[SPEAKER_01]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.
[SPEAKER_01]: Independent Thinking, shared success.
[SPEAKER_01]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.
[SPEAKER_01]: Here is KPP Financial Portfolio Manager, Luke Guerrero,
[SPEAKER_00]: Good afternoon, fellow investors and welcome back to the Wednesday, March 4th, 2021 edition of Invest Talk.
[SPEAKER_00]: I'm your host Luke Guerrero and although we had a best of episode yesterday, we certainly have a brand new show for you today.
[SPEAKER_00]: We're bringing you fresh stories and of course answering fresh finance and investment questions.
[SPEAKER_00]: To that end, in just a bit, we'll talk about today's market performance and run down those show topics for you all.
[SPEAKER_00]: Let's tackle this color question now.
[SPEAKER_05]: Hey guys, I wanna get your evaluation of a company who's stock popped up on a screener.
[SPEAKER_05]: That company is, I'm not sure how to say, it's auto-live, I think.
[SPEAKER_05]: And the ticker is A-L-V, and that's Alfa Lima, Victor.
[SPEAKER_05]: Thank you much.
[SPEAKER_00]: Autolive to your ALV is the world's largest manufacturer of automotive passive safety system.
[SPEAKER_00]: So think airbags, seat belts, steering wheels, and flaters, and increasingly mobility safety solutions for motor cycles and autonomous vehicles as well.
[SPEAKER_00]: It is.
[SPEAKER_00]: a roughly 8.4 billion dollar market cap company have a little bit of debt about 1.8 billion in debt.
[SPEAKER_00]: It's had a bit of a rough year this year though, down 5.5, 3% year to date, down 5.2% over the past three months.
[SPEAKER_00]: But in spite of that, it's up 21.22% over the past 52 weeks.
[SPEAKER_00]: Now it's relative strength.
[SPEAKER_00]: It was pretty solid until the beginning of 2024 when things started to dip off.
[SPEAKER_00]: So what happened?
[SPEAKER_00]: Well, growth is certainly backloaded.
[SPEAKER_00]: A lot of the growth from 2020 into 2022 dramatically slowed down.
[SPEAKER_00]: They actually had a negative revenue growth from 2024, which has started to pick back up a little bit since then.
[SPEAKER_00]: And at the same time, margins.
[SPEAKER_00]: started to to increase a little bit but slightly and certainly didn't expand in a dramatic way.
[SPEAKER_00]: Now from evaluation perspective, they're currently trading at about 10.4 times price to forward looking earnings.
[SPEAKER_00]: Sitting just below the average of the past five years, one of the thing to note, they do pay a solid dividend sitting about 3.1% dividend yield right now.
[SPEAKER_00]: Now, the core franchise is in a way kind of protected by regulation.
[SPEAKER_00]: And their competitive mode is really rooted in two things here.
[SPEAKER_00]: Engineering depth in this passive restraint system.
[SPEAKER_00]: And the fact that government mandates require their product in every new vehicle sold globally.
[SPEAKER_00]: And so for me, with that in mind, kind of interesting that revenue growth has just kind of been lackluster.
[SPEAKER_00]: over the past couple years.
[SPEAKER_00]: One thing that is important to note is sales to Chinese domestic OEMs, actually go 40% in Q4, 2025, 23% for the full year.
[SPEAKER_00]: And so from a growth perspective, they are touching on China, on India, on economies that are
[SPEAKER_00]: Grow.
[SPEAKER_00]: And that's certainly is good for them.
[SPEAKER_00]: But the same time they did have weak guidance.
[SPEAKER_00]: Free cash flow is okay, but not impressive.
[SPEAKER_00]: And the thing that really hits me is that having new growth is just very, very slow.
[SPEAKER_00]: I said it before I'll say it again, lackluster right now.
[SPEAKER_00]: So for now I'd keep it on my watch list.
[SPEAKER_00]: They do have earnings coming up in a month.
[SPEAKER_00]: Hopefully the guide for the full year is less conservative than what we saw early on with the 0% organic
[SPEAKER_00]: As tariffs are taking a new turn, maybe April will bring better guidance.
[SPEAKER_00]: That is auto-live, ticker, A, L, V. We got a lot of ground to cover in the next 45 minutes, including my main focus point, which is about the market rotation panic.
[SPEAKER_00]: We'll take a look at February's Wild Swings and how that might set the stage for continued volatility in March.
[SPEAKER_00]: Also, we have a lot of stories about the Iran conflict.
[SPEAKER_00]: The first one being about U.S. borrowing costs, the effect it's had there, another on why American frackers aren't necessarily Russian to get those wells going in spite of her oil prices are moving, and the third general story on how war isn't always good for defense stocks.
[SPEAKER_00]: We also have voice bank calls, ready to play, and click on on a group of Mexico, SAB, DCV, Tiger GMBXF, and another on stop orders above a price.
[SPEAKER_00]: As always, we'll have some questions from the comment section in the rest of our YouTube channel.
[SPEAKER_00]: Hopefully, we hear from some of you live throughout the channel.
[SPEAKER_00]: We're going to do a break.
[SPEAKER_00]: Please remember, you can call any time and leave your question on the Invest Talk Voice Bank.
[SPEAKER_00]: Feel listening via our live stream or possibly on AM1220 in the Bay Area.
[SPEAKER_00]: Give me a call now at 88899 chart.
