7 Stocks to Buy Heavy Before the Market Takes Off

Hey, bow tie nation. Joseph Hog here with an update you've all been asking for. I warned Sunday of a September dip in stocks, but that it would turn into one of your best buying opportunities. I wanted to show you what I'm watching right now, how to know when to buy, and to highlight the stocks I'm buying. First though, what about those cyber security stocks this week? Monday, every one of these five cyber security names were up double digits with Zcaler, ticker Zs, up 16% on the day. The group is up an average 95% in the portfolio. Just about everyone here except Zcaler nearly 100% return or more. That's 108% return on Crowdstrike. CRWD 92% on Fortnite, FT&T. Octa up 91%. Palo Alto Networks here up 148%. Besides beating the hell out of this drone for the last two years. I highlighted forecast AI spending in Sunday's video showing here. Gartner forecasting total AI spending up 47% this year to $2.6 trillion in global spending. More than that though, I showed by segment the 2026 to 27 increase here. By segment, cyber security expected up 67% 86 billion. That's the second highest growth in AI spending just after data. And now with everyone freaking the hell out that AI is going to kill all humans. Where do you think even more money is going to be going? Now folks, I know these stocks look expensive. I repeat it every time we look at these, even adjusted for that growth. that price to earnings, the PEG ratio, you're paying four to five times where other growth stocks you might only have to pay one times or less. But you cannot wait for these stocks to be cheap. The growth is so strong here. But more importantly, the theme, the fact that that it spending on cyber security cannot be cut means these are just going to keep heading higher. I like all five of these. I think there's still a lot of relative value left in Zcaler at just 1.6 times price to earnings that's adjusted for growth as well as Fortnite here. But Crowd Strike has been by far the best platform. And Palo Alto just dominates with its size and scope. So I'm not trying to pick just one of the best here. I'm owning the group. But for today's update video, I wanted to start with the big picture. Here we are on Fidelity.com. Their research by sector shows the sector performance over uh over the last 3 months. Here is what I'm looking at. And folks, you got to know out there finding these big picture forces, the starting with the big picture, the macroeconomic forces, which which sectors are going to do well. so much easier than just trying to pick one or two of the best 5,000 stocks out there. Okay? You find which sectors are going to benefit from the big picture trends, the big picture forces, and then you drill down to that. And that's what I'm going to do with this video. Here we see over the last three months, energy, obviously, no surprise there. Energy sector doing very well on that jump in oil prices. Folks, I was talking about this over the last three last few months. Everybody was saying the war in Iran was over. I was saying not a chance in hell that Hormuz opens. Okay, that nacho trade and this is just Iran's playbook. Okay, if you look back back to 1980, they did this exact same thing. Held those hostages for over a year just to just to release them the day that Reagan was sworn in just to just to invoke maximum pain on political pain on Carter. That's exactly what they're doing here with Trump and the administration. They are going to hold they're going to hold that straight of hormuse hostage until at least midterms until November before before actually kind of making any kind of a deal and deescalating this situation. So those energy stocks are still going to do very well. Now here we can see the energy sector. We can see the uh if we click through we can see the industries within them. Obviously energy equipment and services haven't done quite as well because it's really just the the current oil prices and the explorers that are doing so well here. So, what we can do if we're look if we're targeting those explorers, we can go over here to the eyeshares or the state street sector tracker here. And this one does a little bit better job of actually showing you the stocks in there. So, what we can do here, we can go into the energy. This is going to show you all 21 stocks in the energy select sector spider that XLE. These are the 500 largest stocks, the S&P 500 largest stocks in each sector. 