[SPEAKER_05]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.
[SPEAKER_05]: Independent Thinking, shared success.
[SPEAKER_05]: Invest talk is made possible by KPP Financial, a registered investment advisor firm, serving clients throughout the United States.
[SPEAKER_05]: Justin Klein and Luke Guerrero stand ready to take your finance and investment questions and share their unbiased answers.
[SPEAKER_02]: Good afternoon fellow investors and welcome back to Invest Talk.
[SPEAKER_02]: This is our Monday April 13th, 2026 edition of Invest Talk and what's a start to the week.
[SPEAKER_02]: More headlines, more market movements for us to unpack.
[SPEAKER_02]: And of course, more questions for us to answer from you.
[SPEAKER_02]: But I'm Justin Klein, and today I'm here with Luke Guerrero.
[SPEAKER_02]: Luke, welcome back.
[SPEAKER_02]: This is the first time we've done a show together in How Long.
[SPEAKER_01]: Oh, it feels like decades at this point, but it is definitely good to be back.
[SPEAKER_01]: I know I annoy you enough on daily basis at our day jobs.
[SPEAKER_01]: And now it's time to annoy you more times a week.
[SPEAKER_02]: Yeah, he knocked on the door and said, hey, I'm doing the show through today's.
[SPEAKER_02]: All right, that works.
[SPEAKER_02]: And I know a lot of our listeners love us, both and work together, so.
[SPEAKER_01]: We're taller.
[SPEAKER_02]: We're taller at us, one of the other.
[SPEAKER_02]: But either way they're going to have to tolerate us for this hour.
[SPEAKER_02]: So we're here to answer their finance and investment questions, give them data and perspective.
[SPEAKER_02]: We have some topics to discuss as well, per usual.
[SPEAKER_02]: And just a bit, we'll talk about today's market performance and run down the show topics.
[SPEAKER_02]: But as usual, we'll tackle this first call a question now.
[SPEAKER_00]: Hey guys, this is Preston.
[SPEAKER_00]: Got a question on the stock APP at 11.
[SPEAKER_00]: from a fundamental analysis that doesn't look too bad or looks to be improving.
[SPEAKER_00]: I know it had a recent pullback.
[SPEAKER_00]: It looks to be at a level of support and wanted your opinion on a good entry point.
[SPEAKER_00]: And overall impression of the stock.
[SPEAKER_00]: Thank you.
[SPEAKER_02]: Luke, looking at app loving one of those growth year names, show we say, they were losing money back in 2022 and guess what, earnings this year is worth $15.67 and then $20 and $70 since next year it's a $417 stock.
[SPEAKER_02]: So if you're looking based on four look yearnings, it's only about a 20 times multiple, but it has pull back as of late because of
[SPEAKER_02]: who knows why, but in conjunction with the growth, pullback.
[SPEAKER_02]: So do you think it's cheap enough now?
[SPEAKER_01]: Well, first of all, we start with a little bit of an explanation of what it is.
[SPEAKER_01]: So it's an AI-powered mobile advertising and app monetization platform.
[SPEAKER_01]: You mentioned it had a bit of a pullback.
[SPEAKER_01]: Honestly, an interesting story with this name and a huge run-up over the past couple years.
[SPEAKER_01]: And then there were some allegations around its infrastructure being connected to some sort of criminal network, which that report was actually dropped in February, and so you saw the stock start to climb again when that was all retracted.
[SPEAKER_01]: and so it's it's court thesis really is that it's acts on platform really has no comparable in terms of matching customers to the ads that companies want to get to them.
[SPEAKER_01]: I mean, you mentioned it used to not make money, which is true.
[SPEAKER_01]: Now it's EBITDA margin is projected to be 84% this upcoming year.
[SPEAKER_01]: I mean, that's pretty wild return on equity 102% it is one of those growth stories within
[SPEAKER_01]: the software space that, as you mentioned, drew down a bit.
[SPEAKER_02]: Yeah, and I always struggle with these names that have those really bad headlines about their business, about their leadership, I tip it.
[SPEAKER_02]: I've done this for 25 plus years.
[SPEAKER_02]: There's the whole
[SPEAKER_02]: That's usually the case in markets.
[SPEAKER_02]: Is that when there is bad headlines, they tend to snowball each other.
[SPEAKER_02]: There's some kernel of truth in there that really throws
[SPEAKER_02]: credibility of the leadership in question.
[SPEAKER_02]: So that's one thing I would worry about.
[SPEAKER_02]: There is an SEC investigation going on right now, which creates a lot of risk.
[SPEAKER_02]: The good thing is that from a technical perspective, it's found support here right around 360 is the recent low trading at what are we at now, four, four, 17, so only about a 10% 10% lower from here.
[SPEAKER_02]: And if it drops below that, then I would probably
[SPEAKER_02]: The problem is that when you have SEC investigations, they could come out with something really, really bad.
[SPEAKER_02]: And it can drop 30, 40, 50% in a day on these type of names.
[SPEAKER_02]: That would totally call in the question, the growth and obviously multiples would come down considerably.
[SPEAKER_02]: So it's very high risk in my mind.
[SPEAKER_02]: They have a good balance sheet.
[SPEAKER_02]: Their business is obviously doing well, but I don't like that smoke that I see.
