The Fed Just Slammed the Market (3 Stocks to Buy Now)

All eyes are on the Fed today and what they're going to do to fight inflation, but is that focusing on the short-term problem rather than looking towards the [music] future? Joining us today is Andy Swan with Tradesmith with a look at three stocks that are getting beaten up right now, but why they are a great opportunity in the long term. Andy, thank you so much for joining us today. We love to have you and the crew from Tradith on the show. Let's start out with that conversation about the Fed today and that fight against inflation. Where do you think the economy stands right now when it comes to consumers and that battle against inflation? >> Yeah. So, what our company does and what we we really focus on is figuring out what consumers are actually doing. Not what Wall Street scared about, not what Wall Street thinks is happening, but actually looking into millions of data points on social mentions, website visits, app downloads, etc. to really figure out what the consumer is actually doing. And and if we just look at that in a vacuum of what the consumer is doing, there's no indication to us at all that the consumer is slowing down or that oil prices or the or in or inflation rates are really impacting the consumer other than the consumer is getting a little bit pickier about where they spend their money and looking for a little bit more value. But consumer behavior looks very strong on our side and tells us that, you know, Wall Street's fears right now about a consumer slowdown are definitely overblown and uh we think misplaced. We think that there are significant opportunities in individual stocks as as well as baskets of consumer stocks that are benefiting uh on the main street side while Wall Street kind of throws the baby out with the bathwater. Yeah, that's so interesting to see that the the actual data that you're seeing is showing consumer strength is actually fairly strong right now. And I know there's been so much emphasis from Wall Street and really the entire market on what the Fed is going to do with interest rates and on higher oil prices and all of these factors kind of as looming fears about what that's going to do to the consumers and the economy right now. And we're recording this just before that Fed announcement comes out, but no matter what happens with that announcement, do you think that's really the key story that people should be looking at? Or is there other information when it comes to some of these consumer and retail stocks that are getting hit so hard right now that uh retail investors should actually be looking at for what the real long-term story is here? >> Yeah, I I think that the real long-term story, inflation is nothing new to the consumer. interest rates being higher than they than we got used to for, you know, over a decade is nothing new to the consumer. I don't think that, you know, 25 basis points here or there is really going to make a huge impact, especially when you think about who's carrying the load in this economy. And that is the top 10% of spenders. And the top 10% are not uh are not impacted by these things nearly as much uh as the bottom 90%, but they're doing the the load of the lifting. And so for us, it's is that top end of the spectrum still spending? Is there spending growing? Is consumer demand growing from those folks? And the answer is without question, yes. In August alone, consumer demand across all of the companies that we cover, the consumerf facing companies that we cover was up by 7.9% year-over-year. That's not something that you see when consumers are slowing down. And it's really just a matter of a shift of where those consumers are spending their money, how they're spending their money, and the value that they're looking for for their money. They're getting a little bit pickier, but they're not slowing down their spending or uh overall consumer demand at all. Uh regardless of, you know, we've seen this oil prices go up on Iran conflict. They've come down. Uh interest rates have moved around a little bit, but throughout all of that, we've seen consistent growth in consumer demand across multiple sectors of the economy throughout the entire uh past 3 to four months. So, we think that the fears of Wall Street are completely overblown. >> I think this is such an interesting way to look at this right now. And I know you have three specific stocks to share with us right now where those fears are overblown, where the sell-off story is way further than what the long-term story and what the real numbers are showing you. So, we're going to get to those three names in a minute, but I think what's important to talk about here is you're talking about data that shows we see consumer confidence, we see an increase in consumer spending, but there is that real impact on the market of those fears. While 25 basis points in either direction won't change that long-term story or those fundamentals you're talking about, it certainly impacts the stock in the short term with uh that market panic a little bit. So, I want you to talk about that market panic that we will likely see this week and what that means for retail investors. >> Yeah, we've seen, you know, market panic around capex spending. We've seen market panic around Iran conflict again, inflation rates, oil prices, etc. The market tends to anticipate and take risk off the table um a lot of times prematurely, and that's what we think that we're seeing once again. I think that's what we'll see for the remainder of this week and probably the remainder of this month. But we see a very resilient customer. we see demand for those companies uh products and services moving uh significantly higher despite what Wall Street may may fear. So for us it's about cutting through the noise um looking at actual consumer behavior and when we do that and we ignore the headlines on wall on Wall Street what we see is Main