3 Stocks to Buy Now (That Could Beat the Market)

It was a wild week, and unfortunately, the Dow was down on Thursday, but somehow my portfolio is still green. Dad, how is that possible? >> The reason that the stock market was so violent on Thursday was largely due to Tesla and SpaceX. They've done very, very poorly. Tesla's sales were great, but their margins are under compression, their cash flow is negative. Obviously, Elon's ramping up the Optimus robot. It's not being monetized yet. And moving over to SpaceX, it's now down over 50% off its high. Obviously, there's no profits till maybe late next year or 2028. Now, their Starship rocket was delayed cuz of weather, but they finally got it off Friday, and they had successful test. So, maybe SpaceX will perform up. But all the people that bet so heavily on Elon, you know, Ron Baron, Cathie Wood, they're not negative for the year just due to carnage. We don't have that exposure. I have Tesla for clients that want it, but it's not in our portfolio models. And why we were doing good when the market wasn't with 80+ stocks is a lot of the data centers companies keep reporting higher order backlogs. We'll get into that as we go on here. And then we have a lot of oil tanker stocks, refinery stocks, and other energy-related stocks that were profiting from the chaos in the Middle East. But I think the last reason we're doing well is we purposely buy high alpha stocks. And what that is is a stock that zigs when the market zags. So, there are stocks out there like Meta that just don't fit our system because they they're very correlated to market. So, I'm proud to have Oasis stocks. I'm proud to have stocks that have been independent of the market. I'm proud to have phenomenal fundamentals to drive our stocks. So, Thursday was a very, very good day for me. I did have to give back some performance on Friday, but overall last week, we beat the market by a big, big margin. >> So, is this sector concentration, or is this more of a factor thing? >> It's it's really sector concentration. And it's also I am buying some foreign stocks a lot of managers won't buy like oil tanker companies are all foreign chartered. I guess we should go back to how most of Wall Street works. Most of Wall Street prefers what is called a tracking manager. That's a manager who will hug the benchmarks and they'll try to buy the best stocks in every sector. There's 11 sectors in the S&P. Frankly, I'm cheating. I'm only buying in four sectors of the S&P. Then I have a bunch of international stocks that are not in the indices. But I'm managing to make money. I'm managing to go where the money flow is. The more money flow, the safer the stock is. And I'm not managing to hug or enhance the benchmark in any manner. So this is my former life, you know, when I managed big pensions, Chicago, New York, Pennsylvania, Maryland. What happened is we had pension consultants telling us how to how much we could buy, how we could buy, but in the end they want something called a high R squared. And I'm I am a low R squared manager and that's why I'm sticking out this year and and last year as well cuz I'm just not willing to hug the benchmarks. So earning season is my judgment day and obviously we go in locked and loaded. Our average stock will have over 40% sales growth and over 100% earnings growth. And you know, even if the stock doesn't go up in the wake of the earnings, it will bounce the next day. I probably should just get into some of the earnings here. G E Vernova, for example, announced 22% revenue growth. They announced 32.8% earnings growth. Believe it or not, even though they had a 2.8% revenue surprise, they had a 20.3% earnings miss. But I'll be honest with you, they don't care cuz their order backlog rose 32% from the second quarter from the first quarter. And on a trailing one-year basis, their order backlog is up 88% to whopping 176 billion. So this is what's happening with all the data centers related companies. The order backlog is getting bigger. We also had Google announce 24% sales growth. That was phenomenal. They had 294% earnings growth, so they had a 208% earnings surprise, which is phenomenal. And their revenue was 2 and 1/2% better. But Google said they're going to spend more money now on AI infrastructure, all approximately 20 billion more. And so the stock temporarily got hit on that, but it it it lifted all the other data center related stocks that are getting all these orders. And a good example, Super Micro got everybody excited because their order backlog hit 60 billion. Their operating margins are almost doubling. So they're going to have phenomenal earnings, and Super Micro is one of the best performing stocks. And then finally, we had Comfort Systems FIX. On Friday, they announced that their sales are up 50.3% in the second quarter. Their earnings were up 91.9. It turned out that their revenue was in sales were 11% better than analyst estimates, and their earnings were 20.7% better than analyst estimates. But the big news is the order backlog. So in Comfort Systems' case, their order backlog rose 12.9% from the second quarter compared to the first quarter. Trailing one year, it's up 73.2%. And also, Comfort Systems has a pretty dramatically expanding operating margins from 13.8 to 17.1. So Comfort Systems is going to go up on Friday on this news. Okay, I guarantee it's going to bounce next week. So good stocks bounce like fresh tennis balls, bad stocks bounce like rocks. My best defense, strong offense. And the big news this quarter is the same as last quarter. The