[SPEAKER_02]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is invest talk, independent thinking, shared success.
[SPEAKER_02]: Invest talk is made possible by KPP Financial, a registered investment advisor firm, serving clients throughout the United States.
[SPEAKER_02]: Here is KPP Financial Chief Executive Officer, Financial Advisor, Justin Klein.
[SPEAKER_00]: Good afternoon fellow investors and welcome back to Invest Talk.
[SPEAKER_00]: This is our Thursday.
[SPEAKER_00]: March 19th, 2026 edition of Investock, and is the first day of March Madness, it's the first day of market madness, so if you feel like you're brackets, there's the first day of the first round, and the winners, so we'll have more on that over on our YouTube channel, so check on some content that we've posted before the weekend, and
[SPEAKER_00]: You know, but today is really about answering your finance and investment questions going over what happened in the market today.
[SPEAKER_00]: It was a very interesting day per usual for 2026 and we'll unpack what the market generations were with the economic news was all of that going forward, but ultimately our main goal is to answer your finance and investment questions.
[SPEAKER_00]: We want to know what is on your mind.
[SPEAKER_00]: What are you thinking about?
[SPEAKER_00]: What can we bring clarity to in your mind?
[SPEAKER_00]: How can we help you make better decisions with your money?
[SPEAKER_00]: That's what we do each and every day on invest stock.
[SPEAKER_00]: Now, just to be able to talk about today's Mark performance and run down the show topics for the hour, but as usual, we'll tackle this first call a question now.
[SPEAKER_06]: Hello, my name's David from San Jose, call regarding hership company, HSY, have the stock for a while now.
[SPEAKER_06]: Look forward to your answer.
[SPEAKER_00]: Thank you.
[SPEAKER_00]: Are looking at her.
[SPEAKER_00]: She H. S. Why is the symbol of the name that we've been buying up for clients for some time back when is in the one 60 range now we're trading right around to 10.
[SPEAKER_00]: 2.6% yield and last year they had a big dip in earnings down 33% why is that because could cow prices were up.
[SPEAKER_00]: And what is her?
[SPEAKER_00]: She do they make chocolate what goes in a chocolate.
[SPEAKER_00]: that hurt their margins.
[SPEAKER_00]: But if you look historically, these
[SPEAKER_00]: The the cure for high prices in the commodity markets is always high prices and we know eventually that would be cured in some way shape or form and it has been as of late and that's where earnings are expected to bounce back to $8.38 this year up 33% and then up to $9.85 next year which would be an all time high in earnings even though we're still down from its 2023 high when it was at $280 per share.
[SPEAKER_00]: So, to us, that was a buying opportunity.
[SPEAKER_00]: And we obviously have done well.
[SPEAKER_00]: And frankly, it's pulled back as a blade.
[SPEAKER_00]: It's down to what percent from us 52 week high, up around 240, now we're at 210.
[SPEAKER_00]: So to me, this is a nice, healthy pullback in the midst of an uptrend that started in around March April of last year.
[SPEAKER_00]: So I think this is a great place to be adding to.
[SPEAKER_00]: If you own it, I would just hold it.
[SPEAKER_00]: We are holding it for clients.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: No, I hope you had a chance to participate in our Invest Talk Market Madness Contest.
[SPEAKER_00]: And let's just go over the winners for today.
[SPEAKER_00]: We had Apple Microsoft Service Now AMD into it.
[SPEAKER_00]: S-Y-L-O-S-Y-M. Symbotic, there we go, Symbotic.
[SPEAKER_00]: And then we had Google or AlphaVet and then HighMix.
[SPEAKER_00]: Each IMAX, those were the ones that advanced to the second round of the market madness competition.
[SPEAKER_00]: Now a lot of ground to cover over the next 45 minutes or so and time permitting will get to all of it.
[SPEAKER_00]: We'll look at our main focus point, which is how should you invest during this market volatility?
[SPEAKER_00]: How should you think about your strategy and adjustments in the midst of a war, spike in oil prices, et cetera?
[SPEAKER_00]: We'll take it into that.
[SPEAKER_00]: In addition, what countries will be impacted the most from this spike in energy prices?
[SPEAKER_00]: Intent, many other countries around the world Mo mainly the poor countries.
[SPEAKER_00]: Why?
[SPEAKER_00]: Because their day to day costs tend to heavily weighted towards these energy inputs.
[SPEAKER_00]: So we'll look at that story.
[SPEAKER_00]: They're up, and we'll talk about why that might be.
[SPEAKER_00]: And then if we have time, we'll look at why Apple continues to win in the age of AI, at least from the business perspective.
