[SPEAKER_01]: This is Invest Talk from KPP Financial, helping investors make sense of the markets one day at a time.
[SPEAKER_01]: Here's your host, Justin Klein.
[SPEAKER_00]: Good afternoon fellow investors and welcome back to Invest Talk.
[SPEAKER_00]: This is our Wednesday July 22nd.
[SPEAKER_00]: 2026 edition of the best talk and a lot of moving parts of the markets we are in the midst of earnings season so we're going to get to a lot of that and it's not just any earnings season it's a very very important one because we have a lot of max seven names reporting the market digesting how their businesses are evolving this is vital to the future of
[SPEAKER_00]: Not just our market, but our economy as well.
[SPEAKER_00]: It's so rely on these names.
[SPEAKER_00]: We're going to dig into that and much, much more during this hour.
[SPEAKER_00]: I know we got caught up in the weeds sometimes in these type of topics, but we also try to spend time to zoom out, give you broader concepts so that it's not about making
[SPEAKER_00]: But it's about building the skills, the tool set, so that you, you don't need the tune yet.
[SPEAKER_00]: We love that you tune into a best talk.
[SPEAKER_00]: But ideally, at some point, you're doing two, one or two things, are either so good on your own that you don't need to tune in here.
[SPEAKER_00]: Or be maybe higher, right?
[SPEAKER_00]: And we're doing it for you.
[SPEAKER_00]: And that happens a lot as well.
[SPEAKER_00]: So either way,
[SPEAKER_00]: We are here to help you find one direction, a direction where you can consistently make good decisions with your money because you've embodied the principles, the smart principles of good decision-making when it comes to your investment universe, your investment portfolio, your broader financial plan,
[SPEAKER_00]: making sure it is all aligned so that you are achieving your goal of financial freelance and nebulous word or set of words.
[SPEAKER_00]: But it means different things to different people, but once again, these principles are the same.
[SPEAKER_00]: Not using your motions, focusing on the reality on the ground, not getting caught up in hype.
[SPEAKER_00]: Those are the things that help you avoid pitfalls and capitalize on opportunities.
[SPEAKER_00]: That's what this hour is about each and every weekday.
[SPEAKER_00]: And of course, we will be answering your finance and investment questions.
[SPEAKER_00]: I'll bring you data, I'll bring you topics, but in just a bit, we'll talk about today's Mark performance and then we'll run down some topics, but as usual, we'll tackle this first-collect question now.
[SPEAKER_05]: The stock I'm asking about is JxN, Jackson Financial.
[SPEAKER_05]: I'd love to hear what you guys think about it.
[SPEAKER_00]: Thank you.
[SPEAKER_00]: All right, looking at Jackson, a financial they operate a holding company.
[SPEAKER_00]: It's a new service.
[SPEAKER_00]: It sells the newbies to retail investors.
[SPEAKER_00]: Simple as that.
[SPEAKER_00]: Does have institutional products, but mainly it's an institutional sales company.
[SPEAKER_00]: The business is good.
[SPEAKER_00]: Guess what?
[SPEAKER_00]: Chocking.
[SPEAKER_00]: If you're able to sell the newbies, you're gonna make a lot of money.
[SPEAKER_00]: If you are the insurance company or you're the salesperson.
[SPEAKER_00]: earnings this year are, no, backtrack.
[SPEAKER_00]: Teaching that great for the buyer, the annuity, but that's new here and there that this is about what the business of Jackson financial is.
[SPEAKER_00]: 8.7 billion dollar market cap, solid balance sheet, good free cash, a little about 5.2 billion.
[SPEAKER_00]: I like that.
[SPEAKER_00]: Now that has fallen, so that's in a bit of decline.
[SPEAKER_00]: going back up.
[SPEAKER_00]: That's interesting.
[SPEAKER_00]: It's been buying back shares since 2021 at 94 million shares outstanding at the end of last year at 60, 167 million shares outstanding roughly.
[SPEAKER_00]: Now we're up over 70 million shares outstanding.
[SPEAKER_00]: What's going on here?
[SPEAKER_00]: That worries me a little bit.
[SPEAKER_00]: The profitability metrics are pretty meager.
[SPEAKER_00]: You've been
[SPEAKER_00]: Those earnings.
[SPEAKER_00]: The technicals are fine.
[SPEAKER_00]: The earnings numbers look good, but that raises a giant red flag.
[SPEAKER_00]: You're showing at five PE.
[SPEAKER_00]: earnings are growing 4% of this year's 18% next year.
[SPEAKER_00]: To me, there's a deeper story here.
[SPEAKER_00]: This seems, and this is my 25 years of doing this.
[SPEAKER_00]: I can alarm bells.
[SPEAKER_00]: when I see things like this.
[SPEAKER_00]: There's something deeper going on here.
[SPEAKER_00]: I don't know what it is, but that's what a 5P ratio is telling you.
[SPEAKER_00]: That's a 20% earnings yield, way too high.
[SPEAKER_00]: So I'm gonna pass on Jackson because it just doesn't pass the smell test to me.
