[SPEAKER_00]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.
[SPEAKER_00]: Independent Thinking, shared success.
[SPEAKER_00]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.
[SPEAKER_00]: Here is KPP Financial Portfolio Manager, Luke Guerrero,
[SPEAKER_07]: Good afternoon, fellow investors, and welcome to the Tuesday, April 7th, 2026 edition of Invest Talk.
[SPEAKER_07]: Now, as I know, you are well aware of our March madness, rather market madness competition has come to an end.
[SPEAKER_07]: That doesn't mean that the learning and lessons stop here.
[SPEAKER_07]: In fact, we have another great show planned for you today, including plenty of educational and actual material,
[SPEAKER_07]: a rundown of today's market performance and several show topics.
[SPEAKER_07]: Before we get to all that, let's tackle our first caller question now.
[SPEAKER_04]: Yeah, this is Will and San Diego, and I'm looking at ticker symbol A, M, L, P.
[SPEAKER_04]: and one there is this is a good investment.
[SPEAKER_07]: Thanks.
[SPEAKER_07]: AMLP is the Allerian MLP ETF.
[SPEAKER_07]: It is the largest MLP ETF by assets actually.
[SPEAKER_07]: And what it does is it tracks infrastructure names.
[SPEAKER_07]: It's a basket of energy infrastructure master limited partnerships that essentially earned the majority of cash flow from midstream activity.
[SPEAKER_07]: So I think pipelines, think storage, and processing.
[SPEAKER_07]: The old right now, take a look at where it's sitting, it's usually around 8%, it's about 7.59 right now, so lower than it has been.
[SPEAKER_07]: It's got an add expense ratio, about 85 basis points.
[SPEAKER_07]: It's actually a 1.01% right now in terms of its expense ratio, but it is an income-focused ETF, right?
[SPEAKER_07]: It's not a single stock, so the frame is a bit different.
[SPEAKER_07]: Top five holdings.
[SPEAKER_07]: Each K-12 to 13% of its weight, which is pretty crazy, right at the top 10, is actually 100% of its weight, because, well, it's very, very small fun.
[SPEAKER_07]: It only has about 15.
[SPEAKER_07]: Holdings, as large as being enterprise products and planes all America pipelines, Sonoco, Energy Transfer, and Western midstream partners.
[SPEAKER_07]: Now the court thesis here is the distribution.
[SPEAKER_07]: You're holding this for that 7 to 8 to 9 percent distribution.
[SPEAKER_07]: yield.
[SPEAKER_07]: But this one critical thing you have to understand before you would consider buying this.
[SPEAKER_07]: It is structured as a C corporation, not a pastor.
[SPEAKER_07]: That means it pays corporate taxes internally before distributing income, creating what is in the business called tax drag.
[SPEAKER_07]: It reduces your effective yield compared to owning the underlying MLPs directly.
[SPEAKER_07]: If you want MLP exposure without the drag, there are other ETFs.
[SPEAKER_07]: that do this.
[SPEAKER_07]: But the benefit is, you're probably thinking to yourself, why would I want to give that up?
[SPEAKER_07]: Why would I want that tax drag?
[SPEAKER_07]: Well, the trade-off is simplicity.
[SPEAKER_07]: MLP sends you a 1099 at tax time rather than a K1.
[SPEAKER_07]: So if you're looking for yields,
[SPEAKER_07]: which frankly, if you've been listening to the show, we always say don't search for you, don't reach for you.
[SPEAKER_07]: You can create your own yield by selling down on your assets yourself.
[SPEAKER_07]: But if that's something that you are trying to get more of in your portfolio, I don't even know if I'd go with this fund, right?
[SPEAKER_07]: It does make it a little less complex or a tax perspective, but you're paying a hefty, hefty, say it one more time, hefty fee, while you're getting there.
[SPEAKER_07]: We got a lot to talk about in the next 45 minutes or so, including my main focus point about the aerospace and defense industry and how contractors are benefiting from the new military investment cycle.
[SPEAKER_07]: Trump's proposed historic defense spending budget and escalating Middle East tensions.
[SPEAKER_07]: They're creating a new military investment cycle.
[SPEAKER_07]: rescue operations, the ongoing conflicts, they're highlighting this increased demand for not just advanced military technology, but new aerospace capabilities.
[SPEAKER_07]: So we'll talk all about that as well as the job market recent data showing a lot of people dropping out.
[SPEAKER_07]: We'll also touch on
[SPEAKER_07]: U.S. wealth to FAC Indian factory closures, how the recent oil shock has caused those things to fall and raise the risk of a global recession.
[SPEAKER_07]: And should we have time at the end of the show?
[SPEAKER_07]: We'll touch on U.S. treasuries and rather the U.S. treasuries and its opinion on private credit risks.
[SPEAKER_07]: We also have some voice bank calls ready to play, including one on 401k to Roth IRA strategy, and another on Riley expiration, Permian Inc. to your REPX.
[SPEAKER_07]: As well as some questions that came in from the comment section of the Invest hockey YouTube channel and hopefully we are from some of you live throughout the show.
[SPEAKER_07]: Going into QuickRake, please remember you can call any time.