[SPEAKER_01]: Yeah, I think it's a valid take if you like this name, it's because you truly believe that their axon platforms mode is durable and that their expansion and e-commerce is going to work.
[SPEAKER_01]: Right?
[SPEAKER_01]: That would make this price a compelling story.
[SPEAKER_01]: But for most people, it's kind of a wait and see situation with that overhang from that SEC investigation.
[SPEAKER_02]: Yeah.
[SPEAKER_02]: Benzon, how you feel about the risk risk reward here?
[SPEAKER_02]: I probably wouldn't jump into it, but could be right for you.
[SPEAKER_02]: The last time we did a show together was July 28th of last year, last summer.
[SPEAKER_02]: I know what you did last summer.
[SPEAKER_02]: We have a lot of ground to cover over the next 45 minutes or so, and time permitting will get to all of it.
[SPEAKER_02]: Our main focus point is about corporate stock, buybacks to the signal.
[SPEAKER_02]: an attractive entry point for investors, we're gonna look at some historical data and discuss kind of what's changed about the market today when it comes to dividends as well as stock buybacks compared to the years in the past.
[SPEAKER_02]: Their decades in the past shall we say.
[SPEAKER_02]: We also have other topics on the docket as well.
[SPEAKER_02]: One is in regards to oil.
[SPEAKER_02]: Yes, it is going to create an inflation problem, but it can also create a growth problem what that might mean for the Fed, Fed policy, and ultimately earnings growth for this year.
[SPEAKER_02]: Then we're going to look at AI, and it's impact on the,
[SPEAKER_02]: The good space, the product space, and how much production is being created or what kind of demand is being created with all of this AI capex spent to look into that we also have course voice bank questions one is on hf sinclair corporation dyno is the symbol diano and then roblox corporation as well and of course many questions that came in via the comment section over on the invest talk YouTube channel.
[SPEAKER_02]: as well.
[SPEAKER_02]: Then of course, I welcome.
[SPEAKER_02]: We welcome.
[SPEAKER_02]: We welcome your finance and investment questions right now.
[SPEAKER_02]: Live 4 to 5 specific time.
[SPEAKER_02]: You're listening on AMT all 20 in the Bay area or if you are listening maybe on the live stream.
[SPEAKER_02]: You can call right now at 8 or 899 chart.
[SPEAKER_02]: Up next, we will comment on today's market activity.
[SPEAKER_04]: 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_04]: Parallel investing means Justin invests right alongside KPP financial clients.
[SPEAKER_04]: He makes the same trade for KPP financial on the same day at the same price and the same percentages as KPP clients.
[SPEAKER_04]: There's no front running and no special treatment.
[SPEAKER_04]: In this way Justin and KPP financials share the same risks and the same potential for success.
[SPEAKER_04]: Parallel Investing aligns the interests of Justin and KPP financial with those of his clients.
[SPEAKER_04]: Justin, Klein and Luke Guerrero are ready to answer your questions about Parallel Investing.
[SPEAKER_04]: And you can learn more anytime at Investalk.com.
[SPEAKER_04]: In the early days, in Vestock was Jerry Klein and Steve Peasley.
[SPEAKER_04]: Now the torch has been passed and a new generation of hosts is on the job.
[SPEAKER_04]: Justin Klein and Luke Guerrero.
[SPEAKER_04]: So when you've got finance and investment questions, don't forget to call in Vestock.
[SPEAKER_04]: 888-99-Jar.
[SPEAKER_02]: Let's go take a quick look at the markets today.
[SPEAKER_02]: Luke, it was a surprising green day with the S&P up over 1% NASDAQ up about 1.4%.
[SPEAKER_02]: Everyone was expecting this to be a bloody day after talks fell apart in Islamabad between Iran.
[SPEAKER_02]: the Iran delegation as well as the U.S. delegation to resolve the conflict there.
[SPEAKER_02]: But Axios reported that there's still forward motion in these talks, and that President Trump is seeking another round of negotiations before real escalation, even though he seems like we're blocking now.
[SPEAKER_02]: We're also blocking the streets of our news now.
[SPEAKER_02]: I guess, do two wrongs make a right?
[SPEAKER_02]: I don't know how this works.
[SPEAKER_02]: But, uh, this is- You can block the straight.
[SPEAKER_01]: We'll block the straight.
[SPEAKER_02]: Exactly.
[SPEAKER_02]: You're not crying.
[SPEAKER_02]: I'm crying.
[SPEAKER_02]: So this is, this is an interesting development.
[SPEAKER_02]: So we say, it's especially the market reaction.
[SPEAKER_02]: Do you think the market's off sides here?
[SPEAKER_02]: Or are they sniffing out a, maybe more, a higher likelihood of a resolution than people are realizing?
[SPEAKER_01]: I think the market is full of hopeless optimists, which doesn't mean they're necessarily wrong, right?
[SPEAKER_01]: But I think it really dug in to the fact that this could have gone one or two ways.
[SPEAKER_01]: You have talks all apart.
[SPEAKER_01]: You have a resumption of strikes, maybe an intensification of strikes.
[SPEAKER_01]: And we just didn't see that.
[SPEAKER_01]: The market started the day negative, and then when nothing really happened.
[SPEAKER_01]: In fact, you saw the opposite.
