Market At Record Highs — Nancy Tengler Says To Keep Buying These Names

Joining me now is Nancy Tengler, CEO, Laffer Tengler Investments. Nancy, great to have you back at the desk. So Caroline, thanks for having me. We're very happy to have you. So, Nancy, you have to say S&P 500 sitting near record highs right now after the tamer than expected or basically in-line inflation data this morning. You've actually said this is one of the best market tapes you've seen since the 1990s. Yeah. Why what makes you so bullish from here. And there's similarities. But there's also a lot of differences compared to the 90s. Is it is because of earnings of course, but because we're in a technological revolution, call it an economy in transition. And the productivity driven growth is compelling and will continue and it'll feed on itself. And we're hearing it from the companies. We sit on all the earnings calls. And we're hearing across sector utilization of all the new technologies, not just ie not just cloud computing, but physical AI as well as a power driven kind of solutions. So we're pretty excited. We'll dig into those drivers in just a second. But first, I think some investors might hear comparisons to the 1990s and get concerned. Yes, they'll think bubble. What makes this time period different than them? Because the companies are real. You know, back then they had a debt on their balance sheet and nothing else. Now you've got these companies that are have pristine balance sheets, fortress balance sheets, really, lots of earnings power. And I'm thinking of the hyperscalers as an example. But but also in the 90s, from 95 to 2000, what you had was about 60% earnings growth, but 220%, price appreciation appreciation in stocks. So it was a mismatch. Multiples were expanding to ridiculous levels 100 times earnings for Cisco. And now what you're seeing is about 80% growth over the last five years. And about 85 to 90% total return. So not multiple expansion. And that's that's a good way to see growth multiples are kind of high. But that that's not a harbinger of a bear market. It's it's more about the mismatch that we had in the 90s. But you'd say this is an expensive market here. I think it's fairly valued because the growth is so powerful. So if you're in the in the interest rate environment we're in, which for younger, investors feels like very high levels. But for those of us who've been doing this for a while, this looks pretty good. Below the norm, really, for the ten year, over the last 40 years. So, we're we're pretty excited about, the opportunities. And therefore, it doesn't feel stretched as a market. You talk about earnings as being a driver. I think the big question, though is what drives it from here. We had Carter on yesterday. He's more of a charts guy. He isn't as bullish based on the charts and basically pointed out that yeah, we can say the S&P 500 sitting at an all time high right now. But over the past three months it hasn't really gone a whole lot of anywhere. It's been flat. So what is it that really breaks us out of this tight range there? I think a broadening of the of the underlying securities. I mean, we've had a pretty concentrated run, that has been somewhat mitigated by the summer swoon, as we call it, at least for. But I think you'll begin to see the broadening out we've been shifting, toward or expanding our exposure to infrastructure. So the I infrastructure build, we owned many of the stocks, we've added new ones and we've added to existing holdings $7.5 trillion in CapEx spending for compute power and for data centers. And that's over the next five years, according to Goldman Sachs. So I want to be exposed to that. And I think that's what's going to drive this, a shifting of, sector leadership. So when you say broadening, you're talking about a broadening within tech then. Well, I mean, we have been seeing an overall broadening. But as you think about the market leaders from here, as it's still very tech driven, just high interest. I mean, I think. It's the new technology driven. So is eating the technology company. It's building infrastructure for the electrification of the new technologies. So that's what I mean by broadening out. Okay. Really dig into those infrastructure plays. Aside from eating, what's the best way to invest in the infrastructure theme, if you will? I think Quanta Services now, it's had a not a big run, but I think it can sustain that based on the backlog, and the earnings growth expectations guided by management. We also on GE for Nova. That's the turbine company that's driving a lot of the power we added to Williams recently. That's another name that it's a defensive way to play the eye trade because remember they're transmitting the natural gas and they have fixed the contract. So they have really very limited exposure to that gas prices and their workaround for the hyperscalers. So, I think that's an interesting one. We also own things like Deere, which is an industrial that really has nothing to do with the infrastructure, but is utilizing AI to drive to help farmers, pick weeds and plant and, using, automated tractors. Pretty cool. You can go in and have dinner and your tractor can keep sowing seeds. So interesting. Yeah. So yeah, it's definitely a different way to play. I, I