Get Ready for September: The Stocks I’d Buy on Any Dip

Everyone's talking about an October surprise this year. And honestly, between Iran, tariffs, and the Fed, I don't know which surprise we're bracing for. But let's start out with the Fed. The financial media keeps saying rising bond yields could force the Fed to hike rates at the September FOMC meeting. Is that actually on the table? >> Well, we're going to get a Beige Book survey and that's coming out after we record this on Wednesday afternoon and we'll see what it says. I don't think it's going to point to a rate hike, but we still have to read the survey. Now, Kevin Walsh is trying to remake the Fed from the bottom up and make sure they don't overreact to things. Uh, so that's item one. Item two, we need a week pay report on Friday. So, right now, payrolls are estimated 53,000. So, if they come in at, you know, anything below that, that would be good. If they come in at 300,000, that would be bad. So what you'll see is that if if we get a strong payroll report, rates will rise. If we get a weak report, rates will fall. So this is one of the unique situations. We want a weak payroll report. Kevin Walsh at Jackson Hole mentioned that inflation is a problem. Stubbornly high, but he wants to, you know, get all the economic data right now. He has a weak job market. He had the weak CPI, PPI. So there are arguments not to raise rates. Now the Fed doesn't follow the bond yields. they follow short to intermediate yields and as those tilt up, which they are tilting up, it would generally force them to raise rates. But let's just let all the data come out and we'll assess it. I'm still in the camp they shouldn't raise rates. One reason is is the home building industry has been decimated. New home sales have plunged. Housing starts have plunged. So, this is one reason the Fed may not want to raise rates. These are just going to hurt an industry that's already battered. That's a significant industry in America. But here's the part that's confusing for most people. The Labor Department keeps reporting that jobs are disappearing. How can jobs just disappear? What's actually going on there? >> That's an outstanding point. Yeah. First of all, if you're an ambitious person with two jobs, kind of like yourself, you know, you might show up twice and then they reconcile all that data and say, "No, there's just one crystal, not two." So, and I'm sure you know a lot of your friends in New York have little gigs on the side. So, that's one of the reasons that data gets revised. Another baby boomers, you know, I'm supposed to be retired by now. Uh, but as you know, I'm no good around the house doing chores and things, so I might as well just keep doing what I'm doing. Okay. Plus, obviously, you know, we have a lot of people we have to help out in the market, and I enjoy what we do. And then you see there's guys like Ed Yardini. He's not retiring. Dolly Parton didn't retire. So, some boomers have to retire because, you know, if you do dangerous work, you know, you don't want to get hurt and stuff, but other people can keep working, especially if we're in a service business. And there could be some deportations. Okay, that's very unclear how much, but yeah, the labor market in America is actually shrunk. >> But with all that uncertainty, are you expecting an October surprise that could shake up the market and even the midterms? Yeah, as we get into the midterm elections, we get all kinds of wild news. A lot of it right now is data centers, how they're driving your electricity rates higher and they're hurting your cost of living and how it's bad for your neighborhood. And even here in Palm Beach County, I'm in Florida right now, you know, the the big data center where Lion Country Safari was, Larry Ellison bought it, was denied even though it would brought tons of property tax revenue in. So, it appears a lot of this anti-data center movement is being fueled by China. They've identified over 200 bots generating fake articles. Unfortunately, some of our politicians have taken up that argument. Obviously, Kathy Hokll from New York has a moratorum on data centers. Hopefully, she'll lift it after the midterm elections, but right now she's just sending the data center business to Pennsylvania. And uh it would be sad for New York to miss out that economic boom that and the property tax revenues and everything that data centers are going to provide. It's become very clear if you look at the inside baseball stuff. What's going on is that China wants to derail the data centers in America so they can win. And that would be most unfortunate. Now, we have gotten some wild headlines this week, and I know that we tried to stick more to stocks, not talk about politics, but this one I want to bring up because Trump is having a little bit of a tiff with Canada even possibly renaming Lake Ontario to