[SPEAKER_01]: You saw the administration reaching out to try and get a second round of talks.
[SPEAKER_01]: Then you have a lack of re-escalation and I think that's really what the market is is Latching on to that that means maybe that the worst of it is over now is that the case who knows?
[SPEAKER_01]: I think this is another example of anybody who tells you what they know is is gonna happen is is lying or or a fool But either way I think in this situation not escalating is a positive thing and the market is gonna react quarterly
[SPEAKER_02]: Yeah, we do have bank earnings coming up this week.
[SPEAKER_02]: So that will be something the market focuses on as we get deeper and we have city group, JP Morgan Wells Fargo tomorrow morning, Morgan Stanley and make America on Wednesday, pre-market.
[SPEAKER_02]: So we'll get some more reaction from.
[SPEAKER_02]: As that part of the market, treasuries were a bit stronger, yields down 2 to 4 basis points across the curve, dollar index was down 0.3% and gold finished down 0.4% silver off 1.1% Bitcoin was roughly flat and WTI settled up 2.6% but well off of its highs, goes right just below $100 per barrel, rent finished up 4.4%.
[SPEAKER_02]: on the day.
[SPEAKER_02]: So it's still a lot to be realized and I continue to say this is a choppy market and that's what you should probably expect going forward.
[SPEAKER_02]: Now let's pivot and what are we going to do?
[SPEAKER_02]: We can do a collar question?
[SPEAKER_02]: There we go.
[SPEAKER_02]: YouTube question.
[SPEAKER_02]: Not all is 49 says thanks for the fantastic show.
[SPEAKER_02]: The question about HESM and MPLX.
[SPEAKER_02]: What do you think which one would you do
[SPEAKER_02]: Look, tell us about HESM.
[SPEAKER_01]: All right, well, my finger's got a type here real quick.
[SPEAKER_01]: HESM is Drumroll Hess midstream LP class A shares.
[SPEAKER_01]: It is a 8.2 billion dollar market cap company.
[SPEAKER_01]: What they do is they develop an acquire midstream assets in order to provide services for third party crude oil and natural gas.
[SPEAKER_01]: Producers now recently in Q4 of 2025 looks like revenue is 400 and 4 million they actually missed estimates by about 3% or even though earnings per share was actually in line with consensus.
[SPEAKER_01]: Now moving ahead it looks like capex is actually dropping about 40% which is something that the market certainly reacted positively to from guidance but overall the stock has really been drifting
[SPEAKER_01]: in the low 30s to the mid 40s over the past six months and it hasn't followed anything resembling strong momentum.
[SPEAKER_02]: An MPLX is the exact opposite.
[SPEAKER_02]: It does have very strong momentum.
[SPEAKER_02]: Relative strength is
[SPEAKER_02]: 66, it's rallied considerably this year on higher oil prices.
[SPEAKER_02]: They'll also a midstream producer as well.
[SPEAKER_02]: What's interesting here is he's looking at two master master live in the partnerships.
[SPEAKER_02]: And what's this YouTube commenter?
[SPEAKER_02]: must realize is that the dividend yield, which on MPX or MPL, excuse me, is 7 points to going forward 7.7%?
[SPEAKER_02]: What's, what's test?
[SPEAKER_01]: Should I about 8% right now?
[SPEAKER_02]: Okay.
[SPEAKER_02]: So first off, this is going to be tax that you're or nearing context rate.
[SPEAKER_02]: These are not qualified dividends.
[SPEAKER_02]: So understand that number one, and it should not be held in some sort of tax defer to count like a 401k or an IRA
[SPEAKER_02]: So, you need to be in a middleing to lower tax bracket, I think, in this in a taxable account, if you're going to be buying it, understand you also get a K-1s that could complicate your tax situation as well, understand that aspect, and know that...
[SPEAKER_02]: These are names that do have a lot of debt.
[SPEAKER_02]: Most of these management, massive and partnerships are capital-intensive.
[SPEAKER_02]: They have a lot of debt.
[SPEAKER_02]: If the cost of capital goes up, that could shrink their ability to pay out their dividend.
[SPEAKER_02]: But I'm looking, if you're comparing one of the other, I think MPLX looks much better to return equity around 34% obviously relative strength is much better.
[SPEAKER_02]: So I'm gonna go with MPLX over S. We're gonna head into a break.
[SPEAKER_02]: We thank you for helping us achieve
[SPEAKER_02]: and we welcome your call anytime, or call me now with your questions that ate it at any night chart.
[SPEAKER_04]: In Vestock, tell your friends they can listen live, download the free podcast, or watch in Vestock on our YouTube channel, and they can leave their finance and investment questions anytime on 888-99 chart.
[SPEAKER_06]: Hi, good day there Luke and Justin, Matt for Minneapolis here.
[SPEAKER_06]: long, long-time listener of the show.
[SPEAKER_06]: Love everything you guys educate me on.
[SPEAKER_06]: Thank you very much.
[SPEAKER_06]: Quick question on a stock.
[SPEAKER_06]: I don't hear you talk about this sector too much, and it's kind of the gaming sector.
[SPEAKER_06]: My question is on RBLX.
[SPEAKER_06]: I believe that is Roblox.
[SPEAKER_06]: I'm wondering what you think of that as an investment for long term, of course.
[SPEAKER_06]: I've seen this stock go up.
