One Stock to Buy Before It Reports — Answering Your Pressing Questions

Everyone's panicking about this pullback, but we're doing the opposite. Dad, where are we in this pullback right now? >> We're going up. Memory stocks, as I talked to, are explaining to the upside. The Dow's down because IBM missed and had poor guidance. Ironically, IBM was losing market share to all the data centers. So, what's bad for IBM is good for us. And everybody's starting to celebrate earnings. I don't own financials but JP Morgan, Goldman Sachs, City Bank all beat Jamie Diamond who's notoriously grumpy was more positive than normal provided good guidance. So it's just time to celebrate earnings and it's every stock for itself but you must beat you must guide higher and of course now we are celebrating the first drop in inflation since 2020. The CPI was down 4/10en of a percent much lower than economists expected. The core was unchanged. That was still good, better than economists expected. And we had this dramatic drop in fuel costs, mostly gasoline, over 9%, but the food did rise 210 of a percent. What I liked is owner's equipment rent, shelter costs were only up 2/10 of a percent. That had been elevated in previous months. So there's no pressure on the Fed to raise rates. Chairman Walsh is in front of Congress right now and I'm sure he's going to stick to the script that we don't want inflation, but he's redoing the Fed from the bottom up with all kinds of task force and things. I think he's got five task force underway. I think it's a very positive environment. Treasury yields fell uh in the wake of the CPI. We're going to have the producer price index out shortly and then we have retail sales on Thursday which should be very very strong. So, I'm excited. We got a lot to be excited about. Before we get into stocks that are now a good buy, I want to ask from our most recent video, are there any changes to your predictions for the second half? Memory, oil, GDP, AI, productivity. >> Yeah, I guess I have to give reiterate all of them. Oil is going to be elevated through Labor Day. It's due to seasonal demand. Period. According to President Trump, the straight is open. And obviously, President Trump has lost his patience with Iran and the IRGC. I don't think he's going to put them back on the stone age, but he's definitely going to curtail their ability to launch missiles and drones and all that stuff. So, I'm not worried about oil because again, commerce is moving, but it is elevated because of the uncertainty with the situation of Iran. Earnings are phenomenal. They say they're going to be up 22 on the S&P. They'll probably be up 30 plus, which what they were last quarter. So, I expect accelerating earnings. I just wrote a oped in market watch about that. The GDP, if I don't hit my 5%, it's because of the tech boom. We're importing lots of the memory from Korea, the GPUs from Taiwan. We're exporting less gold, although we are exporting a lot of oil and refined products. So, the trade deficit uh could be a drag on GDP. It's at least 17 in the second quarter. It could be uh 2% in in the third quarter, but I'm expecting massive productivity gains. I'm still in the camp for 5% GDP growth, but it all depends on on the trade deficit adjustment. Yeah, it's time to be happy. We will face seasonality issues because people leave in the summer months. Uh volume tends to drop, but you know, July is a good month. We're following the typical July pattern. So, I feel very very good right now. >> Does the AI infrastructure trade still have legs after all this volatility we've been seeing? >> Yeah, because the backlog. Yeah, it's a three-year order backlog through 2029. So the real question this quarter is the backlog still growing. That was the big news last quarter. So somebody like Bloom Energy had 9 billion in sales, but they had 18 billion added to their order backlog. So uh the AI trade still real. It's not stopping. The big news, of course, is that uh the tech industry is increasingly taking over the power grid. Um there's a big solar field in Arkansas that Google just went and bought the whole thing. We literally have to double the power grid to add all these data centers and we're not going to be able to do that with utilities. So increasingly the data centers will be fueled by natural gas through a bloom energy fuel cell or a Genova turbine. So you know tech companies are are doing what President Trump told them. He told them don't get it from the utilities generator on your own. And that's exactly what most of them are doing. Now, there's been one stock specifically you've been mentioning to me this week that might be great to load up on before they report. Which stock is that? >> Taiwan Semi announced their June sales were up 67.9%. That's stunning. Strongest ever. They were up well over 6% from May to June. So, sales are accelerating. They announced on Thursday their sales are supposed to be trailing 12 months, up 35. they'll beat and the earnings will 48 and they'll beat. Taiwan Semi has reignited the AI trade. They are the supplier for the GPUs to Nvidia. They make the high-end processors for the MacBook Pros, the Microsoft Surface laptops. And so if TSM is healthy, the entire tech industry and the AI trade is very healthy. So I'm really excited about their earnings on Thursday. That's going to get a lot of our stocks excited. Now, we've gotten quite a few subscriber questions, so let's get into some of them. You've been talking a lot about the memory stocks like MU, SanDisk, and STX. They all have backlogs of 15 months or more. You're saying 3 years or more. But why isn't that already priced into the stock? >> Because it's a cyclical industry and people are manic. But I should be very clear. We have 15 months of pricing pressure. And yes, they have a three-year order backlog, but we expect prices to remain elevated for at least 15 months or five quarters. So, normally memory prices fall because they open up these huge fab factories and then they just overwhelm everybody with supply and traditionally memory prices have fallen because of the cute memory shortage for AI. Right now, memory prices