Street really strong and very resilient at this point finding new ways to spend money with some of the old companies and it's it's encouraging to see we like what we see out of both the full economy and specific companies. I think what you're talking about too leads to that opportunity for investors when we see that market panic right now. It's an opportunity to buy some of these fundamentally strong companies for a lower price because of that market panic that's happening. And of course, there's nothing revolutionary about buy low, sell high, but buying the dip uh especially with what's happening this week right now is a great opportunity in retail. And I know that's something that you and the team at Tradesmith have been focusing on, not just in the retail sector where we're seeing a lot of these stocks really get decimated right now in the market, but there's other stocks out there that are on a dip right now, but Wall Street is really missing that bigger long-term story, which is exactly what we're going to talk about today. One of those stocks that you just did a special report on is Tesla. We're not going to talk about that so much in the video today, but I do want to point to a special report that Andy and his team at Tradesmith are offering a free look at today. So, if you want to check out his report on why Tesla still has a lot of growth ahead of it and that long-term story is different than what Wall Street sees, you can scan the QR code or click the link down in the description to get that free report today. Again, the team at Tradesmith does an amazing job on research. That's why we love having you guys on so you can get all of the research on Tesla and where they think the stock is going to go in the future for free today by taking advantage of that special offer. Okay, Andy, it is time to get into your list today. And I'm really excited for these three names. Let's get started with the first stock that you are buying on this dip right now. >> Yeah, that's Walmart. It's pretty easy call for us. You know, the stocks pulled back again. Wall Street fears, inflation fears, etc. And a general selloff in the sectors pulling the stock down. But what we see is an incredible uh shift to Walmart of consumers, especially that top 10% looking for value from Walmart. These are people that, you know, might have been at Target or other, you know, more expensive stores prior. They're looking for value. They're trading down to Walmart and they're taking very big pocketbooks with them. So, you know, our Walmart consumer demand signal is as high as it's been for multiple years into this Wall Street selloff. That's a phenomenal opportunity we see. And we we especially see it on the Walmart e-commerce side. You know, they fell behind for a decade. Uh their e-commerce solution was pretty terrible and they were losing to Amazon at every turn. We see them turning that corner in a really significant way. They're winning back uh consumers that, you know, five, eight years ago would have said would have never been caught dead in a Walmart. But now uh because those consumers are looking for more from their money, Walmart's able to deliver that. And the e-commerce side of things, the online shopping experience, the app shopping experience is so much better than it was. It's competitive with Amazon. It gets the items to your door, you know, within a couple of hours. Um, so we're really seeing that sector of Walmart take off and win over a lot of really high-profile big wallet consumers that they were losing in the past. And we think that's a huge opportunity for the company um to make those customers happy, make them repeat customers and customers for life that otherwise, you know, again, five, six years ago, you would not have seen them shopping at Walmart at all, but now they are. and uh they're winning that they're winning that wallet share again all while the stock is pulling back. It's a phenomenal opportunity we see in Walmart. >> Yeah, it is so interesting to look at the pullback in the stock and in the chart and then look at their latest earnings report where they really had a phenomenal earnings report that shows a lot of what you just talked about the strength that they are seeing. It doesn't seem like an anomaly to see a really strong earnings report that's followed by a pullback a few weeks down the road. Why do you think we see that? Especially in stocks that fundamentally with those earnings numbers seem to be really strong. Why does the market still pull back then? Yeah, I think it's no secret that Wall Street likes to get ahead of itself a little bit and there's a lot of momentum money that comes into stocks and stocks that are reaching new all-time highs tend to get pushed higher by a lot of these momentum funds shifting their buying into those stocks and then it's becomes a sell the news event. Even when the company puts out a phenomenal earnings report, phenomenal guidance, it just becomes time for a lot of traders and and those with a short-term outlook to take profits and can push the stock down. But we see that as a really strong opportunity for longerterm investors who aren't really concerned about the next two months or 3 months of price action, but are thinking in 2 years, 3 years, or 5 years down the road. And what we can tell you for for Walmart and some of these other stocks is that they're winning customers that they didn't have before. And more importantly, we're able to see uh through our data analysis that they're making those customers very happy and very likely to be repeat lifelong customers that they didn't have in the past. So that combination sets up really nicely for companies like Walmart. >> Yeah. One more question on Walmart that I think is really important to point out here. We keep talking about a pullback in the stock and it has pulled back. uh not quite 10% in the last 3 months, which is a pretty decentsized pullback for a company