[SPEAKER_00]: When we come back, we'll tackle today's market activity.
[SPEAKER_02]: KPP Financial is excited to announce the third annual in Vestock Market Madness Contest.
[SPEAKER_02]: Instead of basketball brackets, Justin and Luke will be watching companies perform head-to-head in an epic showdown.
[SPEAKER_02]: In Vestock participants can compete for the $1,000 grand prize.
[SPEAKER_02]: and demonstrate their market prowess by locking in their stock victory predictions.
[SPEAKER_02]: And yet this, if the contest winner is also following the Investog YouTube channel, Justin will bump up the prize to $1,500.
[SPEAKER_02]: So if you are ready to test your skills in this unique competition, do not wait.
[SPEAKER_02]: It's free to join the fun.
[SPEAKER_02]: Visit Investog.com and search market madness.
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[SPEAKER_02]: Get it done before the deadline, March 18th at 1159 p.m.
[SPEAKER_02]: In the early days, in Vestock was Jerry Klein and Steve Peasley.
[SPEAKER_02]: Now the torch has been passed and a new generation of hosts is on the job.
[SPEAKER_02]: Justin Klein and Luke Guerrero.
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[SPEAKER_02]: 888-99-Chart.
[SPEAKER_00]: 888-99 chart is the number if you want to get through live during this show.
[SPEAKER_00]: But first let's talk a little bit about the market.
[SPEAKER_00]: Today we did see US stocks are rallying, extending the resilience trade that has defined this week.
[SPEAKER_00]: The Dowgate half a percent, the S&P rose 80 basis points Nasdaq led with a 1.3% advance.
[SPEAKER_00]: Russell 2000 added just over 1%.
[SPEAKER_00]: The S&P is not only slightly lower for the week, and the Nasdaq has flipped.
[SPEAKER_00]: Positive.
[SPEAKER_00]: Number of crowded momentum trades that were under pressure earlier in the week snapped a bit back today, high beta names, retail investor favorites, those most shorted stocks and names tied to the Nvidia AI ecosystem all got a bounce Amazon Tesla were the mag seven standouts while memory semis software networking credit cards biotech all among the outperforming sectors.
[SPEAKER_00]: Energy.
[SPEAKER_00]: Notably, one of the days underperformers after leading Monday's session, while airlines, restaurants, and staple-oriented names also trail.
[SPEAKER_00]: Overall,
[SPEAKER_00]: I'm sure you all are aware.
[SPEAKER_00]: The geopolitical backdrop remains unsettled, but markets continued to just trade through it.
[SPEAKER_00]: Morning headlines centered on a New York Times report suggesting Iran may be sending out peace feelers, though U.S. officials were skeptical, and Iran intelligence denied it.
[SPEAKER_00]: Hope for some form of near-term off-ramps that could dampen the inflation and growth headwinds from the conflict are clearly part of the bed alongside the well-worn historical arguments that geopolitical shocks will have not had lasting impacts on equities and it tend to present good dip buying opportunities.
[SPEAKER_00]: The economic data was a genuine bright spot.
[SPEAKER_00]: IISM services printed at 56.1 blowing past the 53.5 consensus and marking the strongest reading since August of 2022.
[SPEAKER_00]: New orders and employment were both better.
[SPEAKER_00]: Well prices paid to actually declined.
[SPEAKER_00]: A favorable composition especially on the inflation front.
[SPEAKER_00]: That follows Monday's second consecutive expansionary ISM manufacturing print giving the economy.
[SPEAKER_00]: Clean Sweep on the ISM front for the first time in a while.
[SPEAKER_00]: ADP Private Payrolls came in at 63,000 above the 50,000 expected, though the report did note hiring was concentrated in just a few sectors with education and health services, really driving the largest gains.
[SPEAKER_00]: The Fed's Facebook a bit more mixed with activity increasing at a slight to moderate pace in seven of 12 districts, but flat or declining in the other five.
[SPEAKER_00]: Treasuries weaker with the curve flaning and yields up 2 to 4 basis points, dollar index pulled back three tenths of a percent after rallying one and a half percent over the prior two sessions.
[SPEAKER_00]: Golden silver roughly flat Bitcoin futures surge nearly 8 percent on the day.
[SPEAKER_00]: All eyes now turn to Friday's employment report in retail sales, Wall Street.
[SPEAKER_00]: Looking for non-farm payrolls around 60,000 following January's 130,000 game.
[SPEAKER_00]: In time to time, we receive questions if you have web forms from investhawk.com.
[SPEAKER_00]: Here's one that came in on Novow, Nordisk, Tigger NVO, so as Novow Nordisk is currently at its lowest point in five years.
[SPEAKER_00]: Considering the weight loss drugs are just a part of their portfolio, do you see any potential in this stock?
[SPEAKER_00]: Nova Nordisk is ticker NVO, what they do is very Danish pharmaceutical company, founded in the early 1900s with a singular focus on serious chronic disease, primarily diabetes and obesity, with a bit of a smaller rare disease at franchise as well.
[SPEAKER_00]: The company is well known for inventing
[SPEAKER_00]: The GOP One Receptor Agnes, that powers both OZEMPIC and Wagovi, the first being for type two diabetes, and the second for obesity, and effectively created the modern anti-OBCD drug market, roughly 43 to 46 billion in annual revenue.