have dramatically risen. That's why Apple had increased the price of the MacBook Pros and iPads. So what what I expect is that windfall profits will continue for at least 15 months, five quarters. But yeah, they look very good for 3 years cuz the demand is there. Right now my favorite is by far Micron followed by Seagate Technology and I do have SanDisk under under management in some portfolios. >> You mentioned that we're in this cyclical cycle, but does memory ever stop being this way or is that just how it's going to be? >> This is very odd. Normally technology makes our lives more efficient. Uh they make our lives better and we normally don't have shortages because you know these factories are predominantly in Asia, South Korea etc. and they can just ramp up and prices get cheaper kind of like TVs get cheaper but the data centers demand has disrupted that and because Micron makes the fastest RAM chips those chips are really really in in strong demand and Micron is you know building new factories in the US including one in New York they they poured the foundation on that and they're building it I do think the bulge or what we call the price increase in memory again is only going to last 15 months and then prices will eventually moderate, but uh we just have to see when supply catches up with demand. It's economics 101, but it is very odd. >> Now, we got a few questions about the data centers, so let's start out with the first one. There's a real backlash building against these data centers locally. Does that slow down memory growth? >> No. The only thing that slows data centers down is what goes in them. So, there is, you know, 5-year order backlog on Genova's turbines. Uh Bloom Energy has a massive order backlog. So obviously pouring the concrete foundations is pretty easy. Wiring them is pretty easy. Then you have to put in those watercooled rack systems like a super micro make. Verive is another stock VRT that participates in that. Uh to a lesser extent Dell's now doing that. The question is where's the glitch? And there was a shortage of fuel cells. There was a shortage of turbines. Now there's a shortage of memory. So yeah, if a data center gets delayed, it's because they can't have the bits to go in it. But as far as a local opposition is concerned, that's okay. They they can put it somewhere else. It's a big country. But they tend to go where it's cold at night so they can vent the data centers at night. So they like deserts. They tend to go where there's fast internet, so fiber optic. They also go where there's green or cheap electricity. So hydro, nuclear are very popular options, but increasingly it's being natural gas driven. >> Now, renewable tax breaks just got pulled as of July 4th. Does geothermal get a boost from the data center demand? >> Yeah, I don't have a geothermal stock. The stock I'm most familiar with is Orment. They operate in Reno. And Reno has hot springs everywhere. In fact, I'm outside of Las Vegas and driving here. I went through massive hot springs. They're just natural. I got to be careful because there's donkeys wherever the hot springs are. I guess they like the water and the grass that grows anyway. So, I don't want to hit a donkey. Oh, when I drive back. But yeah, the data center is a lot like geothermal. It's it's green energy. But the most popular place is Reno, Nevada. >> Now, we got a few questions about your specific strategy. Let's get into them. What are your actual sell signals? When do you get out of a position? >> It's very simple. We run the portfolio like it's a sports team. So, first of all, in stock grader, you can put all your stocks in and save your portfolio. And stock graders update on the weekend and so just check it every Sunday or so and we'll have new stock rates for you. And you can click on stock grader and sort them by the grades. You can sort them by risk. We normally like 60% conservative, 30 mly aggressive, 10% aggressive. But eventually what happens is what's safe today can become more volatile down the road as the stock appreciates. Sometimes the institutional buying pressure is going to eb and the stock will get more volatile. It'll fall in rank. I don't want to pick on any of my stocks, but my gold stocks are more volatile now than they were in in the first quarter. I've started to prune some gold stocks. They still have very good sales and earnings. Everything I've sold has good forecast sales and earnings. I'm just selling something good to buy something better because my average sales are well over 40%. My average earnings are over 100%. So, let's just say you have a stock with a 15% sales growth and 20% earnings growth. Well, it probably will get sold by me unless it's in some unique business and the prospects are really good. So, we don't own more than 80 stocks and as the stock gets towards the telling that list, we often sell it to buy something better. The other thing that's really interesting is that uh we wait for upticks to sell. You know, uh I compete with people that sell stop-loss systems. And I'm not anti-stop loss. If you want to do it, great. But I don't do that. I sell in the strength. I buy in dips. So when I do sell, I can wait. I even the stocks I'm selling have good sales earnings. So I know I can wait for an uptick to sell. So pruning happens more after earning season because they've already announced and guide provide their guidance. And so it's kind of like pruning a garden. So I prune after every earning season. >> Now when you say a screaming buy, are you talking about buy and hold or setting a trailing stop? No, I mean a buy and hold. So, let let me be be clear. If you want to use a stop, that's fine. I don't trade that way. I sell in the strength. I buy in dips. I calculate what we call a standard deviation for each stock. I know the volatility. Uh, a lot of people like to set stops like it's 7%. So, if the stock drops 7%, they'll cash out. What I would highly recommend you do is do the opposite cuz that's what I do. Now, one big warning about stops. I know a lot of people have to do this. Don't do it on ETFs. Uh the spreads are wild. Uh if they see the stops down there, they