPEAKER_08]: So, and it's only 4% off, it's a 52-week-high.
[SPEAKER_08]: So, this is telling me something.
[SPEAKER_08]: This is telling me that a name like Met Life is not what you want to.
[SPEAKER_08]: So, yes, I would sell it and move on.
[SPEAKER_08]: Lastly, let's talk about tax season.
[SPEAKER_08]: We are hitting tax season, and there are some,
[SPEAKER_08]: Mistake, so a lot of CPAs see from their clients.
[SPEAKER_08]: And so let's talk about them.
[SPEAKER_08]: Now the number one mistake, most, especially business owners, make is writing off things as business expenses when they're not really business expenses.
[SPEAKER_08]: Think about dinners, trips, some of them even try to write off property.
[SPEAKER_08]: And you have influencers, especially that can earn six figure salaries and they think everything they do because their influencer is deductible.
[SPEAKER_08]: But the task code is pretty clear it that you can only write off expenses for business purposes if they exclusively used for work.
[SPEAKER_08]: So that's number one.
[SPEAKER_08]: So think about that when you're writing things off number two.
[SPEAKER_08]: Cheeping out on an account, you know, a lot of people, we all hate paying taxes.
[SPEAKER_08]: We all don't want to write that check.
[SPEAKER_08]: And a lot of people try to skimp out on costs because they see, I'm spending this much on taxes, and I want to spend another $23,000.
[SPEAKER_08]: But if your life is somewhat complex, meaning, especially if you have the business, if you have multiple properties, if you have multiple kids, if you have a lot that goes into your return, most likely a great CPA will be able to make up for the mistakes that a cheap CPA will make.
[SPEAKER_08]: I see it very often that skimping out and finding the CPA or the tax prepare, because there are usually not CPAs, that we'll just do it for a few hundred bucks, it costs a lot more in the long run.
[SPEAKER_08]: So make sure you have a good relationship with the CPA that will walk you through the complexities of the tax code so that you aren't pushed into
[SPEAKER_08]: Certain tax brackets, because if you hit different thresholds, it makes you not qualify for certain deductions, all of that, that's what often can happen.
[SPEAKER_08]: And remember, the IRS knows your tricks.
[SPEAKER_08]: So they have powerful tools to make sure that everything is accounted for.
[SPEAKER_08]: So, make sure you don't have any common invoidance tactics.
[SPEAKER_08]: There's a lot of those, the IRS is very well aware of.
[SPEAKER_08]: They can garnish your wages, even your social security, you'll pay tax leans, penalties over time.
[SPEAKER_08]: So it's not worth it to skimp on your tax preparation.
[SPEAKER_08]: Make sure you apply to head and make sure you have a professional if your tax situation is a bit complex.
[SPEAKER_08]: Don't I'm just inclined?
[SPEAKER_08]: I remind you, I want to remind you about the K-P financials parallel investing.
[SPEAKER_08]: When we make a trade for our clients, we make the same trade for ourselves, the same day, same price, same percentage, no front running, no special treatment, we invest right along the side of our clients.
[SPEAKER_08]: So if you want to learn more, just head over to invest.com.
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