Lake America. What's going on here? >> Well, he already did. Uh he signed an order for the Interior Secretary to rename Lake Ontario Lake America. Kathy Hokll said she's not going to change the signs, but it's already happened. And it's funny down here, you know, they renamed Palm Beach Airport Donald J. Trump airport. Well, they changed the signs pretty fast around here. There's all new signs on the highway. So, New York's going to fight him on that. But I think the sad thing that's going on is Doug Ford, the premier of Ontario, is more bombastic than President Trump is. He basically said, "I'm not going to sell America electricity." Now Canada because they have all this hydroelectric have direct current grids to America. That is stupid. You what's he going to do with electricity? He can't store it. All he can do is stop the dams from going through the turbines. So there's a huge auto industry in Ontario and America. Things go back and forth. Even, you know, Nissan, Honda are going to be affected in addition the big three. I think the auto industry just has to meet with everybody and and work something out because this is going to disrupt their supply chains. I think it's really sad what happened. Um but you know, Canada did walk away and I think Doug Ford is is a problem. Now the other thing is Mark Carney is a globalist. So you know he was the head of the Bank of Canada, the Bank of England. He's got lots of friends in Brussels. Obviously, Brussels and and a lot of the G7 members don't like President Trump. So, it looks to me like they're trying to interfere with the midterm elections and and swing Michigan. So, if they do swing Michigan successfully, that will be a big blow to President Trump. This is kind of what's going on now. And it's unfortunate, but I hope the auto industry can just make everybody work all this out because the whole thing is stupid. >> Well, speaking of surprises, let's talk about the markets. The S&P 500 dividend yield just fell below 1%. While Treasury yields keep climbing. So, does that combination put the stock market at risk at all? >> Yeah, that's the narrative you hear on the financial channels that as yields go higher, it will eventually suck money out of the stock market. So, that is true for interest rate sensitive stocks, especially dividend stocks. That is true for some value stocks. It is not true for growth stocks. Growth stocks will not be derailed by rising rates. Okay? But it does make the market more problematic. You know, if I'm in the home building business, this is not good. If I have pay a high dividend yield, this is not good. Okay? And most of the value stocks do pay dividends. So, there's some truth to the narrative, but it doesn't apply to growth stocks. And the other thing is the surge in interest rates is largely being caused by you know the conflict in the Persian Gulf. The US and Iran are hitting each other again. There's an island right in the middle of the straight of Hermuz that apparently Iran is launching projectiles and as I talked to you today apparently two oil tankers have been hit. Now these are not big missiles but they cause some damage and obviously the US has to retaliate. So, the good news it's on a small island. So, whoever's launching those uh projectiles is a sitting duck. We'll see what happens, but oil is going to drop after Labor Day because worldwide demand drops and I don't think it'll drop as much this year because everybody's got to replenish their inventories. So, we are going to get some price relief from this energy surge that's caused bond yields to go higher and that's a global event. >> So, that 53% earnings growth, was some of that actually just tariff rebates flowing through? Yes, it was. And that's a narrative that's not out there a lot. So, we're still shocked. There was 53% earnings growth of the S&P last quarter. We're shocked. But, you know, if you throw out Google and Amazon, it the rate falls about 32% pretty fast. So, yeah, tariff rebates helped a lot. We are going to have 30 plus% earnings growth going forward on the S&P, but technically last quarter was peak earnings momentum and we will not be able to sustain that. And uh you know we get these very good questions from our subscribers because we have very smart readers. They they go down that eight factor fundamental model and says why is a stock got an F in earnings momentum? Well because when you go from 1,200% earnings growth to 900% earnings growth you're decelerating. Okay. So this is something we have to keep an eye on. And I mean there's stocks out there like Palunteer and Super Micro that are still accelerating. There are others that are decelerating. Even some of the memory stocks might decelerate. Not all, but even some might. We'll see when the earnings come out. >> Well, with that being said, one question we do keep getting is why are you so bullish on