3 Stocks To Buy As Big Tech Sells Off (And 2 To Avoid)

The whole tech sector is [music] down this week after the first round of Mag 7 earnings. Where is the money rotating to? That is what we are going to dive into today with Rob Spivey from Altimetry Research. Rob, so glad to have you on the show. We're going to dive into a lot of different stocks today and and my favorite format, which is we are talking about three stocks that investors should be looking at getting into right now during all of this tech crash that's underway. And then two stocks to stay away from. All of this based on your deep dive accounting outlook on these companies and what the earnings really tell us about where these companies are sitting and what they could mean for investors. So we have a lot to dive into on the five stocks we're going to cover in this video, but I want to start out by talking about this tech crash because Thursday morning was a really rough morning for the market after Tesla and Google reported on Wednesday. >> Nasdaq opened up down better than 1 and 1/2%. S&P down one. I think Alphabet was down plus 7%. Tesla down 13. You know, it's funny. It It generally felt when you looked at the two earnings reports, like it was a genuinely a a Goldilocks situation where she couldn't figure out which of the bear's porridge she liked. Google, the problem was you're spending too much on AI a hyperscaler infrastructure and Tesla, you're not spending enough. Well, the fact of the matter is when you look at it, this investment cycle isn't stopping is the big narrative. And so while people can, you know, gnash their teeth, it's funny. You look at every single quarter for really the last 3 years. The hyperscalers come out and give their guidance in terms of what they think is going to happen for their capex numbers and the market doesn't like it cuz the market says you're spending too much. And then what happens is the next quarter, guess what happens? All of them have massive data center revenue because of the fact that the issue is they can't build enough. I mean, even if you looked at the at that earnings call for Alphabet, specifically they said, "We still are capacity constrained." Right? I They even went on record as saying, "The reason why we went to SpaceX and xAI and bought the capacity we bought is cuz we can't build data centers fast enough." And I think Bridget, you know, whatever people worry about this idea of the of the this CapEx boom going too far, you should always pay attention to the uh to two things. One is the idea of is there demand behind it that's real? Cuz if there is, look, you know, it's not a you build it, they will come situation. It's there. You're going to have the revenue behind it. And the second thing is can they get the financing. And we're not seeing issues with either of those narratives, which is why we would argue that the tech part of this is a total overreaction. Anybody who's spooked that this is the end of the bull market is really missing the story here. >> Yeah, I I think looking at the crash that we saw in tech at the end of this week kind of mirrored what happened the previous week in the memory sector when we saw Micron down almost 30% over just the course of less than 2 weeks. We had a guest on who was predicting that Micron would bounce back very quickly as soon as the hyperscalers reported and showed how much money they're investing and spending at companies like Micron. And that's kind of playing out in the market this week. We see Google down massively, all of these big hyperscalers down because of the spend, but then you look at Micron and it's getting a nice little bounce back. Their earnings reports are showing just how much money is going into these other companies. So, let's talk a little bit about the hardware, the infrastructure plays that were down earlier in the month and and what's happening to them this week and throughout the rest of the the the quarter ahead. >> There's a reason why even with the sell-off that's hap that's happening right now for the hyperscalers, you know, you look at tech hardware. Alphabet has been been basically the most profitable company in the world for forever. I mean, 160, 180 billion dollars in net income that it throws off. Samsung is going to this year have better than 200 billion and next year forecast for that 300 billion dollars, which is staggering. And then SK Hynix and Micron are the exact same narrative. Hence, where are they running? But you look at this and so, that idea of the sector rotation, you know, we've done a lot of research inside of bull markets. Um and a lot of people, when you see this kind of move, people get worried, "Oh, no, is this the toppy end of a bull market?" You know, you're getting these massive swings in these very, very big companies. And you know, it's the center of the whole entire story. Something really important happens inside of bull markets, which is the leadership in a bull market never stays, in terms of the sectors, the exact same. And we did a lot of research on this at Altimetry. And what we found is we looked back over the last, basically, three decades. And what we found is there was never a year where the three sectors that were leadership in one year stayed the leadership in the next year. Generally, one to two of them stayed leadership, right? So, just for context, the last year it was