was taking a look at your notes though. And Amazon and Nvidia recently made it into your Value Folio. Talk to me about Amazon and Nvidia. The fact that they are value players at this point. And you still think that they're values right here. Yeah. That's a good catch, Caroline, because most people miss, we found them in growth two years ago. We added Google to our value portfolio. If you remember, after Bard, everyone said they're never going to compete. And I it was a disastrous launch. And then they came out with Gemini and the stock's up over 100%. But if you look at the Russell 1000 value index, the world is upside down. The largest holding is Amazon. The first half of the year it was micron. So I don't know what how they're I know how they're doing the calculations. But sometimes you get these fallen angel growth stocks that are trading like value stocks with Nvidia. The big dividend increase was a wink from management in our view that they believe this earnings power is sustainable. It was also trading at a multiple of between 16 and 18 times next year's earnings, with earnings growth of 60 to 80%, depending on if you use the fiscal year or the calendar year. So we wanted to have a piece of that because on a price earnings to growth ratio, it was trading at 0.25 times. Whereas a stock like Tesla is trading at five times. So that was that was that stock. And then Amazon just couldn't get out of its own way. We really believed that that that well, we believe Andy Jassy knows what he's doing and he's been through this before with us. So we wanted to be in it before earnings. That's rare for us. And we we got lucky. We sold some Apple to buy the Amazon and it was a a perfect trade for at least a couple of weeks. Would you still buy both here. What I yeah I would. I should note that your strategies have all outperformed the S&P 500 so far this year. I was taking a look at the list. As you think about your highest conviction ideas for the rest of 2026. So because some of these names have run up, what are those? I do think it's in the infrastructure. So the names that I've already mentioned, there's some other names that we're looking at that we can't talk about because we're going to be adding them up. But I think that that will be the trade for the second half of the year. Now, that does not mean we need technology to to also outperform for the market to do well. So I think you still want to own, a number of the tech names and the, the cybersecurity names are a big part of our portfolios, the Palo Alto Network at CrowdStrike. That business, is going to grow, but there's also going to be competition from the vertically integrated, I think Palantir's service. Now, they're all getting into cyber security, for data. And I think that's going to be an interesting battle going forward. Palantir is a name that you would add here. We did add to it during the summer. Swoon. But we've seen a rebound in Palantir still down on the year, but it's quite a bit higher than it once was. I mean. With these with these highly valued, I'm not going to say overvalued stocks like Palantir, Tesla, space. They're narrative names. So that yes, the growth at Palantir is remarkable. But you're buying that name for the future. So consequently it's very volatile during deep sea we added I just happened to remember this. We added to the name at $88 a share. It ran up to like 250 and then it came back down to 100. And I'm still happy. So you just want to use use volatility as your friend if you're a long term investor. And that is what we do. Are as six top picks for 2026 are up more than 40%. Walmart and Qua quanta, Tesla, CrowdStrike, D.R. Horton Dai. If an investor missed out on those, which one would you still definitely put fresh money into right now? Of those six, what depends on your time horizon and your risk appetite. If you have, a robust risk appetite, I would continue to add to CrowdStrike. If you don't, I think Walmart is getting is getting interesting in here, because it has underperformed and underperformed target for the first time and I don't know, 5 or 6 years. I'm like, wait a bit. Yeah. And they're they're expanding margins, because they're using all the technologies. Tesla is on that list. It's been the big laggard. Yes. What still needs to happen for Tesla to actually become the winner? I think as well. I mean, full Self-Driving and really the cyber cab and robotaxi, really need to, to launch. But that that's that's the name we got into because of the battery storage business, the mega pack business, electric utility grade battery storage. I think the merger, the potential merger with SpaceX or acquisition by SpaceX of Tesla will be a catalyst for for price outperformance. I have to ask, because at the top, you were talking about why this time is different than the 1990s. And you talked about these pristine balance sheets, kind of the fortress balance sheets. Space is obviously public now, doesn't necessarily have that pristine balance sheet yet it's not a profitable company. Would you be an investor in space here? Yeah, we just added some we owned it on the IPO. And we have added to it, recently on weakness. This is a name you're going to buy for the next 3 to 5 years. And honestly, in my view, Caroline, you're not going