[SPEAKER_03]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.
[SPEAKER_03]: Independent Thinking, shared success.
[SPEAKER_03]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.
[SPEAKER_03]: Here is KPP Financial Portfolio Manager, Luke Guerrero,
[SPEAKER_01]: Good afternoon everybody and welcome to the Tuesday, March 31st, 2026 edition of Invest Talk.
[SPEAKER_01]: I'm your host Luke Guerrero and this is a very special episode we have for you today.
[SPEAKER_01]: For no other reason than we are finally through the first quarter of 2026.
[SPEAKER_01]: what a ride it has been and certainly there will be more market moving events on the horizon.
[SPEAKER_01]: So we're going to talk about all of that today.
[SPEAKER_01]: We're going to talk about today's market performance.
[SPEAKER_01]: We're going to run down those show topics for you in just a bit.
[SPEAKER_01]: Why don't we dive right in and end the quarter right by starting to answer our first caller question now.
[SPEAKER_00]: I have a question regarding company full star surgical ticker symbol is FTAA have never heard anybody say anything about it and I was wondering your take on it and it just reported a couple of days ago.
[SPEAKER_00]: Just an overall assessment.
[SPEAKER_00]: We'll be fine.
[SPEAKER_00]: Thank you.
[SPEAKER_01]: Stick a look at Star, surgical ticker, STAA.
[SPEAKER_01]: Frankly, I have not heard anybody say anything about this name either, so let's take a look together.
[SPEAKER_01]: What they do is they make the Evo implantable lens.
[SPEAKER_01]: It tries to correct vision without touching the eyes natural lens.
[SPEAKER_01]: For them,
[SPEAKER_01]: mix up about seventy thirty-three-three-three-two-and-a-half percent of the revenue, about nine percent comes from the United States, 18.9 from Japan, and 39 percent from elsewhere.
[SPEAKER_01]: It is a small, small company, about nine hundred and forty-nine million with an M.
[SPEAKER_01]: dollar market cap trading at about $18.70 per share as of today.
[SPEAKER_01]: Now Q4 revenue came in.
[SPEAKER_01]: It's 57.8 million up 18% on paper but it's been misleading because revenue outside of China actually fell 2%
[SPEAKER_01]: And the whole story is really China, where distributors were destocking because of uncertainty around a proposed Al-Khan acquisition that ultimately fell apart.
[SPEAKER_01]: Now fully revenue dropped nearly 24% so it was certainly a rough year.
[SPEAKER_01]: The good news though, Gross margins improved to 76% adjusted EBITDA nearly broke even and China inventory is now.
[SPEAKER_01]: normalized.
[SPEAKER_01]: Now we have seen a persistent downtrend since really the middle of 2021 with very little technical strength, very little positive momentum throughout that time sample.
[SPEAKER_01]: Unidate their down 19.01%.
[SPEAKER_01]: So it's been a bit of a rough year.
[SPEAKER_01]: Now management looks like it's currently two interim co-CEOs, while the board is searching for a permanent leader.
[SPEAKER_01]: Management has said 2026 may see significant sales increases, but haven't really done anything to
[SPEAKER_01]: The stock ran up from about the teens to the mid 20s on the thesis of its recovery and that normalization in China, but it really says given back a bit of those gains, a fair bit of those gains, especially after the announced Q4 miss.
[SPEAKER_01]: The bookcase is pretty simple.
[SPEAKER_01]: You got a real product.
[SPEAKER_01]: You got growing myopia, uh, endemic globally.
[SPEAKER_01]: You have China's re-stocking tailwind and you have pretty cheap, forward-looking revenue.
[SPEAKER_01]: I mean, it looks like they're priced to sales.
[SPEAKER_01]: It's about 3.8.
[SPEAKER_01]: That's really dirt cheap.
[SPEAKER_01]: And so, from my quick look here, I mean there's a legitimate product in a bit of a messy operational chapter, there could be high upside, but given it size, given it's really all over the place growth and its concentration on one geographical market, that means there's high execution risk as well.
[SPEAKER_01]: So I don't really see anything on the rise and that makes me want to buy into this name right now.
[SPEAKER_01]: Certainly, the price momentum is very weak.
[SPEAKER_01]: Thanks to the call.
[SPEAKER_01]: We've got a lot of ground to cover in the next 45 minutes or so, including my main focus point, which is about growth versus value stocks, and are we ready for a major reversal?
[SPEAKER_01]: As you all know, technology stocks have really been suffering.
[SPEAKER_01]: They suffered their worst week and nearly a year last week as investors realized that even the most innovative companies that can't escape the gravitational pull of rising interest rates.
[SPEAKER_01]: and associated economic uncertainty.
[SPEAKER_01]: The cell-off, kind of forcing investors to reassess these sky-high valuations and growth assumptions that have dominated the market for the better part of the past couple years.
[SPEAKER_01]: So we'll touch on that story.
[SPEAKER_01]: We also, we'll talk about U.S. consumer confidence, surprisingly on the rise and the latest labor market data, gold, why it has really had a bit of a sell-off amidst rising conflict and how foreign central banks have been selling U.S. treasuries.
[SPEAKER_01]: We also have some voice-mate calls rated play, including one on the Synchrony Financial Ticker SYF and RCI Hospitality Holdings.
[SPEAKER_01]: Rick is the ticker for that one, RICK.
[SPEAKER_01]: As always, we got some questions from the comment section of the Invest talking YouTube channel.
[SPEAKER_01]: And hopefully, I look forward to some of your calls throughout the show.
[SPEAKER_01]: What we're going to do quick break, please remember you can call any time and leave your questions at the Invest Talk of Voice Bank.