might run it down, have an extra wide spread, and please don't do that. You know, there's a big fuss on leverage ETFs now. Trust me, they have hideous spreads. I was on Bloomberg recently complaining about the spreads. I had my own ETF, okay? I rang the bell in the stock exchange. Why don't I have that ETF anymore? Because my average spread was 3.54 and I got disgusted at it and I didn't want to do that business anymore. So when I left my ETF, I told people, "Don't sell. Wait till they liquidate it and you would get higher price." And that's exactly what they did. So trailing stops are popular, but I don't do them. They're also mostly sold by software companies. One of the interesting things is a stop loss system for registered investment advisors, to my knowledge, has been banned since 1968 because they consider it market manipulation. I'm a buy and hold guy. I like long-term capital gains and I plan on holding stocks usually five to six quarters, but lately due to these growing order backlogs, we're going to be holding a lot of stocks for two to three years now. >> Now, someone asked, "Do you ever recommend selling something to raise cash other than just dumping F-rated stocks?" >> Well, by the time they're F-rated, I'm long gone. I will own the C's with good fundamental scores. A good example is Super Micro has a good fundamental score, so I'm holding that. Last I looked it was C-rated. If it dips into a D, I will probably sell it unless the fundamentals are extraordinary and I know I got an earnings I can count on. But normally, yeah, I'm selling stocks when they're C. And if I hold any C's, they have to have phenomenal fundamentals. So, you know, I have a quant model, I have a fundamental model, and I and merge them both to get stock greater. But, uh, yeah, the the D's and Fs should not be in your portfolio, and you should only own fundamentally sparies. While we're talking about portfolio strategy, someone wanted to ask if someone's building a portfolio and wants to grow it fast, how much should go into AI? >> Well, a disproportionate amount because that's where the money flow is. You see, what makes a stock safe is money flow. And the data centers are 50% of the construction in America right now. A little more actually last I looked. So yeah, if I break down my portfolio, I used to say I had 45% in AI and medicine related stocks, but then the market broadened out and now I'm probably more like 54 and 55%. So the rest are going to be in energy. I still have a lot of gold stocks, not as many, but you know, I have at least 16 gold stocks. Uh, and they're still going to have very good earnings. I have Eli Lilly, okay? Ly I do have, you know, some biotechs that I I like, okay, not that many. So, I'll go wherever there's good earnings. So, yeah, you have to overweight AI right now. It's where the money flow is and the buying pressure. >> Now, let's answer some quick hits. What are your thoughts on Venture Global VG? >> All right, Venture Global is a hot stock. Their sales are supposed to be at 46.9%. That's excellent. Their earnings supposed to be up 252.7%. That's very good. The analysts have revised their estimates higher in the last 90 days from 35 cents to 49. That's good. And they've had two quarters in a row of big surprises. Last quarter was 63.3. So yeah, this is a hot stock. It is an LG company and they're building up new LG production facilities. They have a lot of infrastructure both in the United States and Europe. But it has not showed up on my radar yet, but it should. I think the reason it probably hasn't, it only surprised the last two quarters. It has surprised the previous four. I would definitely be all over it. But yeah, this is a very good stock and uh kudos to you for finding this. >> Now, what about Energy Transfer ET? >> Well, that's a pipeline company and that's Canadian and there's a lot of news about the pipelines in Canada because Canada is dependent upon sending their oil to America and if they get a pipeline especially out to the west coast they can reduce their dependence on America. But, uh, energy transfer their dividend yield is 6.8%. So it trades mostly on the dividend. Uh as far as their forecast of sales and earnings are sales are supposed to be up 41.9% earnings supposed to be up 16.1. The analysts have not changed their estimates. But the big problem with energy transfer for me is it has missed four quarters in a row. So this is trades more like a dividend stock even though it has sales and earnings growth. And by the way, the earnings aren't growing as fast as sales means the margins are under compression. I want to ask about one more stock, Bloom Energy. You mentioned it earlier in this video, but what's your take on them? >> That's one of my major holdings. Uh, their sales are supposed to be up 105.4%. Their earnings supposed to be up 302.7%. They got big upward analyst revisions from 26 cents to 40 cents in the last 3 months. Last quarter, their surprise was 242.4%. Their smallest surprise in the last four quarters was 47%. This stock, as spectacular as it is, is trading more on the perceived order backlog. So again, last quarter, their orders were double their sales. Now, because Bloom Energy dominates fuel sales, there's other fuel cell companies up and coming, but because Bloom Energy dominates natural gas fuel cells, they're very popular with a company called Brookfield, which owns a lot of data centers and likes the Bloom Energy uh fuel cells, so does Oracle. And again, their order backlog's ridiculous. So, I'm very excited about Bloom Energy. Are there other natural gas fuel cell companies out there? Yes. But no one has the order backlog or the profitability of Bloom Energy at this time. >> Well, great. Thank you all so much for your questions this week. We always try and look at them and answer as many as we can. If there's any that we missed, please leave them in the comments below and I will be asking Louis them in our next midweek update. But thank you all so much for watching. If you enjoyed this video, give it a like and subscribe to our channel if you're enjoying our content. But we'll see you this Sunday for a new