communication services, which is, you know, everybody from Alphabet and Meta to telecom companies and media companies. And it was tech hardware and it was industrials. And what we're really seeing happen here, which is interesting, is not the tech the tech is leading leaders losing leadership. What we're actually seeing is it seems like communication services has really taken a backseat. But, this swing in tech tech hardware is really a story about people triangulating just how big this boom is going to be. And so, we think that the really interesting thing that's happening right now is you're seeing a changing of the guard in terms of leadership. And we've already started to see it so far this year, but with communication services possibly stepping back, tech hardware and industrials will stay strong. And there's another sector that we think is going to really be a big part of leadership for the rest of this year. Jen, we're going to cover a little bit of all those different sectors in this list today. Again, the three stocks that you should look at adding to your portfolio right now, and the two stocks that you likely want to get out of, or at least not get into if you don't already own them. So, we have a lot to get to today. Let's get started with the first stock on your list. And even before we get to that name, let's talk about this sector that you are seeing more of this rotation going to for the next year ahead. >> Yeah, and I mean and the whole entire thing that we're seeing here, which is what we think is so interesting is when you look, we talk a lot at Altimetry about this idea of the AI boom, right? And the and the kind of the the daisy chain of all of the different parts of the US economy that are impacted by and if you actually look like right now, really effectively 65% to plus of US market cap is really tied to AI in one way, shape or form. And so when you look, the leadership that we've seen in terms of communication equipment and and I should say and I should say telecom and tech equipment, I should say tech hardware and then industrial equipment really makes sense. That's the closest area of this AI boom buildout, right? cuz you think first you have to start with the chips, right? We talked about Micron, Nvidia, all the stuff that's inside of the data center in terms of the ethernet cables, the the switching equipment, all this other stuff and then you go from there and you go, okay, now you need the power that goes behind it and you need the heating cooling solutions. That was industrials. Well, the last part if you keep on going out for those kind of that for that blast zone, the last part is to get any of that, you need energy. You need natural gas and you need oil. And what was really interesting is for this whole entire journey, you know, people were kind of missing that obviously that was the last piece of the puzzle and we've seen so far this year, it's been telling that so far this year, the top three sectors have been industrials and technology and technology hardware in particular and energy. And we see a whole lot of reasons that that's going to continue to be the story in the back half of the year. It's you know, a lot of people say, well, how much of this is just you know, it's going on with with Iran and the Strait of Hormuz and now the Red Sea potentially being closed and everything else. That is a short-term story certainly, but that's not the actual story here. The story here is we have a structural need for natural gas in the United States because of both what we're seeing in terms of AI data center need for for on-grid and off-grid power and also we're ramping LNG to get it to all of our our allies because of what's happening in the Gulf. And two, we need oil for a lot of this stuff, too, basically in terms of generators and everything else. And structurally, because of now the geopolitical uncertainty that we have with everything going on in Iran, we've got a premium that's now going to be on oil for a long time, and that makes all of the shale players, right, all those wildcatters in the Permian Basin, actually up by you, Bridget, not that far away from you if you get up to the Dakotas, right, in Colorado and everywhere else, basically go, "Hey, we're going to actually it's going to make money for us to invest in oil in oil wells, too." And so, we are seeing a boom that's going to be lasting the market is really totally sleeping on here, and that's what we think is so interesting. This is not the start of a sell-off. This is a sector rotation that's going to mean energy stocks are going to become more and more important with industrial stocks and tech stocks still being really strong. >> And this is not the first time even this week that we have heard people saying that they are seeing so much money rotating into energy through oil, through any means, because really it's a part of that greater energy story. And I'm excited to get into the three names you have for us. We're also going to cover those other sectors, some of the big winners last year that you should be getting out of right now. So, stick around and wait for those two names, too, because that's an important part of this. But if you want some other names to look at, too, make sure to check out this free report. Rob and Joel at Altimetry Research take a deep dive into the accounting behind what is happening