[SPEAKER_00]: It is one of the largest companies in Europe by market cap.
[SPEAKER_00]: And so, take a look at this name.
[SPEAKER_00]: So I'm trading down.
[SPEAKER_00]: I reached its peak in 2024 when OZEMPIC MENIA was really going manic, some might say.
[SPEAKER_00]: 52 weeks ago, price is 56% higher.
[SPEAKER_00]: I was trading at 142 now down to 38.5 down 24.33% year to date.
[SPEAKER_00]: So it's having a bit of a rough year and after outperforming its industry from 2020 to 2023, it has flipped now.
[SPEAKER_00]: Sales grown dramatically from $19.4 billion to $46 billion in 2025, though notably a dip coming next year down to $44 billion.
[SPEAKER_00]: Same time though, margins remaining pretty high return on equity though set to dip from $61.4% to $42.4% next year.
[SPEAKER_00]: Now, what is behind this anatomy of the collapse?
[SPEAKER_00]: Well, 2026 guidance of down five to 13% in revenue and profit decline is really the cause of the sell-off here as we're starting to see a bit of a structural re-pricing of this semi-glutide market.
[SPEAKER_00]: And at the same time, Eli Lilly, another drug company is winning the U.S. prescription war.
[SPEAKER_00]: And so the market has potentially not finished pricing that reality.
[SPEAKER_00]: There is a bright spot that we go the pill launch.
[SPEAKER_00]: Really a genuinely positive story FDA proved in December and it launched in January.
[SPEAKER_00]: So we're moving from the injection side of this drug to the oral side of this drug.
[SPEAKER_00]: But as you know, pharmaceutical companies, it's all about innovation.
[SPEAKER_00]: It is all about what is next.
[SPEAKER_00]: And so they're working on additional drugs that increase their offering of weight loss potential.
[SPEAKER_00]: But you cannot look past what is happening with revenue.
[SPEAKER_00]: And at a time where we have a administration that is generally antagonistic to international companies
[SPEAKER_00]: I have always said, especially for pharmaceutical companies specifically, healthcare companies too, gas, energy, pharmaceuticals are the two companies that the government is invested in making less profits.
[SPEAKER_00]: They want people to generally have to pay less at healthcare because it keeps people happy, they get votes, and pay less at the gas pump.
[SPEAKER_00]: Then you add on the layer that there are US companies that are competing on the same front.
[SPEAKER_00]: It has in the past 18 months move from the most expensive farmed company 39.4 times price to forward looking earnings to its current 10.9.
[SPEAKER_00]: But I mean to drop off again pretty significantly in the month of February, so it's broken past any level support.
[SPEAKER_00]: I'm not really seeing anything structurally.
[SPEAKER_00]: That can be beneficial here that signals to me.
[SPEAKER_00]: I mean, there was a bit of volume today on a 5% price increase, but it still seems to be trying to do some price discovery here.
[SPEAKER_00]: So for now, probably keep it out of the portfolio.
[SPEAKER_00]: Well, I just see what happens a little bit.
[SPEAKER_00]: That is, never notice to your NVO.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: So, got plenty to go.
[SPEAKER_00]: More answers to your questions in our main focus point when we come back.
[SPEAKER_02]: The official numbers are in now with 62 million downloads in Vestark.
[SPEAKER_02]: Listen live or download the free podcast, call anytime 888-99 chart.
[SPEAKER_00]: So February just delivered, something that nobody really had on their Bingo card coming into 2026.
[SPEAKER_00]: similar staples, industrials, materials, each up over 7% on the month, utilities, surge, at the same time, the S&P 500 fell 90 basis points.
[SPEAKER_00]: Not kind of divergence is unusual enough, but here's what makes it genuinely strange.
[SPEAKER_00]: Cyclicals and defense is almost never rally at the same time.
[SPEAKER_00]: These two groups that exist on opposite ends of the investment spectrum defensive stocks, your proctors, and gamble, your Coca-Cola, their safe havens, you buy when you're worried about a recession.
[SPEAKER_00]: Cyclicals, your industrials, material names, are what you buy when you're betting on economic expansion.
[SPEAKER_00]: When both groups are leading at the same time, while tech is getting hammered, there's really no playbook for that from the last decade.
[SPEAKER_00]: As one strategy has put it, it's created a really difficult environment for market participants to navigate.
[SPEAKER_00]: The numbers are striking.
[SPEAKER_00]: You're today at Consumer Staples.
[SPEAKER_00]: Up 16 materials.
[SPEAKER_00]: Up nearly 18 industrials, 14 meanwhile IT, down almost 4% and discretionary off five, all those numbers being through the end of February.
[SPEAKER_00]: The sector dispersion in the S&P 500 has reached the 99th percentile of historical norms.
[SPEAKER_00]: That means that the gap between the best and worst performing sectors is wider than virtually any period in modern market history.
[SPEAKER_00]: And yet they have been on S&P 500, up to less than 1% on the year.
[SPEAKER_00]: The average stock is having a great 2026.
[SPEAKER_00]: The index just doesn't show it, because mega-capped tech names that dominate the waiting are dragging it down.
[SPEAKER_00]: So what's actually driving this?
[SPEAKER_00]: It's really two trades happening simultaneously under the same roof.
[SPEAKER_00]: And they're united by one thing.
[SPEAKER_00]: They are both anti-tech.