[SPEAKER_06]: And I've seen it go up and kind of making a profit now and seems to be a pretty good one.
[SPEAKER_06]: I have a little boy and he's on the day and thing almost every day and his friends get on it with him and they play games and instead of getting together each other homes now and weekends they all get on and grow blocks and that's how they interact and stuff.
[SPEAKER_06]: And then they give each other gift cards of their row bucks for birthday gifts which I don't
[SPEAKER_06]: So I guess it's kind of how they learn to keep track of their money and stuff like that.
[SPEAKER_06]: So it seems to be making money and kids love it and adults love it.
[SPEAKER_06]: I'm learning too, older adults.
[SPEAKER_06]: So what do you think of this company?
[SPEAKER_06]: It seems to be great in making good money.
[SPEAKER_06]: I'll listen to the show and look forward to hearing your great answer.
[SPEAKER_02]: Thank you, have a good day.
[SPEAKER_02]: And this is an interesting one because it's made a pretty large round trip, big roller coaster over the last pretty much year, it bottoms in early April last year right around fifty one dollars per share.
[SPEAKER_02]: Rallyed all the way to a high in what is this July or actually early October, sorry early August of a hundred and fifty dollars per share to rally 200% in a very short period of time.
[SPEAKER_02]: And now it's back down to the 50s, $57.66 a share today.
[SPEAKER_02]: This is also an interesting one, Luke, because if you look at their net income, their earnings per share, their profitability metrics, they're all really bad, they're all deeply negative.
[SPEAKER_02]: But then you look at cash flow, free cash flow, it's a billion, three, and at an all-time high, killing 12 months.
[SPEAKER_02]: How do you reconcile this?
[SPEAKER_01]: I mean, I think you hit the nail on the head on the thing that is the most worrisome for me when looking at this name is in spite of all of the user growth, either bookings growth in fiscal year 26 is guided at 22 to 26% free cash flow year over year, they're expected to grow 26% in spite of all of that.
[SPEAKER_01]: The company has never been profitable, despite all of the years of scaling.
[SPEAKER_01]: And their age check program was already created near-term engagement and booking headwinds, which could dampen their overall growth metrics.
[SPEAKER_01]: Now, on the other side of that, there is one wild card going on, which is something that everyone turns to at some point, a subscription model.
[SPEAKER_01]: And so Roblox Plus is 499 a month.
[SPEAKER_01]: And it's launching April 30th.
[SPEAKER_01]: So it would be a new recurring revenue stream.
[SPEAKER_01]: If it converts even a fraction of the 144 million plus daily users, it changes the profitability story entirely.
[SPEAKER_02]: Yeah, so this is interesting.
[SPEAKER_02]: Is it losing money because it's just investing in its business and its capacity to service its customers?
[SPEAKER_02]: And it's depreciating or amortizing
[SPEAKER_02]: that those expenses, that's what's interesting to me, is that the cash flow is
[SPEAKER_02]: going higher, like you said, maybe getting more subscriptions, et cetera.
[SPEAKER_01]: I think it's because of their heavy investment in their infrastructure and in this case they're safety read the age check stuff.
[SPEAKER_01]: I think that has essentially been plowing that free cash flow back into the business and no matter how quickly they're scaling, it's not making a dent on bottom line earnings.
[SPEAKER_01]: Which is why, as I mentioned, when
[SPEAKER_01]: the way everybody goes is at a certain point they go towards a subscription model to bake in that revenue and try to turn that story around.
[SPEAKER_02]: That can they just maybe they at some point they stop investing in supporting their infrastructure and then they can turn a gap profit.
[SPEAKER_01]: I mean, they've been scaling for the past six years, they haven't been able to do that.
[SPEAKER_02]: Yeah, I think that's the question you have to answer is when will this turn to profitability?
[SPEAKER_02]: Because the good thing is there's a lot of debt.
[SPEAKER_02]: Are they buying back shares?
[SPEAKER_01]: I think the issue.
[SPEAKER_01]: Billion dollars of shares are something to do to employees.
[SPEAKER_02]: Yeah, they continue issue more shares.
[SPEAKER_02]: It's just not enough for me.
[SPEAKER_02]: And the free cash flow yield is not good enough either.
[SPEAKER_02]: It's still priced to free cash flow is 29.
[SPEAKER_02]: That's still high multiple, even if you're going based on cash flow.
[SPEAKER_02]: So it is that support technically, but I want to see more progress from the profitability.
[SPEAKER_02]: Now in the best stock, we'll look into this story, no tax on tips with the IRS ruling actually means for workers and the economy.
[SPEAKER_02]: The IRS has published its official list of occupations that qualify for the new no tax on tips provision, giving millions of service workers potential tax relief.
[SPEAKER_02]: We'll examine the economic impact of this policy, who really benefits what it might mean for consumer spending patterns.
[SPEAKER_02]: That story is for tomorrow, but for now, I'm Justin Klein with Luke Guerrero, and we're ready to take your calls any time at 8-899 chart.
[SPEAKER_05]: Invest talk is ready 24-7 for your finance and investment questions.
[SPEAKER_00]: I'm hoping you'll give me your cake on Oremat Technologies, ORA.
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[SPEAKER_02]: Blue Garmin focus point today is about corporate stock buybacks.