in the entire energy sector, and they'll share one of their biggest predictions in the new dark energy area. This is a free report you can access just because you're watching this video now. You can scan the QR code or click the link in the description and get that free report while it's still there. Again, it's a generous offer. Thank you guys for sharing even more information with our viewers today, Rob. Let's get on to that first stock that you are looking at right now. >> Yeah, and that first stock is Baker Hughes, BKR. So, this is one of the oil equipment and services majors, right? When you think uh doing stuff in the oil patch and the natural gas patch, think Baker Hughes. Right, there's a reason why literally there is a a rig report that everybody in the oil field um that's in the energy patch follows that basically says how many rigs are actually right like uh basically punching holes in the ground, and it's produced by Baker Hughes cuz they're at the heart of this. And so, you look at Baker Hughes. So, one, as we're seeing this surge of investment in oil and gas, they're going to benefit. But, they have other reasons why they're benefiting big also. One is because the fact that as LNG buildout grows, as we're expanding LNG capacity in the United States, as they have to rebuild and cutter. But, the fact that Baker Hughes is one of the most specialized and best-placed companies to benefit from that. And also, when we talk about that idea of dark energy, Baker Hughes is actually helping for these AI data centers in terms of getting power. Baker Hughes is actually helping with that, too. And so, you put this all into place, and what you see is the whole entire narrative around energy and why we're so excited is this idea of a boom in demand because of what the AI data centers are doing, and Baker Hughes is set up in three different ways to benefit from that. And the best part, the market doesn't even realize how profitable this firm is because as reported metrics, the GAAP numbers that everybody looks at, see this company is being the bare minimum profitability, 5% return on assets. But, on a uniform accounting basis, when we clean up the noise, when we see all the real profits of this business, we can see it's actually producing a 15% return on assets, 3x what the market thinks. And we think when the market starts to realize that, as all of this macro tailwind picks up, there's a lot more upside in Baker Hughes. >> Yeah, and right now you look at the chart action on this one this week. Um it is starting to have a little bit of a rebound uh probably based on what's happening with the the headlines and the geopolitical issues this week. But, you can see it's actually pulled back significantly from where it was at the start of the summer. Uh so, it's an interesting time to be looking at this name, too. I wanted to talk a little bit more about volatility in this stock. Do you think that there is long-term growth outlook for the next year, no matter what's happening in the headlines? Or if you invest in this one today, should you prepare for some volatility uh based on what we might be seeing, you know, coming out in the news and things like that? Is it fairly reactive? >> Because of the fact that Baker Hughes is one of the biggest players out there, when people reach for something to trade on oil and gas, there is some level of that. Um right? I mean, the reason why we saw the sell-off, basically, from earlier in the summer was because people thought, "Oh, guess what? Everybody Everything's resolved with the Iranian conflict. Everything's going to open up. We're not going to actually punch any holes in the ground after all, whatever." Um so, there is going to be some, you know, volatility as news flow goes on, and which is why we always talk about the idea when we talk, we say, you know, be tactical, right? In terms of your dollar cost averaging into a stock when you're buying in. The reality is, though, the the tailwinds for this company are durable and long-lasting, and they aren't going anywhere. This is not an idea that if President Trump and the Iranian leadership came out tomorrow and said, "All is forgiven. Everything is fine. We're resolved." Baker Hughes is still going to have phenomenal reasons for really strong earnings growth and investment that aren't going anywhere. >> Yeah, let's talk about that, too. If oil drops down to $70 a barrel again, is Baker Hughes still a highly profitable company from an accounting perspective? Do they still have plenty of other opportunities even if the price of oil does drop? >> Exactly. And this is the important thing for them in terms of one, their really strong one LNG exposure, and how they are supplying actual equipment into data centers for turbines and stuff, but also the idea that when you look at $70, which because of again that geopolitical premium that we're going to see even if the war is resolved, probably the floor for oil, and because natural gas is not going below $2 or $2.50 anytime soon, because of those two factors, basically anybody in the US who would think about punching holes in the ground for oil or natural gas is making money. So, they're spending with Baker Hughes cuz Baker Hughes gives them the equipment and the service to be able to do it. And the whole entire rest of the world has to have that investment because of what we've seen