[SPEAKER_01]: If you're listening for your live stream or possibly on a M1220 in the Bay Area, pick up that phone and dial 8899 chart.
[SPEAKER_01]: Up next, we'll talk about today's market activity.
[SPEAKER_02]: 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 Investorkose Justin Klein.
[SPEAKER_02]: Parallel investing means Justin invests right alongside KPP financial clients.
[SPEAKER_02]: He makes the same trade for KPP financial on the same day at the same price and the same percentages as KPP clients.
[SPEAKER_02]: There's no front running and no special treatment.
[SPEAKER_02]: In this way Justin and KPP financial share the same risks and the same potential for success.
[SPEAKER_02]: Parallel Investing aligns the interests of Justin and KPP financial with those of his clients.
[SPEAKER_02]: Justin, Klein and Luke Guerrero are ready to answer your questions about Parallel Investing.
[SPEAKER_02]: And you can learn more anytime at Investalk.com.
[SPEAKER_02]: Luke Guerrero is here, and he's ready with answers to your finance and investment questions.
[SPEAKER_02]: Call in Vestock, 888-99, chart.
[SPEAKER_01]: A to 899 chart is of course the number to ask your question live while we are on air today.
[SPEAKER_01]: But until we've get our first live call rather before we get our first live call, let's talk a little bit about the market because equities surged in the biggest rally.
[SPEAKER_01]: It's last May.
[SPEAKER_01]: It was fueled by fresh hopes for an off ramp in the Iran conflict.
[SPEAKER_01]: The Dow jumped two and a half percent.
[SPEAKER_01]: That's going to be gain nearly 3% on the day.
[SPEAKER_01]: Nasdaq's sword 3.8.
[SPEAKER_01]: Russell 2000 rallied 3.4, max 7 collectively, up over 4.5% on the day.
[SPEAKER_01]: And the callos for that was, well, a bit of a shift in tone from multiple directions.
[SPEAKER_01]: You have the president seemingly confirming reports.
[SPEAKER_01]: that he is willing to end the military's campaign against Iran, even if the straight of her moves remains largely closed.
[SPEAKER_01]: Do have Iran's president who said, Tehran is ready to end the war, but once guarantees you have China and Pakistan who unveil the five point plan for midi stability, but Middle East and really geopolitical backdrop, it's still messy.
[SPEAKER_01]: The IRGC threatened U.S. companies in the region and a third aircraft carrier has been deployed to that area as well.
[SPEAKER_01]: But for the first time in weeks, markets may be on hope, maybe on a dead cat bounce who knows, saw a little bit of daylight to run with it.
[SPEAKER_01]: The tactical setup was, I mean, right before exactly this kind of move, positioning had been widely flagged as washed out, sentiment was deeply negative, and outside, month and quarter, and buying added fuel.
[SPEAKER_01]: Recent rate stabilization did help with some repricing of central bank reaction functions
[SPEAKER_01]: of the hawkish extreme.
[SPEAKER_01]: And a big week of M&A activity also played into the resilient corporate narrative heading into Q1 earnings season.
[SPEAKER_01]: Now, the leadership textbook, around the leadership was textbook risk on, right, momentum, growth, high beta, most shorted names, retail favorites, all ripped, semi's, memory, large cap banks, investment banks,
[SPEAKER_01]: We're among the standouts, as well, energy the notable laggard with WTI crude settling down one and a half kind of trailed the market as well.
[SPEAKER_01]: On the data front, pretty mixed, and, frankly, secondary to the geopolitical story, you would consume your confidence, beat expectations with the labor market views, essentially unchanged,
[SPEAKER_01]: Treasury's are mostly firmer with yields down about three basis points at the front end the dollar fell six tenths of a percent gold rallied 2.7 percent and silver surge over 6 percent while Bitcoin added nearly 2 percent on today.
[SPEAKER_01]: Tomorrow brings ADP private payrolls, ISM manufacturing and retail sales in the morning with the market closing Thursday afternoon ahead of the good Friday holiday, which does mean we will have a best of show on Friday.
[SPEAKER_01]: March employment report drops Friday morning and spite of the market being closed while streets will confer a 60,000 gain after February's negative at 92,000 number.
[SPEAKER_01]: Why don't we hit the invest stock YouTube comment section question bank early today for a relatively fresh question that came in on ticker CAG?
[SPEAKER_01]: And that question says, your thoughts on a company like CAG that produces cheap food for times like these.
[SPEAKER_01]: Value trap or decent value at this price.
[SPEAKER_01]: I know the 9% dividend will likely be cut, but I've been nibbling under $16.
[SPEAKER_01]: Let's take a look if we think we should be nibbling as well.
[SPEAKER_01]: CAG is Kanagra Brands, they sell process and package foods, they have a grocery segment, they have the refrigerated in frozen segment, they have their international segment, and they have their food service segment as well.
[SPEAKER_01]: Now 91% of the revenue, 91% comes from the United States.
[SPEAKER_01]: Chart looks very weak, down 41.06% over the past 52 weeks, beta has actually been flat.
[SPEAKER_01]: I nearly zero, negative 0.01 over the past year, which is kind of wild.
[SPEAKER_01]: You date change, na is a 9.19% negative, and growth is abysmal to put it mildly.
[SPEAKER_01]: They have less revenue rather that they're projecting less revenue and may 2027 than they had in May 2021.
[SPEAKER_01]: Revenue growth is 1% from 2021 onward.
[SPEAKER_01]: margins.
[SPEAKER_01]: Bit better than you'd expect for a company such as this.
[SPEAKER_01]: But I mean, the market's pricing at really weak relative to forward looking earnings.