[SPEAKER_00]: We also have voice bank calls on Wattsco and then buying credit card companies.
[SPEAKER_00]: Also, we have questions that came in to be the comment section of the Invest Talk YouTube channel as well.
[SPEAKER_00]: But most importantly, we'll be your live calls.
[SPEAKER_00]: I welcome your live calls, anything finance or investment related.
[SPEAKER_00]: Give me a call, eight, eight, nine, nine chart.
[SPEAKER_00]: Now we're heading into a quick break.
[SPEAKER_00]: Please remember you can go any time.
[SPEAKER_00]: Leave your question on the investment on voice bank, releasing via the live stream or possibly a name 1220 in the Bay Area.
[SPEAKER_00]: You can call right now, eight, eight, nine, nine chart.
[SPEAKER_00]: Hang on because I'll talk about today's market activity in the next segment.
[SPEAKER_01]: 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_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.
[SPEAKER_01]: And you can learn more anytime at InvestTalk.com.
[SPEAKER_00]: the Invest Talk phone lines never closed and now Justin Klein is here call Invest Talk 88899 chart it ain't 99 chart it ain't 992427 it's like if they would ask your question on today's show let's take a quick look at the markets today we were certainly in the red for pretty much the entire day but
[SPEAKER_00]: We recovered a lot late in the day and the NASDAQ only was down a little more than a quarter percent.
[SPEAKER_00]: Same with the S&P.
[SPEAKER_00]: The Dow was down slightly less than half a percent on the day.
[SPEAKER_00]: If you look at the heat map of the S&P for the daily, you had Tesla down over 3 percent, Netflix down 3, G down 3, Micron down 3 on earnings.
[SPEAKER_00]: But most of everything was kind of flat to slightly down.
[SPEAKER_00]: You had some gains out of names like AMD and Intel and Dell, anything kind of hardware related in the text base did fairly well.
[SPEAKER_00]: Retail suffered Amazon and Costco down about half percent while Mark down about three quarters of one percent.
[SPEAKER_00]: So it wasn't really that crazy of a day.
[SPEAKER_00]: trepidation of what's going on in the middle east.
[SPEAKER_00]: You did have WCI crude up 0.1% so basically flat.
[SPEAKER_00]: Brent was up.
[SPEAKER_00]: Brent crude is up 1.2% the market is not advancing further, but still staying at these elevated levels.
[SPEAKER_00]: Really the big news was silver was down 8.2% copper down 2.1% gold down 5.9% the lowest close since mid January.
[SPEAKER_00]: The dollar index though was down 0.9%
[SPEAKER_00]: with notable weaknesses about cross the major currencies.
[SPEAKER_00]: You had treasuries, they were mixed across the curve, and but you saw front end yields came off their early highs.
[SPEAKER_00]: So a little bit less hawkish at least the market is pricing in from the Fed.
[SPEAKER_00]: And there continues to be a wave of attacks in the Middle East on oil infrastructure, but I think it's notable that you did not see a big jump in prices.
[SPEAKER_00]: You did see initial claims that did tick down, uh, initial claims to want to play mix.
[SPEAKER_00]: Excuse me, continuing claims did tick up, however.
[SPEAKER_00]: You had Philadelphia manufacturing index that came in above consensus, new orders fell three points, but you also saw an acceleration in the prices,
[SPEAKER_00]: to the reversing the decline in January.
[SPEAKER_00]: So certainly inflation-expected inflation pressures continue to mount new home sales, though.
[SPEAKER_00]: That miss consensus in a big way, 587,000 consensus was 720,000.
[SPEAKER_00]: So kind of a rough reading on that side.
[SPEAKER_00]: So pretty interesting days, still not a whole lot
[SPEAKER_00]: Especially after the the Fed announcement yesterday that didn't get a whole lot of movement either we are in the midst of up up x week so options expire on Friday typically you do get the market getting pinned a whole not a whole lot of movement until we
[SPEAKER_00]: get a resolution or get through opx, which would mean maybe next week, volatility could increase once again.
[SPEAKER_00]: Usually they're a gamahedge unwinds, which means the market tends to move in the opposite direction of where most of the
[SPEAKER_00]: Notional value of the options lean and right now it's on the put side what that means is that there are more bets to the downside of the market than upside Which typically as you get closer to opx on Friday and into next week that actually should give a bit of a bid to the market as a whole
[SPEAKER_00]: And who knows what happens over the weekend, it looks to be some contentiousness between the Trump administration and Israel and some of the tactics and places that Israel has bombs.