for wrecked infrastructure. So, yeah, even at $70, even at $65 a barrel, you're seeing healthy things for Baker Hughes, but we're probably not getting down to $65 a barrel just because uncertainty even if everything gets resolved. >> Yeah, I think that's the outlook we're hearing from just about everyone right now. All right, good first pick in this sector. Let's move on to the next name that you were looking at as a buy right now on this new sector that a lot of the big money is rotating into. >> Yeah, and that's EQT, ticker EQT. EQT is one of is actually the largest natural gas producer in the United States of America. They have shale wells across really primarily Pennsylvania, but effectively in Appalachia where they are producing tons and tons of natural gas and the reserves that they have are way more than a decade in terms of the reserves to be able to keep on producing that at insanely low costs. And this is the real and genuine asset here is the US is effectively bigger than Saudi Arabia for oil when it comes to natural gas. We are the dominant player and it is a competitive advantage that we have against anyone else when it comes to our idea of why we are going to win the AI race. And EQT is front and center because they have the ability to ramp capacity in very real ways as we get stronger demand. And if you think about all the stuff that I talked about in terms of us ramping LNG exports, us needing more natural gas. I mean, if you look at big players in power and in technology and in hyperscaler technology infrastructure will tell you is the only way for us to win the AI race in the next 5 years is natural gas. And so, EQT is going and that means stronger demand means stronger prices. And so, EQT is going to have a double benefit of one stronger volumes that they're producing both shipping all the way to the Gulf and sending to anywhere that where where data centers are that are running either turbines from somebody like Baker Hughes providing it to them or um or basically building their own turbines or using um fuel cells from um Bloom Energy, all of them need EQT's natural gas and at potentially higher prices. That means for EQT where this company has way higher profitability than an industry peers. And this is what's really interesting. But when you look, the average natural gas expiration production company, right, company who punches holes in the ground, generates a return on assets of around 5%, right? They're not insanely profitable businesses. EQT, because of how good their wells are and how cheap they are, its return on assets floats closer to 10%. And that's the thing is they've got this far more profitable business that's about to compound way better, and that's why we think it's so interesting. >> Yeah, I think here what I'm hearing from this one is that this is very much directly tied to the AI infrastructure story. And we'll do plenty of videos talking about how nuclear energy demand is growing because there's so much demand from AI data centers. And we have videos on all these battery stocks or energy stocks like Bloom Energy that's have seen tremendous run-ups because there is so much demand from AI. But it seems like investors, when you talk about oil or natural gas, come some of these older energy assets, people aren't as interested because they're worried that they're not going to see the same kind of outsized returns in an EQT like you do in Bloom Energy because it's something new, it's something growing that you see those really impressive returns. So let's talk about what kind of returns investors can expect looking at an established solid company like EQT because of that AI data center factor coming into the stock. >> Bloom Energy, EQT is not going to be up 1,500% in the span of 6 months. I'm going to say that right now. That's not the call here at all. But if you want to actually understand, again, at the end of the day, Bloom Energy, when Bloom Energy goes and ships all of those fuel cells out to Starship to Stargate Jupiter out in New Mexico, the 2.4 gigawatts that they're talking about shipping or whatever else, that needs to be powered by natural gas. And the if you think about the massive ramp that we're going to have in terms of natural gas demand, just to put in perspective, the US grid over the last 20 years, right? US GDP has more than doubled since 2005, more than doubled. That's how impressive the growth we've had in the United States has been. US energy demand for 20 years was flat. It was flat, and what that meant is even though we were ramping how much of that power was coming from natural gas, prices weren't really impacted because we didn't have see the sudden surge and build out. Over the last 2 years, all the sudden ramp that we've had to have in natural gas production because of the fact that we have a whole bunch more power plants going up, we're talking about 20-30% growth in US power consumption. And that is a totally different paradigm for EQT and the other natural gas exploration production companies, which means we can have steady 15-20% earnings growth in a company like this, which is an insane amount of compounding for a company that's PEs are in the single and low double digits on a uniform accounting basis. So, tons of upside here for a company that's not valued for it, and it's sustainable upside too because of the visibility we have. >> Yeah, I