[SPEAKER_07]: and leave your message on the Invest Talk of Voice Make.
[SPEAKER_07]: If you're listening via our live stream or on AM1220 in the Bay Area, pick up that phone and dial 88899 chart.
[SPEAKER_07]: When we come back, I'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 financials 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]: 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.
[SPEAKER_02]: So when you've got finance and investment questions, don't forget to call in Vestock.
[SPEAKER_02]: 888-99 chart.
[SPEAKER_07]: 88899 chart is the number if you want to get through to me live or at any point in time leave a voicemail in our question bank.
[SPEAKER_07]: That being said, let's talk a little bit about the market today, US stocks finishing mostly higher on Tuesday and a session that essentially dominated or rather was dominated by one question.
[SPEAKER_07]: What happens at eight o'clock Eastern tonight?
[SPEAKER_07]: The doubt it took tens of a percent while the S&P Nasdaq and Russell 2000 all eaked out fractional gains at the end of the day because stock really rose near their best levels of the session on late afternoon headline suggesting a possible deescalation ahead of the president's threat to Iran to make a deal or face widespread attacks on bridges and power facilities now the headline noise was
[SPEAKER_07]: for lack of a better word a bit deafening trump meaningfully ratcheted up his rhetoric and more u.s. and Israeli strikes were launched notably against carg island but diplomacy appears to be ongoing press coverage suggested the White House hasn't completely closed the door to an extension in fact before we started recording it looks like they agreed to a two week extension
[SPEAKER_07]: Toronto is reportedly reviewing the proposal for a longer term solution so we'll see what happens later in the night tonight.
[SPEAKER_07]: But outside this moves are expected in either direction.
[SPEAKER_07]: The complacency versus phonodynamic that's really defined recent weeks cuts both ways from here.
[SPEAKER_07]: WTI crewed settled up one and a half percent on the day, hitting a fresh post 2022 high.
[SPEAKER_07]: Treasuries were mostly firmer with the curve steepening and yields down about four basis points.
[SPEAKER_07]: At the short end, Treasuries 58 billion dollar through your auction stopped through by over a basis point with very strong foreign demand, a pretty welcome contrast to the tailing auctions we saw earlier in March.
[SPEAKER_07]: Under the surface, managed care outperformed on CMS rate update to the hospitals also rallying, energy banks, networking, ad chemicals among some of the other leaders, Apple and Tesla were the Mag7 underperformers while Alphabet kind of held up the best amongst that group.
[SPEAKER_07]: Home Builders, Apparel and Restaurants, some of the worst performers on the day.
[SPEAKER_07]: Looking at the data, durable goods orders declined 1.4% worse than expected.
[SPEAKER_07]: But the details were a bit better.
[SPEAKER_07]: You saw X transport rows 8 tenths and core capital goods orders gained 6 tenths both above what Wall Street expected.
[SPEAKER_07]: 80p's weekly employment data shed private employers adding jobs to the highest piece so far this year.
[SPEAKER_07]: New York Fed's Consumer Expectation Survey showed one of your inflation expectations rising to 3.4%.
[SPEAKER_07]: All eyes tonight on the eight o'clock deadline, of course, we likely got that resolution extending towards two weeks.
[SPEAKER_07]: So beyond that, we're looking for ahead, pretty packed rest of the week, we get FOMC minute on Wednesday, PCE and Q4GDP on Thursday and March CPI on Friday.
[SPEAKER_07]: Take a look at this question that came in earlier.
[SPEAKER_07]: And it says, what are your thoughts on investing in Australia?
[SPEAKER_07]: They have an abundance of natural resources, stable government policy, geographical trade advantage, predictor GDP growth, and potential tech growth.
[SPEAKER_07]: I'm looking into enter into FLAU.
[SPEAKER_07]: Well,
[SPEAKER_07]: You know, there is a bit of a bullcase for investing in Australia.
[SPEAKER_07]: The economy is accelerating growth forecasted to pick up from 1.4% around 2.25% in at 2026 and into 2027.
[SPEAKER_07]: As you mentioned, you know, the resources sector, that is a big standout.
[SPEAKER_07]: But you see it with our economy as well.
[SPEAKER_07]: What's really important is consumer spending.
[SPEAKER_07]: And their consumer spending is growing around two to three percent.
[SPEAKER_07]: You're over year you're seeing tax cuts.
[SPEAKER_07]: You're seeing wage growth.
[SPEAKER_07]: You're seeing ongoing rate relief business investment is pretty strong.
[SPEAKER_07]: And it adds a pretty solid diversifier.
[SPEAKER_07]: I would say because of the access to other markets that for us are on the other side of the world.
[SPEAKER_07]: And so logistically, it's a pretty good market to get into.
[SPEAKER_07]: Let's take a look at FLA, which is the Franklin Footsee Australia ETF.
[SPEAKER_07]: And this guy is an $89 million fund.
[SPEAKER_07]: What they're doing is capturing the Australian market.
[SPEAKER_07]: It's one of the largest economies in APAC of course.
[SPEAKER_07]: And they only cover large and mid caps that is they actually exclude small caps in this fund.
