The Stock Market's Best Kept Secret: 3 Sectors Nobody's Watching

Everybody might still be talking about tech, but there are plenty of other sectors in the market many retail investors are ignoring right now. Joining us today is Mark Likenfeld of the Oxford Club to share three stocks in three sectors that really many people in the retail community are missing and not even looking at right now. Mark, so glad to have you on the show. I'm always excited to talk about the way you view the market and that's looking at solid companies that have really strong fundamentals and are just good companies to add into your portfolio. This time we're not going to be talking about those big tech names so much. We're going to be talking about a few different sectors again that are very quiet right now. Why do you think it's a good time to be looking outside of the AI and big tech story right now? >> Really? Because you want to be investing in what's working. technology absolutely has been working and it's been working for a long time, but we're starting to see money rotate into some other areas of the market. We're starting to see small caps have actually been outperforming all year and just other sectors besides tech. You know, obviously the MAG 7 have not been performing so great. Uh, as a lot of people know, there are other sectors that are starting to perform well and people aren't paying attention to them. So, I think it's still pretty early to get in on these sectors before they really uh take off. And and I I think these are sectors that, let's say 3 months from now, everybody will be talking about. >> All right. That's what makes it really interesting is that we're still getting in early on the potential uptrend for some of these sectors. So, we're going to get into those in a minute. I want to talk a little bit more. I'm trying to get some more education into some of our videos this week. And talking about diversification, why it might not be a good idea to have all of your investments in that one sector. >> Yeah, absolutely. You never want to have all your eggs in one basket to use a cliche because yes, when things are are running hot like AI, then you can make a lot of money, but you have to time it perfectly because when something is as hot as AI. When it falls, it often falls hard. There's an expression in the market that stocks take the stairs up and the elevator down. And that's very true. When things have been running hot for a while and they fall, uh, it can happen very, very quickly. And a lot of investors end up getting trapped. They don't get out quickly enough. They think, well, you know, I'll wait for the bounce. And and sometimes that bounce doesn't occur nearly as quickly as you think it will and prices continue to fall. So, it's really important to to always be diversified so you always have something working that takes some of the sting out of, you know, what might be dropping at that point. >> I think it's a smart way to look at the market right now, especially with again so much growth in one area of the market. It's just good to be prepared as an investor, especially newer investors. And Mark, you are so great at teaching some of these more basic concepts of investing, but really the right way to invest and the best ways to protect yourself. And that's why I love having you on the show. If you like learning from Mark, you can also find his guide on how to invest in dividends. Mark is really the dividend king. He talks about these things all of the time. And if you want to get a free report from him on the best 12 dividend stocks to invest in right now, you can scan the QR code again with our free offer for our viewers today to to learn more from Mark for free. You can also access his free video trainings as well where he talks about some different dividend strategies. To access all of that, again, just click that link in the description or scan the QR code on your screen. All right, Mark, let's get into this list today. What is the first sector that you're looking at? So, uh, I really like the health care sector right now. And and generally speaking, as a long-term investor, I've always liked the health care sector that it's something that's pretty recession proof. Tons of money always being invested into finding new drugs. You know, as we're living longer, unfortunately, one of the things that comes with living longer is is often getting sicker and getting more diseases. And so, there's just a ton of exciting development in and progress in fighting a lot of these diseases. And it's just always a place where money will be invested, money will be spent. If a recession hits, you're going to cut back in certain places. You're probably not cutting back on your medicine. And there are a lot of really great companies from, you know, kind of conservative uh big pharma companies that pay great dividends to small speculative biotechs that could be absolute home runs if their drug ends up working the way you hope it will. You know, sometimes you see small biotechs, you know, double or triple overnight. But healthcare really does run that spectrum from conservative big mature companies to the most speculative stocks in the market. >> I think that's such a great point, Mark, that there are just such a variety of different types of investing to be found in the healthcare sector. So again, whether you're a risk-on investor or someone who likes safer uh dividend strategy stocks, uh you can find that in healthcare. But let's get into the stock that you are looking at right now is a really strong name to look at adding in the healthcare sector. >> Sure. And this is this is one of my favorite names in healthcare because it's a biotech stock, but it's not a super speculative one. In fact, it has a very different business model than most biotech companies. It's liand pharmaceuticals. LGND is the symbol. And what they do is they do have some drug discovery, meaning that they are coming up with new drugs. Uh but they also acquire a lot of early stage drugs. And when they do when they whether they have acquired it or whether they're developing it, they then license them out and collect the royalties. So what why that's important is to get a drug from the lab to the market through all those trials. Typically takes about 8 to 10 years and costs as much as on average $2 billion. So it's a very high risk high return endeavor. What Lian does is they often are developing it in the very very early stage when it's a lot cheaper and then they license it out to a big pharma company or a big biotech company and when they do that they push all the risk to the other company because the other company now owns it and they're going to incur the cost and the time and the the manpower to develop that drug and see if it works. So it it's really a royalty company, a drug royalty company. And and the key part of that is they offset the risk. And risk is really the big uh the big factor for biotech companies because they do spend so much money in time. And if it doesn't pay off, well, they've just sunk, you know, a billion2 billion dollars into a project over 8 10 years and they have nothing to show for it. So Ligand uh is is kind of the opposite of that and their business model is working. So they have uh $780 million in cash. It's been cash flow positive for nine of the last 10 years and six in a row. Uh they've generated about 120 million in cash over the last 12 months. Earnings