like Walmart. But uh just a few days ago, we had another uh guest on talking about retail stocks. And there are other names in this retail story that are really getting decimated down 30 to 40% in the last 90 days versus you look at Walmart and their 52- week range is really barely a range at all. There's very little volatility in Walmart in comparison to some of those other retail stocks out there that are much smaller companies, maybe more niche companies. But what does that say about Walmart? Um, well, when you're looking at buying the dip in retail, to buy a company like Walmart that has less volatility, more stability than trying to get in on some of the other retail names that are seeing really massive 40% pullbacks in the last 3 months. >> Yeah. Well, the the stocks are more volatile because the business is more volatile. And Walmart stock is less volatile because its business is less volatile. And I think that gives investors a unique opportunity to play the strength of the consumer. Uh the shift uh you know from value spending, the shift of that wallet spend from some of these other competitors to Walmart. That lack of volatility gives investors uh a a nice opportunity to play things with a fairly low risk of of downside but still have the upside uh reward structure that comes from defying Wall Street's fears and saying uh the consumer looks good here and if the consumer looks good and the consumer is shifting their spend from other retailers to Walmart then that's an asymmetric type of opportunity in our books that that reduces the total risk that you're taking to the downside because Walmart's so diversified, so big and so stable while still giving exposure to the consumer upside that we see uh forming right now. >> All right, let's move on to that second stock on your list. And this one, at least over the last year, has seen a little bit more volatility than Walmart's. >> Yeah, Home Depot much more volatile than than Walmart. Bigger stock swings. I think Wall Street sees this as even more exposed to inflationary type of pressures, to interest rate pressures, etc. But when we look at our consumer data, we seeing consumer demand for Home Depot plus 15% year-over-year, which is about as strong as we've seen uh since CO since the big do-it-yourself renovation boom that CO brought on. And what we think is happening there is that consumers have pretty much accepted the fact that mortgage rates are going to stay high. And so now we're getting into kind of a second wave of the home renovation boom. You understand that if you're sitting at a a mortgage rate of 3% or less, you're probably not selling if you don't have to anytime soon. The home that you're in is going to stay the home that you're in for a while. And so you start thinking about those upgrades uh to your kitchen uh to your outdoor facilities or your basement and some of that do-it-yourself work. And we're seeing a lot of that happen with Home Depot, even on the appliances side where people are talking about, okay, uh looks like we're stuck here for a while. Maybe we can upgrade this with a new washer dryer combo or a new refrigerator for our kitchen. And so when we see consumer demand up 15% year-over-year in a large company like Home Depot, that's a significant, very significant type of event. And it tells us that Wall Street is dead wrong about the inflationary or interest rate pressures that they think that the consumer is feeling. There's a new cycle of home renovation happening and most people uh that are embracing that are going to Home Depot even over its competitor lows. So, we think Home Depot setting up for a phenomenal long-term opportunity here. >> A couple of things that you said there really stand out to me. One, you're repeating that pattern of looking at the retail companies out there that are essentially stealing customers from other competitors and they are getting more of the customers that are out there than their competitors. I think that's a great reason to be looking at stocks. But the other reason that you said is that secondary uh DIY home repair because of interest rates remaining high. And I think that that point is especially timely today talking about the Fed and in the interest rate potential changes. But I think people are anecdotally choosing to stay in homes longer and doing these kinds of repairs. And I want to talk about if that's showing up in earnings. I know you said we're seeing that growth for sure, but how much of an impact could that make on a very strong and steady stock like Home Depot that's been around for a long time, and yes, it does see more volatility, but is there enough of a wave of DIY home repairs and things like that that we're going to actually see some potential growth for stockholders for Home Depot in the next year? >> Yeah, I think I think that there is. It's clear from our data that there is. And I wouldn't just put it in the do-it-yourself camp. you know, Home Depot wins most of the contractor business as well. And so, if you're hiring a contractor to do some remodeling to your home, then it's very likely that he or she is going to Home Depot to get what they need to complete that job. And so, I do think that the executives of these companies are towing the line. They're being cautious, especially with their guidance because interest rates are rising, because oil prices are rising. they have to be a little bit conservative about what they say looking out into the future. But I think once we get a little more clarity uh on the Iran situation, the Fed interest rates, um oil prices, etc., if those things start to work their way out of uh the concerns of Wall Street and these executives and just become a little bit more normalized, which I think is very likely to happen. And then you're looking simply at the data in front of you and the consumer demand in front of you, that's when these companies can start to talk optimistically about