[SPEAKER_02]: Do they really signal the attractive entry point for investors?
[SPEAKER_02]: The last year,
[SPEAKER_02]: S&P 500 companies, bought back over a trillion dollars in stock.
[SPEAKER_02]: But they only paid out about three quarters of a trillion dollars in dividends.
[SPEAKER_02]: So for the last five years and for the most of the last 20 years, companies that have continued to buy back more shares were spending more money on buyback, so we say, then paying out dividends.
[SPEAKER_02]: And about two thirds of the 1200 concurrent constituents of the morning star US market index, repurchase shares over the last year.
[SPEAKER_02]: 20 years ago, Luke, that was only 22% of companies in that index.
[SPEAKER_02]: So, buybacks are becoming a lot more popular.
[SPEAKER_01]: One thing that I think most people don't realize is 40 years ago, ish, roughly.
[SPEAKER_01]: You can even really buy back shares because it was viewed as stock manipulation.
[SPEAKER_01]: You are inherently driving up the earnings per share of your company.
[SPEAKER_01]: And so it's only in the past two, two and a half decades that this has been a common practice.
[SPEAKER_01]: Now, I think people have
[SPEAKER_01]: started to understand the importance of dividends in terms of total return.
[SPEAKER_01]: You can't just look at a price of a stock and how that's moved and understand the true return while holding that.
[SPEAKER_01]: But I think people too often don't think about stock by-backs and what that does for share price, what that does for investors who will on, and given how predominant now it's become as a way to return, return value to shareholders, return capital to shareholders, I think it's starting to have its moment.
[SPEAKER_02]: Yeah, and it's more comfortable for executives, I think, because by-backs are kind of like dating,
[SPEAKER_02]: Increase them, they can decrease them, they can announce that they have the ability to buy back shares, and then that actually do it, whereas dividends are kind of a commitment.
[SPEAKER_02]: You have to pay this out every single quarter if you start to raise that dividend, then investors start to expect that as well that you will continue to raise that dividend.
[SPEAKER_02]: And that becomes a problem if you eliminate or suspend or reduce that dividend, the share price gets hit dramatically.
[SPEAKER_02]: And then there's the tax efficiency part, where if you pay out of dividend, well that dividend is tax, it may be taxed at,
[SPEAKER_02]: the long-term capital gains rate of 15 or 20% of the qualified dividend rate, that's true.
[SPEAKER_02]: But the corporations are taxed as well.
[SPEAKER_02]: So there's that double taxation side there whereas by-backs, they are not taxed until the shareholder sells the shares, right?
[SPEAKER_01]: Yeah, that's true.
[SPEAKER_01]: I think another interesting thing, it signals, again, and this is four companies that actually go through rather than creating these programs,
[SPEAKER_01]: It tells investors, effectively, we have too much cash.
[SPEAKER_01]: We are generating so much free cash flow that we do not know how to spend it.
[SPEAKER_01]: We can't reinvest it in the business.
[SPEAKER_01]: We don't see any sort of M&A target that would benefit our business.
[SPEAKER_01]: And that's a positive signal.
[SPEAKER_01]: If they don't do it, if they don't go through with it, if they the next year don't renew their program, nobody cares.
[SPEAKER_01]: Compare that to David.
[SPEAKER_02]: Well, I would say, people, investors care, but there aren't those dividend investors and there's that are, there aren't, there aren't buy back investors, right?
[SPEAKER_02]: There's a lot of dividend investors.
[SPEAKER_02]: There's not a lot of people.
[SPEAKER_02]: It would be like, I just wanna buy the companies that have the highest buy-back yields.
[SPEAKER_02]: Most people don't say that.
[SPEAKER_02]: And then there's also funds that are focused on income where they have a mandate to invest in it.
[SPEAKER_02]: certain amount of companies all the companies have that some sort of yield or yield minimum and when that drops below a certain level date they have to sell it so that creates a headwind as well when they cut the dividend whereas like I said there's not a lot of funds that are just focused on the buyback yield for example.
[SPEAKER_01]: Well, one of the things that it does, you know, talked about the positive signals it has for investors.
[SPEAKER_01]: There's also a bit of, even though 40 years ago, right, a lot has changed in the past 40 years before people thought it was market manipulation.
[SPEAKER_01]: But there's still that looming, our managers, just doing share repurchases in order to boost earnings per share.
[SPEAKER_01]: There's been criticism from a lot of politicians who say, well, you should be using this cash to reinvest in the business.
[SPEAKER_01]: You should be using this cash to pay your employees more, especially in a time of inflation.
[SPEAKER_01]: You look back at what's happened over the past year, and maybe one of the reasons why after the run-up defense contractors haven't continued to just boom forward is the administration effectively banned, sure by Vax.
[SPEAKER_01]: at those large defense contractors.
[SPEAKER_01]: And so I think there could be a bit of political headwind for the just massive amount of cash that companies had been returning to their shareholders over the past couple years.
[SPEAKER_02]: And you have to realize, or you have to understand, where is that buyback coming from?
[SPEAKER_02]: Like you said, CEOs, executives, can push forward a stock buyback program, but is that coming from,
[SPEAKER_02]: cash flow is it coming from debt.
[SPEAKER_02]: A lot of companies have done that as well, which is, hey, we have a pretty clean balance sheet.