[SPEAKER_00]: So we had a great show yesterday.
[SPEAKER_00]: We looked into this question, can the magnificent seven earnings hold the market up?
[SPEAKER_00]: Talk about how an obscure volatile measure, volatility measured is pointing to a potential breakout or break down.
[SPEAKER_00]: We'll also answer the listener question on it.
[SPEAKER_00]: Danna, her, excuse me, I'm like, stop.
[SPEAKER_00]: On Danna, if you have an omiss it, go check it out.
[SPEAKER_00]: The best way to get every show is to follow
[SPEAKER_00]: Now we have a lot of ground to cover over the next 45 minutes.
[SPEAKER_00]: And I mean, folks, point is about stocks beyond tech.
[SPEAKER_00]: Where is the market rotating?
[SPEAKER_00]: What's working right now?
[SPEAKER_00]: See the big sell off in semiconductors, memory stocks, all that.
[SPEAKER_00]: He got a nice little bounce of the past couple days.
[SPEAKER_00]: Books for the sectors and themes that are working when tech isn't.
[SPEAKER_00]: How to find opportunity in this chaos.
[SPEAKER_00]: We'll dig into that story.
[SPEAKER_00]: We'll also look at Google's earnings.
[SPEAKER_00]: It's the first big hyperscaler to report earnings this season.
[SPEAKER_00]: Guess what?
[SPEAKER_00]: 6 billion dollar cash per year.
[SPEAKER_00]: As it raised AI spending.
[SPEAKER_00]: So we'll dig into the numbers there.
[SPEAKER_00]: Also, shifts in capital flows.
[SPEAKER_00]: How is this going to change the role of the US dollar?
[SPEAKER_00]: We know we're going through time, a time of major approval and major change, and most likely the dollar will be central to that, so we'll look at that topic.
[SPEAKER_00]: We also have voice bank questions on a gree-reelty corp ADC and that 401k allocations, and also some questions that came in from the comments section on the best stock YouTube channels.
[SPEAKER_00]: But we're going to head to a quick break.
[SPEAKER_00]: Please remember you can call any time and leave your question on the Invest Talk Voice Bank or if you're listening live via our live stream on in besttalk.com or possibly an aim for 20 in the Bay Area.
[SPEAKER_00]: You can call right now at 80 to 99 chart.
[SPEAKER_00]: Hang on because I plan to talk about today's market activity in the next segment.
[SPEAKER_01]: It's official.
[SPEAKER_01]: Total lifetime downloads for the Invest Talk podcast are now more than 63 million.
[SPEAKER_01]: Justin Klein is here now taking your calls live.
[SPEAKER_01]: Invest Talk, 888-99 chart.
[SPEAKER_00]: 8999 chart, 89904 to 70.
[SPEAKER_00]: It's how you get through and ask your question on today's show.
[SPEAKER_00]: Let's get a look.
[SPEAKER_00]: Go look at the markets for a potential fall through yesterday, the future is big bounce in tech.
[SPEAKER_00]: We didn't get that today.
[SPEAKER_00]: We actually got a sell off.
[SPEAKER_00]: You're the NASDAQ down a little over half a percent.
[SPEAKER_00]: SMB was barely on down only 10 points, 14 basis points.
[SPEAKER_00]: That was essentially flat.
[SPEAKER_00]: Only down six points there.
[SPEAKER_00]: If you look at what drove the market down, mostly it was, names like Tesla, then 1.3 met it down two and a half until down 2.7 Microsoft, then nearly 2%, then it names like Palantir down six, space X. Oh, but I tell everyone, one of the most greedy overvalued stocks in the history of markets.
[SPEAKER_00]: I think the most degregiously overvalued stock in the history of markets.
[SPEAKER_00]: Now at 115, I've here to 135, it's down 50% from its high, just less than a month ago.
[SPEAKER_00]: So, continue to sell off on that front.
[SPEAKER_00]: Surprising in some ways, but not at all, and others, right?
[SPEAKER_00]: Surprising in how quick it rolled over, especially because the lock-up period doesn't really start in earnest until next month.
[SPEAKER_00]: There's been more dumping of shares.
[SPEAKER_00]: So I think this could go much, much lower probably, sub-hundred at some point, very soon, probably, and then I think this could be a sub-50-all stock in short order.
[SPEAKER_00]: But really, the market was dragged down by a tech overall, yet some strength energy continue to do well as oil prices are strong utilities, are bouncing back as well as some more rotation into those safe sectors.
[SPEAKER_00]: in the U.S. Iran War that is potentially disrupting the Red Sea, which would create more chaos and supply chain bottlenecks.
[SPEAKER_00]: President Trump said it's morning to destroy a bridge of power plant in Iran any time Iran attacks its ship in the state of Remus.
[SPEAKER_00]: So once again, more rhetoric ramping up there, another aspect that's very, very concerning.
[SPEAKER_00]: Bon Yields.
[SPEAKER_00]: Bon Yields, again, up again today.
[SPEAKER_00]: Marked an outpricing in just over 40 basis points worth of fed tightening this year.