[SPEAKER_07]: Pretty simple, pretty straightforward.
[SPEAKER_07]: It is cap weighted.
[SPEAKER_07]: So I hope the expense ratio is small.
[SPEAKER_07]: Looks like it is only nine basis points here.
[SPEAKER_07]: As promised, 75% large, 21% mid, pretty highly concentrated.
[SPEAKER_07]: The Commonwealth Bank of Australia is 12.59% telling me they're probably aren't individual caps, meaning they aren't sector caps either.
[SPEAKER_07]: I mean, if you're trying to get an Australian, there are a lot of reasons why that gives you some pretty good geographic diversification away from U.S. heavyport folios.
[SPEAKER_07]: A cheap market cap weighted fund is a good way to do it.
[SPEAKER_07]: Why don't we see if we can squeeze into one more question before the break?
[SPEAKER_06]: Hey Justin and Luke, this is Sam from Michigan.
[SPEAKER_06]: Got a question on Intel, I am TC.
[SPEAKER_06]: I've got a partial position in it with this be a good time in your opinion to pick up some more.
[SPEAKER_06]: Thank you very much.
[SPEAKER_07]: Intel Corporation is actually a name we hold in one of our strategies.
[SPEAKER_07]: I'll be at a bit of a smaller weight compared to some other names.
[SPEAKER_07]: It's up 4.19% today, 43.39% year to date up 170%
[SPEAKER_07]: over the past 52 weeks and that's after a prolonged downturn in the business that ended with well U.S. investment directly into the company and trying to really go follow through with their plans to have an internal foundry within their business.
[SPEAKER_07]: It has been probably one of those dramatic comeback stories in tech.
[SPEAKER_07]: It hit a 52 week low about $17.67 that was a multi-decade low in mid-2024.
[SPEAKER_07]: And since clawed its way back, it's pretty about 52 per share right here.
[SPEAKER_07]: I mean, the bulk case one of the reasons we like it is,
[SPEAKER_07]: I mean, it's one of the most compelling stomach conductor names.
[SPEAKER_07]: If you believe the turnaround is real, right?
[SPEAKER_07]: Intel's 18A is the most advanced processing node, ever built on US soil.
[SPEAKER_07]: The government has made Intel survival a national security priority, server CPU allocations are repeatedly selling out.
[SPEAKER_07]: In fact, they're reportedly selling out through 2026.
[SPEAKER_07]: And so I've always thought that if the US government is so concerned with this company succeeding,
[SPEAKER_07]: Maybe it could it is an important part of the industry that certainly should be in your portfolio.
[SPEAKER_07]: I mean, is the it is a high stakes turnaround certainly the operational progress.
[SPEAKER_07]: It's it's real, but I mean, if $52, you know, we started to trim it a little bit.
[SPEAKER_07]: It's it's maybe pricing in.
[SPEAKER_07]: a Goldilocks scenario, 80 times price to forward looking earnings, we didn't completely trim out of it.
[SPEAKER_07]: We're still holding on to a decent portion of our position, but if looking a little rich right now, especially as we approach April earnings, if it starts to pay back a little bit, maybe we would add some, you'd think to add some more to your portfolio, but where it is right now, I think if you're profitable, time to take some profits that is INTC Intel Corporation.
[SPEAKER_07]: Headed into break, still to come, a good discussion on the aerospace defense industry, and a bunch of other topics, but most importantly, more answers to your finance and investment questions.
[SPEAKER_07]: We got voicemails.
[SPEAKER_07]: We got questions from the comment section question bank, but we haven't had yet as a live call.
[SPEAKER_07]: You could be the first, pick up that phone and dial, 888-99-chart.
[SPEAKER_02]: Luke Guerrero is here, and he's ready with answers to your financial investment questions.
[SPEAKER_02]: Call in Vestock, 888-99, chart.
[SPEAKER_07]: Last Friday, the Trump administration formally set Congress the fiscal year 2027 defense budget in the number.
[SPEAKER_07]: Pretty staggering, $1.5 trillion, that is $1.5 trillion in base discretionary spending.
[SPEAKER_07]: The first time base defense spending has ever exceeded the $1 trillion mark.
[SPEAKER_07]: And then on top of that, an additional 350 billion in mandatory spending through a reconciliation bill.
[SPEAKER_07]: This represents a 44% increase from the current fiscal year for context that exceeds even the Reagan buildup and approaches spending levels, not seen since World War II.
[SPEAKER_07]: The budget allocates roughly $760 billion to weapons procurements and modernization alone.
[SPEAKER_07]: The Navy gets the largest share at $150 billion.
[SPEAKER_07]: The air in space forces get 101, the Army gets 60.5, there's 65 for shipbuilding.
[SPEAKER_07]: 18 battle for ships with 16 non battle for ships including initial funding for a new Trump class battleship and next generation frigates and the golden dome missile defense shield gets 17.5 billion in 2027 on top of the 22 billion it's already gotten totally nearly 39 billion for the program.
[SPEAKER_07]: So the first question
[SPEAKER_07]: which defense contractors are going to benefit most from this spending the answer depends on where the money flows and the budget tells you pretty clearly.