[SPEAKER_00]: The first is the anti-IAI trade.
[SPEAKER_00]: Investors are actively rotating at if anything that looks like it could be disrupted or displaced by AI.
[SPEAKER_00]: Software names got crushed earlier.
[SPEAKER_00]: In February, as AI innovations threatened to eat into their core business and video reported blackout earnings or blowout earnings.
[SPEAKER_00]: And the stock still fell, because the market is now demanding proof that all this capex generates returns.
[SPEAKER_00]: The sentiment is shifted from rewarding AI potential to punishing AI spending.
[SPEAKER_00]: Investors are looking for places to hide from AI disruption, and that's funneling money into both defensive sectors, things people need regardless of what AI does.
[SPEAKER_00]: And to what some analysts are calling the Halo trade, heavy asset, limited obsolescence, pipelines, railroads.
[SPEAKER_00]: waste operators, utilities, defense contractors, tangible infrastructure businesses that AI simply cannot make obsolete.
[SPEAKER_00]: The second trait is the physical AI story.
[SPEAKER_00]: It's the bullish cyclical case.
[SPEAKER_00]: Materials and industrials aren't just benefiting for being not tech, they're directly tied to the physical buildout AI requires.
[SPEAKER_00]: You need steel, copper, concrete.
[SPEAKER_00]: Electrical equipment to build data centers.
[SPEAKER_00]: You need power grid upgrades.
[SPEAKER_00]: You need construction crews and heavy machinery.
[SPEAKER_00]: All the contracts that have been signed for AI infrastructure over the past two years are now entering the construction face so industrials and materials.
[SPEAKER_00]: They're seeing real earnings tailels wins, not just sentiment driven rotation.
[SPEAKER_00]: Industrial is reported 27% earnings growth in Q4, driven by aerospace and defense spending and the physical construction of AI infrastructure.
[SPEAKER_00]: Now.
[SPEAKER_00]: The key question is, can this unusual alliance between cyclicals and defensives last and the answer is almost certainly not?
[SPEAKER_00]: As one strategist I read put it, the defensive trade has gotten a bit overcooked and crowded, consumer staples up 16% in two months is not normal for a sector that typically delivers mid-singled digit annual returns.
[SPEAKER_00]: At some point, if the economy is genuinely running hot,
[SPEAKER_00]: which the cyclical strength suggests you'd expect money to flow out of defensives and further into cyclicals, the correlation should break down.
[SPEAKER_00]: For the wild card, as we keep coming back to it on the show is the macro backdrop.
[SPEAKER_00]: If the Iran conflict keeps oil elevated, the Fed can't cut rates or worse, signals it might hike then cyclicals face real headwinds from higher borrowing costs even as the fundamentals look strong.
[SPEAKER_00]: And in that scenario, defenses might hold up longer than you'd expect.
[SPEAKER_00]: This also be a disruption angle that cuts both ways for the broader economy on one hand.
[SPEAKER_00]: Yeah, I could be a massive productivity driver that makes everything cheaper.
[SPEAKER_00]: On the other, it could trigger painful job losses and hurt consumer spending.
[SPEAKER_00]: And in a consumer-driven economy, that's 70% of GDP, that's a real risk.
[SPEAKER_00]: So investors are simultaneously playing offense on the physical buildout and defense against the disruption.
[SPEAKER_00]: That's why both sides of the trade are working right now.
[SPEAKER_00]: For your portfolio, here's the practical takeaway.
[SPEAKER_00]: If you're still concentrated in mega-capped tech, and you're thinking you're diversified because you own the S&P, we talked about this two days ago, you're not.
[SPEAKER_00]: The index has been a closeted tech fund for years, and now that tech is under pressure, it's showing.
[SPEAKER_00]: The average stock is doing meaningfully better than the index.
[SPEAKER_00]: This rotation continues to equal weight strategies and sector-specific exposure to industrials materials.
[SPEAKER_00]: energy could continue to perform the cap-weighted benchmark, but don't blindly chase the defense of Rally.
[SPEAKER_00]: Consumer staples at 16% year-to-date is pricing in a lot of fear.
[SPEAKER_00]: The more durable opportunity is probably on the cyclical side, particularly in names tied to the physical infrastructure built out, because those have both the rotation tailwind and a genuine earnings story behind them.
[SPEAKER_00]: On the next invest talk, we'll look into this story, the great AI job displacement block.
[SPEAKER_00]: eBay cut thousands as ESAI reshapes work forces.
[SPEAKER_00]: Block is planning to lay on nearly half its work force in what calls a deliberate and bold embrace of AI, while eBay cuts 800 jobs citing AI transformation.
[SPEAKER_00]: This wave of AI driven Lyoff raises incredible questions about the future of work, and whether these productivity gains will translate to sustainable profits for shareholders.
[SPEAKER_00]: That's smart, but for now I'm Luke Guerrero ready to take your calls at 888-99-chomp.
[SPEAKER_02]: KVP Financial is excited to announce the third annual Invest Talk Market Madness Contest.
[SPEAKER_02]: Invest Talk Participants can compete for the $1,000 grand prize.
[SPEAKER_02]: So if you are ready to test your skills in this unique competition, do not wait.
[SPEAKER_02]: Visit InvestTalk.com and search Market Madness.
[SPEAKER_00]: Let's go to Dave from Fremont, sorry for talking so long and making you wait, but how can it help you?