[SPEAKER_00]: What's interesting is that gold is now breaking out to the upside.
[SPEAKER_00]: Gold finished up 1.9% silver up 2% so definitely some safe haven buying here.
[SPEAKER_00]: Bitcoin off about 1%, WTI up 3%.
[SPEAKER_00]: So as I've said before, I think you're getting, get finally getting into this phase where the supply deficits that been going on for three, four months now are starting to catch up.
[SPEAKER_00]: And it's clear there's no resolution to what's going on in the Middle East.
[SPEAKER_00]: It's a crackmire that we'll just likely continue to drag on.
[SPEAKER_00]: You did out performance today in Home Builders, did well?
[SPEAKER_00]: Surprising once again, considering a higher interest rates.
[SPEAKER_00]: Food did well, telecom did well, industrial metals, chemicals, those all did well.
[SPEAKER_00]: With the laggers today, software was broadly weaker, transports, med tech, credit cards, insurers, regional banks, private equity, those are all weak on the day.
[SPEAKER_00]: What else do we get?
[SPEAKER_00]: More anthropic AMD partnership, but I think it's kind of a whole circle, circular financing issue that continues to struggle there.
[SPEAKER_00]: G-Renova, one of the higher profile laggards today, a lot of it is likely margin compression that you're seeing.
[SPEAKER_00]: That's one issue.
[SPEAKER_00]: And then once again, Google kicked off earnings, and that is down after hours along with Tesla, down big after hours as well.
[SPEAKER_00]: So very interesting day, and we're really kicking me into gear with the earnings season.
[SPEAKER_00]: Let's go with a YouTube comment question.
[SPEAKER_00]: I'll let me just says, hello, this is Marin and I'll meet a county, I really enjoy our show on K-Dow, or your show on K-Dow.
[SPEAKER_00]: I've held AVB Avalon base since before 2013,
[SPEAKER_00]: B.
[SPEAKER_00]: Obviously, I'm more of a setting for get it investor, but over decades it has been a steady eddy, but today I learn from a mix of ABB's merging with equity, or essential to form a multi-family real-state behemoth.
[SPEAKER_00]: Can you explain some of the pros and cons in the merger for this retail investor like me?
[SPEAKER_00]: Will it still be a read or something else entirely?
[SPEAKER_00]: Is there a tax consequence?
[SPEAKER_00]: Good or bad for me?
[SPEAKER_00]: Interesting.
[SPEAKER_00]: I have a lawn,
[SPEAKER_00]: So as I'm seven, you know areas and have substantial source of income, have other substantial uncertainty.
[SPEAKER_00]: I always learn something useful from your program.
[SPEAKER_00]: Thank you so much.
[SPEAKER_00]: I have not seen anything come in that is telling this a merger.
[SPEAKER_00]: This is interesting.
[SPEAKER_00]: I'm going to have to do a little research.
[SPEAKER_00]: I want to answer this, but I'm going to have to do a little research on this, and I will answer it right after this, right?
[SPEAKER_00]: This is the best talk now with more than 63 million downloads thanks to you, Hang-On, our work continues.
[SPEAKER_00]: But can you call it a day and a day and a day and a day and a day and a day and a day?
[SPEAKER_01]: In the early days, in Vestock was Jerry Klein and Steve Peasley.
[SPEAKER_01]: Now the torch has been passed and a new generation of hosts is on the job, Justin Klein and Luke Guerrero.
[SPEAKER_01]: So when you've got finance and investment questions, don't forget to call in Vestock, 888-99, chart.
[SPEAKER_00]: So to answer the listener's question or the YouTube comment question, this shows you I don't read maybe these.
[SPEAKER_00]: I just answer them on the fly.
[SPEAKER_00]: There is a vote on August 12th of a merger of equals between AVB and equity residential if it passes then it will combine.
[SPEAKER_00]: You'll get about let's see 2.8 shares of equity residential
[SPEAKER_00]: for each share of AVP, AVB, excuse me, that you own.
[SPEAKER_00]: So it's gonna come in the company to still be publicly traded, there's no tax consequences that you have to worry about here, there'll just be a bigger company.
[SPEAKER_00]: Maybe a little more risk, but potential for upside as well.
[SPEAKER_00]: So I don't mind it.
[SPEAKER_00]: Usually these do these type of mergers of vehicles similar size companies, similar types of assets,
[SPEAKER_00]: Right, they're neat, then I think this is fine.
[SPEAKER_00]: So I wouldn't worry about any tax consequences, just maybe a slight change in the income you get from it.
[SPEAKER_00]: One thing to think about is doing direct indexing if you're trying to diversify from this name, that's 13% of your portfolio, it's kind of a lot.
[SPEAKER_00]: In some taxable accounts, somebody think about, drop does it, we do it for clients, so happy to talk to you about that.
[SPEAKER_02]: let's keep things rolling here comes another fresh voice bank question now good morning Luke and Justin this is Josh from New York i had a quick question about my 401k allocations i only have three international investment options within my 401k the Vanguard total world which is about six percent u.s. allocated stocks and the mfs international diversification fund which is about 99.6 percent u.s.