[SPEAKER_02]: We can take all of this.
[SPEAKER_02]: Maybe they should have a relatively low PE for example.
[SPEAKER_02]: We can start to borrow money, leverage up our balance sheet, and start to buy back our stock and
[SPEAKER_02]: and they believe that that is going.
[SPEAKER_02]: That's a better use of capital and helps them look good by like you said, boosting their earnings per share.
[SPEAKER_02]: Now, for the average investor is this a signal, or by that's a signal that they should buy the company, buy the shares.
[SPEAKER_02]: And if you look at different studies, and you look over many time periods,
[SPEAKER_02]: It, it definitely varies.
[SPEAKER_02]: Now, before the 2000s, the broad US stock market dividend yield range from 3 to 6%.
[SPEAKER_02]: It's now below 2% in a big part of that is the dominance of share by a vaccine.
[SPEAKER_02]: It's very different here in North America versus the rest of the world.
[SPEAKER_02]: And so that's a, that's a, that's a, um,
[SPEAKER_02]: That's a big difference of why you see those foreign indices yielding so much, but really investors should focus more on total shareholder yield, meaning how much they're paying out in dividends as well as share buybacks as well on top of that.
[SPEAKER_02]: And what is the optimal mix for companies and for executives is it growth focused investments, is it acquisitions, is it debt reduction.
[SPEAKER_02]: What is it?
[SPEAKER_02]: You know, Warren Buffett always said, when stocks can be bought below the business of value, it's best use of capital for that cash is to buy back shares.
[SPEAKER_02]: in Warren Buffett's terms, that's usually pretty rare, right?
[SPEAKER_01]: Yeah, that is usually pretty rare.
[SPEAKER_01]: And you also have to remember, there's been a human psychology and there as well, these people within the departments at these companies are human.
[SPEAKER_01]: And as humans would do, when things start to get a bit stressful economically, they start to pair back their actual share repurchases, why?
[SPEAKER_01]: Because if you expect the future to have a bit of friction, you want to, most of your cash position.
[SPEAKER_01]: And so contrary to what may make sense, you end up in situations sometimes when companies stop buying back shares when they should be I.E.
[SPEAKER_01]: in a risk-off environment when share prices cheap, and they continue to buy back shares when they shouldn't be when valuations are high.
[SPEAKER_02]: Yeah, that's certainly true.
[SPEAKER_02]: And you know, market dynamics really have, I've changed a lot over the past 25, 30 years.
[SPEAKER_02]: And so,
[SPEAKER_02]: This is a new paradigm for the average investor.
[SPEAKER_02]: And the dividend investor, because so many dividend investors are starved for yields.
[SPEAKER_02]: People are chasing.
[SPEAKER_02]: You see it all the time, right?
[SPEAKER_02]: We get people that call about MLPs, they call about a telecom company who has a lot of debt than has a 67% yield.
[SPEAKER_02]: Because there aren't, as I said before, there are 4,000, the market yielded 3 to 6%.
[SPEAKER_02]: That was a pretty good yield, but that's no longer the environment that we operate in.
[SPEAKER_02]: So it's, and we're gonna have a deeper dive on this.
[SPEAKER_02]: Luke, we did this last week.
[SPEAKER_02]: We'll have this video out in our YouTube channel sometime in the next day or two.
[SPEAKER_02]: So be on the lookout for that, where we really dive deep into,
[SPEAKER_02]: What works, what do pay attention to?
[SPEAKER_02]: When it comes to share buybacks, and whether it's a creative to the shareholder or not.
[SPEAKER_02]: Sometimes it can be bad if you're buying shares back at high prices with a lot of debt and with a business that is very cyclical, right?
[SPEAKER_02]: So there's a lot of details that we get into on a video.
[SPEAKER_02]: Now, from time to time, we also received questions via web form from vestalk.com.
[SPEAKER_02]: Here's one that came in earlier, said, what do you think about Cisco?
[SPEAKER_02]: S-Y-Y, not CSCO.
[SPEAKER_02]: That's why it's very different business.
[SPEAKER_02]: Today, after its recent purchase of restaurant D-PO acquiring more debt to do so, tell them about Cisco.
[SPEAKER_01]: Well, Cisco's the world's largest food distributor and that they deliver food beverages and kitchen supplies to all sorts of customers, restaurants, hospitals, schools, hotels, both in the US and internationally as well.
[SPEAKER_01]: It's a $34 billion market cap company.
[SPEAKER_01]: It's got a little bit of debt, though nothing crazy about 13.4 billion in debt.
[SPEAKER_01]: And you're to date,
[SPEAKER_01]: Well, it's performed slightly under.
[SPEAKER_01]: Well, the S&P is returned.
[SPEAKER_01]: It's down 45 basis points here today.
[SPEAKER_01]: Down 3.55% over the past three months.
[SPEAKER_01]: Now, the last quarter, look like revenue was up 3% year over year.
[SPEAKER_01]: Experts share was up year over year by about six and a half percent.
[SPEAKER_01]: That was a beat on both of those.
[SPEAKER_01]: You've been seeing margin expansion.
[SPEAKER_01]: Gross margin expanded by about 15 basis points.
[SPEAKER_01]: and their international segment actually delivered their ninth consecutive quarter of double digit adjusted operating income growth.