[SPEAKER_07]: Missile and air defense systems are the top priority driven directly by the Iran War the U.S. burned through billions in patriot and fat interceptors in the first days of the conflict and replenishment orders are massive, RTX.
[SPEAKER_07]: formerly known as Rayfion is the most direct beneficiary here, then make the Patriot system, fat interceptors, and aim 128 AM RAM missiles.
[SPEAKER_07]: And they recently doubled AM RAM production to 1200 missiles annually on a $3.5 billion contract.
[SPEAKER_07]: Their business is more missile heavy than any other of the prime, so the munitions replenishment cycle flows disproportionately through them.
[SPEAKER_07]: Lucky Martin benefits from the F-35 program, which is getting increased funding and for missile defense systems, including the Golden Dome architecture, North of Grumman is positioned to the B-21 Raider stealth bomber program, which entered low rate initial production and through their role in space-based missile defense sensors, general dynamics benefits from shipbuilding.
[SPEAKER_07]: They build the Columbia class submarines and Virginia class attack submarine.
[SPEAKER_07]: So as you can see, it's pretty wide spread here.
[SPEAKER_07]: But the nuance is a bit easy to miss.
[SPEAKER_07]: The biggest growth isn't going to legacy programs.
[SPEAKER_07]: Within this proposed budget, spending on established weapon system, it's relatively flat.
[SPEAKER_07]: The over 20% growth rates are concentrated in newer technologies, space-based systems, AI, and autonomous platforms directed energy weapons drones.
[SPEAKER_07]: This means the smaller, more innovative defense tech companies could see proportionally larger revenue growth than the big five primes.
[SPEAKER_07]: So how do you think this might affect aerospace stock valuations?
[SPEAKER_07]: Well, the Iran War has been an interesting case study because the big prime they barely moved.
[SPEAKER_07]: When the war started, they were already priced for growth.
[SPEAKER_07]: The five largest defense contractors are up 50% on average since June 2024.
[SPEAKER_07]: four of the five trade at roughly 26 times four earnings near historic highs.
[SPEAKER_07]: The war validated the thesis, but didn't really add much incremental upside because the market had already priced in record Pentagon budgets and NATO spending at 5% of GDP.
[SPEAKER_07]: The defense tech names by contrast, they've continued outperform.
[SPEAKER_07]: The goate spider aerospace and defense ETF, which has more exposure to smaller innovative companies as I've performed the cap weighted eye shares version by about 13 percentage points over the past year.
[SPEAKER_07]: That tells you where the incremental spending growth is actually being captured.
[SPEAKER_07]: The long-term outlook for the sector world, the structural case.
[SPEAKER_07]: It's as strong as it's been in decades.
[SPEAKER_07]: NATO members, they pledged 5% of GDP for defense spending.
[SPEAKER_07]: European Defense budgets have doubled since 2019.
[SPEAKER_07]: Japan, South Korea, India.
[SPEAKER_07]: They are all raising military spending targets.
[SPEAKER_07]: Global Defense spending is projected to top $3.6 trillion by 2030, and the Iran War has created a real world demonstration of weapons to bleach, and that will drive replenishment cycles for years.
[SPEAKER_07]: But there are risks you need to understand.
[SPEAKER_07]: Trump's executive orders banning buybacks and dividends at major defense contractors, it's still in effect in its pressuring near-term shareholder returns.
[SPEAKER_07]: The $1.5 trillion budget relies on $350 billion from a reconciliation bill that hasn't passed Congress and faces opposition from some House Republicans.
[SPEAKER_07]: If the war becomes even more unpopular, enough to flip Congress and the mid-terms, the defense budget could face political headwins.
[SPEAKER_07]: And the Defense Production Act has been floated as a tool to compel manufacturing which, in effect, would squeeze margins further.
[SPEAKER_07]: The key consideration is really whether you're buying for the current conflict or the structural cycle.
[SPEAKER_07]: The reality is, if the war ends tomorrow, Defense stocks they might pull back on the news as the risk premium deflates, but the structural spending cycle is what we've been talking
[SPEAKER_07]: And that's being driven by things that have already happened, munitions, replenishment, what people are seeing in the wars.
[SPEAKER_07]: The golden dome built out ship building, global rearmament as a trend.
[SPEAKER_07]: It extends well beyond any single conflict.
[SPEAKER_07]: The $1.5 trillion budget makes the case in the clearest possible terms.
[SPEAKER_07]: This isn't a trade.
[SPEAKER_07]: It is a multi-year investment theme backed by the largest defense spending commitment in modern American history.
[SPEAKER_07]: On the next investment talk, we'll look into this story, Employment Growth 2026, Job Resilience and Geopolitical Crisis.
[SPEAKER_07]: The U.S. labor market posted its largest job gains in 15 months showing remarkable resilience despite escalating mid-East tensions.
[SPEAKER_07]: That's tomorrow, but for now, I'm Lou Guerrero and ready to take your calls at 888-99 chart.
[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_07]: It's gonna will from San Diego.
[SPEAKER_07]: How can I help you?