[SPEAKER_01]: 8.9 times price to forward looking earnings.
[SPEAKER_01]: 0.9 book value.
[SPEAKER_01]: It is trading at
[SPEAKER_01]: less than the book value of its assets.
[SPEAKER_01]: It's trading at the lowest level in the past five.
[SPEAKER_01]: Years in EBITDA margin stands at 17.6% set to compress down to 15.20 margins across the board here.
[SPEAKER_01]: Are compressing down
[SPEAKER_01]: all the way from top to the bottom.
[SPEAKER_01]: Return on equity, set to be at 9.9%.
[SPEAKER_01]: And not to mention dividend yield, 8.9% dividend yield.
[SPEAKER_01]: Compare that to the previous years.
[SPEAKER_01]: Oh, by the way, they didn't even pay a dividend in 2025.
[SPEAKER_01]: Compare that to the previous years.
[SPEAKER_01]: Where it was ranging from 2.7 to 5 all over the place.
[SPEAKER_01]: Absolutely all over the place.
[SPEAKER_01]: And so from a fundamental perspective, you know, it's got $6.4 billion in debt on a $7.5 billion market cap company.
[SPEAKER_01]: It's levered.
[SPEAKER_01]: Marginzer compressing growth is for lack of a better word, non-existent.
[SPEAKER_01]: And so what do I think about a company such as this?
[SPEAKER_01]: Well, you've been nibbling under 16.
[SPEAKER_01]: And I have shows no signs of improving.
[SPEAKER_01]: It's been on a persistent downtrend since the end of 2022
[SPEAKER_01]: I think overall, not a big fan here.
[SPEAKER_01]: I think there's a reason why it's been trailing such as it is, not just the market, but its industry writ large.
[SPEAKER_01]: And so we need to ask me in a time such as these are people try to trade down, try to trade down into more budget options because things are getting a bit more expensive.
[SPEAKER_01]: I mean, I didn't really see a lot of growth from 2021 to 2022.
[SPEAKER_01]: That a billion in revenue growth, it was under 10% at a time where you'd expect for it to be fantastic.
[SPEAKER_01]: And then it just tapered off from there.
[SPEAKER_01]: So overall, I'm not really liking it.
[SPEAKER_01]: And by the way, the report earnings tomorrow.
[SPEAKER_01]: So I certainly wouldn't be buying in before that happens either.
[SPEAKER_01]: That is, CIG canogra brands incorporated.
[SPEAKER_01]: Thanks for watching.
[SPEAKER_01]: Thanks for leaving your question in the comment section.
[SPEAKER_01]: Now, we are well into the thick of it when it comes to the invest talk market madness.
[SPEAKER_01]: And if you don't own it by now, if you were a participant in this competition, or maybe if you weren't a participant in this competition, Justin and I are putting up videos on our invest talk a YouTube channel where we are rounding out, I guess each round of competition, talking about the winners, talking about the losers, what is driving returns, showing beautiful charts that I made if you're interested.
[SPEAKER_01]: And so that all happens exclusively on the Invest Talk YouTube channel.
[SPEAKER_01]: I want to remind you, if you are the winner, if you are eligible to win the $1,000 prize, a prize actually is 50% higher if you are a YouTube subscriber.
[SPEAKER_01]: So, head over to Invest Talk with two T's over there on YouTube and check it out.
[SPEAKER_01]: We're headed into a break, a little bit longer than our last one.
[SPEAKER_01]: But when we come back, we'll talk about our main focus point about value versus growth.
[SPEAKER_01]: And of course, answer more of your finance and investment questions here on Invest Talk.
[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, Justin Klein and Luke Guerrero.
[SPEAKER_02]: So when you've got finance and investment questions, don't forget to call in Vestock, 888-99-Chart.
[SPEAKER_01]: So here's the number that really captures the story of Q1226.
[SPEAKER_01]: The Russell 1000 growth index is down nearly 5% year to date.
[SPEAKER_01]: The Russell 1000 value index, it's up 8.6, that the spread of almost 14 percentage points.
[SPEAKER_01]: For context, the last two times we saw, value app before a growth by this margin over a similar timeframe, we're during the dot com bust in 2001.
[SPEAKER_01]: And the bear market route in 2022, we are living through, would could be a genuine regime change in market leadership.
[SPEAKER_01]: It has to be 500 is on track for its biggest monthly decline in years, but the headline index is masking a much more complex picture underneath.
[SPEAKER_01]: Energy is up almost 21% here to date material 17 consumer staples 15 industrial 12.
[SPEAKER_01]: These sectors are at multi year highs.
[SPEAKER_01]: Meanwhile technology is the worst performing sector.
[SPEAKER_01]: IT is down, communication services down, mag 7 have collectively plunged nearly 6%.
[SPEAKER_01]: just in the month of March alone before rallying today.
[SPEAKER_01]: The Great Rotation, what analysts are calling silicon to steal, could be the defining story of the market right now.
[SPEAKER_01]: So the first question, listeners are understandably asking, why are text talks falling when they're not directly affected by energy prices?
[SPEAKER_01]: And it's a fair question.
[SPEAKER_01]: Last time I checked Microsoft does not drill oil.
[SPEAKER_01]: Apple doesn't ship crude through the straight-of-hore moves.
[SPEAKER_01]: The tech sucks are being hit by three forces simultaneously and none of them are about oil directly.
[SPEAKER_01]: First, rising interest rates.
[SPEAKER_01]: This is the most important channel.
[SPEAKER_01]: When Treasury yields rise and they've jumped significantly since the Iran War started, the discount rate used to value future cash flows goes up.