[SPEAKER_00]: So we'll see if there's a breaking of ranks on that side that causes maybe a pullback from hostilities, we shall see something you might get over the weekend.
[SPEAKER_00]: But that was the market today, not a ton of movement
[SPEAKER_00]: We'll see how we, what kind of reaction we get to Marrow.
[SPEAKER_00]: Let's keep things moving and pay the back to a question from our anytime listener line.
[SPEAKER_07]: Hi, and best talk.
[SPEAKER_07]: I had the question about buying into a credit card company.
[SPEAKER_07]: So, Visa, Master Carter, American Express, where the three that we're on my watch list.
[SPEAKER_07]: So, my question is, do you have a preferred from those three company that you would allocate money towards?
[SPEAKER_07]: Or do you feel like it could even be good just to dollar cost average into?
[SPEAKER_07]: The three of them evenly not do some like super high weight in my portfolio, but just to have some exposure, I just see them as a, I guess, triopoly and also with the expenses at the cards charge, it just seems like they'll always have like that income, I also was curious you take on American Express, I know they charge higher fees, some merchants, but they also don't have as many people probably who qualify for the card, just because it requires a higher credit score, if that has any influence on your decision to my first question,
[SPEAKER_07]: I know that's a lot, but I'm very interested to see what you guys say.
[SPEAKER_07]: So I'll listen on the show, and thank you as always.
[SPEAKER_00]: Well, first off, I'd like that you're looking at quality companies' quality businesses.
[SPEAKER_00]: But there are risks here, and there's a big difference between a Visa to MasterCard and an American Express.
[SPEAKER_00]: What you have to understand is that MasterCard and Visa, those are not credit card companies.
[SPEAKER_00]: Those are credit card processing companies, very, very different.
[SPEAKER_00]: They make money on swipe fees, on ATM fees.
[SPEAKER_00]: debit fees, excuse me, that's how they make money.
[SPEAKER_00]: Now American Express also makes money on that, but as you said, they'd lend money.
[SPEAKER_00]: Basta card and visa do not take credit risk.
[SPEAKER_00]: They do not lend to customers.
[SPEAKER_00]: Banks, lend to customers.
[SPEAKER_00]: Synchronies, lend to customers.
[SPEAKER_00]: Sofice, sofice, bank lead, lend to customers.
[SPEAKER_00]: There are those are credit card companies that actually take credit risks
[SPEAKER_00]: American Express historically has a pretty nice business of doing a little bit above getting the swipe fees as well as charging interest on the credit cards they didn't have a higher quality of customer so in rougher times they have less defaults.
[SPEAKER_00]: They don't tend to lend to low credit investors or customers
[SPEAKER_00]: Now, when you're stepping back and you're looking at all three and the swipe fees, what I worry and I think you're seeing this in the chart is that will the shifts in crypto and stable coins cause more and more people to move away from those transaction rails.
[SPEAKER_00]: Will AI start to utilize and that's the kind of the current consensus that could change obviously, is that AI will start to transact
[SPEAKER_00]: with stable points and on crypto networks, versus a VCR mastercard or American Express.
[SPEAKER_00]: And it gets being priced in the markets.
[SPEAKER_00]: Now, that's a big question you have to answer yourself.
[SPEAKER_00]: If you think that third tri-opily, as you said, it will maintain, then you want to invest, that's fine to invest in these.
[SPEAKER_00]: You want to be fading this decline in these names.
[SPEAKER_00]: I would pick American Express because of that higher profitability, that diversity in their business of the three.
[SPEAKER_00]: But frankly, I wouldn't buy any of them because I do think over time their premiums that the market is pricing on these names is too high and it's going to come down to have to come down a lot for me to take on the risk of their payment networks being distributed over time.
[SPEAKER_00]: So I'm passing on all three.
[SPEAKER_00]: They're heading into a break.
[SPEAKER_00]: I'm ready to take your calls now, but eight, eight, nine, nine chart.
[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, Justin Klein and Luke Guerrero.
[SPEAKER_01]: So when you've got finance and investment questions, don't forget to call in Vestock, 888-99, chart.
[SPEAKER_00]: Then you probably know we get questions from the comment section over on our YouTube channel.
[SPEAKER_00]: Let's go answer it one of those questions now and Jake Samuels says, hey guys, love the contest and love the show.
[SPEAKER_00]: But do you love Rine Medal ADR?
[SPEAKER_00]: R N M B Y is the symbol R N M B Y.
[SPEAKER_00]: I can't find a ton of information on it, so I don't know if I love it yet, what do your thoughts, overall thoughts and the companies that buy the current levels over there and you price to keep on my watch list.