[SPEAKER_03]: Yes, I'm wondering what sort of strategy should an investor use during times of war, times of a lot of deficit spending,
[SPEAKER_03]: I would think we need to be a little bit more cautious about what's going on in the market and the world.
[SPEAKER_07]: Well, you're certainly accurate in that description of how one wants to treat times like this.
[SPEAKER_07]: You know, I think that not all wars are created equal certainly.
[SPEAKER_07]: This one is a little bit more pernicious in that.
[SPEAKER_07]: It has big inflationary effects, right?
[SPEAKER_07]: This is one of and could turn out to be one of the worst inflationary impulses related to conflict ever because how much oil, how much raw materials goes through that particular choke point on the other side of the world.
[SPEAKER_07]: Now in realities and investor, the best strategy to have during a war is to reallocate your
[SPEAKER_07]: because the reality is that the market tends to bottom and the war-related themes tend to be at their highest.
[SPEAKER_07]: Roughly about 10 to 20% of the way through the conflict.
[SPEAKER_07]: Now the difficulty is obviously predicting when is the 10 to 20%.
[SPEAKER_07]: Now, in this certain situation of what's going on right now, and increased deficit, spending in this geopolitical issue, what you're really talking about is inflation.
[SPEAKER_07]: And so we actually have been talking about this a lot, and we recently did a video on our YouTube channel that addresses this exactly.
[SPEAKER_07]: And we talk about how traditionally, in times of conflict, people go towards the US dollar, people go towards gold.
[SPEAKER_07]: But when you have an inflationary shock like this,
[SPEAKER_07]: And one that is entrenching the US specifically in conflict, you're not really seeing that.
[SPEAKER_07]: You're in fact seeing gold do the opposite.
[SPEAKER_07]: Gold is coming down as run down a bit.
[SPEAKER_07]: A lot of that driven by gold's historic run up certainly, but a lot driven by the fact that with inflation rate expectations go up.
[SPEAKER_07]: And when rates go up, the cost of holding gold, which has a yield of zero, goes down.
[SPEAKER_07]: So in these types of situations, some of the best things to be in are other commodities.
[SPEAKER_07]: or we talk about being in assets, in Swiss assets, there are all sorts of things that can help in inflationary environments such as this.
[SPEAKER_07]: And so that is to say that your core thesis of definitely being a bit more cautious, being a bit more measured and really starting to think about ways in which not just in the short term because we all can see the elevated oil prices and all these things, but the way the world might change down the road,
[SPEAKER_07]: on resources that come from that particular area of the world, being less dependent on oil more dependent on natural gas.
[SPEAKER_07]: And all these themes that take years to play out.
[SPEAKER_07]: In times like this, when the market seems to be the most afraid, when prices are the most depressed, are frankly when you can see the most value in long-term investments.
[SPEAKER_07]: Thanks for the call.
[SPEAKER_07]: Now from time to time, we do get questions that are submitted via HubSpot.
[SPEAKER_07]: And that's always a great treat over here when they come to investsock.com.
[SPEAKER_07]: So here's one that came in recently on SSNC Technologies.
[SPEAKER_07]: It says SSNC started to look attractive after the recent pullback and share buyback.
[SPEAKER_07]: Do you think so?
[SPEAKER_07]: Well SSNC Technologies is,
[SPEAKER_07]: Kind of depends on how you look at it.
[SPEAKER_07]: It's either a finance company or a technology company.
[SPEAKER_07]: We settle on it being a thin tech company.
[SPEAKER_07]: It is a global provider of financial services software and software enabled services.
[SPEAKER_07]: So think portfolio management, trading, investor services for asset managers, for banks, for hedge funds as well.
[SPEAKER_07]: Now it's had a bit of a rough year.
[SPEAKER_07]: actually a pretty rough year down 21.22% down 22.12% past three months down 8% over the past 52 weeks.
[SPEAKER_07]: Recently they did guide.
[SPEAKER_07]: to an organic growth midpoint of about 5.1%, which did beat the consensus, which was about 4% operational cash flow guided the expectation of beat there as well.
[SPEAKER_07]: It is kind of one of the most frustrating setups in software, we actually hold a small allocation in one of our strategies, because fundamentally it's excellent, but the stock is actually decline nearly 10% over the past year, despite,
[SPEAKER_07]: record results aggressive, buybacks, it peaked near about $91 per share, now it's trading in about $69 per share, it drifted back downward as investors started to rotate away from slower growth software names towards those AI peer plays.
[SPEAKER_07]: It's a big demand story here.
[SPEAKER_07]: And you know, the analyst consensus for targets been around 100% that means about a 30%
[SPEAKER_07]: The reason why it's pretty compelling and has been to us is because of the business model.
[SPEAKER_07]: It is deeply embedded in the operational workflows of asset managers, of hedge funds, of all of these institutional investment operations clients don't really leave because their entire operations are built around their services.
[SPEAKER_07]: The stickiness really drives recurring revenue of over 90% of the total and gives the company pricing power that flows into its 39, 40, 45% even to margin.
[SPEAKER_07]: effectively what you're buying right now is 39% EBITDA margin plus 5% growth and 1.7 billion in free cash flow to valuation of roughly 9.8 times price to forward-looking earnings and it's a high-quality financial infrastructure compounder.