[SPEAKER_01]: Tech companies are priced on the promise of earnings, years into the future.
[SPEAKER_01]: When you raise the discount rate on these distant cash flows,
[SPEAKER_01]: President values drop a stock priced at 40 times earnings is mathematically far more sensitive to rate changes than one priced at 15.
[SPEAKER_01]: This is why high growth stocks get crushed when yields rise.
[SPEAKER_01]: Even if their actual business is an affected by oil prices.
[SPEAKER_01]: Second.
[SPEAKER_01]: The AI CapEx questions.
[SPEAKER_01]: Investors spent 2023 through 2025 rewarding companies for promising to spend hundreds of billions of dollars on AI.
[SPEAKER_01]: Now they're demanding proof of return.
[SPEAKER_01]: Microsoft spent 37.5 billion in a single quarter on infrastructure and its stock fell because margins compressed.
[SPEAKER_01]: Nvidia reported a below-out quarter stock drop because the market is asking where the AI investment cycle has peaked.
[SPEAKER_01]: Software stocks got hammered when new AI tools threatened to displace their core products.
[SPEAKER_01]: The sentiment is shifted from AI will change everything to show me the money.
[SPEAKER_01]: Third, the rotation itself tends to be a bit self reinforcing as money flows out of tech and into energy, industrials, and defensives.
[SPEAKER_01]: Tech sells deeper.
[SPEAKER_01]: which triggers more workflows, which deepens it further.
[SPEAKER_01]: We're now at a point where growth stocks are trading at a 21% discount to morning star's fair value estimates, a level that they've been at less than 5% of the time since 2011.
[SPEAKER_01]: It tells you the selling has been a bit indiscriminate in some cases.
[SPEAKER_01]: Now what technology tends to be a bit most vulnerable to economic downturns software is the most exposed right now for two reasons AI disruption is hitting hardest here.
[SPEAKER_01]: If AI agents can automate legal work coding customer service data analysis, what happens at the companies itself offer for those tasks?
[SPEAKER_01]: Workdays down 25% year-to-date Adobe, service now, down 12 sales force 9.
[SPEAKER_01]: Second reason is software companies depend on enterprise spending decisions that get delayed when CFOs are uncertain.
[SPEAKER_01]: This semiconductor company fills orders from data center buildouts that are already contracted.
[SPEAKER_01]: A software company needs a CFO to sign a new deal.
[SPEAKER_01]: You see, if I was looking at oil at a hundred inflationary accelerating in a possible recession and deciding, oh, not going to do that now.
[SPEAKER_01]: So how should investors approach tech stocks during periods of macro uncertainty?
[SPEAKER_01]: Well, the practical answer depends on how you bound your time horizon.
[SPEAKER_01]: If you're a long-term investor with five to ten years, the selloffs creating opportunities in high-quality names, names that are now trading at meaningful discounts to intrinsic value.
[SPEAKER_01]: Morningstar, raise their fair value estimates on several hyper scalars, even as prices fell because the underlying businesses are still growing.
[SPEAKER_01]: They, I build out as real, cloud adoption is real, digital transformations are real.
[SPEAKER_01]: And so buying these companies into discount to fair value because of a temporary oil shock is exactly the kind of opportunity somebody who has a long time horizon should be looking for.
[SPEAKER_01]: If you're a short or trim investor or you're overweight tech, this is a moment for rebalancing, not panic.
[SPEAKER_01]: The rotation from growth to value has been pretty rapid, but it's approaching over sold levels on a technical basis.
[SPEAKER_01]: So growth to value's ratio is nearing some extremes that have historically preceded reversals.
[SPEAKER_01]: That doesn't mean tech is going to rip higher tomorrow that we did today, but it doesn't mean that easy money in the value trade may be largely made.
[SPEAKER_01]: Our current tech valuations justified giving these changing economic environments.
[SPEAKER_01]: I mean, here's the tension.
[SPEAKER_01]: Growth stocks are expected to deliver 27% earnings growth this year versus 6.4% for value stocks.
[SPEAKER_01]: It's a massive gap.
[SPEAKER_01]: If these growth expectations hold current valuations for many tech names are actually reasonable or even cheap after the sell off, but if a recession materializes.
[SPEAKER_01]: or if the capex cycle slows those growth estimates, they come down, then the multiples they have further to fall.
[SPEAKER_01]: The bottom line is the great recession, sorry, great rotation, who don't jinx it, is real.
[SPEAKER_01]: It's been violent, and it's created genuine opportunities on both sides of the market.
[SPEAKER_01]: Value stocks have earned their outperformance through legitimate earnings tailwinds from energy defense of his infrastructure, but the value trade is now crowded and technically extended.
[SPEAKER_01]: Text stocks have been unfairly punished in some cases, but legitimately repriced in others.
[SPEAKER_01]: The smarter approach isn't to pick aside, it's to rebounce towards those opportunities that the rotation has created.
[SPEAKER_01]: Still got a lot of show planned for you today, right when we come back from this break, here on in Best Talk.
[SPEAKER_02]: There are a few things that make KPP financial special.
[SPEAKER_02]: One of them is parallel investing.
[SPEAKER_02]: This means they invest right alongside their clients.
[SPEAKER_02]: Here's how it works.
[SPEAKER_02]: When KPP financial makes a trade for their clients, just in client makes the same trade for himself and KPP.
[SPEAKER_02]: On the same day, at the same price, and same percentage.
[SPEAKER_02]: No front running, no special treatment.
[SPEAKER_02]: Learn more about Parallel Investing at Investalk.com.
[SPEAKER_05]: Hi, good day, Justin and Luke.