the future. And when companies start to talk optimistically about the future after a period of, you know, a little bit of a conservative lean, uh, then that's when not only can the the guidance or expectations of future profits and EPS start to rise, but it's also when Wall Street gets comfortable putting a higher multiple on the company. So you get that double dip of expanded uh EPS guidance along with an expansion of multiple that can really drive stock prices up very quickly once that kind of uh fear thaw starts to happen. And that's what we think will happen either in Q4 or early uh Q1 of 2027. >> I think following what Wall Street is doing and what they're missing versus the signs that they're starting to believe in the future of Home Depot is a good way to look at this. One thing that stood out to me is looking at institutional buying in Home Depot and it looks like in Q2 we started to see some huge signals that institutions are starting to get back into the stock when it's down near the bottom of that 52- week range. So I think you're definitely on to something with uh Wall Street might have overdone the selloff. It's down almost 30% uh for the year, but you can see they're starting to get back in at where the stock is today. Do you like to follow those signals, Andy, of looking at uh trying to get in as institutions are starting to buy up a stock more? >> I love to look at when institutions are buying, especially on, you know, stock dips where you've got this kind of trough forming, bringing their positions up bigger and bigger is a huge positive sign because typically what happens is that institutions have access uh to the data that we put out there as well because we sell directly to those institutions. Those are some of our biggest clients in terms of our consumer data, demand signals, and so they buy that data. They have other sources of that data. They're seeing the same thing happen on Main Street that we're seeing. And they're seeing the companies and their their sellside analysts be cautious about the future of the stock, the future of the economy, etc. So, they're seeing that divergence as well. And when institutions are starting to pick up shares while the consumer data is pointing higher, that's just another confirmation signal that we're on to something and I really think that we are with Home Depot. >> Yeah, I love that information and data that Wall Street wants from you and you are offering that for free to our viewers today. We're looking at these buy the dip opportunities in retail right now, but you just had a special report. Again, the kind of information that you share with a lot of those institutions who make decisions based on the data that you're giving them, you are offering to our viewers for free today on this special report on what Wall Street is missing about Tesla. And you are really diving into the details of what Wall Street is missing about the signals of future growth for Tesla that they're not pricing into the stock yet. So, if you want to dive into the research that Andy and his team have done, you can do that for free today by scanning the QR code or clicking the link in the description. Make sure to take advantage of that free special report while you can. Again, the data is fascinating and it's information that so many people on Wall Street rely on to make decisions about what to do with these stocks, and you can do that, too. All right, Andy, let's move on to the last stock that you have for us today. Talking about this dip in retail right now, it's a stock that has really strong fundamentals as well. >> Yeah, it's Amazon. And I think this one's different than the other two that we that we had. It's the same in that the consumer is strong and we see uh consumer demand signals for buying things from Amazon at or near all-time highs and no signs that the consumer is slowing down. But with Amazon, you get that additional exposure to the AI arms race through their data center products and the data center products are absolutely uh skyrocketing in terms of institutional and consumer demand here. Um, so with Amazon, you get all of what we talked about with Walmart. You get some of what we talked about with Home Depot, but you get this additional exposure to the AI uh, infrastructure buildout and all of that spending that's happening. And so, we love Amazon here. We think it's probably the best company in the world. A proven uh, history of execution against large opportunities like what's happening in AI right now. Whatever the headlines want to say about, you know, pacing the frontier or slowing down AI, everything that we're seeing is an acceleration of spending into the AI arms race. You know, we just um we just look took a look into Google. They've got a backlog for their data centers of a half a trillion dollars that they can't fulfill right now. And that's larger than the total amount of of revenue that they got from those data centers over the trailing 12 months. So when you see backlogs bigger than the actual actual realized revenue stream, something very big is happening. And it's not a slowdown. It's not a pacing of the frontier. It's an expansion. It's it's an acceleration. And Amazon is one of the very few companies in the world that gives you exposure both to uh the strong uh resilient consumer that's defying Wall Street expectations and this AI buildout phenomenon that's going on. So really like Amazon on any dips uh for the foreseeable future pretty much like Buzz Light you said kind of to infinity and beyond with Amazon. >> That is a very bullish Buzz Lightyear outlook on this stock for sure. I think there's more to dive into there on that the two sides of Amazon and when you look at it because it does have that exposure to the AI story. It's more volatile than the other two names that we talked about. You can't ignore the volatility is is greater in Amazon. But I'm curious about uh the the funding and