to care if you've got it at 105 or 150 because it is it will be, the future and will change the way we live. So the whole Elon Musk dynamic is you just have to hunker down, during periods of weakness because he will inevitably find a way. And I there was a big article in the Journal yesterday about, you know, how, he will win on his pay package if there is a merger acquisition, because he'll meet a bunch of the metrics. He he's always about two steps ahead of everyone else, maybe even a dozen steps ahead. What about some of the other sectors that we haven't hit on health care, energy, financials? Do you expect to continue to see a broadening out of this market overall, and where are you finding opportunities there. So we in the example we own Goldman. We own, Brookfield Asset Management and JP Morgan when we had 1 or 2 others. But those are kind of the biggest holdings in the portfolio. What we're hearing from these companies is that they are utilizing AI. So, Goldman talked about it on the call that they're going to keep headcount flat, but they're going to grow 20, they think 25% faster. So that that's a powerful, multiplier. I would be looking at consumer discretionary. That's a sector that we're overweight. We like a number of the names we had. We recently added to before earnings. Thank goodness. Starbucks that name is, is a really interesting one because the CEO, we knew we knew how to turn it around. And he is Amazon of course, is consumer discretionary. I think Home Depot and gets interesting here. We own it. It's in our 12 best ideas portfolio has not really done much. And that's, that's the nature of the beast. But we think housing will ultimately, see it a renaissance. I'm just not sure. When anything you're avoiding here. Staples. We own a couple. We own one utility. Electric utility. Rates. I just think there's better places to be right now. We own a rate or two in the portfolios, but not even a market way. So I think when you're in a growth, a really, super sized growth environment like this, you one stick with the growth. I know you don't do price targets, but as you think about where the market goes from here, I would venture to guess you'll say higher, how much higher? Well, I don't know. We're up about 10% this year on the S&P. I think we could close out. I would be happy if we closed out the year up 12 to 15%, rather than 20 to 25, because what we know from previous bull markets and this is a fairly young bull market certainly compared to the 90s. But what we know is, that you need to take a breather, you need to prune back the roses, need down the dough. However you want to say it, you need for things to settle in. So I would be I would be content there. We may get we may get a real big momentum boost in the fourth quarter, which is usually when we see that a. 15% breather is still a pretty good breather. What proves you wrong? What's the biggest risk to this bull market? Yeah, I would have said geopolitical shock, at the beginning of the year. But we seem to work our way through that as we always do. I mean, if companies start missing, I think if, if we start to see, guidance that is slowing, well, let me say this, we will see a deceleration in earnings growth. The question is how much? If the credit markets crack, I'll be wrong. I mean, credit spreads are still pretty tight by historical standards. You're hearing a lot of grousing from the bond market. Too much debt. But this this is, this is nothing compared to what we've seen in the past. So I think I think those two things in particular. Okay, I think this is a great time to pivot to our rapid fire round of this or that. You know, how to play. Quick questions, quick answers. No hedging. Are you ready? Yeah. No. Here we go Nancy. Wall Street two bullish or justified. I think it's just five stocks. At record highs. Buy or wait. I think if you're a long term investor you buy sorry I hedged. It's okay. I trade early or late. Early. $10,000 today. Lump sum or average in lump sum. Bigger mistake chasing winners or sitting on the sidelines. Sitting on the sidelines. Biggest market risk from here. Valuations or inflation? Inflation. Best place for fresh money value or growth. Growth's. Best value in the market today. Stock. Or sector. I'd say consumer discretionary. Top to top consumer discretionary pick right now. Amazon. More upside from here Amazon or Apple. Amazon. Broadcom or AMD. Broadcom Palo Alto or CrowdStrike. CrowdStrike. Meg seven name you'd avoid here. Meta. Buy one Tesla or SpaceX x. Tesla for the next 12 months. U.S. stocks or international. U.S.. Better bet from here. Large caps or small caps? I think large caps. Still. For long term investors, individual stocks or index funds. Individual stocks cash on the sidelines. Put it to work now or wait for a pullback. Put it to work. One word to describe how your feeling about the market for the rest of this year. Bullish market buy your entire lower higher. How much higher. I'd say 5%. Nancy Tengler I always appreciate you joining us. Thanks so much. That's Nancy Tengler CEO of Laffer Tengler Investments. If you want to hear the opposite perspective, check out our full interview with Carter Worth he explains why he'd be underweight tech right now and reveals which sectors he'd rotate into.