[SPEAKER_07]: It's trading at a meaningful discount to what analysts you're seeing, what intrinsic value we see, but sometimes the market doesn't price things to intrinsic value.
[SPEAKER_07]: It doesn't price things.
[SPEAKER_07]: to the fundamentals of the company.
[SPEAKER_07]: And so, you know, momentum looks pretty poor right now.
[SPEAKER_07]: You know, we are starting to consider maybe picking some up a bit more, but either way from a fundamental perspective, it's a solid company that is SSNC, SSNC technology's holding Zank.
[SPEAKER_07]: Let's roll in another question that came in earlier to 888 and 99 sure.
[SPEAKER_05]: Hi, this is Rick from Y.
[SPEAKER_05]: Great show, by the way.
[SPEAKER_05]: I'm trying to decide on the better strategy for this year, between selling a stock high-owned that has become a large part of my portfolio, or converting an equal dollar amount of my regular 401k to my Roth IRA.
[SPEAKER_05]: Both have an impact on my taxes and Medicaid cost, although not exactly the same, but they're similar.
[SPEAKER_05]: I was just seeing if you had thoughts or recommendations
[SPEAKER_05]: How will I share with them?
[SPEAKER_05]: Mahalo.
[SPEAKER_07]: It's a great question.
[SPEAKER_07]: And it can be a bit complicated of question now.
[SPEAKER_07]: There are some tax differences, certainly.
[SPEAKER_07]: It seems to me from your description of your problem that your primary priority is reducing taxes rather reducing the amount of money that you have to give up that you cannot spend yourself.
[SPEAKER_07]: So that's something you should certainly consider, which of these two options?
[SPEAKER_07]: Increases your tax burden, the least.
[SPEAKER_07]: The second thing you should consider, which, frankly, I think is important as well, not as important as money-leaving your pocketbook.
[SPEAKER_07]: But actually, you should be up there.
[SPEAKER_07]: Is the concentration risk?
[SPEAKER_07]: You said you have a position.
[SPEAKER_07]: It's decently concentrated.
[SPEAKER_07]: I don't know what that means.
[SPEAKER_07]: Is it 5% of your portfolio?
[SPEAKER_07]: 10% of your portfolio?
[SPEAKER_07]: 20% of your portfolio?
[SPEAKER_07]: That matters.
[SPEAKER_07]: If you're upwards of 20% of your portfolio on one position, I would say, who cares about the taxes?
[SPEAKER_07]: You have asymmetric risk here.
[SPEAKER_07]: And so keeping these things in mind, I think you're thinking, and without knowing your specific circumstances, it's hard to really dive in here and give a concrete answer.
[SPEAKER_07]: Should be finding a way to balance both of those things because you don't have to do one in isolation.
[SPEAKER_07]: You can reduce your
[SPEAKER_07]: concentration to something more reasonable.
[SPEAKER_07]: Keep it below 15%.
[SPEAKER_07]: Again, I wouldn't think that you should have it at 15% in the first place, but just sort of peer not wanting to incur too many gains, not wanting to pay too many taxes.
[SPEAKER_07]: I think you don't want to reduce that concentration just because investing is not just about return, it's not just about the money you have, it's about volatility, it's about the risk inherent in your portfolio.
[SPEAKER_07]: So my thing would be, consider both, how much risk you're currently taking in concentration, versus how much you have to give up in taxes in order to bring that risk level down.
[SPEAKER_07]: So we spent weeks talking about the macro picture, right?
[SPEAKER_07]: Oil prices, treasure yields, inflation expectations.
[SPEAKER_07]: Today I want to make it tangible with a Reuters report that follows what's actually happening to real business on the ground because this is where the oil shock stops being an abstraction and starts being a bit of a crisis.
[SPEAKER_07]: Now Kevin Kelly runs Emerald Packaging in 92 million dollar family on business in Union City, California that makes plastic bags for grocery stores.
[SPEAKER_07]: In the weeks since the war started, the cost of plastic resin has nearly doubled from 45 to 85 cents per pound.
[SPEAKER_07]: Now Kelly says it would be economic suicide to honor his pending contracts of the old prices.
[SPEAKER_07]: So he's declaring force measure.
[SPEAKER_07]: He's telling customers he cannot deliver at the agreed price because factors beyond his control have made it absolutely impossible.
[SPEAKER_07]: And he expects price increases too.
[SPEAKER_07]: Keep coming through the summer, even if the war ends tomorrow, because there's so much plastic caught up in the Middle East supply chains.
[SPEAKER_07]: And this is an isolated across the economy, prices paid by businesses for inputs increased by more by the most and more than 13 years in March.
[SPEAKER_07]: Goldman Sachs has raised its probability of a U.S. recession to 30 percent.
[SPEAKER_07]: Internationally, pictures worse.
[SPEAKER_07]: In one of India's regions, more many aluminum extrusion plants shattered within four to five days of the war starting because gas supply dried up.
[SPEAKER_07]: India is a leading global exporter of aluminum products used in construction solar panels, transportation, consumer goods.