think this is a really interesting stock, especially looking at where the chart is right now this week. It is on that pullback from, you know, the that early May timeframe, much like the last company we just covered. It is starting to bounce back some, but I still think it's an attractive time to get into this one. You make a really great case long-term, especially over the next year to 5 years, of why this company has so much growth still ahead for it, especially in their earnings and profitability. So, this is the one I want to add to my Bridget's Buys watch list. If you are new to this channel, I add one stock per video that we talk about to this watch list to see how the stock moves over time. Like you said, Rob, I'm not expecting this one to to jump 300% but I do expect it to be in the green uh for my portfolio come this time next year. So, uh excited to add this one to the list. If you want to check out my Bridget Spies watchlist, scan the QR code or click the link in the description. It's just marketbeat.com/bridget and you can see how some of the stocks we talk about on this channel are doing. All right, Rob, let's get into the third name in energy before we get onto your two stocks to drop list, which I'm also excited about. third name you are looking at as a buy right now? >> And this is Murphy Oil, ticker MUR. So, Murphy Oil, but they are a old-school exploration production company, true wildcatters, as they say. They've got basically half of their production in the US, in Canada, in places like Vietnam is oil and half is natural gas. But the lion's share of their revenue is oil just cuz obviously oil you sell for more. But when you look at what's really interesting about them, those assets are producing at really, really low cost levels. And so, they are throwing off tons of cash on Murphy is. And so, Murphy has used that cash flow to make really, really, really smart bets over the last five to seven years that are just now about to pay off right at a critical moment where we need a whole lot more energy. Well, they have invested in both the US Gulf, so offshore US off Louisiana, and in Vietnam, and in Cote d'Ivoire, right, in Africa. Well, they've made big bets about oil and natural gas and they are seeing the opportunity from those wells to potentially double their reserves. Um and when we talk about that in terms of that's a big deal in of itself, but the really exciting thing is just as we're seeing oil prices get stronger, they're about to finally start to see production in the end of this year by Q4. Really in Q3 they might even see it where we are like now, but by Q4, we're talking about potentially seeing a surge in their production, which could have tons and tons and tons of upside for this business that the market's totally sleeping on. And that's what's so exciting is we're just about to see that real ramp in production, that first oil flow out of the wells just in a few months, and that's going to be a big catalyst for this company that the market's sleeping on. >> Uh it's definitely not the only name in energy that the market is not paying attention to yet. There are some other names in energy, specifically companies that are going to see a tremendous boost from the AI demand and have similar windfalls coming for their books. So, if you want to look at some of those stocks, too, make sure to check out that free special report. Again, this is from Joel and Rob at Altimetry Research, and it dives into some names in this dark energy space. It's totally free today with a special offer just for our viewers. So, click that link, scan the QR code, and you can enter your email address, and they will send that report right to you, totally free today. All right, Rob, let's get on to that drop list. This is just as important as what stocks to buy right now is talking about the stocks to stay away from in this current market. What is the first name on your list? And I'm excited to see which sector it's in because I know you mentioned earlier the winners last year may not be the winners this year. >> Exactly, right. And that idea and when the idea everybody is when you look at communication services, that again is right the big players in social media, that's also telecom, and that's also media companies, also. There was a bit of a run-up for those telecom companies, for those media companies. Missing one, the risk for disruption in terms of AI innovation and also the risk of disruption from new technology coming out there. And that technology disruption is front and center for the first company we're talking about here as a company that you want to fade, which is T-Mobile. TMUS is the ticker. So, T-Mobile, it benefited hugely the last few years from eating Comcast's lunch. So, Comcast, right, basically their dominant business is selling broadband internet now, right? It's not cable, even though people think about it, it's actually broadband internet is their money maker. And T-Mobile came out with a better solution for a whole lot of America, which is, "Hey, how about you get your internet from effectively using a mobile solution at home?" Right, we've got dense enough mobility and high enough bandwidth going from you know, from your basically cell phone towers to be able to do that. And so, they wiped the floor with Comcast and have seriously pressured Comcast. But, the big narrative here