Nvidia when it's only a C-rated stock and stock grader >> because the fundamentals, okay? You know, it's it has over 100% sales and earnings growth. It did that on the Blackwell Ultra Chip. Now, it's ramping up for Vera Rubin. It's going to have over 100% earnings growth all next year. They raised their guidance. Okay. Now, when we look out a couple years, Nvidia says it's going to be growing 70%, the ounce are expecting 45%. Nvidia is increasingly making integrated systems for the data centers that go in the in the rack systems. What's interesting is they had to raise their prices 15% because of higher memory costs. What's also interesting is the memory shortage is going to impede Nvidia sales, but it'll be over 100%. Next year it'll be over 70% the next fiscal year. I always stick with fundamentals. Uh the quantitative grade measures alpha over a stock standard deviation. It identifies institutional buying pressure. It's true that a stock like Nvidia which has gone up 5,000% in recent years might stall just a bit. Some of its physics, some of it's its size. So its quantitative rate can fall, but its underlying fundamentals are incredible. And that's why we stick to the fundamentals. We know the fundamentals long term will work. We know the stock will get its mojo back. Again, I'm expecting Nvidia to be $300 by the end of the year, $500 by the end of the decade, although I think I'm going to have to raise that. And that's why we never give up on stocks when they have great fundamentals. Okay, we keep our head down. But yeah, N is a whole. Okay, but Nvidia is the flagship for the entire market. So that's why we're forced to talk about it. and and Micron will be the encore for this last earning season. But earning season is wrapped up. We're going to test our stock selection models here in a few days to see how they work on a trailing one-year basis, both the quant and the fundamental models. But the last time we tested all that, the the fundamental models are very important. And sometimes the fundamental models beat our quant models, which is why fundamentals are so important. >> All right, let's get into your subscriber questions. We mentioned in a previous video when is the best time to buy stocks during the month of September, but we got a question about if they should wait until the end of September to pick back up a few AI stocks even though we might be seeing a few dips at the end of August. >> I can explain this very precisely. If you are an aggressive investor, you buy in any dip. If you are conservative and the gyrations of the market bother you, wait for the last week of September. So, usually when a stock pulls back, it will bounce and then might have to retest that near-term support level. I'm not Tammy Marshall, okay, who's, you know, an expert in all this, but I do know human nature, and it is human nature for when a stock dips for a lot of people to buy it and then it bounces. So, again, if you're aggressive, buy in any dip. If you're conservative, wait for the last week of September. And that will be quarter and window dressing. We tend to do extremely well in the last week of September. >> Well, with that being said, Dad, when do you expect HWM to pop? >> HWM? Oh, that's how Aerospace. Their forecast sales and earnings are fine. They got hit here the other day. Defense stocks in general have not been doing well, but their order backlog is huge. So, that's an example of a great stock out of Quebec. >> Now, someone wants to hear your thoughts on holding paper gold versus real metal. Do you invest in paper gold? No, I only invest in gold stocks with strong sales and earnings. But an example of paper gold would be GLD, the gold ETF. And an example of real metal would be Costco. You can buy gold bars at Costco without much of a markup. So your problem is when you buy physical gold, what is the markup? So if you buy gold coins, for example, you'll notice that the American Eagle has the biggest markup, followed by, you know, you know, the Kougaran followed by the Mexican peso. So there's different gold coins out there. They're all pure. They're all good, but you know, the US coin will cost more than the South African coin and the Mexican gold coin, even though those coins are fine. So what I would recommend is that you buy gold bars and Costco does sell, you know, 1 oz gold bars. >> You recently were on Fox just yesterday and mentioned about the refiners. Can you explain to our viewers what you meant there? Yeah, President Trump was meeting with refinery executives in the White House. Obviously, there's acute shortage of diesel. That's part of the inflationary problem out there because diesel is in the transportation chain. So, even if oil prices come down, but diesel prices remain high, that's going to be a problem. Obviously, we make a surplus of diesel. The real bottleneck is on the West Coast where