[SPEAKER_05]: This is Matt from Minneapolis.
[SPEAKER_05]: Long long time, Mr.
[SPEAKER_05]: Here to your wonderful show.
[SPEAKER_05]: Hey, I appreciate everything you guys do.
[SPEAKER_05]: I have just a quick question for you.
[SPEAKER_05]: I've had the stock in my portfolio here.
[SPEAKER_05]: fuel packer enterprises for quite some time.
[SPEAKER_05]: For the last year or so, it seems it's just been in this range for me between like 18 and maybe 23, it hasn't broke out of that or done a thing.
[SPEAKER_05]: I'm getting tired of it and I'm considering taking my money out and investing at some place else.
[SPEAKER_05]: I hear you guys talking about value stocks a lot.
[SPEAKER_05]: And I have found this fund on VTV.
[SPEAKER_05]: What do you think of that move moving from HP to VTV?
[SPEAKER_05]: Would that be something positive for my future?
[SPEAKER_05]: Thank you for your answer.
[SPEAKER_05]: Look forward to hearing it on the show.
[SPEAKER_05]: Have a good day.
[SPEAKER_01]: HP is a Hewlett Packard Enterprises.
[SPEAKER_01]: It is an enterprise IT infrastructure name.
[SPEAKER_01]: Now they did report earnings on March 9th, revenue was up.
[SPEAKER_01]: Ooh, about 18% year over year a slight top line miss, but earnings per share was a record beating the high end of guidance by about 10%.
[SPEAKER_01]: There was a recent acquisition of Juniper, which drove, that were revenue up about 152% year over year, gross margins expanded sharply to 36.6% free cash flow with 788 million and management raised a full year EPS guidance to about $2.30 to $2.50.
[SPEAKER_01]: When spite of that, didn't jump much.
[SPEAKER_01]: It was trading at about $21 per share, now it's trading about $23 per share.
[SPEAKER_01]: Another reason why is because growth has been pretty stagnant year over year going back to 2020.
[SPEAKER_01]: It's point where it's trading at 8.9 times price to forward looking earnings.
[SPEAKER_01]: I mean, it has been a frustrating hold.
[SPEAKER_01]: It ran from the high teens to 26 on the June of her deal and AI infrastructure excitement.
[SPEAKER_01]: But then it drifted back.
[SPEAKER_01]: To the low 20s, as memory inflation and server weakness kind of started to dominate the narrative they're never King margins hit a 23 24% and cumulative networks for AI orders were raised to about 1.7 billion to the AI angles real but the market.
[SPEAKER_01]: Understandably, he's fixating a lot of the headwinds they've had.
[SPEAKER_01]: Now, the book is simple.
[SPEAKER_01]: A legitimate AI infrastructure play through Juniper's data center switching business, training at roughly nine times four earnings.
[SPEAKER_01]: It's a steep discount to some of those peer play networking peers, but at the same time,
[SPEAKER_01]: The core server business is under a lot of pressure.
[SPEAKER_01]: Memory cost inflation is a huge deal.
[SPEAKER_01]: It will be a multi-quarter drag and the Juniper integration added 2.6x net leverage to the balance sheet.
[SPEAKER_01]: So let's put in a bit of a weaker position at the time where the rest of the business is struggling.
[SPEAKER_01]: It is a 30 billion dollar market cap company.
[SPEAKER_01]: It's got a decent amount of debt about 20 billion now post deal.
[SPEAKER_01]: And so with that frustration,
[SPEAKER_01]: Maybe we want to diversify.
[SPEAKER_01]: Well, this would certainly be a bit of a wholesale shift, right?
[SPEAKER_01]: The thing about holding HPE thing about selling it is it's fine.
[SPEAKER_01]: It's not exciting, right?
[SPEAKER_01]: They're server networking, hybrid cloud spaces, competitive margins, or thin, growth is modest.
[SPEAKER_01]: You're essentially swapping the single stock for your ID of the Vanguard value ETF.
[SPEAKER_01]: Now, the Vanguard value ETF, which is Tigger VTV.
[SPEAKER_01]: It's pretty large fund, right?
[SPEAKER_01]: They have about 162 billion under management.
[SPEAKER_01]: It's super cheap, 30 basis point expense ratio.
[SPEAKER_01]: It's top holdings are exactly who you'd expect them to be.
[SPEAKER_01]: Think you're halfway JP Morgan, exon, Johnson and Johnson.
[SPEAKER_01]: It's done really well here today.
[SPEAKER_01]: Compared to the rest of the market, it's up 1.64% year to date.
[SPEAKER_01]: And so with the shift that we just talked about,
[SPEAKER_01]: It gives you an instant diversification across sectors into something that is historically held up better than growth and recessionary high rate environments, which even if we resolve the issues in the Middle East tomorrow.
[SPEAKER_01]: The supply chain cost effects aren't going to be felt for quite some time or it aren't going to be gotten over for quite some time which puts a lot of risk there.
[SPEAKER_01]: So I think that given the specific company you're trying to sell I think it's probably a good idea Moving into something like VTV getting more value exposure.
[SPEAKER_01]: I think is a good idea as well Thanks for the call It's keep things moving make it to an arrow
[SPEAKER_04]: A lot of my question is regarding RCI Holdings ticker Rick, I would like to know the prospects for a long-term hold is this still a worthwhile hold and if it is is it time to scoop more up.
[SPEAKER_04]: with this be a good buy at these levels, or is the thesis broken?
[SPEAKER_04]: Thank you, and best talk.
[SPEAKER_04]: Always given the people what they want.
[SPEAKER_04]: I will hang up and listen.