[SPEAKER_02]: I can also get into the Vanguard International Total International Stock Market Index, which I'm pretty sure excludes the U.S. completely, and I was wondering if I wanted some international exposure, and because there's so much overlap with those first two and my large cap exposure, that if going fully excluding the U.S. would make sense, and if so, if about 20% of my outfit allocation would make sense.
[SPEAKER_02]: I appreciate any input you have on the matter.
[SPEAKER_02]: Thanks.
[SPEAKER_00]: Bye.
[SPEAKER_00]: Yeah, very simple.
[SPEAKER_00]: I would go with the one that's...
[SPEAKER_00]: Exclusively International, then you know exactly what your exposure is.
[SPEAKER_00]: It's not going to move over time.
[SPEAKER_00]: This is your allocation to your foreign markets in the Vanguard.
[SPEAKER_00]: Pull it International Stock.
[SPEAKER_00]: Fund is, it's not bad, it's not the best one out there, but you know, we're in a 401k, you're very limited to what you invest in.
[SPEAKER_00]: I would roll it into 401, I rate at some point if you can, but in the meantime, using this is just fine.
[SPEAKER_00]: Now it's 20% the right number.
[SPEAKER_00]: I think it should be higher.
[SPEAKER_00]: You know, you talked about the global index being more like 60% domestic, 40% foreign.
[SPEAKER_00]: I actually think you should be at least 30% in foreign markets.
[SPEAKER_00]: So I would and maybe even up to 40, but 30 is a good starting place and then it also depends on what risk you're taking if you're all equities 30 percent.
[SPEAKER_00]: in the 30 to 35% range is probably good.
[SPEAKER_00]: If you are a more modern investor, you sounded pretty young, so I'm guessing you're aggressive of everyone else out there who might be more moderate.
[SPEAKER_00]: You know, maybe you scale that international exposure down, and you add more bonds, maybe some international bonds, maybe some maybe some short-term corporate bonds.
[SPEAKER_00]: You know, that can be a good way to diversify, and then also,
[SPEAKER_00]: For everyone, it's just gaining exposure to harder assets, gold, silver, copper, uranium, things like that, if it could be a great addition to, but once again, in a 401k, you can be pretty limited.
[SPEAKER_00]: But definitely start with about 30% in foreign markets.
[SPEAKER_00]: So let's play another listener question from 8 to 8, 9, 9 chart.
[SPEAKER_06]: I'm just talking ahead of question about draft kings, stickers, DK, NG, like you guys to take a look at this.
[SPEAKER_06]: as a speculative play for a long-term hold, what price target do you think would be a good opportunity to take a position?
[SPEAKER_06]: I'll listen on the show and thanks guys.
[SPEAKER_00]: Draft Kings.
[SPEAKER_00]: Now, I want to first caveat this with, I think that these companies are despicable.
[SPEAKER_00]: Uh, we've had the opportunity to be have drafting sponsoring Vestock.
[SPEAKER_00]: I passed on it without even bullying King and I.
[SPEAKER_00]: These companies operate in horrible faith or not good faith actors.
[SPEAKER_00]: People, they just kind of try to get people addicted.
[SPEAKER_00]: People who's there's ones that can addicted to those millions of dollars.
[SPEAKER_00]: Uh, it, there's nothing positive that comes out of having this legalized.
[SPEAKER_00]: And then you look at the chart, and it's basically been in a downtrend since January, February of last year, peaked out around, if you three now send a 22, they're making money now.
[SPEAKER_00]: They spend a ton of money on advertising, obviously, you've seen that.
[SPEAKER_00]: If you listen to podcasts, which obviously do, if you listen to the show, then you'll know that they sponsor a lot of podcasts.
[SPEAKER_00]: But once again, it's just very, very skeesy, slimy industry.
[SPEAKER_00]: Ultimately, I think regulation takes this name out.
[SPEAKER_00]: or these type of names, this is definitely industry out.
[SPEAKER_00]: There's now battle with Kalishi and Pauli Market and they're trying to, they're actually, they're actually lobbying to get rid of sports betting because they're trying to be the only game of towns.
[SPEAKER_00]: There's a lot of battling there.
[SPEAKER_00]: I just don't like the industry.
[SPEAKER_00]: It's just not good for society.
[SPEAKER_00]: It's not good for anybody who's financially literate.
[SPEAKER_00]: They, if you actually win money consistently, they kick you off the platform.
[SPEAKER_00]: So it's just a terribly run, horribly run from an ethical standpoint business.
[SPEAKER_00]: And then their profits are not really growing that much.
[SPEAKER_00]: You know, their revenue isn't actually growth is slowing on the revenue side.
[SPEAKER_00]: I'm passing on draft gains, the chart is terrible, the business ethics are terrible, I think that industry is terrible, so I would not invest in it.
[SPEAKER_00]: The next investment talk we'll look into the story.
[SPEAKER_00]: Dollar vs.