[SPEAKER_07]: When those plants go offline, it doesn't just affect India.
[SPEAKER_07]: It creates supply shortages and prices will increase globally.
[SPEAKER_07]: As this shock gets bigger, the risks of recession, they rise significantly.
[SPEAKER_07]: There are likely thresholds where certain kinds of economic activity simply can't be justified.
[SPEAKER_07]: And you get a sharper, more non-linear pullback.
[SPEAKER_07]: Brent Crude has been above $100 for more than three weeks.
[SPEAKER_07]: The damage to Gulf refineries, ports, oil storage, means that energy supplies.
[SPEAKER_07]: could take months to return even if combat ends.
[SPEAKER_07]: State-run oil companies in Kuwait, in Qatar, they have confirmed this.
[SPEAKER_07]: The IMF is set to reduce its global growth forecast and raise its inflation outlook, Oxford economics, warms the US economy, should withstand a short conflict, but the longer it persists, the more likely something breaks.
[SPEAKER_07]: US consumer spending, I mean, it's holding up for now.
[SPEAKER_07]: Bank of America, credit card data shows 4.4% year over year growth, but strip out gas.
[SPEAKER_07]: And drops to 3.6, lower income households, they are devoting even more of their budgets to fuel.
[SPEAKER_07]: And discretionary service is spending, restaurants, travel, entertainment.
[SPEAKER_07]: It's going to contract meaningfully in becoming months as cash flow squeezes tighten.
[SPEAKER_07]: The war is no longer just a financial market story.
[SPEAKER_07]: It's hitting factory floors, farm fields, family budgets, every weekend continues.
[SPEAKER_07]: The economic damage, it compounds.
[SPEAKER_07]: Back that plastic's manufacturer, he put it a good way.
[SPEAKER_07]: He said, we've created huge problems for ourselves that are going to play out over the next several months.
[SPEAKER_07]: It's trying to tackle one more question before the break.
[SPEAKER_01]: Oh, this is James from Georgia.
[SPEAKER_01]: I was trying to contact Justin or Luke regarding iron, mountain, and corporate.
[SPEAKER_01]: Picker symbol is I, R, M.
[SPEAKER_01]: I've been holding the stock for a while.
[SPEAKER_01]: I was trying to see if you could look into it to see how it's performing currently and what the outlook is for this particular polling.
[SPEAKER_01]: We greatly appreciate all you do.
[SPEAKER_01]: And we'll listen to the show for your answer.
[SPEAKER_01]: Have a good day.
[SPEAKER_01]: Thank you.
[SPEAKER_07]: I earned mountain incorporated.
[SPEAKER_07]: Besides having a great name, is a real estate investment trust.
[SPEAKER_07]: What they do is they have several businesses
[SPEAKER_07]: So what they do is they have two very different businesses, right?
[SPEAKER_07]: That that structure within this this route.
[SPEAKER_07]: They have their physical records and document storage operation, which serves 95% of Fortune 1000 companies, and they also have a rapidly growing data center business.
[SPEAKER_07]: So effectively you have a hypergrowth segment as well as a legacy infrastructure compounder.
[SPEAKER_07]: Now, Q4 2025, revenue is at 1.84 billion.
[SPEAKER_07]: It was up 17% over year in bead estimates.
[SPEAKER_07]: EBITDA was at 705 million.
[SPEAKER_07]: It was also up 17%.
[SPEAKER_07]: I mean, four year 2025 looked pretty solid.
[SPEAKER_07]: You had growth in the business from the data centers from digital.
[SPEAKER_07]: All collectively grew 40% in Q4 and 30% plus for the full year.
[SPEAKER_07]: Data center alone revenue.
[SPEAKER_07]: Data center revenue alone was up 39%.
[SPEAKER_07]: It has been one of the most dramatic stories in REITs because typically as you see rate expectations, go up, reap prices 10 to go down.
[SPEAKER_07]: But the stock's been pretty dramatic.
[SPEAKER_07]: It's spent years than the 30 to 50 range as a slow growth record storage company.
[SPEAKER_07]: Then re-rated sharply as the data center business gained credibly.
[SPEAKER_07]: I mean, it's up 25% year to date up 35.08% over the past 52 weeks.
[SPEAKER_07]: That's pretty solid.
[SPEAKER_07]: It's also only training
[SPEAKER_07]: Effectively, I think it is a little bit underappreciated as a data center rate.
[SPEAKER_07]: It has a pretty strong development pipeline here.
[SPEAKER_07]: But at the same time, it's pretty levered.
[SPEAKER_07]: It's got $18 billion in debt on a $30 billion market cap company.
[SPEAKER_07]: About levered five times.
[SPEAKER_07]: It's gap earnings are thin.
[SPEAKER_07]: The data center build out requires continuous heavy
[SPEAKER_07]: It's a tough one.
[SPEAKER_07]: It's an interesting hybrid infrastructure story in the market.
[SPEAKER_07]: It's has that recession proof records business, probably why it's held up stronger than other reads.
[SPEAKER_07]: It pays at 3.2% dividend, which is growing annually.
[SPEAKER_07]: Even with the capital intensity, I don't mind a small allocation of this game.