order backlogs are getting bigger and bigger and bigger. >> So let's go back to that alpha and beta discipline, right? You're deliberately screening out the high correlation names. >> That's correct. So I'm from Berkeley, and I was taught that markets are efficient, and any deviation in performance was due to a beta. And they used to have a Professor Barr Rosenberg at Berkeley that apparently had a better beta than everybody else. Well, I'm so old that when I would pick up a textbook, there wasn't a word called alpha in the textbook. But I was fortunate I got a little paperback by this guy William Sharpe, who was a Stanford professor. It says, "Well, in addition to beta, there's this called alpha." So, I set out to document alpha exists. And if markets were efficient, alpha would always be at or near zero. So, my whole thing with Stock Raider and just pumping all this out there is to prove that everybody's been lied to. Everyone should not induct. They should go in the the high alpha stocks, which are predominantly the A and B grade stocks. I took alpha, I divided by the stock's standard deviation. Risk to me isn't the angle of a stock's ascent, it's the dispersion. So, there are stocks out there that go up in a very smooth, steady manner. They're powerful, they're not that risky cuz they're not wiggling that much cuz the buying pressure is so relentless. Eventually, that buying pressure will ebb and the stock will get more volatile and fall in my quantity rankings. On top of all this, I have that eight-factor fundamental model that we overlay. So, it's a one-two punch. And out of the 1,200 day rated stocks that we have, like in your portfolio, only have 80 stocks. So, that's a lot and that's plenty for diversification. But, in theory, alpha would would not exist if the markets were efficient. So, this whole quest of Stock Raider, for everything I do for the last 47 years, is to prove there are market anomalies and inefficiencies out there and it starts with the alpha calculation. >> So, speaking of finding mispriced opportunity, same question on a country level. Britain's got a new Prime Minister, seventh in 10 years, pitching a 10-year reindustrialization plan for the north. Is that credible or is that dead on arrival? >> Well, you know, I was talking to Ed Yardini at the Money Show in Las Vegas and he did a good bulletin about how the bond vigilantes are probably going to stop anything Prime Minister Burnham is going to try to implement. If you remember, the bond vigilantes don't like higher government spending or higher deficits. And there was a previous Prime Minister, Liz Truss, who wanted actually cut taxes to stimulate the economy and the bond vigilantes wouldn't let her do it and they actually got her thrown out of office. So, the reason Prime Minister Burnham's not going to be able to re-industrialize Britain is because they have expensive electricity. Now, if he sucks up to Scotland and starts to use their crude oil natural gas, so Britain has a competitive advantage, I take it all back, okay? But, he really has to suck up to Scotland and use his country's own natural resources. Because right now, half of Britain can't pay their power bill without subsidies. Now, uh Prime Minister Burnham did one very nice thing. He did remove the VAT tax from everybody's electric bill. So, he is a populist. He's trying to suck up to people, but the bond vigilantes are probably not going to let him do it. >> So, those same bond vigilantes, Diamond's flagging them here, too, on that $40 trillion US debt load. Is that a real threat to the Trump agenda, or is it just noise? >> Yeah, it is. And Jamie is always grumpy. He was better than I expected when he announced uh JP Morgan's earnings, but then he did a podcast and this came up. So, he said it's not an imminent problem, but he warned it's going to eventually be a problem. And bond yields are pretty high right now. They've backed up considerably. Now, they're also backing up because of higher energy prices, cuz obviously the the war between uh Iran and the United States is escalating and is causing a lot of uncertainty, okay? So, now the EU didn't raise rates and our Fed meets next week. I don't expect them to raise, but, you know, it's out there that the Fed central banks might have to raise rates. Now, the truth is, they can't control oil prices with interest rate changes, so that's kind of stupid, but nonetheless, Jamie's right and we have to deal with this and that's why our Treasury Secretary is so important. Scott Bessent is so much better than Janet Yellen. I will say this, what's happening now is we call the velocity money has accelerated and there's a lot of demand for our Treasuries. The dollar is very strong. Uh so, I think we can maintain these deficits for a while. But, yeah, long-term all countries have to do what the bond vigilantes want. Our uh new Fed Chairman Kevin Warsh said that he's going to do what the market tells him, which means he's going to listen to bond vigilantes. I think they like that comment. >> And finally, if push came to shove, you know, the US has a lot of natural resources. So, we could take a lot of our natural resources that the federal government owns and start selling assets. So, we have a lot more collateral behind our big budget deficit than other countries. But, yeah, it's it's we're running over 100% of GDP now, and this is a it's a serious deficit, and the Trump agenda is front-loaded. So, no matter what happens in the midterm elections, he's going to get to do what he wants. And the And the