21 of them in the energy sector. And you can see here, Valero Energy, the refiners doing very well over the last three months just on the the spread between gasoline and the refining margins there. We see Marathon, we see Philip 66. So, a lot of these, the closer you get to the customer, the closer you get to retail sales in energy, the gasoline sales doing very well. I wouldn't overlook the big dogs here though. Chevron, Exxon, Devon Energy, talked about that quite a bit on the channel. Took her DVN. We've got Fang Energy or Diamondback Energy, ticker Fing. Fang there. Another favorite on the channel here. So, energy stocks bound to keep doing well at least until early November before we actually hear any kind of a uh a real deescalation in the situation there in Iran. Also want to highlight financials here with that huge jump in interest rates here, folks. Banks and especially insurance companies are going to do very well on those higher rates. Okay, insurance companies, they take your premiums, but they don't have to pay out anything for years and years. But they can't just invest those premiums, that cash flow that they have, can't just invested in anything in stocks and in risky investments. They have to put that investment, they have to put that money into ultra safe and liquid investments. That's usually bonds. Okay? So, with those bond rates going up, with those yields on bonds going up, insurance companies are going to be making a lot of money. Banks will also do well because they're they're earning more money on their loans if the if the economy doesn't fall apart and we run into a recession. So, I would mainly focus on the insurers here. Here we can see we can go back up here to the financials. We come down here. 76 companies within the S&P 500 are within that financial select sector. Spider are in the financial sector. We can come down here. Payments doing very well over the last 3 months. Global payments and PayPal as well. You've got uh travelers, some of those insurance companies that I was talking about. Travelers doing well. Robin Hood Markets of course doing well. Then you've got some of the exchanges, you know, brokerages doing very well on increased in trading. But I wouldn't uh I wouldn't I wouldn't pass up some of these other insurers. So we've got Travelers Insurance there. We've got some of the other insurance. We've got Credential Financial doing very well. Metife doing very well. You want to focus on the insurers with that hike up in interest rates. Tech stocks also holding up over the last 3 months. outperforming the market with an 8% return. Seeing a lot of differences in tech stocks uh today, folks already talked about those cyber security stocks. Going to talk about software stocks next, but a lot of the infrastructure stocks that we talked about on Sunday are falling today as some of those CEOs talk about slowing down slowing down the pace of development for AI. Worried that the AI is going to kill all humans, right? Is going to destroy us all. Folks, I don't know about you, but uh some of some something in this just doesn't ring right. Okay? Never have we been in so deep inside a technological revolution. And uh the people especially the people most most to benefit from that revolution said ah slow your roll. We're going to we're going to slow down here. We're not going to take advantage of this and we're going to let our competition catch up with us. It just isn't going to happen. Okay. I don't know quite what uh the motivations here for Dar Dario Amodi and Sam Alman there uh for the for the main companies, but yeah, it's easy for them to say slow down because they're already in the lead. If everybody slowed down, then they would still maintain that lead and still book billions, trillions of dollars in that AI spending. I think they're just kind of trying to manage expectations, especially ahead of their IPOs. Talked a lot about that on Sunday. But anyway, I don't think this tech this tech AI boom is stopping one minute. Again, I think this September dip in some of those stocks is going to be a buying opportunity. And we talked about that. I I think you still you focus on the leaders here in these segments in the chips and the semiconductors Nvidia AMD in networking and accelerators in AVGO that's Broadcom in Marll technologies MRVL memory SKH highix SKHY in Micron ticker MU and then deeper down there in P power and cooling with Bloom Energy and VST Vista just as important as those sectors that will do well over the next few months the stocks within those that we want to watch probably more important here the sectors that we want to avoid in stocks within those. First up here, Consumer Discretionary. It's up 1.2% over the last three months, but down 5.6% in the last month alone. And I think it's going to get a lot worse. We're going to highlight more on this later on in the video here. Now, I want to look at these three worst performing sectors, though. Real estate, consumer staples, and utilities because they are all going to be seeing a continued weakness here over the next few months. It is not going to let up. And these sectors are going to be under a lot of pressure. All of it related to higher interest rates. first because all three of these that real estate, consumer staples and utilities, they are all highly indebted companies or or sectors, right? The companies in these sectors, they all have very stable cash flows. They all have u very strong