[SPEAKER_00]: So this is Rine Metal R-H-E-I-N-M-E-T-A-L, and they are out of Germany.
[SPEAKER_00]: This is one of those names that boomed during the
[SPEAKER_00]: war with Ukraine because European countries started to ramp up their spending on defense.
[SPEAKER_00]: And that's what this company does.
[SPEAKER_00]: They develop and sell component systems and services for security and civil industries.
[SPEAKER_00]: and their business has done very, very well, but it's now trading at pretty high valuations.
[SPEAKER_00]: So earnings this year is supposed to be $9.19, that's up 149% from the $3.69 they earned, the previous year.
[SPEAKER_00]: And then so they're in $13.73.
[SPEAKER_00]: Next year, those estimates are coming down to $360 stock.
[SPEAKER_00]: So,
[SPEAKER_00]: Mark, it's kind of priced this in.
[SPEAKER_00]: It's losing momentum.
[SPEAKER_00]: It's making it low.
[SPEAKER_00]: It's high.
[SPEAKER_00]: It was back in the fall of last year, around $468 per share made a lower high in January and now continues to head lower.
[SPEAKER_00]: This is really just to play on European defense spending.
[SPEAKER_00]: I, I like this pull back, much more reasonable valuation than it was around 460, now it's a 360, but frankly, I don't see, let me give you a support level on this.
[SPEAKER_00]: Cause I would like to buy it.
[SPEAKER_00]: Great, I mean, I would love to buy it right around 1, 5, 1, 35, 1, 40.
[SPEAKER_00]: I don't know if it'll get all the way down there.
[SPEAKER_00]: Let me see this, 300, that would be support.
[SPEAKER_00]: I would buy it at 360 now, so I think there's more downside to come.
[SPEAKER_00]: Thanks for the question.
[SPEAKER_00]: Let's see if I can fit in another listener question now.
[SPEAKER_03]: Hello, I had a question on FTNT that's Frank Tom, Nancy Tom.
[SPEAKER_03]: This is a stock that I read about regarding cyber security in a Morningstar article that was thinking maybe I put in a little bit, maybe less than 1% of my portfolio and depending on the result, I may either add a little bit more or just hold.
[SPEAKER_03]: Let me know what you think.
[SPEAKER_00]: Thank you.
[SPEAKER_00]: a very good cybersecurity company.
[SPEAKER_00]: Consistent growth earnings last year were up 16% so it's supposed to be up another 8% this year and a lot of% next year.
[SPEAKER_00]: Now those expectations are coming down, but it's a bit of a worry.
[SPEAKER_00]: What the stock is down about 24% from its 52%, but it's still trading in the high 20s times P perspective for looking P perspective.
[SPEAKER_00]: Which isn't drastically expensive,
[SPEAKER_00]: Now, this is near the top of our list of the cybersecurity names, because of its high profitability, very strong balance sheet.
[SPEAKER_00]: The question is, is it cheap enough?
[SPEAKER_00]: Yeah.
[SPEAKER_00]: And my simple answer is not quite.
[SPEAKER_00]: It has a much better risk versus reward than it was.
[SPEAKER_00]: Just handful of months ago, yes.
[SPEAKER_00]: But I want to see it down around $60 per share.
[SPEAKER_00]: Now we're at 83.
[SPEAKER_00]: That's an area that I would pick it up.
[SPEAKER_00]: So right now, it's still trending somewhat bare still below the Trinity moving average.
[SPEAKER_00]: It's attempting to break above it though.
[SPEAKER_00]: It's been kind of knocking on that door here for the last couple of months.
[SPEAKER_00]: That's the positive.
[SPEAKER_00]: So maybe a starter position here is not the worst idea because technicals are improving somewhat, but ultimately I'm not buying it aggressively until it gets to 60.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: That was four to net, four to net, FT and T is a symbol, 61 billion dollar market cap, no dividend, but is, let's see, is it buying back shares?
[SPEAKER_00]: Yeah, it's one of those serial capital returners to buying buying back shares.
[SPEAKER_00]: That's how they, they don't pay a dividend, they buy back shares, 2.2 billion dollars from free cash flow, decent free cash flow yield, and they're buying back shares, which I certainly like.
[SPEAKER_00]: So I'm going to give Fortnite a mild thumbs up right now, but I would give it a huge thumbs up around 60.
[SPEAKER_00]: Now the next and best talk we'll look into the story.
[SPEAKER_00]: Labor, market, Iran, war, impact.
[SPEAKER_00]: Job's data shows resilience.