[SPEAKER_00]: Emerging Market Currencies is a safe haven rally a trap the U.S. dollar has been gaining ground as investors flee to safety amid escalating in Middle East tensions, even as the pound and other currencies give back recent gains, but strong dollar has its own set of consequences for multinational's emerging markets in commodity prices.
[SPEAKER_00]: We'll talk with that story tomorrow, but for now, I'm just inclined we're ready to take your calls any time and take it any money and share it.
[SPEAKER_00]: At KPP Financial, Accountability means more than advice.
[SPEAKER_00]: It means we invest alongside you.
[SPEAKER_00]: Through our parallel investing approach, when we recommend an investment for clients, one or more KPP principles invest their own capital at the same time.
[SPEAKER_00]: Same day, same price, same percentage.
[SPEAKER_00]: If your portfolio moves, ours does too.
[SPEAKER_00]: That is alignment, that is transparency.
[SPEAKER_00]: That is the KPP difference.
[SPEAKER_00]: Visit investtalk.com to get your free portfolio review.
[SPEAKER_01]: KPP Financial Special.
[SPEAKER_01]: One of them is parallel investing.
[SPEAKER_01]: This means they invest right alongside their clients.
[SPEAKER_01]: Here's how it works.
[SPEAKER_01]: When KPP Financial makes a trade for their clients, Justin Klein makes the same trade for himself and KPP.
[SPEAKER_01]: On the same day, at the same price, and same percentage.
[SPEAKER_01]: No front running, no special treatment.
[SPEAKER_01]: Learn more about Parallel Investing at InvestTalk.com.
[SPEAKER_00]: The Red folks point today concerns the stocks that are beyond tech.
[SPEAKER_00]: Where the market is actually working right now.
[SPEAKER_00]: We've seen a fairly large pullback in many of the chip names, and many of the AI data center centric.
[SPEAKER_00]: stocks, and there's different sectors that covers from tech.
[SPEAKER_00]: We know there's chips.
[SPEAKER_00]: We know there's memory.
[SPEAKER_00]: We know that there are there are there are many verticals within technology that that cover that even some of the Mac 7 which in some ways
[SPEAKER_00]: It's been helping them in other ways.
[SPEAKER_00]: It's been hurting them.
[SPEAKER_00]: But then there's the industrial applications as well.
[SPEAKER_00]: From HVAC companies to those that supply products that power the data centers or help connect power to the data centers that happens a lot as well.
[SPEAKER_00]: So there's many verticals that this is bleeding into.
[SPEAKER_00]: But many of those names are also pulling back considerably.
[SPEAKER_00]: recently all the way to a low of $1,300.
[SPEAKER_00]: So nearly I cut in half.
[SPEAKER_00]: And we're getting a little bit of a bounce here, but still you're seeing a market in rotation.
[SPEAKER_00]: Big bounce yesterday, but today's a good example where you had some very interesting sectors outperform.
[SPEAKER_00]: Number one day is not a trend, but you have seen that multi-week pullback in those names you get a bounce, is it a counter trend bounce, most likely.
[SPEAKER_00]: Maybe it's probably more down sent to go for tech, but there are sectors that are working.
[SPEAKER_00]: Health care is a good example.
[SPEAKER_00]: Many of those are hitting or near new highs.
[SPEAKER_00]: New 52 week highs.
[SPEAKER_00]: And it's not just retail investors, actually retail investors are late to the game.
[SPEAKER_00]: Institutional investors are the one that are rotating capital away from tech towards more defensive names.
[SPEAKER_00]: To be healthcare, financials, housing,
[SPEAKER_00]: Financial showing strength, major credit processors, payment platforms, they're kind of safe havens right now.
[SPEAKER_00]: And then traditional industrial applications, not your data center related ones, but traditional industrial companies, housing is catching a bid as well.
[SPEAKER_00]: Now us including many analysts, see this is actually healthy.
[SPEAKER_00]: Not everything's going to hell in a hand basket.
[SPEAKER_00]: This is a correction rather than the start of a secular bear market, most likely.
[SPEAKER_00]: I would say this for about a quarter now that they're starting to feel like, even though it's not to be even a new year, but to be any of a half year.
[SPEAKER_00]: And
[SPEAKER_00]: In 2022, pretty much when that started, that was the start, when that year started, that was the start of that major drawdown in big tech where there was an extrapolation of growth during COVID that just never really materialized, right?
[SPEAKER_00]: The growth rates slowed considerably.
[SPEAKER_00]: It names like Zoom go down 90% from their high because everyone thought you or the market expected that growth and Zoom users
[SPEAKER_00]: Continue for many, many years to come and reality is a flash in the pan.
[SPEAKER_00]: And so an AI that's what you're seeing now is most likely a corrected period to work off the excess.
[SPEAKER_00]: Reassess stretch valuations.
[SPEAKER_00]: Doesn't mean the long-term structural growth story is gone.
[SPEAKER_00]: It just means that the market needs to find true value.
[SPEAKER_00]: It needs to assess the real winners or loser and losers, just because you have a piece in the AI ecosystem.