uh you know cash flow business models. So they tend to use a lot of debt in that uh in that financial mix, right? Uh obviously real estate a lot of that is bought on debt. Consumer staples and utilities all those companies have high debt leverages. When interest rates go up, the cost of that debt goes up as well. The interest rates they have or the interest they have to pay on that debt goes up. Also though, the second thing that's going to hold these stocks down and these sectors down is that as interest rates go up, that pulls investors, those yield seeking investors out of those stocks. Okay? If I can get a five or 6% return on bonds on US Treasury bonds, risk-free treasury bonds, then why am I going to take the extra risk to get maybe a three or 4% yield or dividend in some of these sectors, the stocks of some of these sectors? So what happens is of course investors get pulled out of the stocks in those sectors that lowers the price increases the yield to where it's more competitive. The dividend is more competitive with those bonds and it kind of stabilizes there but not until the price comes down on those three sectors. Also want to talk about the stocks in the software industry part of that tech sector feeling the heat again after a few disappointing earnings reports that showed AI might have been weighing on subscription revenue. This is a 5-day chart to Monday. Of course, a lot of these stocks have gotten a bump up on that idea that AI might be slowing down. Again, I don't I don't believe it for a second here. I think that dip's going to be a buying opportunity for those AI infrastructure stocks. And I think that fear in some of these software names are going to come back. Here we see in the 5-day chart to Monday, Cloudflare took her NE really the sole survivor here, up 9.9%. That was really just a a part of the cyber security segment of that business. The rest of them here, Appan took her a up 1%. The rest all in negative territory over the past week. Autodesk down 2.4%. Snow snowflake CRM Salesforce Palunteer all down four 5%. Adobe and Service Now down 6%. And it was really the two stocks here that reported their earnings that started that selloff in some of those software stocks over the last couple of weeks. Shares of Adobe ticker ADBE were initially down as much as 5%, even on reaching a billion users and lifting its fullear outlook when it warned that a shift in its business model could weigh on its near-term recurring revenue growth. Autodesk, for its part, plunged 17% when the company forecast next quarter and fullear numbers that that missed analyst expectations. Now, against the recurring AI fears that are on again, off again, there are still companies in the space that that are bucking the trends and others that present some great buying opportunities. Again, you've got Cloudflare ticker NE that closed up 10% last week as the company positions to be a key middleman between AI agents and that model use helping enterprise users save millions in costs. Also, Service Now, ticker NO, another big player in that AI agent orchestration theme, is still down 30% over the year and a good buy the dip opportunity. So, I do like Service Now, ticker N. But I wanted to compare all of these across each other on growth and valuation. See where some other opportunities we might pick up on, especially after last week's dip. So, we've got Service Now here, NO, Snowflake, SN, Palunteer Technologies, PR, PLTR, Data Dog, DDOG, Apploven, A I've included Cloudflare here, NE as well. That's kind of kind of skirts the line between cyber security and uh and software. There we can look here at the uh at the one-year chart and we can see a little bit of a little bit of separation here. The market is speaking in which it thinks are going to survive this AI apocalypse for software. Obviously, Data Dog and Snowflake doing very well. Data Dog up 66% over the last year. Snowflake up 47%. Down at the bottom here, Apploing 43% down now. Service Now down 24%. I think that's your big opportunity here. I think that's where the market is wrong. market is looking only at its software side of the business. I think it does so much better on that AI orchestration theme and that side of the business that it it boosts up the rest of it. Palunteer flat for at 1.7% over the last year and uh and Cloudflare ticker NE up 47%. Again, a lot of that is on its cyber security offering. But if we come down here to growth, we can see what really separates these companies is that growth. We can use the Ford estimates for growth here. Service Now only expected to grow about 20%. So that is something that is is kind of holding this stock back. It is the the lowest uh the lowest expected growth on the list here. Snowflake 30% growth expected. Palunteer 62% but you are paying for that in the valuation. We're going to get to that pretty soon. Data dog 26% applovening 29% almost 30% and cloudflare 30%. So with the exception of the low dog