[SPEAKER_01]: RCI Hospitality.
[SPEAKER_01]: Well, if we are giving the people what they want, certainly RCI Hospitality as well, because they operate.
[SPEAKER_01]: Don't like Lips.
[SPEAKER_01]: They have a vast portfolio of restaurant bar concepts, bomb shells, cabaret, tutsis, scarlets, they've about 40 plus nightclubs, and then they're shrinking chain of that restaurant format.
[SPEAKER_01]: It has been a rough time for them over the past year down 46.88 percent.
[SPEAKER_01]: You're to date down 4.32 percent and that's in spite of revenue growth being pretty solid with past five years but certainly bad over the past two.
[SPEAKER_01]: The revenue was 293 billion, 2023, now it's down to 270.99, sorry that is million, not billion.
[SPEAKER_01]: It did turn a profit.
[SPEAKER_01]: They're just barely martin sitting at 3.9% the stock has honestly been a bit demolished right down roughly 50% over the past year.
[SPEAKER_01]: Now near its all time lows around 21 to 23 is where it has been ranging and they're really started with this leadership turnover.
[SPEAKER_01]: They had declining same store sales.
[SPEAKER_01]: They had recurring impairment charges and self insurance reserve charges all kind of hit at the same time.
[SPEAKER_01]: The bulk case here is that the nightclobs are, well, cash generating business, they tend to do better in recessions than other businesses, they're high margins, they have loyal customer bases, limited competitions, and they're roughly five to six times EBITDA, stock is pretty cheap, even if same-store stales are weak, if they stabilize it, becomes pretty cheap.
[SPEAKER_01]: Part of their business segments, specifically that bombshell segment is doing a real week.
[SPEAKER_01]: It just looks to me to be a pretty deeply out of favor microcap name with a legitimate cash-loing business under a pile of one-time charges and leadership uncertainty that frankly puts it in a position where especially given the access on the internet to say adult entertainment seems to be a weak,
[SPEAKER_01]: reason to invest in a business to the point where maybe the multiples here are justified.
[SPEAKER_01]: So this is the name we looked at at one point in time and for us it was a pass then for me it's a pass.
[SPEAKER_01]: So we had two important data releases today and both really paint a picture of a labor market that is softer than the headline on employment rate.
[SPEAKER_01]: really is suggesting.
[SPEAKER_01]: So let's start with the Jolts jobs reports.
[SPEAKER_01]: We're job openings fell by about 358,000 in February to 6.8 million in a bit below expectations.
[SPEAKER_01]: The job openings are rate to drop to 4.2% from 4.4%.
[SPEAKER_01]: But the really concerning number,
[SPEAKER_01]: is hiring, hiring plunged by nearly half a million to 4.85 million, the lowest level since March of 2020.
[SPEAKER_01]: When the pandemic, as you all remember, shut down the entire economy and so outside of COVID, it was the lowest since August 2014.
[SPEAKER_01]: That's a pretty stark number.
[SPEAKER_01]: Businesses aren't just being cautious about adding workers there, essentially stop adding workers.
[SPEAKER_01]: And the client in hiring, it was pretty broad.
[SPEAKER_01]: Commodation and food services saw $178,000 drop or $178,000 opening drop, health care, professional services, construction, fell sharply, aligning with the weakness that we saw in this February payroll support.
[SPEAKER_01]: And the client in job openings were concentrated among small and mid-sized businesses, which are typically the most sensitive to economic uncertainty.
[SPEAKER_01]: Now layoffs, they'd take up slightly rising,
[SPEAKER_01]: That's 61,000 to 1.72 million, but remain pretty low in absolute terms.
[SPEAKER_01]: This is the low higher low fire equilibrium that we've been talking about on the show.
[SPEAKER_01]: Companies aren't really cutting workers, but they're incompletely stopped bringing new ones in.
[SPEAKER_01]: Morgan Stanley's chief economist actually described it pretty well.
[SPEAKER_01]: He said the forehorses into the labor market, which are hiring.
[SPEAKER_01]: layoffs, job opening, and unemployment rates are also suggesting deterioration even before the oil shock fully works through the economy.
[SPEAKER_01]: Now,
[SPEAKER_01]: Vetshare called this a zero employment growthy growth equilibrium with a feel of downside risk.
[SPEAKER_01]: The phrase matters because it signals the fed sees the labor market as fragile, even if the unemployment rate at 4.4 doesn't look alarming on its own.
[SPEAKER_01]: On the consumer side, the conference boards confidence index ticked up slightly about 91.92.
[SPEAKER_01]: Above the 88 that economists expected, but in turnals, tell a bit of a darker story, consumers 12-month inflation expectation, jump to 5.2% the highest levels since May of 2025.
[SPEAKER_01]: The proportion of people saying jobs are hard to get hit at its highest levels since February of 2021, and plans to buy big ticket items, homes, cars, appliances.
[SPEAKER_01]: They shifted from yes, and maybe to now.
[SPEAKER_01]: Conference Board's chief economist noted the cost of living remained at the top of consumer's minds driven by tariff pass through and spike in gas prices certainly that's on top of my mind.
[SPEAKER_01]: The labor market differential, which tracks the gap between people saying jobs are plentiful versus hard to get and correlates with the unemployment rate as collapsed from 18.2 a year ago to about 5.8 today.
[SPEAKER_01]: There's a dramatic deterioration and how people perceive the job market even if the headline numbers aren't cut up yet.
[SPEAKER_01]: So for investors, the data reinforces the data reinforces the data.
[SPEAKER_01]: This bind, this stagflation bind, the fed is trapped in, the labor market is weakening, which normally calls for rate cuts, but inflation expectations are on the rise, which prevents cuts.