the the debt that so many of these hyperscalers are getting into to build out the AI story. Is Amazon's retail side of the business strong enough to support the cash flow needed to kind of limit Amazon's exposure to all of the debt for their AI buildout part of the business? >> Yes, it is. And Amazon's balance sheet can handle much more than they're even projecting to take on. The consumer side of their business is extremely strong, prints a lot of cash. The data center side of their business is extraordinarily profitable. And when I think about, you know, companies like Amazon, Google, Alphabet, these are two of the best companies in the world for the past three decades, and they've executed against enormous opportunities extraordinarily well over and over again. So, I think for any of us to sit back and say they're spending too much is a fool's errand. It is it it's arrogance at its finest. when the smartest minds at these companies that see the data in real time, that see the demand for what they're building out towards um absolutely skyrocketing. These people spend money because they're going to make money. There's very few cases where either Amazon or Google Alphabet has spent money on something that didn't turn out to materialize. So, I think we have to be uh humble in our analysis of this and we have to just sit back and say, "Yeah, okay. The numbers are big and they're scary and it's a lot of money, but there's a reason why they're spending this much money and that's because of what they see on the ground. That's what that's because of what they hear from their customers. That's because their customers are spending 50 to 70% more than they committed to and are asking for more capacity at rates that the these companies have never seen before. So when you have all of that happening, you have to build out or you're going to seed your lead if you're Amazon to others like Microsoft or to Google Alphabet. And so that can't happen. They have to spend the money. and the smartest minds in the world are saying we have to spend this money because it's going to make us a lot of money two to three years from now and we don't care what Wall Street says about our free cash flow in the meantime. >> Yeah, I think that is a good description of the, you know, AI customers that Amazon is catering to and is doing really well and is very successful at. I want to talk about the Amazon consumers that are those retail consumers a little bit deeper here. And I it's a question that probably applied to Walmart and Home Depot as well. But bringing it back to that inflation discussion we had at the beginning about fears of inflation of high oil prices really hitting the US consumer hard. Could it slow down spending? Getting back to that conversation with Amazon, you have to think that this company absolutely has exposure to those higher gas prices. I can't panic order a birthday present for a kid at 11 p.m. and get it delivered to my house at 8:00 the next morning and not think that gas prices won't impact a company like Amazon and their overall business model. So, when it comes to those kind of macro discussions and the fears that people have about could this hit consumers, could those expenses get passed off onto the consumer and then slow down spending, do you think there's any validity to that fear that's out there in the market when it comes to companies like Amazon? Yeah, I think that there's there's basic math and basic logic what you just displayed which is absolutely true that as gas prices uh move higher, as interest rates move higher, things get more expensive and some of that gets passed on to the consumer. But what I would say back to that is that we have seen oil over $100. We have seen interest rates significantly higher than they were five or six years ago for a sustained period of time. and the consumer has dealt with it. The consumer I think there's there's another way to look at this and that is in a parallel universe where interest rates remained low and oil prices remained in the 60s or 70s the consumer might simply be doing far better and spending far more. This could be, you know, a slowed down consumer that we're seeing right now, but that slowed down consumer is still able to spend more than they were last year. And I think that's the phenomenon that's probably taking place. I think that there's other areas of the economy. There's other efficiencies. There's a lot of these buy now pay later services that have emerged that have allowed consumers to continue spending in somewhat uh responsible ways. and using debt in somewhat responsible ways. That actually makes this kind of not worst case but a a badcase scenario with high oil prices and high interest rates relatively still a strong consumer in that environment. And so what we see is the consumer is strong even in this environment. And so if these environmental pressures, Iran, war, oil prices, interest rates start to ease or at least stabilize, how much stronger could the consumer become? And that's the story that we're interested in. And that's why we're interested in finding the stocks and the companies that are winning market share right now, creating long-term uh almost addicted customers to their platforms because those are the companies that when things stabilize and the consumer gets even stronger will benefit the most. >> I think that's a great way to look at retail stocks. I know that's a similar discussion that you do in that special report on Tesla. Again, don't forget about that. Click the link if you want to check out that research. But if you want a different approach on some of those more volatile retail stocks right now looking at extended trades more than a year out, make sure to watch this video that just posted a few days on our channel. It is a really interesting less risk, higher profit way to look at investing in the dip in retail stocks right now. You can check out that full interview