[SPEAKER_01]: So, in spite of where the stock has been performing, because it's been ranging for like five years.
[SPEAKER_01]: At this point, right?
[SPEAKER_01]: It's never returned more than the absolute value of five percent since 2021.
[SPEAKER_01]: It's been ranging.
[SPEAKER_01]: It's by that they've
[SPEAKER_02]: Yeah, and this purchase of restaurant depots, that was called.
[SPEAKER_02]: Yeah, restaurant depot.
[SPEAKER_02]: A lot of people are kind of up in arms.
[SPEAKER_02]: They think it's going to be now monopoly in food or restaurant distribution.
[SPEAKER_02]: So if you believe that's the case, then they should be able to up their margins, extract more cash flow, pay down debt, and this sell-off on,
[SPEAKER_02]: This news, which had it moved from around 90 all the way down to what 75 or so, 72 and change at the close today, this is
[SPEAKER_02]: It's a worry, or it's not a worry, but it's an opportunity, most likely, on the cell off.
[SPEAKER_02]: So I actually think this would be a good buying opportunity if you are confident in their monopoly around the food distribution.
[SPEAKER_02]: So I actually think it's a good opportunity.
[SPEAKER_02]: It's trading at enterprise value even around 14 historically that is kind of the low end of its range.
[SPEAKER_01]: I will say, though, they did announce an acquisition recently for jet-trou.
[SPEAKER_01]: Oh, no, that is it.
[SPEAKER_01]: It's restaurant still.
[SPEAKER_01]: Yeah, that is the company, but I would like to see the structure of how they structure this, right?
[SPEAKER_01]: They're about $35 billion mark at capital and $13 billion in debt.
[SPEAKER_01]: It's a $29 billion deal.
[SPEAKER_01]: Are they taking out a lot of leverage in order to do this at a time when restaurant demand is a lower?
[SPEAKER_01]: That would certainly be,
[SPEAKER_01]: wild.
[SPEAKER_01]: If customers don't come, it doesn't matter if you have a monopoly or not.
[SPEAKER_01]: If people aren't spending money at restaurants, it doesn't matter if you own every restaurant in town.
[SPEAKER_02]: That's why I'm opening the restaurant.
[SPEAKER_02]: It's the distribution to the restaurant.
[SPEAKER_01]: Or on the contrary, the restaurant says, I don't have any customers.
[SPEAKER_01]: I don't need any distribution.
[SPEAKER_01]: So you find yourself in a situation where, especially as the economy, maybe starts a deteriorate.
[SPEAKER_01]: Now you're taking on a lot of debt and what could be higher interest rate environment.
[SPEAKER_01]: Could be a little tricky.
[SPEAKER_02]: Yeah, yeah, it's definitely not a clear cut case either way.
[SPEAKER_02]: I kind of agree with you though that's been me and during for a long period of time, what's, is this the catalyst for to break out?
[SPEAKER_02]: It doesn't seem like it because the market's not really reacting positively to this, but that's what you would, this is what you would do here, is you would fade the market's reaction if you think this is going to be a good acquisition for that.
[SPEAKER_02]: And let's keep going and roll in another list in a question from eight to eight, nine, nine chart.
[SPEAKER_03]: I've got a position that by 20 shares in a stock ICIC bank limited, IBM is a stock symbol, but no wonder if I should start selling some of the software to just hang on to it.
[SPEAKER_03]: Thanks a lot for your answer.
[SPEAKER_02]: And this is, what do you call it?
[SPEAKER_02]: Ikiyaki bank.
[SPEAKER_02]: Ikiyaki.
[SPEAKER_02]: That's what Steve used to call it.
[SPEAKER_02]: It's not going to stick with it.
[SPEAKER_02]: This is actually a name we own for clients.
[SPEAKER_02]: And it's one of those names.
[SPEAKER_02]: We're actually, it's, it's under discussion to get rid of.
[SPEAKER_02]: We have made a decision yet.
[SPEAKER_02]: But this is the largest bank in India.
[SPEAKER_02]: And with the higher oil prices, that's weighing on the Indian economy, because they are a big importer net importer of.
[SPEAKER_02]: oil.
[SPEAKER_02]: So that's what's weighing on Indian stocks in general and then at geeky.
[SPEAKER_02]: Now it's a it's a historically a wonderful performer, one of the best performers within the Indian market.
[SPEAKER_02]: So if you're looking for good exposure to India then this would be the ones.
[SPEAKER_02]: So what do you think?
[SPEAKER_02]: What's your current impression of this and whether it makes sense for this person to hold it?
[SPEAKER_01]: Yeah, I mean, it's, it's certainly tough, right?
[SPEAKER_01]: It is a best in class, Indian private bank.
[SPEAKER_01]: It's got a fortress of a balance sheet.
[SPEAKER_01]: It's got improving asset quality, but the Iran conflict and tariff uncertainty, they're, they're directly threatening and he has trade routes for mintances.
[SPEAKER_01]: Their export economy is a lot of macro pressure there, which is what makes it such a difficult choice.
[SPEAKER_02]: Yeah, it is at some good support, it bounced off the 200 week moving average.
[SPEAKER_02]: It's still in a broader uptrend.
[SPEAKER_02]: I would hold it for now, but it all depends on your view of this surround conflict.