[SPEAKER_01]: The fed held rate hates at 3.5 to 375 this month and projected only a single cut this year.
[SPEAKER_01]: But some economists now think that even that single cut may not happen.
[SPEAKER_01]: The window is closing because every week oil stays elevated, inflation expectations are going to drift higher and the case for easing gets harder to make.
[SPEAKER_01]: Meanwhile, real economy, the one where actual people are trying to find jobs and by groceries, it's kind of getting squeeze from both sides.
[SPEAKER_01]: It's like we got plenty of time before our next break to tackle another one of your questions.
[SPEAKER_01]: This one on ticker SLB.
[SPEAKER_01]: It says, I own SLB and the position is 4.3% of my portfolio.
[SPEAKER_01]: I'm about 24% was wondering if I should take some profits of these new highs.
[SPEAKER_01]: Should we be taking profits on our energy stocks even when they hit new highs and the position grows above forish?
[SPEAKER_01]: I've heard the drop in energy will come quick.
[SPEAKER_01]: Well, SLB is slumberj, is the world's largest oil field services company, so they do drilling, they do reservoir performance, they do production systems, and they've been a fast-growing digital AI segment as well that has expanded into this data center cooling solutions business.
[SPEAKER_01]: Now,
[SPEAKER_01]: of 22.94 over the past 52 weeks, which makes it now a $77 billion market cap company, only $9 billion in debt.
[SPEAKER_01]: As expected, oil prices go up, they do well.
[SPEAKER_01]: Oil prices go down, they do not do as well.
[SPEAKER_01]: Now for 26 management guided revenue to about 37 to 38 billion adjusted EBITDA, about 8.6 to 9.1 billion.
[SPEAKER_01]: On March 11th, SLB pre-announced a Q126 headwind of about six to nine cents in EPS from additional costs, likely mid-East activity disruptions in seasonality instead of QRN revenue would be a bit below expectations.
[SPEAKER_01]: Now,
[SPEAKER_01]: The stock previously peaked in 2024 to about $50 per share than slid to the high 30s as oil prices begin to weaken and the oil fields services cycle started to turn, but I mean, it's recovered a lot, right?
[SPEAKER_01]: Q1 has done very well for this company.
[SPEAKER_01]: It's $51.39 is where it's trading now.
[SPEAKER_01]: So,
[SPEAKER_01]: On the plus side, you have this idea that SLB is quietly becoming a technology company inside of an oil services wrapper.
[SPEAKER_01]: It has a billion plus and digital ARR, data center cooling exposure is growing 121%.
[SPEAKER_01]: And I had driven a workflow, tools being adopted across the industry.
[SPEAKER_01]: It's certainly a positive for them.
[SPEAKER_01]: It roughly, uh, it's like EVD bits.
[SPEAKER_01]: 12.
[SPEAKER_01]: It's been higher than it has been until this recent run-up, but still reasonable 17.5 times price before looking earnings that's still on its average range.
[SPEAKER_01]: I mean, it is even without the AI part, it is a best-in-class oil services name.
[SPEAKER_01]: at what was a cyclically depressed valuation before midies tensions in the rise in oil prices with a bit of an interesting digital growth engine that maybe the market is under pricing a bit.
[SPEAKER_01]: So if oil stabilizes for a longer period of time, it could certainly be good for this business.
[SPEAKER_01]: What does that mean for their data center business?
[SPEAKER_01]: Staying to be seen.
[SPEAKER_01]: I would say that it's always a good idea to take profits, especially if you're significantly up, right?
[SPEAKER_01]: If you can reallocate towards other areas of your portfolio, 4.3% isn't an egregiously high thing, but the idea is when you enter a position, you should have an idea of what your target is, what your tolerance band is for going above or below that, and then stick to that with discipline.
[SPEAKER_01]: That applies not just to this name, that applies to any single name in your portfolio.
[SPEAKER_01]: This is Invest Talk, I'm Luke Guerrero.
[SPEAKER_01]: We have one goal here to help you achieve your financial freedom, or we're continues after this break, which will be our final break of this beautiful Tuesday.
[SPEAKER_01]: So get your questions in now by picking up that phone and dialing 80-899 chart.
[SPEAKER_01]: Orlando from San Bernardina, hang on, you will be next.
[SPEAKER_02]: 24-7, Rainer Shine, there's always value in the Invest Talk podcast.
[SPEAKER_02]: 888-99, chart.
[SPEAKER_01]: It's good to Orlando from San Bernardino.
[SPEAKER_01]: How can I help you?
[SPEAKER_06]: Hey, how are you?
[SPEAKER_01]: Doing well, how are you?
[SPEAKER_06]: I'm good.
[SPEAKER_06]: Thank you.
[SPEAKER_06]: Well, I have a question about some kind of opportunity cost.
[SPEAKER_06]: They're closing the one here in Ontario, California.
[SPEAKER_06]: And I'm actually wondering, they offered me a state-aid bonus, but I'm thinking about opportunity cost.
[SPEAKER_06]: What if I couldn't find a job that pays equal or more in the time, or as if I was to wait until the day that they closed the plant, what if there's no work available?
[SPEAKER_06]: Yeah, that's a great question.
[SPEAKER_01]: So let me ask you some clarifying questions who just tell me, think through this.
[SPEAKER_01]: So what is the time period over which they want you to continue working?
[SPEAKER_06]: Uh, I have until August 28th.
[SPEAKER_06]: Okay, so they want to pay you from when they go to.
[SPEAKER_01]: So they want to pay you a bonus to continue working for the next six months.
[SPEAKER_06]: Yeah.