[SPEAKER_07]: That is Iron Mountain Inc. Take your IRN.
[SPEAKER_07]: Read it into our final break.
[SPEAKER_07]: So if you've got a burning question on your mind, pick up that phone and dial, eight and eight, 99 chart.
[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]: Just in Klein and Luke Guerrero.
[SPEAKER_02]: So when you've got finance and investment questions, don't forget to call in Vestock.
[SPEAKER_02]: 888-99-Chart.
[SPEAKER_07]: Our last story today is about the March jobs report, because it had a pretty strong headline number, healthy job growth, and a decline in unemployment.
[SPEAKER_07]: But buried in the data was a trend that deserves a bit more attention.
[SPEAKER_07]: The labor force participation rate, edge down to 61.9%, the lowest level, since 1977, outside of the pandemic,
[SPEAKER_07]: Now, for those of you who don't know the March of the Patient Rate measures the share of working-age Americans who are either employed or actively looking for work, and it's been falling gradually since the early 2000s, but the reason to climb it's accelerated.
[SPEAKER_07]: An understanding why matters for everyone's thinking about longer term economic growth.
[SPEAKER_07]: The primary driver is demographics.
[SPEAKER_07]: Baby Bovers, they started retiring in the early 2000s, and that wave continues as younger
[SPEAKER_07]: The participation rate for Americans 55 and older, it's dropped from 40.2% in January of 2020.
[SPEAKER_07]: The 37.2% last month, a 20 year low.
[SPEAKER_07]: Some of this is pandemic driven early retirement workers who were 55 or older when COVID hit left the workforce and just never came back, especially those who had built significant home equity in 401k balances during the bullmark.
[SPEAKER_07]: Others are opting out amid the uncertainty of AI disruptions sitting on the sidelines rather than competing with technology for roles that may be evolving.
[SPEAKER_07]: The second factor is immigration policy.
[SPEAKER_07]: The administration's crackdown stricter enforcement deportations reduce legal immigration pathways.
[SPEAKER_07]: That's cut off a pipeline of often younger workers who come to the U.S. specifically to work.
[SPEAKER_07]: And as one indeed economists put it, declining immigration has age the workforce.
[SPEAKER_07]: More rapidly than demographics alone would explain.
[SPEAKER_07]: Now why does this matter to us?
[SPEAKER_07]: Well, the economy grows in only two ways.
[SPEAKER_07]: more workers join the workforce or each worker produces more.
[SPEAKER_07]: If participation keeps falling, the ceiling on economic growth, it gets lower.
[SPEAKER_07]: Unless productivity gains start to compensate.
[SPEAKER_07]: A lower participation rate means slower long run economic growth.
[SPEAKER_07]: Now it sounds like a lot of doom and gloom, there's good news out there.
[SPEAKER_07]: U.S.
[SPEAKER_07]: Productivity Growth.
[SPEAKER_07]: It has been above historical averages for the past several years, partly thanks to technology adoption.
[SPEAKER_07]: And that's partially offsetting the labor supply decline and primage participants.
[SPEAKER_07]: Those are workers who are age 25 to 54.
[SPEAKER_07]: That's at a near multi-decade high, which tells you the overall drop, it's about aging and immigration, not really about discouraging workers giving up.
[SPEAKER_07]: But here's the open question.
[SPEAKER_07]: how much more productivity growth can we possibly get?
[SPEAKER_07]: If AI delivers on its promise, productivity, you could accelerate enough to fully offset the declining workforce.
[SPEAKER_07]: But that's not a given.
[SPEAKER_07]: If it doesn't, if it just remains, this niche activity that helps productivity on the edges or
[SPEAKER_07]: If those productivity gains are instead concentrated in sectors that don't employ many people, then we're looking at structurally slower growth for the U.S. economy into the future.
[SPEAKER_07]: For your portfolio, this has implications for which sectors, which themes deserve long-term allocation.
[SPEAKER_07]: Companies that drive productivity, automation, AI infrastructure robotics,
[SPEAKER_07]: healthcare companies, they benefit from aging populations and any sector that depends on a abundant affordable labor, then construction, hospitality, agriculture, well, they can find themselves facing chronic headwinds that are not going to reverse on their own.
[SPEAKER_07]: I'm Lou Guerrero and this completes another episode of Invest Talk.
[SPEAKER_07]: Justin and I thank you for listening and I encourage you to tell your friends and family members about our free podcast downloads.
[SPEAKER_07]: If they're interested you could find those at iTunes and Spotify and while you're over there please be sure to leave us a rate and review.
[SPEAKER_07]: As always.
[SPEAKER_07]: If today's episode made you think about your financial future, whether or not your investments in your risk aligned with your tolerance and your goals, whether or not you'll be able to achieve what you went in retirement save for your kids' college education, whether you really prepared into the future.
[SPEAKER_07]: At KPP Financial, we offer no cost portfolio reviews, it is a free and confidential service.
[SPEAKER_07]: That sounds interesting, head over to invest.com and click the portfolio review button.
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[SPEAKER_07]: This is Invest Talk.
[SPEAKER_00]: Good night.
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