[SPEAKER_07]: Well, actually, you just went over a topic that was kind of like a great start for what I wanted to ask because thinking about AI and how most likely there is going to be a
[SPEAKER_07]: lot of things automated, I have a question about the main ticker, main, M-A-I-N, and whether or not you think they're positioned in a good spot for capitalizing on the way things are changing in the future if everything goes well with Iran and with everything recovers
[SPEAKER_07]: possible entrance into this ticker.
[SPEAKER_07]: Thank you.
[SPEAKER_00]: Sure, let's take a look at Main, which is Main Street Capital Corporation.
[SPEAKER_00]: What they are is they are an internally managed business development company and so they lend to an invest equity in a lower middle market company.
[SPEAKER_00]: Think 10 to $150 million in revenue.
[SPEAKER_00]: They have what is really a two-pronged model.
[SPEAKER_00]: They use that investment.
[SPEAKER_00]: So floating rate loans plus equity co-investment in the same bar worse.
[SPEAKER_00]: They're internally managed, so there's no external manager, feed, drag, it's a pretty big structural advantage compared to most of its BDC business development company peers.
[SPEAKER_00]: In terms of size, it's about a $5.1 billion market cap company.
[SPEAKER_00]: The past 52 weeks, it's down 22 basis points, and spite of it being up nearly 3% today.
[SPEAKER_00]: You're today that's down 2.48%.
[SPEAKER_00]: Now,
[SPEAKER_00]: It has since 2021 outperformed its industry by as much as 42% that's what it did in 2021.
[SPEAKER_00]: From evaluation perspective, it's sitting near the middle of its range about 14.1 times price to forward looking earnings.
[SPEAKER_00]: Now, in its recent quarterly report, they had revenue about $145.5 million dollars, a three and a half percent beat.
[SPEAKER_00]: Return on equity.
[SPEAKER_00]: Pretty solid for a company this type, sitting at 17% though, notably going to dip down to 11.9% next year, according to their own guidance.
[SPEAKER_00]: Now one of the benefits here, one of the reasons why I think it does so well, is it really has this lower middle market focus.
[SPEAKER_00]: There's less competition from large banks in institutional lenders, pricing power on loans, that internally managed structure also helps to keep costs down,
[SPEAKER_00]: the equity co-investment.
[SPEAKER_00]: It helps for upside participation along with those debt returns, and they've had a bit of dividend compounding, 18 straight years of dividend growth.
[SPEAKER_00]: The fact that they're credit facility expanded in February, 2026, last month, it signals pretty active deal pipeline, as well, which is exactly what you wanna see with these types of companies.
[SPEAKER_00]: It is one of, I would say, the gold standard names within the BDC space.
[SPEAKER_00]: It has very solid management.
[SPEAKER_00]: As you can see with their historical returns, with their consistent dividend growth.
[SPEAKER_00]: But how to connect this to your question is actually really interesting one.
[SPEAKER_00]: I think nobody knows what's going to happen with AI.
[SPEAKER_00]: Nobody ever knows everyone's just guessing.
[SPEAKER_00]: That's first you foremost.
[SPEAKER_00]: But if history is a lesson at all,
[SPEAKER_00]: industrial advances, tend to be more towards the middle of the pack of guesses of how things are going to bear out.
[SPEAKER_00]: Are there going to be layoffs most certainly?
[SPEAKER_00]: Will they be orderly probably not historically speaking when technology advances?
[SPEAKER_00]: Companies tend to do mass layoffs in times of economic stress using recessions as excuses to already draw down on workforces.
[SPEAKER_00]: But I think the reason why it could benefit a company like this is because of where it's targeting.
[SPEAKER_00]: Because one of the more likely outcomes with AI technology is lowering the barrier for entry for these smaller businesses.
[SPEAKER_00]: Cutting the necessity of tech stacks at least in the early phases, I don't think any multi-billion dollar corporations are going to use cloud security.
[SPEAKER_00]: No.
[SPEAKER_00]: But these smaller companies can spin up more quickly and that makes it easier to scale.
[SPEAKER_00]: So I think you're on to something here when you're thinking about the benefits of AI for companies like this, and certainly in terms of middle market, lower middle market BDC companies, this is a good one.
[SPEAKER_00]: That is, at main, main street capital corporation, thanks to the call Dave, have a great day.
[SPEAKER_04]: Let's keep things moving and drop another listener question now.
[SPEAKER_04]: putting in a stop order of both the price.
[SPEAKER_04]: I've done the below the price, but I'm sworn in what you consider in placing a stop above the price.
[SPEAKER_04]: Thank you for your help, have a nice day.
[SPEAKER_00]: So the point of a stop loss is after you have purchase something, you essentially want to have a little protection.
[SPEAKER_00]: And so if something goes too low, you want to stop that loss.
[SPEAKER_00]: And so a little confused why you would want to put a stop directly above, unless it's a trailing stop or a stop limit cell.
[SPEAKER_00]: In which case, you would be locking gains in after the stock rises.
[SPEAKER_00]: If it is at a buy stop, which is used to enter a position once it breaks above a resistant level, not exactly sure.
[SPEAKER_00]: There are reasons why you might put a stop in place.
[SPEAKER_00]: I just mentioned two of them trailing stops, stop limit cells.
[SPEAKER_00]: I guess three buy stops.