[SPEAKER_01]: Okay, and so is that bonus going to be paid at the end of the period is it just going to be paid like salary is it paid up front then you're contractually obligated to work that period of time.
[SPEAKER_01]: How does it work?
[SPEAKER_06]: At the end of the period and I it's not contractual.
[SPEAKER_06]: I can be let go if I commit a fireable sentence.
[SPEAKER_01]: Okay, so it sounds like at the end of the period there's an option that you would would you move to different plant or how would that work.
[SPEAKER_06]: I'm actually looking to move to a different company.
[SPEAKER_06]: I don't want to work for a company that's closing plants down.
[SPEAKER_01]: Yeah, that's entirely fair.
[SPEAKER_01]: I mean, I don't see any downside if I'm being honest to continue to work for this company for what the next five months while searching for another job.
[SPEAKER_01]: What is the job?
[SPEAKER_01]: The core question here is, right, you want stability.
[SPEAKER_01]: You want stability and income.
[SPEAKER_01]: And for me, even if you're earning less at a new job,
[SPEAKER_01]: But it is for a longer period of time, IEU have a job in 12 months.
[SPEAKER_01]: It wouldn't be worth it to stay where you are just because there may be a higher bonus right now.
[SPEAKER_01]: Now, if you don't have a job lined up right now or the job market is likely to continue to be good in the next five months or you could negotiate with a company you wanted to work for.
[SPEAKER_01]: That, hey, I would like to start at the end of this period in August for this reason.
[SPEAKER_01]: that could certainly be, you know, to your, to your benefit.
[SPEAKER_01]: One other thing that could possibly happen as well is you could find a new job at a different company and say, hey, you know, I can't start until August because I'm going to be paid out this bonus.
[SPEAKER_01]: I'll be walking away from this and that's just not something that I can financially do and maybe they would be willing to pay you out that kind of thing as a starting as a, as a, as a, as a, as a bit of a starting bonus there.
[SPEAKER_01]: So my advice would be, in this particular situation,
[SPEAKER_01]: you need to get a little bit more clarity and what the job market looks like to you, how likely you are to get a new job immediately, which I think is preferable to a short-term bonus situation.
[SPEAKER_01]: And if you can even push that start date out further, so you can kind of take advantage of the best of both worlds.
[SPEAKER_01]: Does that make sense?
[SPEAKER_01]: Do you?
[SPEAKER_06]: Yeah, it does.
[SPEAKER_06]: I had never thought of anything like that.
[SPEAKER_06]: I just, I didn't think they wouldn't even consider that.
[SPEAKER_01]: Yeah, it's always good to ask, because you know what, the worst thing they can say is no.
[SPEAKER_06]: Yeah, you're right.
[SPEAKER_06]: That's what I tell people too.
[SPEAKER_01]: Well, thank you, Luke.
[SPEAKER_01]: Of course, have a wonderful day, Orlando.
[SPEAKER_01]: So I got a little bit of a gold.
[SPEAKER_01]: We don't have much time.
[SPEAKER_01]: But I think a lot of people have been interested to, if not puzzled by the fact that gold was supposed to be the ultimate crisis hedge.
[SPEAKER_01]: It's up over 200%.
[SPEAKER_01]: So far, this decade, it rallied during Russia's invasion Ukraine.
[SPEAKER_01]: It rallied during previous Iran-related oil shocks.
[SPEAKER_01]: And yet, since the Iran War began,
[SPEAKER_01]: It's plunged.
[SPEAKER_01]: It doesn't work in equities.
[SPEAKER_01]: So what kind of hedge is this anyway?
[SPEAKER_01]: Well, yield's arising, right?
[SPEAKER_01]: We talk about this all the time.
[SPEAKER_01]: Gold doesn't pay interest.
[SPEAKER_01]: There's an opportunity cost to holding onto something that does not have any yield.
[SPEAKER_01]: So if inflation expectations are meaningfully higher going into the future, gold prices are likely to fall.
[SPEAKER_01]: Central banks also seem to be selling it, which is an interesting newer dynamic.
[SPEAKER_01]: Turkey has sold a not $8 billion in gold, Poland's central bank governor recently mused about locking in profits from gold as well.
[SPEAKER_01]: This is a bit of a structural concern.
[SPEAKER_01]: Gold has started behaving like a speculative asset rather than a safe haven.
[SPEAKER_01]: I like to chalk it up too.
[SPEAKER_01]: Well, there's a lot of nuance.
[SPEAKER_01]: Certainly, there's a lot of multiple things that are happening at once.
[SPEAKER_01]: But it really comes down to the core thing for me, which is when you're worried about a crisis in the future, you buy gold.
[SPEAKER_01]: When you're worried about a crisis today, you sell gold, because you can't pay for your phone bill in gold.
[SPEAKER_01]: You pay in dollars.
[SPEAKER_01]: Well, guys, that doesn't for another episode of Invest Talk, Justin and I want to thank you for listening and encourage you to tell your friends and family members about our free podcast down those or do you can get iTunes and Spotify, as well as our free videos, which you can get on the Invest Talk YouTube channel.
[SPEAKER_01]: As always, if today's show made you think about your investment, your retirement, your taxes, your kids future, your future, whether everything is really within the plan for your goals,
[SPEAKER_01]: At KPP Financial, we offer no cost portfolio reviews.
[SPEAKER_01]: It's a free and confidential service.
[SPEAKER_01]: We're just in a night can just serve as another set of eyes, just to give you a bit of a financial checkup.
[SPEAKER_01]: That sounds interesting.
[SPEAKER_01]: Head over to www.investalk.com and click on the portfolio review button.
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