[SPEAKER_00]: Does it mean that you necessarily have a great business who will be the real winners at the end?
[SPEAKER_00]: Will it be the hyperscalers?
[SPEAKER_00]: Or will it be the picks and shovels type of companies?
[SPEAKER_00]: Because ad demand is not really going anywhere of the long term.
[SPEAKER_00]: That's secular demand is going to grow.
[SPEAKER_00]: It's just a matter of what clip.
[SPEAKER_00]: Then you got on top of that, what's going on in the least?
[SPEAKER_00]: Oil prices reigniting to the upside, reigniting inflation fears, 10-year treasury pushing higher, and when economic uncertainty rises, the fence of sectors tend to outperform.
[SPEAKER_00]: Their buffer is against high beta growth stocks, the volatility of them.
[SPEAKER_00]: That's where you're seeing utilities up to 2.2% on the day.
[SPEAKER_00]: When the market was flat to mostly down, golden silver, reigniting to the upside, material companies, up nearly 2% on the day, same with metals and mining.
[SPEAKER_00]: So over-weighting value is now the name of the game.
[SPEAKER_00]: We said that for a little while.
[SPEAKER_00]: The ratio of growth of value really peaks in the beginning of June.
[SPEAKER_00]: Now we're getting to the end of July, so we're going on two months now where the market has been rotating in earnest.
[SPEAKER_00]: This is not most likely just a two-month blip.
[SPEAKER_00]: To me, this very well could be the start of a 22, it's 22 type reset in the growth universe.
[SPEAKER_00]: Now let's pivot to another new question that came in earlier on today's eight, eight, nine year inch art.
[SPEAKER_07]: Hey, guys, this is Lloyd from Wisconsin, just calling to get your thoughts on two real estate names.
[SPEAKER_07]: I'm trying to add real estate into my portfolio as I'm bullish on it going forward
[SPEAKER_07]: And I have no exposure, I'm looking at ADC and V-I-C-I.
[SPEAKER_07]: Those are the two real estate reads that I'm looking at and I'd be curious your opinion.
[SPEAKER_07]: Thank you.
[SPEAKER_00]: I're looking at ADC, agree, royalty, and V-C.
[SPEAKER_00]: So ADC, agree, royalty, nine billion dollar market cap.
[SPEAKER_00]: This is an industrial read.
[SPEAKER_00]: It's funds from operations, let's go up 6% this year, 5% next year, revenue up 16% this year, 9% next year, I like this.
[SPEAKER_00]: I have all the REET sectors.
[SPEAKER_00]: This is definitely up there as one of my favorites.
[SPEAKER_00]: Now, it's just the horse within the industrial space.
[SPEAKER_00]: I'm not going to call that.
[SPEAKER_00]: But I like industrial REETs.
[SPEAKER_00]: actually near the bottom of the type of reach that I want to own.
[SPEAKER_00]: A read that is tied to Las Vegas.
[SPEAKER_00]: Not only the Las Vegas is going anywhere, but you've heard all the stories of a lot less travel.
[SPEAKER_00]: Part of that is a lot of Canadians go to Vegas typically, but they're opting to travel to different countries now.
[SPEAKER_00]: But then there's also the fact that a lot of these hotels have actually sold their property to VG, names like VG, and they lease them out, it's called a seller leaseback.
[SPEAKER_00]: And now in order to pay that, they cash out a big dollar amount of billions of dollars for these properties.
[SPEAKER_00]: In order to carry the cost of the finance or the lease,
[SPEAKER_00]: You have to raise prices on rooms, resort fees, all of that.
[SPEAKER_00]: And she's making the experience in Vegas.
[SPEAKER_00]: That is comfortable as it used to be.
[SPEAKER_00]: So that's one of the big reasons by VFU is in a strong downturn versus ADC is in a strong uptrend.
[SPEAKER_00]: So if I'm picking one or the other, I'm 100% going with a, d, c, thanks for the call.
[SPEAKER_00]: And I wanna address the last place that he said, he's bullish on real estate.
[SPEAKER_00]: I'm bullish on very select segments of real estate.
[SPEAKER_00]: You actually pick one commercial industrial properties.
[SPEAKER_00]: But I think there are definitely a lot of pockets of real estate that will continue to struggle.
[SPEAKER_00]: I think B and C office properties are going to continue to struggle.
[SPEAKER_00]: A properties, this is what I'm seeing here locally in Orange County, who are offices in an A property, which talked to our real estate commercial real estate broker, and he's saying that lease rates for our office complex is going up.
[SPEAKER_00]: But B and C properties, especially C level properties are going down quickly.
[SPEAKER_00]: So I think you have to understand what you're exposed to and then when it comes to Residential real estate, I think we're actually in the start of a broader correction in prices across the country, every
[SPEAKER_00]: Every neighbor is different, every city is different.
[SPEAKER_00]: But broadly, I think we're going through a correction in crisis.
[SPEAKER_00]: Now let's go to a YouTube comment section question.