[SPEAKER_00]: Use the jobless claims continues show a sluggish but stable labor market, both low layoffs, anchoring economic stability, even as global conflicts, rage, however.
[SPEAKER_00]: Economist war in that prolonged, Iran, war tensions, could eventually threaten labor market strength.
[SPEAKER_00]: We'll get to that story tomorrow, but for now, I'm Justin Klein, and I'm ready to take your calls now.
[SPEAKER_02]: Justin Cline is here and ready to tackle your questions.
[SPEAKER_02]: I've heard you say multiple times that you prefer shorter duration crash response.
[SPEAKER_02]: Can you explain to me why it is more advisable?
[SPEAKER_02]: Call in Vestock, 888-99 chart.
[SPEAKER_01]: There are a few things that make KPP financial special.
[SPEAKER_01]: One of them is parallel investing.
[SPEAKER_01]: This means they invest right alongside their clients.
[SPEAKER_01]: Here's how it works.
[SPEAKER_01]: When KPP financial makes a trade for their clients, just in client makes the same trade for himself and KPP.
[SPEAKER_01]: On the same day, at the same price, and same percentage.
[SPEAKER_01]: No front running, no special treatment.
[SPEAKER_01]: Learn more about parallel investing at investtalk.com.
[SPEAKER_00]: One thing we know about Chaos is that it breeds opportunity.
[SPEAKER_00]: And that's what I mean, focus point is about today.
[SPEAKER_00]: And about the war volatility we are experiencing.
[SPEAKER_00]: And whether it should impact your overall strategy.
[SPEAKER_00]: So we'll look at different asset classes and how to think about those asset classes in context to the recent market, sell-off.
[SPEAKER_00]: The first is obviously equities.
[SPEAKER_00]: And this feels disruptive.
[SPEAKER_00]: We know that.
[SPEAKER_00]: What the question is, is there something existential?
[SPEAKER_00]: Is it going to have a long lasting impact
[SPEAKER_00]: relatively short-term, and what is the market price in already?
[SPEAKER_00]: The market is adjusting to this new information, but is it a signal to investors to abandon in their long-term investment strategy?
[SPEAKER_00]: Most likely not.
[SPEAKER_00]: The best buying opportunities are when the headlines look rough.
[SPEAKER_00]: Not good to get rougher.
[SPEAKER_00]: Absolutely.
[SPEAKER_00]: Are we at that crescendo of fear?
[SPEAKER_00]: I'm not quite feeling it yet.
[SPEAKER_00]: I get a lot of question.
[SPEAKER_00]: I kind of know based on calls into the show where sentiment is.
[SPEAKER_00]: Very interesting.
[SPEAKER_00]: It's actually one of the ways that help make decisions with clients.
[SPEAKER_00]: People are all calling about a particular sector well, that's probably a sector that we should be trimming.
[SPEAKER_00]: If everyone's worried and thinks they should raise cash and go to cash, well, then that might be a good buying opportunity.
[SPEAKER_00]: So we're somewhere in the middle based on my sentiment analysis.
[SPEAKER_00]: But more on the bearish side, meaning we're getting close to a good buying option, especially in many sectors.
[SPEAKER_00]: So this is a time to tweak your portfolio.
[SPEAKER_00]: Rebalance and a reminder that you should rebalance, probably quarterly.
[SPEAKER_00]: Going into this year, it was a great time to adjust your portfolio and rebalance closer to overweight harder assets that
[SPEAKER_00]: bits in the sky and you saw that with the cell-off and tech throughout the share.
[SPEAKER_00]: You should know, get that volatility right at the end of the quarter or the beginning of the quarter.
[SPEAKER_00]: Do you see somewhere in the middle?
[SPEAKER_00]: Now, we're getting a little bit of volatility now, but that also means that once we get to the end of this quarter is going to be a lot of good buying opportunities.
[SPEAKER_00]: So this is the time to think about rebalancing your portfolio, laying out a strategy and slowly working your way towards that.
[SPEAKER_00]: Then there's fixed income, what should you avoid?
[SPEAKER_00]: Well, an inflationary environment bonds tend to not do very well and you get a sell-off in bonds and duration assets.
[SPEAKER_00]: So talking about 10 year bonds, 20 year bonds, 30 year bonds, they tend to sell-off and you've seen that over the past two, three weeks.
[SPEAKER_00]: So stick to high quality, short to basically short-term fixed income.
[SPEAKER_00]: That money, that is the money that is set aside for the next kind of two to three years.
[SPEAKER_00]: But Vini Cash to pay bills over the next 12 months, that should be probably more like short term.