here now service now and uh and the high one Palenter all of these right around 30% revenue growth expected and we're going to put this together with the valuation here again we're going to be using the PEG non-GAAP Ford uh numbers here this is the price toearnings adjusted for growth so what this tells you it's that core price toearnings number okay how much you're paying for every dollar in earnings generated because that's what you own as an investor you own those earnings how much do you have to pay to get a share of those earnings for each company. Obviously, companies growing much faster, you're going to have to pay a little bit more for those earnings because they're growing so much faster. Companies growing a little bit slower, you can get them cheaply, but that's for a reason. Okay? And then we're adjusting that for that growth. Put them all on a level playing field here with the forward expectations for growth. Here we see service now trading for 1.3 times on that uh price to earnings adjusted basis. Very cheap compared to some of these. We can also see app 111.63 times. So the cheapest among the group actually kind of surprised Palunteer down here under two times price to earnings adjusted for growth that is very cheap even uh you know even though the price to earnings is 103 times there it's just that that growth is so strong in its earnings. So we take a another look at Palanteer I think it has come down or it's been flat for over the year while those earnings have growth grown it's kind of caught up with the the valuation here. Here are some of the more expensive ones. Cloudflare 4.8 eight times. Those cyber security names are always going to be expensive. The snowflake up or at 3.8 times and data dog at 3.2 times. So, a lot of this is just showing you that, you know, the market feels like uh Snowflake, Data Dog are going to be uh are going to survive through this AI software fears and are going to do very well. So, investors are paying a lot for that uh you know, for those stocks still. They're still very expensive on a price to earnings basis here. I would I would stick with Service Now, ticker N. I think the market is wrong on that. I'd take another look at Palunteer. It is coming into value territory compared to some of these others. And then maybe even Apploven. If if AppLoven can survive this these AI software fears, I think that is a great value at 63 times price to earnings adjusted for growth. I'm going to highlight one of the biggest warning signs in the market next. But first, if you haven't yet, use the special invite link below to join me on the Blossom Investing app and see every stock in my portfolio. It's totally free to use and help support this channel. So, I do appreciate that. and you're going to get to see what over 500,000 investors are talking about in the social feed. So, look for that invite link below or just scan the QR code here and I'll see you on Blossom. But right here, folks, I think this is the most important chart of this video. I think all investors need to be watching this part because travel stocks are looking like the next warning that a deep consumer trouble is coming and the group falling as much as 11% last week. Here we have Airbnb, Airbnb down 8%. TCOM, TCOM, that's Trip.com down about 11 12%. American Airlines, the flights there, Expedia down about 12, 13, 14%. Trip Advisor down 17%, Booking.com down 18% and Norwegian Cruise Lines down 24%. Okay, the common denominator within all of these is travel, is the uh, you know, is is the travel and the consumer. Now, some of the pain there was partly on that surge in price in the price of oil. It shot up to past $100 a barrel last week. Here we can see the start of the week. It's up 1.7% to $101 a barrel. Wasn't cheap before that and shot up even higher. See gas prices about 400 $4.15 a gallon here in Tampa. Let me know in the comments what gas prices are where where you're at. But that escalation in the war of Iran, but also highlighted deeper problems in the consumer space with the recent earnings from a lot of these retailers. First up, it was Dick Sporting Goods shocking investors sending its shares down 26% when it reported sales fell 3.6% 6% at its foot locker segment with the CEO pointing out further consumer weakness to come. Then Lululemon Athletica ticker LLU plunged 17% after cutting its sales forecast again in the face of weakness in that US athletic customer nation. This is one area that consumer related space with travel or retail stocks that I would not be jumping in on in these dips until we see one either those can't miss prices or strength returning in consumer spending. I don't think either one of those are going to happen over the next month. So, be very careful about these these consumer related companies. Join me on Blossom and see all the stocks in my portfolio with the invite link below. Don't forget to join the Let's Talk Money community by tapping that subscribe button.