[SPEAKER_00]: Sam Klein spelled differently, KLA and E. Says, I have a question on picking which valuation metrics are best to screen for stocks to invest in.
[SPEAKER_00]: I know there are many and it's good to look at them all next to each other.
[SPEAKER_00]: However, which one is the best to create creating a stock screen?
[SPEAKER_00]: P, pag ratio, which is PE to growth.
[SPEAKER_00]: P, forward, P, enterprise value, ebit, et cetera, things love the show.
[SPEAKER_00]: First off, I do not love, when I'm talking about ratio analysis, I do not love earnings, earnings community.
[SPEAKER_00]: Nipulated, it's just not the cleanest way to value or look at the ratio a company's trading at.
[SPEAKER_00]: I like to look at enterprise value to EBITDA, mainly going forward, what are forward-looking EBITDA projections, enterprise value includes debt.
[SPEAKER_00]: So when you're looking at PEE, price is only including the market cap, which is not a full enough picture for me.
[SPEAKER_00]: So I like to look at almost all the ratios I want to look at.
[SPEAKER_00]: include enterprise value, not market cap.
[SPEAKER_00]: And that's where a lot of the PE, prices sales, the book, they don't encompass the debt part.
[SPEAKER_00]: Then when it comes to the other side of the ratio, I like to focus more on the cash flows and even to get that, I'd be happy to look at enterprise value to free cash flow.
[SPEAKER_00]: That's a good one.
[SPEAKER_00]: So those are some metrics I would focus on when you're trying to screen, but then I would also vary it depending on the sector you're talking about.
[SPEAKER_00]: Some sectors high debt is actually a good thing.
[SPEAKER_00]: Like a bank.
[SPEAKER_00]: More you lend the more you're potentially making a profit now.
[SPEAKER_00]: You're your bad lender.
[SPEAKER_00]: That's an issue.
[SPEAKER_00]: But as long as you're a smart lender, the more you lend, the more debt you put on the balance sheet, the better it is for potential earnings.
[SPEAKER_00]: And then once again, they're their idiosyncrasies within each industry.
[SPEAKER_00]: And that's where I go to you want to focus on one ratio within each industry.
[SPEAKER_00]: And then you're not comparing a company and one industry versus another.
[SPEAKER_00]: You're comparing one company to other companies within the industry.
[SPEAKER_00]: Could be trading cheaper from a ratio standpoint, but what about profitability?
[SPEAKER_00]: Maybe it's trading cheaper for a reason.
[SPEAKER_00]: Very possible.
[SPEAKER_00]: to make sure you're controlling for those variables.
[SPEAKER_00]: Let's go answer another voice mail question now.
[SPEAKER_00]: Hey Justin and Luke Marlow from New York.
[SPEAKER_04]: Love your show a long time listener.
[SPEAKER_04]: Just have a question about a company UGI.
[SPEAKER_04]: I'm trying to invest in energy as you encourage this is a gas company.
[SPEAKER_04]: And it's really focused in Pennsylvania.
[SPEAKER_04]: They have natural gas and protein and other things.
[SPEAKER_04]: It just seems like a good business.
[SPEAKER_04]: So it's wanted to know what you thought about this, like a smaller regional play on the natural gas recovery over time.
[SPEAKER_04]: Love what you do.
[SPEAKER_04]: Thanks so much.
[SPEAKER_04]: I'll listen on the show.
[SPEAKER_00]: OK, UGI.
[SPEAKER_00]: Now, first off, I do not overweight energy.
[SPEAKER_00]: I would overweight energy infrastructure as well as refined products, refineries, things where we're not building a lot of new facilities to produce that end product.
[SPEAKER_00]: I love those type of businesses.
[SPEAKER_00]: Now, UGI is kind of in that vein.
[SPEAKER_00]: distribution, transportation, storing, marketing of mainly propane.
[SPEAKER_00]: Marigasses, their propane segment, their biggest contributor to revenue.
[SPEAKER_00]: I think that is a business that is quality.
[SPEAKER_00]: Earnings this year, so it's supposed to be 280, that's down 13%, but then up 16% next year, 33%, which should be in all time high in earnings.
[SPEAKER_00]: They do have a lot of debt, but their cash flow is pretty consistent, profitability is pretty good.
[SPEAKER_00]: pear ratios, about 50% but the cash dividend pear ratio is pretty high.
[SPEAKER_00]: So that worries me they're paying out a lot.
[SPEAKER_00]: I don't think this dividend is that sustainable.
[SPEAKER_00]: Because that debt, the cash flow is good, not amazing.
[SPEAKER_00]: This is one of those easy red flags.
[SPEAKER_00]: This a company for years was raising their dividend.
[SPEAKER_00]: And suddenly in 2023 they stopped raising their dividend.
[SPEAKER_00]: When that happens, you have to ask yourself, why would they be stopping?
[SPEAKER_00]: And the answer simply is, the can't afford to raise any more.
[SPEAKER_00]: They probably can't afford the current dividend.
[SPEAKER_00]: And you look at that based on the cash, pay rate dividend, pay rate ratio, it cannot.