[SPEAKER_00]: T bills, hired money, market accounts, etc.
[SPEAKER_00]: Then there's gold.
[SPEAKER_00]: Today, we, I have not been buying a lot of gold and silver for new clients for about three months now.
[SPEAKER_00]: Today was the first time that really stepped in with size into that market.
[SPEAKER_00]: And gold is a diversifier.
[SPEAKER_00]: Yes, it's selling off now, stronger dollar.
[SPEAKER_00]: Gulf countries are selling off assets in order to fund a lot of their adjustments, shall you say to their budget in the short term, so that's creating a little bit of volatility.
[SPEAKER_00]: But ultimately, I do think this is a good buying opportunity and gold.
[SPEAKER_00]: But there's another way to think about this sell off, and that is taxes.
[SPEAKER_00]: Volatility can create opportunity, especially when you're talking about potentially tax loss harvesting or doing Roth conversions.
[SPEAKER_00]: You can convert securities that if maybe the client a little bit.
[SPEAKER_00]: Without selling them, remember, you can do that.
[SPEAKER_00]: You don't have to do the conversion in cash.
[SPEAKER_00]: You can actually convert securities.
[SPEAKER_00]: So if you're down on a particular security, you can convert that into your IRA, your Roth IRA, you're paying taxes on that full amount, but it's on a lower dollar amount because of that price decline.
[SPEAKER_00]: So something to think about as well as we go through this market correction, which frankly is healthy.
[SPEAKER_00]: And any given year, you should always expect a 10% decline in markets at any given moment.
[SPEAKER_00]: That is the norm, so don't think that this market's decline is anything but ordinary.
[SPEAKER_00]: No, we've got time, so let's roll in another listener question now.
[SPEAKER_04]: Hello.
[SPEAKER_04]: I just had a question today about a stock called Walksco.
[SPEAKER_04]: WSO.
[SPEAKER_04]: I want to know, before I pull the trigger to you, Ted, is advisable to jump in at the course of this at the moment.
[SPEAKER_04]: You can please let me know.
[SPEAKER_04]: I appreciate it.
[SPEAKER_04]: Thank you so much for you out.
[SPEAKER_00]: Looking at Watts Go, WSO is the symbol.
[SPEAKER_00]: I mean, should be air conditioning, heating and refrigeration equipment and related parts and supplies to residential customers,
[SPEAKER_00]: The cell-electric and oil furnaces, commercial air conditioning, and heating equipment, their business has done very well in the midst of an AI.
[SPEAKER_00]: Well, actually now they look at it.
[SPEAKER_00]: It hasn't.
[SPEAKER_00]: If I'm looking at earnings, earnings peaked in 2022 at $14.20 and they're just to earn.
[SPEAKER_00]: 12 dollars in 64 cents only up 3% for last year and those estimates are coming down as well.
[SPEAKER_00]: So one of my questions, even though I'm looking at the profitability, which is good around 17% returning equity market cap, right on 15.5 billion with no debt, nice 3% dividend yields, but their pay ratio is pretty high, so I don't think I dividends really going up in the shorter term.
[SPEAKER_00]: I wonder why is there business not booming?
[SPEAKER_00]: Both the other HVAC companies are doing very, very well.
[SPEAKER_00]: There's, is it?
[SPEAKER_00]: It sure's outstanding, it's need to go up.
[UNKNOWN]: Why is that?
[SPEAKER_00]: Why is that?
[SPEAKER_00]: The technicals are good.
[SPEAKER_00]: It bottoms back in November.
[SPEAKER_00]: It's now an uptrend above the 100-day moving average below the 200-day moving average.
[SPEAKER_00]: So it's in a tentative uptrend, shall we say.
[SPEAKER_00]: It's okay, enterprise value, they're unnamed, it's about fairly valued, but my issue is the lack of growth, you're trading at a high multiple, but why is business not booming in the midst of the data center build out?
[SPEAKER_00]: It's clearly losing market share to, for example, a comfort system, USA.
[SPEAKER_00]: same business.
[SPEAKER_00]: And their earnings since 2022 has gone from $5.29, all the way up to $44, expected next year.
[SPEAKER_00]: Just massive growth.
[SPEAKER_00]: So if you're trying to
[SPEAKER_00]: by a track company that is crushing it and trading at a market premium, I met your much rather by one that is positioned for the AI data center built out.
[SPEAKER_00]: Now, it doesn't mean that's not without risks, but I met your other own those type of needs.
[SPEAKER_00]: So I'm passing on Wattsgo.
[SPEAKER_00]: Those pivot over to another voice mail question now.