Trump agenda is generating record tax revenues. So, I don't see a problem at this time. But, yeah, as soon as we have a downturn, it could become a problem. >> You mentioned that the Fed isn't in panic mode on debt. Are they in panic mode on inflation because the ECB held rates steady this week with oil climbing? So, does the Fed follow or hike to get ahead of it? >> No. Uh that's a good question, by the way. They Under Kevin Warsh, the Fed doesn't want to overreact. He wants markets to tell him what to do. So, he doesn't want to fight market rates. And on all the Fed's economic reports, he really wants to get down to the core cause of inflation. So, let me tell you some past errors the Fed made. So, under Janet Yellen, when she was chairman of the Fed, she was a big proponent of Phillips curve, okay? And what the Phillips curve says is that as unemployment falls, wages rise, and inflation ripples through the economy. Well, the Phillips curve hasn't worked for a long time because of productivity gains, and of course, AI is designed to create even more productivity gains. So, hopefully you and me and everybody else that uses computers and AI are much more productive now. So, that is a false narrative. And the Fed cannot control food or energy inflation. So, you should look at the core rate. But, you know, when energy goes up, you know, the cost of shipping, diesel, and everything goes up, and it starts to ripple through the economy. Now, we had very good news, obviously, in June on inflation. So, we'll see if July's we're going to back up here a bit cuz the price of oil's up again. So, it's going to be oscillating for a while, but I don't think the Fed should panic unless rates rise dramatically and and they'll have to to raise rates. But, rates rates have been under higher this week largely due to that to the oil. But, you know, we're in such better hands now under Kevin Warsh. >> So, I'd love to zoom back into the market. With everything you just laid out, macro, geopolitics, rates, where is that leading for your greater right now? Literally, what is the best buy on the board right now? >> Well, Google's a phenomenal buy cuz it didn't go up after it announced its phenomenal results and higher spending. And they did get hit with a billion-dollar fine from the EU. So, Trump is threatening tariffs on the EU, but Google's a phenomenal buy right now. Comfort Systems, another phenomenal buy. I don't have better socks than these. GE Vernova is a good buy, but it it's going to take a long time to make all those turbines. So, those are three stocks that just come to mind that that announced this week that are phenomenal buys. Your turn. >> So, through all of it, the debt story, the Middle East, and the Fed, your greater is still finding stocks worth owning. So, it's not just about avoiding the chaos, it's about being positioned for it. >> Yeah, it's finding the sweet spot. You know, every time there's a problem in the world, somebody profits. Obviously, my oil tanker stocks are going to have higher day rates because the chaos in both the Red Sea, the Houthis fired on a couple Saudi tank ships, and uh the Strait of Hormuz. Obviously, there's a shortage of refined products. So, the refinery stocks are making record earnings. So, I have big integrated energy companies. They're doing well. So, yeah, you can profit from the chaos, okay? You know, you can even buy defense contractors. Uh I said that some defense contractors this week had very good earnings. So, you know, I'm not pro-war or pro uh world chaos, okay? But, I am pro sales and earnings. Uh so, if my stock greater finds them and they pass my eight-factor fundamental model, I buy them. And I'm going to ride them as long as the fundamentals are there. So, we'll see. You know, oil is definitely going to drop in the fall. Worldwide demand drops after Labor Day. So, I have to keep an eye on these things. I'm not sure I'm going to be holding forever. Another good example are those gold stocks that I was so heavily invested on early in the year. They did not have the best second quarter, but they're firming up again because there's all these reports the Chinese are back buying gold. So, they firmed up here. But, you know, I did prune prune a few gold stocks and I'll watch their forecast sales and earnings here very carefully. So, I have this thing called optimization model and it tells you how you should weight stocks cuz the way the computer thinks, the computer thinks stocks are squiggly lines. And the computer is going to try to take the stocks and make a smooth line. And it's going to come back and say I want 3.2% in this stock, 1.7% here. And over time it'll start to cut weights as stocks become more volatile. If you find a stock that just really looks good and but it's industry you might not be as strong like Eli Lilly, it'll overweight that. You know, I'm I'm very comfortable. I also I should add that, you know, I would say our largest holding in Nvidia has been acting very well. Okay. So, that's good news. I love earning season. This is my judgment day and we just want to go through this and adjust our portfolios as needed, but right now we have wave after wave of good news for the next 3 weeks. >> Well, we'll be discussing what current gold stocks Louis is still holding in our midweek update. Let us know in the comments if there's any questions that you want us to answer. As always, thank you all so much for watching. Make sure to give this video a like and subscribe if you haven't already, but we'll see you this Wednesday for a new video.