is the ROE jump that's forecast to happen this year from continued benefit from that is not paying attention to the fact that they're seeing rising competition, too. Right, this is where they're investing at the end of the day a red ocean. And there's another company who we talked about Bridget last time that you were nice enough to have Joel and I on this call, which is SpaceX and specifically Starlink. And right, when you think about the long-term strategy for Starlink, it is to start to move into that space, too, and drive greater competition in the effectively ability to get broadband in a whole lot of different ways. And that really caps the ability for T-Mobile to continue to take share, T-Mobile to boost price once they take share, and a whole lot of other things that are really basically saying, "Hey, this company might actually not benefit from this continued tailwind that they've had already and actually might start to see some headwinds coming in." We look, when we analyze companies at Altimetry and we use our uniform accounting, the big secret weapon that we use to do this is we call them better expectations analysis, which is looking at understanding what is the market pricing the company to do versus what do we think the company can really do. And we look at T-Mobile, what's really important here is the market is expecting T-Mobile to basically maintain its best ever return on assets that it got last year and a little bit of the bump they're getting this year and not really pricing in any of the competitive pressures it could have, especially because its return on assets is currently like 1 and 1/2 X what all the the telecom companies are. And so, we think as competition grows and as pricing normalizes and this red ocean continues to get redder because of competition, we'd like to see that return on assets fade and the market isn't seeing that at all and that's why we think T-Mobile is one to maybe get away from that winner from prior years and focus somewhere else. >> Yeah, you can see that in the chart, too. This one is not a strong even from a technical analysis, either. Good to know that you think that downtrend could continue and I think the chart looks a little bit similar on the second stock on your do not buy list or time to drop list, too. Let's get to that second name. >> Yeah, and this is a company right when you talk about that idea of what's going on in the media space, something's really important and it's Netflix, NFLX for those of you who don't know the ticker. Netflix has been brutal in the last year and change. It's down over 40% after having been a phenomenal run beforehand and this is a classic example of a company where, you know, the more you might think, "Oh, it's down 40% and Netflix probably will be one of the winners from the streaming battles. So, maybe this is a company that we could dip our toes back into because the fact that it can't be this bad forever." Well, here's the issue for Netflix. Even if you believe that, you know, they're going to be able to pull on ad revenue to be able to reengage growth, even if you believe that they're going to be able to pull on, um, you know, effectively bringing other channels onto Netflix and acting like YouTube does and basically not just offering Netflix content but saying, "Hey, you can go here, there, or the other place." The structural issue is one, there's a reason why they've been pulling back on all of their KPIs that they've made available to investors over the last two years. They understand growth is saturating, but the bigger issue here comes back to embedder expectations again for this company. So, Netflix, when it was 40% higher than it is right now, what was going on for the stock was the market was pricing in this company that is starting to see saturated growth, seeing return on assets continue to improve, and growth continue to maintain at 15-20% a year. After we've seen the stock pull back, now what's going on is the market's basically pricing now the idea that yeah, Netflix will remain one of the best businesses in media with phenomenally high return on assets that stay flat, and growth might be high single digits, low double digits. That does not sound like a cheap company to me at all, especially if you think, "Look, you've got competition in terms of short form, in terms of AI content, you've got continued um competitive pressures from Paramount, from Disney, from YouTube, from everywhere else." This is not a world where Netflix is going to see a surge in growth, and you really need that to believe that there's any upside here now, and that's why we're saying, "Hey, yeah, we know it's fallen. This is not going to be new leadership again, so don't buy this dip." >> Yeah, you're going to hear lots of different articles out there saying it's time to buy the dip in Netflix. And thank you for sharing that kind of alternative opinion about staying away from this stock right now. Let us know what you think in the comments. Are you buying the dip in Netflix or staying far away from this name? And if you want to hear some other stocks that Rob and Joel are recommending as buys, and two others to avoid, again, very important topic, too. Make sure to watch those videos from when they're on last month and see some other accounting perspective stock recommendations and stocks to avoid. Watch that full interview here.