[SPEAKER_05]: Hello, gentlemen.
[SPEAKER_05]: I wanted your thoughts on a spot that I've had on my watch that's for quite some time.
[SPEAKER_05]: Victor, Victor, Victor, Victor, Salveline.
[SPEAKER_05]: Thank you for your thought.
[SPEAKER_00]: Looking at valvoline, we most people know, they make engine oil.
[SPEAKER_00]: And if we use cool ends for transmission fluid, gear oil, grease, filters, wipers, etc.
[SPEAKER_00]: Strong business.
[SPEAKER_00]: It's just in growth, 2021, they only earned 58 cents, but last year, they earned $1.59, and this was earned $1.70 this year, and then 201, next year, and it's a $32 stock.
[SPEAKER_00]: So based on that, you're talking about a mid-teens forward-looking multiple.
[SPEAKER_00]: Not terrible?
[SPEAKER_00]: You have earnings or revenue growth last quarter at 11% earnings, we're up 16%.
[SPEAKER_00]: The technicals are not fantastic.
[SPEAKER_00]: But I do like the fundamentals, return equity on 30%, pre-cache flow, only about 57 million.
[SPEAKER_00]: That's probably my biggest worry is that pre-cache flow has dipped and has not recovered.
[SPEAKER_00]: Really, cash from operations, kind of, it's been up around 320 million and peaked out around 408 back in 2021.
[SPEAKER_00]: It's margins, operating margins right around 17%, which is down from its peak back in 2017, and has been rolling over.
[SPEAKER_00]: So I don't love that.
[SPEAKER_00]: This is an input cost situation, I'm not sure.
[SPEAKER_00]: It does have a little bit of debt, but it's has been buying back shares, I like that.
[SPEAKER_00]: Overall, I don't, I like the profitability.
[SPEAKER_00]: I like the business, but I love the business.
[SPEAKER_00]: Don't really love the chart because it's in a downtrend.
[SPEAKER_00]: This would be really have to be a long-term play.
[SPEAKER_00]: Being you're gonna have to probably deal with a little more downside volatility, but it's probably a good portfolio diversifier.
[SPEAKER_00]: because of its brand name, it's consistency of its earnings, and so I like that.
[SPEAKER_00]: So as a small position of portfolio, sure, but you really have to have a very long-term view, and it has to be as more of a portfolio diversifier than you making a ton of money in this short-term.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: Let's touch a bit on the companies or companies' countries that are going to be impacted
[SPEAKER_00]: Now put simply, it's probably going to be some of the poorest countries in the world.
[SPEAKER_00]: You're talking about countries like Nepal, Jordan, Pakistan, Egypt, and Ethiopia.
[SPEAKER_00]: They're impacted greatly during the initial invasion of Ukraine, when oil prices spike, and you had countries like Sri Lanka that struggled,
[SPEAKER_00]: Certain businesses to conserve fuel, Pakistan is closing schools, universities, and moving everything online to conserve fuel.
[SPEAKER_00]: And countries like Nepal have long waits for cooking gas that they use every day.
[SPEAKER_00]: Now, they're basically two ways to look at this.
[SPEAKER_00]: One is the exposure to they have to the impact costs of energy.
[SPEAKER_00]: And then their resilience, which means how much in reserves do they have, both in actual fuel, but also for concurrency reserves to actually buy fuel at these prices.
[SPEAKER_00]: Egypt spends about 3% of its GDP on oil, gets nearly half of its supplies from the Gulf region.
[SPEAKER_00]: Pakistan spends 4% of its GDP at oil and gas,
[SPEAKER_00]: Pakistan has reserves that will only cover about three months of imports, and Egypt still carries a huge amount of debt, and that this is obviously going to strain that, and it's going to be difficult for them to finance their government.
[SPEAKER_00]: And this is why global investors are pulling money from emerging market debt funds.
[SPEAKER_00]: So they're going to be very tied or the correlation to the broader market, we very
[SPEAKER_00]: these oil prices.
[SPEAKER_00]: Now some countries that are gonna hold up well, countries like Indonesia, and the Philippines, they get their oil typically, elsewhere, and they have a lot of, they have a strong balance.
[SPEAKER_00]: They have a lot of reserves.
[SPEAKER_00]: Thailand spends 7% of its GDP and oil imports more than any country, but they hold 100 days of import reserves, strategic oil reserves, like we have.
[SPEAKER_00]: and they have seven months of imports to cover their foreign exchange.
[SPEAKER_00]: The India is probably the economy that the big economy that people are worried about the most.