California doesn't want diesel made from oil. That's why the refineries are closing. Let me clarify this. So when you refine a barrel of oil, you're going to get about 19 gallons of gasoline, about 12 gallons of diesel. You're going to get some jet fuel, some kerosene, other distillates. That's all in the diesel family. It depends on the grade of oil and how the refinery is set up. Uh if you get heavier oil, you'll make more diesel. So because the US makes refineses a lot of intermediate to heavy grades, we do make a lot of diesel and we export that around the world. However, California does not want diesel made from oil. They want it made from organic things like soybeans. So what happens is and we have a stock called Darlington D that facilitates that industry. The only issue is diesel tends to absorb water. Organic diesel absorbs water much faster. So boat sales on the west coast have collapsed because a lot of the boats um are too much water in the fuel from the green diesel and it's just messing up the boat engines and it's really hindering sales out west. If you go to a marina in California, you'll see that diesel's almost $10 a gallon. So for our friends in like in San Diego, they take their boats and they go down to to Mexico to fill up because that diesel will absorb less water than the organic diesel. The other thing is California is still hellbent on getting organic jet fuel, which they're not using yet. There's all these aviation instance reports of water getting in the fuel lines, causing corrosion, and causing airplanes to go down. Okay, these are mostly private jets. The commercial planes are just flying so much that's not an issue. So, I'm not really big on the organic fuels cuz I don't want to go down on a plane. In fact, I'll fly commercial in California just to make sure. But, you know, this is a problem. And so, California is going to always have higher diesel costs than the rest of America because again, their diesel is largely made from soybeans. >> Which refinery stocks do you recommend and own? >> HF Sinclair, which is Dino, Philip 66, which is PSX, Marathon Petroleum, MPC. I should add that Philip 66 is building a pipeline from the Perium Basin to Phoenix and then once it gets to Phoenix then Phoenix will be able to send refined product to California. Right now California is importing up to 30% of its gasoline mostly from Korea and India and so California is sensitive to the Persian Gulf because that's where the 30% of their refined product comes from once it gets to India or Korea. So once that pipeline hits the west coast, California might get some price relief. >> Now let's end on one more subscriber question. One subscriber push backed on something you said. They want more rationale behind the idea that if supply constraint continues, a 6P is dirt cheap. Whose PE were you actually talking about there? They mentioned that Micron's forward PE is sitting at 12.78 right now, not six. Obviously, we have extremely smart subscribers and I really appreciate that very precise question. So, I'm going to give you now a very precise answer. We're looking at different forecast earnings. You're looking at 2020 6. I'm looking at 2027. Micron is forecasted by the analyst community, all of them on average to post earnings of $155.3 in fiscal 2027. Right now, based on its current price, that puts its forecast to P ratio at 6.04. So that's where me and Lucas got the six times forecasted earnings from Micron. We were looking at at forecasted fiscal 2028 earnings. The big issue with Micron and these memory stocks is when is the glut going to be over. Okay? Because DRAM especially, which Micron is specialist in, is typically falls in price over time because they keep making more of it. And it and the question is, is it in 15 months and 24 months? And Lucas made it very clear that the industry says the shortage will persist well into 2027. So that's that's good for Micron. That's good for uh Seagate, SanDisk, Western Digital. We own all the stocks. We recommend all these stocks, but Micron will be the most volatile one because they make the DRAM memory. You know, they don't make disc drives to my knowledge. They just make the the flash memory. And they and SanDisk are the biggest in that. The other companies are making more of the the solid state drives and stuff that the data centers need. >> Well, excellent questions all around. Thank you all so much for asking us them. We love going through them and answering them each week. If this video helped you make sense of the market, give this video a like and subscribe to our channel. We are so thankful that we are almost at 30,000 subscribers. And once we hit that mark, we will be doing another book giveaway for all of our new viewers. So, help us reach that milestone by liking and subscribing. Thank you all so much for watching. We'll see you this Sunday for a new