[SPEAKER_00]: So I guess I would need a little bit more clarification on what you mean by placing a stop above your buy price.
[SPEAKER_00]: Thanks for the call.
[SPEAKER_00]: So if you've been watching the bond market, things are actually looking a bit encouraging.
[SPEAKER_00]: The ten-year yield had been trending a lower, hitting a four-month low, 3.96%.
[SPEAKER_00]: But that was on Friday before the strikes in Iran.
[SPEAKER_00]: Mortgage rates had pulled below six percent for the first time in over three years.
[SPEAKER_00]: Treasuries were finally starting to work again as a hedge against stock volatility, which they had failed to do consistently during the inflation era.
[SPEAKER_00]: But then the Middle East happened and all of that reversed in a matter of hours.
[SPEAKER_00]: On Monday, Treasure yields log their biggest one-day gain since last June, the 10-year pushback above 4% and since Edge does highest 4.1%.
[SPEAKER_00]: The bond market is telling you something very clear.
[SPEAKER_00]: Inflation fears, now outweigh haven't flows.
[SPEAKER_00]: Normally when stock sell off and geopolitical risk spikes.
[SPEAKER_00]: Money flows into treasures, pushing yields down.
[SPEAKER_00]: But when the same event that's driving the stock sell off is also driving oil prices higher, you get a collision between this haven trade and the inflation trade.
[SPEAKER_00]: And right now, inflation is winning.
[SPEAKER_00]: The mechanics are straightforward.
[SPEAKER_00]: Oil spiking on the straight of her moves disruption fears pushes up energy prices, which feeds into inflation expectations.
[SPEAKER_00]: The break even rate on five year inflation protected treasuries has climbed above 2.5% from 2.46%.
[SPEAKER_00]: Fed funds futures have reprised meaningfully the probability of two rate cuts this year.
[SPEAKER_00]: It dropped to 55% from 79% just on Friday, but is a massive shift in expectations in a matter of days.
[SPEAKER_00]: And this isn't happening in a vacuum even before the Iran conflict inflation was proving sticky.
[SPEAKER_00]: The Fed's preferred gauge the PCE price index was already set to show the heftiest monthly gain in a year when it reports next week.
[SPEAKER_00]: Cornflation was firming.
[SPEAKER_00]: The Fed was already in a different spot.
[SPEAKER_00]: Now you went on an energy shock on top of that, and the path to rate cuts gets a lot narrower.
[SPEAKER_00]: For bond investors, the situation is what one strategy is called more prolonged inflation impact, and less of your typical risk off flow.
[SPEAKER_00]: That's a tough combination.
[SPEAKER_00]: You're getting the worst of both worlds.
[SPEAKER_00]: Stock volatility without the bond hedge working.
[SPEAKER_00]: Now, there's a case for treasuries still.
[SPEAKER_00]: Vanguard's head of US treasuries pointed out that if the conflict drags on and weighs on economic growth, that eventually pushes investors back into the longer-term bonds.
[SPEAKER_00]: Higher energy prices are inflationary, but also contractionary.
[SPEAKER_00]: They eat into consumer spending, as well as corporate margins.
[SPEAKER_00]: And at some point, growth fears do dominate inflation fears and yields will fall.
[SPEAKER_00]: Vanguard's view is that yield levels are attractive and volatility made create opportunities, but near-term, bond markets, it's in a bit of a no-man's land.
[SPEAKER_00]: If oil sustains about 80 to 85, it's very hard for the Fed to cut, and yields probably drift a bit higher, if oil pulls back on a de-escalation, a February rally could resume.
[SPEAKER_00]: The direction of oil is basically the direction of treasuries right now.
[SPEAKER_00]: And so now, more than ever, the oil market holds the key.
[SPEAKER_00]: Take a look at this question that came in a bit earlier on ticker GRAB, type this in, figure out what GRAB is.
[SPEAKER_00]: I, yes, Jerry B is grab holdings.
[SPEAKER_00]: The question says, thanks to the video, Justin.
[SPEAKER_00]: I never miss it.
[SPEAKER_00]: I'll tell him you said that.
[SPEAKER_00]: Can I get your take on grab?
[SPEAKER_00]: Was hoping for some Asia exposure?
[SPEAKER_00]: Her a lot of my friends used the service.
[SPEAKER_00]: I liked it.
[SPEAKER_00]: Not sure if it translates to an investment.
[SPEAKER_00]: Ah, the core misnomer.
[SPEAKER_00]: Because you like using something, you should invest in it.
[SPEAKER_00]: Well, let's take a look at this.
[SPEAKER_00]: Kind of a super app in Southeast Asia.
[SPEAKER_00]: It is ride-hailing, and it is food delivery, it is digital financial services, and it operates in eight countries, Singapore, Indonesia, Malaysia, Thailand, Vietnam, Philippines, Myanmar, and Cambodia.
[SPEAKER_00]: So this would be a name that gets you Asian exposure.
[SPEAKER_00]: It's down about 17.84% here today, down 12.58% over the past 52 weeks, and since it's IPO, and it looks like about a year after it's IPO nearly, we've reached a price of 1637.
[SPEAKER_00]: It's been a bit of a downward spiral, not trading at $4 in 10 cents.
[SPEAKER_00]: The same time growth, I mean, it exists.
[SPEAKER_00]: It's honestly not too bad.