[SPEAKER_00]: This has been about 3% of their GDP on energy from abroad and about half of that comes in the middle east, but they have foreign currency reserves that cover about seven months of imports and they have oil stocks that will last about 70 days or so and they have refineries that can process low quality crude which they can get from Russia as well.
[SPEAKER_00]: But the longer term impact is actually going to be downstream and probably be felt in fertilizer.
[SPEAKER_00]: Next, in fertilizer is made from natural gas and it's becoming more and more expensive.
[SPEAKER_00]: So, you're going to see a lot of stresses from these economies, more and more, with a higher cost of fuel and eventually fertilizer.
[SPEAKER_00]: Those are some best thought.
[SPEAKER_00]: I'm Justin Klein, and we have one goal here each every week.
[SPEAKER_00]: It's helped you achieve your own version of financial freedom, and I work continues after this final break to get your questions at the right now at 8 to 8.99.
[SPEAKER_01]: Every investor is working to build a secure financial future.
[SPEAKER_01]: How they get there and when they get there, that depends on many factors.
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[SPEAKER_00]: It's talk about cars and car prices.
[SPEAKER_00]: And there's an interesting dynamic happening and it's a microcosm of our entire economy.
[SPEAKER_00]: The case shape to economy.
[SPEAKER_00]: Talk about this a lot.
[SPEAKER_00]: But the car business is grappling with stubbornly high prices.
[SPEAKER_00]: There's an affordability problem.
[SPEAKER_00]: Republicans blame environmental and safety regulations, Democrats obviously blame tariffs.
[SPEAKER_00]: But whatever the end result or the causes, the end result is that more and more cars are selling for prices well above $40,000.
[SPEAKER_00]: And fewer and fewer budget friendly cars are available.
[SPEAKER_00]: The average selling price of US vehicles,
[SPEAKER_00]: last year was $47,000, which means that lower and middle income consumers basically have to buy use cars.
[SPEAKER_00]: The average transaction price is up 40% from December of 2018 through December of last year.
[SPEAKER_00]: 40%.
[SPEAKER_00]: In 2010, 96 models sold at a sticker price at or above $40,000, 96 models.
[SPEAKER_00]: Last year, there was 156 models that were offered at levels of $60,000 or more.
[SPEAKER_00]: So inflation adjusted, gold 40 is the new 60.
[SPEAKER_00]: That means budget models are,
[SPEAKER_00]: become even more scarce.
[SPEAKER_00]: In 2010, there were 25 models priced at around $20,000 or less.
[SPEAKER_00]: Last year, there were only 20 models available at in a quick today's equivalent price, which is around $30,000.
[SPEAKER_00]: So think about 2010, a $20,000 card then is basically a $30,000 card now and there are less models available.
[SPEAKER_00]: The share of US new vehicles purchased from households,
[SPEAKER_00]: earning $100,000 or less.
[SPEAKER_00]: Stay around 50 to 60% for a number of years.
[SPEAKER_00]: Until the recent decade, last year, those that make $100,000 or less are kind of only 36% of new vehicle sales.
[SPEAKER_00]: They just can't afford it.
[SPEAKER_00]: And then when it comes to profit margins, they're actually up.
[SPEAKER_00]: GM made on operating profit about $42 million per vehicle, sold in 2024.
[SPEAKER_00]: That's up from $3,000 in 2018, because they're selling more SUVs and pickup trucks.
[SPEAKER_00]: Ford said they'll have five models under $40,000 available by the end of the decade, just five.
[SPEAKER_00]: are probably the biggest part of this, because these engines to make them more fuel efficient are not much different they were before, especially when it comes to their input costs, just more technology.
[SPEAKER_00]: And a lot of these are electric, and so that's certainly more expensive.
[SPEAKER_00]: But you're going to see this more and more and more is prices are going to stay elevated because the input costs are just higher.
[SPEAKER_00]: That's the bottom line.
[SPEAKER_00]: So don't expect to see a big direction in new car prices.
[SPEAKER_00]: This will probably be the new norm for the foreseeable future.
[SPEAKER_00]: I'm Justin Klein, and I remind you about KP Financial's parallel investing where we make a trade for our clients to make the same trade for.
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[SPEAKER_00]: We invest right alongside our clients.
[SPEAKER_00]: If you want to learn more, just head over to BestTalk.com and please tell your friends and family about a free podcast down those, which you can buy anytime that I tunes or Spotify, be sure to rate review on iTunes as well.
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[SPEAKER_02]: Independent thinking, Tritsk Thess, is the Best Talk.
[SPEAKER_02]: Good night.
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