[SPEAKER_02]: I think it gets a big rally if we get some sort of resolution on that front.
[SPEAKER_02]: That was the best thought I'm just inclined.
[SPEAKER_02]: Here today with Luke Guerrero, and we have one goal every weekday.
[SPEAKER_02]: It's helped you achieve.
[SPEAKER_02]: your version of financial freedom.
[SPEAKER_02]: I'm going to work at the news after this final break.
[SPEAKER_02]: It's a good question.
[SPEAKER_04]: Isn't it right now at 8-899 chart?
[SPEAKER_02]: Luke, there's a lot going on in the world today.
[SPEAKER_02]: Is there?
[SPEAKER_02]: There is.
[SPEAKER_02]: And top of mine for most people is what's going on at least in oil prices.
[SPEAKER_02]: And we had Friday's CPI report, and it was the hottest and almost two years.
[SPEAKER_02]: We all know pretty much why.
[SPEAKER_02]: And the question I think for everybody is, what does this mean for fed policy?
[SPEAKER_02]: What does it mean for growth in the economy as a whole?
[SPEAKER_02]: Do you think that they're going to use this as an excuse to raise rates, or do you think they pause?
[SPEAKER_02]: How do you think this impacts their decision as well as growth in the economy?
[SPEAKER_01]: Well, that's the million dollar question, isn't it?
[SPEAKER_01]: I think that
[SPEAKER_01]: At least for now, in less things, continue to evolve.
[SPEAKER_01]: It could potentially be Jerome Powell's favorite work, transitory, and so prematurely raising rates at a time where the labor market's not weak, but it's certainly softer than it has been.
[SPEAKER_01]: Could be that, right?
[SPEAKER_01]: We live in an economy now that is entirely propped up by consumer spending.
[SPEAKER_01]: And so what you don't want to do at a time when consumers are going to pair back their spending because costs are increasing is also crushed on the demand side.
[SPEAKER_01]: That is not good, not a good idea.
[SPEAKER_01]: I think that to counter my own point of potentially being transitory, at the same time PC, X energy,
[SPEAKER_01]: hasn't really budged and so it's been what you and I have been talking about for so long which is a persistent inflationary environment even before any of the issues shall we say that started to rise in the Middle East.
[SPEAKER_02]: Yeah, the immediate impact on inflation certainly is being felt on the energy side, gasoline, diesel, etc.
[SPEAKER_02]: But it's really will feed into the good market as well.
[SPEAKER_02]: We talked before about it's not just oil and gas, it's also
[SPEAKER_02]: aluminum, copper, urea, fertilizer, and puts, et cetera.
[SPEAKER_02]: So clearly it's going to have an upward push on inflation for probably at least the next three probably closer to six to nine months, even if we get this resolved in the coming weeks.
[SPEAKER_02]: So I think that's kind of baked in the cake here, but that is not that's
[SPEAKER_02]: We, at least we hope, is more of a one-time event kind of similar to COVID, right?
[SPEAKER_02]: And, you know, will this be, be a chance or I think it will?
[SPEAKER_02]: So why not?
[SPEAKER_02]: Cut rates.
[SPEAKER_02]: Are you talking about the labor market being weaker?
[SPEAKER_02]: And so far, if you actually look at the Fed funds curve,
[SPEAKER_02]: The odds, there's now no chance of a rate hike by your end, so they're kind of going along with what you were saying, no reason really to hike rates.
[SPEAKER_02]: But a lot of reasons just stay paused through your end.
[SPEAKER_02]: And there's a 66% chance that'll be the case.
[SPEAKER_02]: But that also means there's about a third chance they'll be.
[SPEAKER_02]: one or two cuts by a year and as well.
[SPEAKER_02]: So what's the argument against cutting rates?
[SPEAKER_01]: Well I think it's what I said before is even before the situation inflation wasn't ever really meaningfully near the Fed's 2% target.
[SPEAKER_01]: And so what you don't want to do is turn something that is transitory like an energy shock into something that is even more persistent because money becomes looser.
[SPEAKER_01]: I think everything around everything is saying that at least for now the best course of action is to wait and see how things start to develop because there are more than anything too many unknowns.
[SPEAKER_01]: Of course this could
[SPEAKER_01]: in the middle east into something that is a persistent long term energy shock and then you what have to start raising rates again.
[SPEAKER_01]: It just becomes a bit uneasy.
[SPEAKER_02]: Yeah, but the, as we said, the higher energy costs are transitory, but they will crimp growth, at least in a near term, because it's a regressive tax, usually falls hardest on the middle and lowering count consumers.
[SPEAKER_02]: They can least afford that extra $10, $15, $20 to fill up their tank.
[SPEAKER_02]: This could feed into corporate margins as well.
[SPEAKER_02]: good worsen the labor market which is already kind of at stall speed we've talked about that before the fourth quarter now is it it looks to be there's only about a half a percent quarter over quarter annualized earnings are a GP growth that's basically nothing right consumer sentiment is an all-time below so there's definitely more arguments for a rate cut despite the inflationary impulse that the these energy prices are are creating a short term.
[SPEAKER_02]: Well, that about does it?
[SPEAKER_02]: I'm Justin Klein with Luke Rereo reminding you about K-P Financial's hair loan vesting when we make a trade for our clients.
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