[SPEAKER_00]: And margins, they did make money for the first time in 2025, and those margins are set to expand into 2026.
[SPEAKER_00]: So what's really driving this?
[SPEAKER_00]: Well, one of the key drivers of margin growth is that 90% of their mobility rides are actually dispatched by AI.
[SPEAKER_00]: So this is helping to drive efficiency.
[SPEAKER_00]: Their digital banking is scaling pretty quickly.
[SPEAKER_00]: But there's a lot of regulatory risk in some of these underdeveloped countries in Indonesia, specifically, the government has proposals around, excuse me, ride-hailing commission caps.
[SPEAKER_00]: Financial services, that particular part of their business, still negative EBITDA.
[SPEAKER_00]: And they're not even projected to break even until second half of this year.
[SPEAKER_00]: Emerging market FX exposure across a currency's talk about volatility,
[SPEAKER_00]: And you also have local players that are starting to compete aggressively in both delivery and in FinTech.
[SPEAKER_00]: And so their first profitable year in 2025 gives them a bit of momentum, certainly.
[SPEAKER_00]: Enough to trade that 34 and a half times price before looking earnings, probably not.
[SPEAKER_00]: The sell off from $6.
[SPEAKER_00]: It was mid 2025 until now, more than anything is probably indicative of real macro risk off in emerging markets more than fundamentals deterioration.
[SPEAKER_00]: But that's where their business is.
[SPEAKER_00]: And so with that risk, I don't see the reward worth it right now.
[SPEAKER_00]: That is, GREB, grab holdings, limited.
[SPEAKER_00]: Exactly, we got plenty of time, so let's play another caller question now.
[SPEAKER_03]: Hey, Justin Luke, this is Chris from Atlanta.
[SPEAKER_03]: I was going to see, while I was screened through some other stocks I was interested in, a stock called GM, EXF, Rubo, Mexico, SAP, popped up.
[SPEAKER_03]: And it seems to be in areas that are working, mining, industrials, engineering, and stuff that things that have been working this year.
[SPEAKER_03]: and it's a foreign exposure, the chart for the last six months to a year looked good.
[SPEAKER_03]: I was going to see what you guys thought of this time.
[SPEAKER_03]: There's not a whole lot of information I could find.
[SPEAKER_03]: You dive in on it.
[SPEAKER_03]: I'd like to hear your opinions.
[SPEAKER_03]: Thank you guys very much.
[SPEAKER_00]: GMBXF is a Mexican industrial conglomerate.
[SPEAKER_00]: It's been around for
[SPEAKER_00]: over 100 years now and they operate due three segments, mining, which is about 75% of the revenue, transportation, freight rail, and infrastructure, I think highways, airports, and ports.
[SPEAKER_00]: Another mining division is the parent company of, this is true, big dorming.
[SPEAKER_00]: Anyway, take a look at this company.
[SPEAKER_00]: It truly is the whole story.
[SPEAKER_00]: Here is, is copper.
[SPEAKER_00]: It's up 157.38% over the past 52 weeks.
[SPEAKER_00]: Bear with me, I gotta check on this.
[SPEAKER_00]: Yes, okay, so that is correct what I was seeing is that it is actually the parent company of Southern Copper, ticker SCCO, which is New York listed, one of the world's largest copper mine producers.
[SPEAKER_00]: So with 75% of its revenue coming from mining,
[SPEAKER_00]: This is effectively just a more diversified play on Southern Comforts.
[SPEAKER_00]: Why you've seen here today, did up 28.8%, 3%.
[SPEAKER_00]: Again, copper is the whole story.
[SPEAKER_00]: It's essentially a leverage copper play.
[SPEAKER_00]: Trump's 50% copper tariff announcements sent copper to five and 90 a pound directly benefiting this company.
[SPEAKER_00]: There's that structural copper deficit.
[SPEAKER_00]: It owns 88% of SCCO.
[SPEAKER_00]: 88%.
[SPEAKER_00]: So if you buy this, you get Southern Copper, maybe it a little bit of a discount plus you get some transportation and infrastructure divisions.
[SPEAKER_00]: Now there are risks.
[SPEAKER_00]: There's liquidity constraint.
[SPEAKER_00]: Are the US trading volume makes this hard to size for institutional buyers?
[SPEAKER_00]: Overall, I like this name, but understand the risks of investing in a less liquid, leveraged copper play.
[SPEAKER_00]: That is GMBXF, thanks to the call.
[SPEAKER_00]: This is our final break.
[SPEAKER_00]: So get your questions in now at 80 to 99 chart.
[SPEAKER_02]: 24, 7, Rainer Shine.
[SPEAKER_02]: There's always value in the Invest Talk podcast.
[SPEAKER_02]: 80 to 99 chart.
[SPEAKER_00]: Let's get a Robert and Pleasanton.
[SPEAKER_00]: You got a question about RTX?
[SPEAKER_06]: Yeah, good afternoon, Luke.
[SPEAKER_06]: Iran conflict happening and the need for weapons, I'm wondering if you would think that this is a good time to put some money into this stock.
[SPEAKER_00]: Sure, it's a great question.
[SPEAKER_00]: RTX is Raytheon technologies.
[SPEAKER_00]: That's what it used to be, and they rebranded to RTX Corporation.
[SPEAKER_00]: It is one of the largest aerospace and defense companies.