[SPEAKER_00]: So, I generally like these businesses better than like an EMP company, but I don't like the balance sheet, and I don't like the cash flow, and I don't like that pay rate ratio, so I'm passing it.
[SPEAKER_00]: They were heading to our final breaks, give me a quote, get your call in now, I did it 99 chart.
[SPEAKER_01]: or you learn about how the market works.
[SPEAKER_01]: The better your chances for success.
[SPEAKER_01]: So don't forget to call, in Vestark, 888-99 chart.
[SPEAKER_03]: Hi, Justin, or Luke, this is Dan from Walnut Creek.
[SPEAKER_03]: I'm glad to question about a couple of funds.
[SPEAKER_03]: Does looking at this A, B is a Victor U.S. or the T, H, R.
[SPEAKER_03]: I was looking to add one or both of these to my portfolio is wondering if this is a good time.
[SPEAKER_03]: If I should look for a downturn and then get in or I should just jump in now.
[SPEAKER_03]: Thanks very much.
[SPEAKER_00]: Well, the marketing general is getting rockier and probably will be rockier in the back half of this year.
[SPEAKER_00]: Especially compared to the first half of this year where we just had that modest pullback of the market to end the first quarter
[SPEAKER_00]: Fairly un-eventful until the last month where there was some mild volatility, but overall on the grand scheme of things historically, that's not a lot of volatility in a two-quarter period.
[SPEAKER_00]: So, both of these are domestic equity focused on VTHR.
[SPEAKER_00]: That's just going to be the Russell 3000 index for a straightforward, very tech-heavy 36% in tech roughly.
[SPEAKER_00]: Financials that 11 or 12 percent, everything else is in single digits.
[SPEAKER_00]: It comes to its weighting.
[SPEAKER_00]: Now, advantage, you're going to pay a little bit more from expense ratio standpoint.
[SPEAKER_00]: You're still very diversified in 1900's, versus 3000 for the Russell 3000.
[SPEAKER_00]: But your attack is only about 29.
[SPEAKER_00]: You're getting 11% industrial, 16% financials, 11% consumer cyclicals.
[SPEAKER_00]: You're getting a little more basic materials.
[SPEAKER_00]: three or seven versus four.
[SPEAKER_00]: So if I'm picking one of the other, I'm definitely picking a Vontis US equity timing.
[SPEAKER_00]: That's a little more difficult, but I'm definitely picking a Vus over VT HR.
[SPEAKER_00]: Now, let's just talk a little bit about the dollars.
[SPEAKER_00]: This is, we're giving this a little bit deeper to Maro, but I wanna give you a primer on it because,
[SPEAKER_00]: The dollar's been strong as of late, but there are a lot of potential reasons to be concerned about the dollars no longer counter cyclical, meaning it used to be when the economy got sour, what sour, money moved into the dollar, it was a safe haven.
[SPEAKER_00]: But.
[SPEAKER_00]: Now what you're seeing is capital flows are moving more into US equities as opposed to US treasuries.
[SPEAKER_00]: In fact, because the geopolitical concerns and our deficit blowing out now at 7% that's a GDP ratio roughly in a non recessionary environment.
[SPEAKER_00]: Money is no longer
[SPEAKER_00]: flowing into treasures because they don't trust our ability to repay was out greatly devaluing the dollar.
[SPEAKER_00]: What's held up the dollar, though, is actually money flowing into tech because the AI creates.
[SPEAKER_00]: But if that reverses, like in 2022, you're likely to see a large drawdown in the dollar.
[SPEAKER_00]: Then there's what's happening in Asia.
[SPEAKER_00]: Japan is starting to spend big on new era investments.
[SPEAKER_00]: They own a lot of dollar assets or to finance this capital investment at home.
[SPEAKER_00]: They're likely going to have to sell off dollar assets including U.S. Treasuries does one of the reasons why the net flows into U.S. equities compared to U.S. Treasuries is so dramatic.
[SPEAKER_00]: the highest ratio ever because there's actually in some instances, depending on the country, net outflows of money into U.S. treasures.
[SPEAKER_00]: In the year tomorrow, the U.S. received well over $600 billion in net equity inflows, however, that was a record amount.
[SPEAKER_00]: So once again, if the tight turns and equities, it will likely also turn on the dollar as well, which puts the Fed at a crackmeyer, because lower dollar will likely ignite more inflation, which makes it harder for them to ease policy in the midst of maybe a correcting equity market.
[SPEAKER_00]: Then there are light Asian currency, six of the 10 cheapest currencies according to Deutsche Bank models, Arne Asia.
[SPEAKER_00]: And we see what's happening in Japan,
[SPEAKER_00]: and many other countries in that region, they are getting tired of a we currency, because they're feeling the effects of inflation, so they actually want their currencies to be stronger.
[SPEAKER_00]: So that was a bit of a primer for tomorrow, but I think it was important to cover because that's a unique aspect that we'll expand on tomorrow's show.
[SPEAKER_00]: I'm Justin Klein, minding you about K-P-P-P-I-D-A-N-Tools.
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