[SPEAKER_00]: So they got their Pratt and Whitney jet engines, their Collins Aerospace, and then that Raytheon division, so your missiles radar and air defense systems.
[SPEAKER_00]: Pran Whitney, surge 25% in Q4 because of demand.
[SPEAKER_00]: One of the things that's really driven this company at a 260, eight billion dollar backlog that is three years of forward revenue visibility at their current run rate.
[SPEAKER_00]: And that's tremendous.
[SPEAKER_00]: There's also defense super cycle if you haven't been paying attention, which everybody knows about.
[SPEAKER_00]: And they're the producer of Tomahawk cruise missiles.
[SPEAKER_00]: They're the producer of the Patriot Air Defense Systems, all in extreme global demand, especially as we continue to deplete our stockpile of Patriot missiles during this conflict, and probably Tomahawk cruise missiles as well.
[SPEAKER_00]: So there is likely to be
[SPEAKER_00]: a lot of demand for their products.
[SPEAKER_00]: The strike in Iran, or Iran, Iranian facilities in June of last year was really a direct catalyst for the defense sector broadly.
[SPEAKER_00]: It's one of the reasons why this name is up 62.25% the past 52 weeks, it's up 1.11% right now.
[SPEAKER_00]: But the reason why I would probably hesitate to add it to my portfolio right now is this trading at a five year high that given what has happened in the past couple days,
[SPEAKER_00]: has just over bought right now.
[SPEAKER_00]: I think structurally aerospace defense names stand to do well over the next five years as we see more international rearmament.
[SPEAKER_00]: But I think right now just given where we are in the cycle and where prices are and recent news.
[SPEAKER_00]: I wait for a bit of a pullback before I've went in or here.
[SPEAKER_00]: that is RTX Corporation.
[SPEAKER_00]: Thanks to the call.
[SPEAKER_00]: It's great segue to one of our other stories about defensive stocks, jumping another 3% on Monday.
[SPEAKER_00]: You saw European names, jump, you saw Canadian names, jump, you saw U.S. names, jump.
[SPEAKER_00]: Funnel case is, well, NATO members agreed at the Hague Summit to a new benchmark of three and a half percent of GDP for defense spending.
[SPEAKER_00]: And the Trump administration is pushing for five.
[SPEAKER_00]: European Defense spending has doubled since 2019.
[SPEAKER_00]: It can see estimates European spending alone could reach 800 billion euros by the end of the decade.
[SPEAKER_00]: And so you're saying, okay, big backlog, that sounds good, but here's the problem.
[SPEAKER_00]: And this is where it gets interesting for investors.
[SPEAKER_00]: Defense stocks are now trading at about 35 times forecasted earnings.
[SPEAKER_00]: That's not far off in video.
[SPEAKER_00]: Scepton video is growing sales at 75% year over year.
[SPEAKER_00]: Defense sector is growing much slower.
[SPEAKER_00]: European defense stocks are at roughly 30 times forward looking earnings, which is double their five-year average.
[SPEAKER_00]: The multiples are,
[SPEAKER_00]: Only makes sense if the drum beat of war continues, but isn't so loud that government starts squeezing the companies.
[SPEAKER_00]: And that's the Goldilocks problem, defense companies, cater almost exclusively to governments.
[SPEAKER_00]: That makes them targets for political pressure, in times of crisis, history is full of examples.
[SPEAKER_00]: During both world wars, the British government imposed steep windfall taxes on arms manufacturers, after the US entered World War II, the government repeatedly renegotiated prices.
[SPEAKER_00]: And we're already seeing the early signs of this dynamic, Trump signed an executive order, prohibiting large defense contractors from stock buybacks and dividend payments, and floated capping executive compensation at 5 million per year.
[SPEAKER_00]: So for investors, the defense trade comes down to this.
[SPEAKER_00]: You need just enough conflict to sustain spending, but not so much that governments start extracting profits through renegotiated contracts, through windfall taxes, or by-back restrictions.
[SPEAKER_00]: That's a pretty narrow window.
[SPEAKER_00]: And at 35 times earnings, you're paying a premium that assumes the window stays open for a really long time.
[SPEAKER_00]: If you're in these names and they've worked beautifully, congratulations, but understand what you own.
[SPEAKER_00]: The risk isn't the demand goes away because it won't.
[SPEAKER_00]: The risk is that governments decide that profits are too fat when their citizens are paying higher taxes and dealing with wartime inflation.
[SPEAKER_00]: That's when the political economy turns against you, even as the order book stays full.
[SPEAKER_00]: I'm Lou Guerrero.
[SPEAKER_00]: And this concludes another episode of Invest Talk, Justin and I thank you for listening and encourage you to tell your friends and family members about our free podcast downloads as well as our YouTube videos over there on our Invest Talk YouTube channel.
[SPEAKER_00]: Don't forget to sign up for Market Madness, the deadline is quickly approaching that's all available over there at Invest Talk.com.
[SPEAKER_00]: Another thing that's available, be portfolio review is scheduler.
[SPEAKER_00]: We'll talk all about the strategies that we implement that can help you secure your financial future.
[SPEAKER_00]: At KPP, we put skin in the game to parallel investing, we invest right alongside our clients, so we share the same risks, we share the same potential for success.
[SPEAKER_00]: Head over to investsock.com to learn more, Justin and I cannot wait to speak with you.
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