are projected to triple by 2030 and quadruple by 2032. And they have more than 100 uh drugs both that are being sold commercially and that are being developed. So this is a really interesting business model that offsets a tremendous amount of risk and it's also a very lean and mean company only 40 employees because they're not spending you know a ton of uh resources on developing these new drugs. Uh so you know once they have something promising then they offload it to uh a larger company that's willing to take on that risk. >> This is such an interesting business model. I'm so glad you brought this up because it again it is very different from a traditional biotech. Again, a market beat tracks these FDA events that you were talking about that take so long and they take a lot of time. We have a tab on each stock specifically following all these FDA events and there is one for this company, but it does sound a little bit different. Um, and so that's interesting to see just the business model for this company. I also want to talk about how much growth this company has had. You talked about the um expected projected uh growth story for this company, but also the stock has already had such a tremendous year. It's up about 180% in the last year. So, it's had a really strong runup and it's flying high above those analyst consensus price targets right now. And I know you've been on the show before talking about how you really don't pay attention to analysts. I think you used to be one. Um, and so I want you to talk about that too with this this name because I think some investors will look at the price tag on this. Look at the the recent price action of how much of a runup the stock has had and wonder why would you get into this name right now? >> Yeah, that's a great question. And so it has had a great run so far this year. Uh but as I mentioned earnings are projected to triple by 2030 and quadruple by 2032. So that the growth is enormous. So yes, you know the valuation is high but it's because that growth is so strong. So with regards to the analysts, you know, analysts are notoriously late to the party. Uh that's, you know, that's kind of what they're known for where they are upgrading, they're changing their price targets, they're changing their estimates after the fact. So it's after the company has already done something, the stock takes off, then they come around to upgrading it or raising their estimates because they don't want to stick their necks out. They don't want to be wrong. It's much easier and more comfortable place to be with the pack when you are picking stocks uh from, you know, an institutional level. And that's why they are always always late to the party. So I'm very happy to go against the analyst. And in this case also about 9% of the float is short. That's not skyhigh, but it's starting to get high. Like about 10% is really where it it peaks my attention. And the reason for that is as stocks go higher, uh, anybody who is short is taking a loss or or it has a losing position. So at some point they have to decide how much pain can they suffer before they have to close their position. And but when they close a position, they buy stock, which adds to demand. So right now, Ligand is at all-time highs, which means every single one of those shorts has a loss. Do they cover in five points, 10 points, 100 points, you know, we don't know what their tolerance for pain is, but every point higher that the stock ticks means it's getting worse and worse for the shorts. And theoretically, they should be thinking about closing their positions, which, you know, could create a short squeeze and push the stock even higher. Yeah, like you said, all-time highs for this stock. It's performing incredibly well. I think any investor who owned this a year ago would be very happy with the nearly 200% returns in one year. But let's move on to that second sector that you are looking at right now that a lot of the retail investing community isn't looking at yet. >> Yeah. And that's the insurance sector. And you know, not quite as exciting as technology and biotech, but we are starting to see insurance stocks really start to move. And if if you look at the insurance ETF, uh it it's really performing quite well. A lot of the stocks are doing as well and interest rates are are higher than they, you know, they were, let's say, a year ago or so. Uh I expect rates to continue to go higher. We're seeing uh we're seeing inflation not not under control even though gas prices have come down after the the war, but uh consumer prices really aren't coming down. Uh we're also seeing a very strong dollar which to me is a signal that the world believes interest rates are going higher as well. And insurance companies do better when interest rates are higher because what they do their business model is they take your premium and they invest it in conservative very conservative investments like bonds. So as yields go higher they make more on on their money. You don't get paid more if you have a claim. So they're just making more. Their their margin goes higher. So if rates continue to go higher, insurance is is going to be a really good sector to be in. >> That's a really interesting case for uh insurance as a sector is looking at the interest rates. I I don't know if I've heard it explained that way before. Let's get on to the specific stock that you are looking at in insurance because this is a name I think many people will definitely recognize. >> Absolutely. And that's AFLAC, ticker symbol AFL. And so what I like about this company is a few things. They have a 2% dividend yield. So, not super high, but you're getting something. And they've raised the dividend every year for 33 years. So, clearly, this is a company that knows how to run its business on behalf of shareholders. And so, 33-year track record, I think it's safe to assume that that dividend will continue to increase. So, if you buy it now and hold it for a while, you should be receiving higher than 2% over the course of the years. And there are a couple of a couple of different areas that I really like in their business. They actually have a global pet insurance market. Actually, the global pet insurance market, not theirs specifically, but the global pet insurance market is expected to double from 2025 to 2030. This is going to be a 17.5 billion dollar market. I don't know if you have pets, but a lot of people that I know who have pets have started taking insurance because every time you go to the vet, it seems like it's $700,000. Uh it's getting kind of pricey. So, uh pet insurance is becoming an increasingly popular product. Athlac's also very big in Japan. Their Japanese business is growing very strongly and that's a a a market that I really like as well. Uh they have a very very sharply lower debt to equity ratio than its peers. So that tells me also this business is managed well. Their balance sheet is healthy. And having that lower debt level means that they have the ability to expand if they needed to take on more debt in order to, let's say, acquire a company or open up a new market. So, I like that they have that financial flexibility. We talked about analysts before. Wall Street hates this company. Three out of 14 analysts rated a buy. So, that means there's a lot of room for upgrades. And upgrades, despite what I think of analysts, upgrades actually can move a stock. So you get a a an upgrade on the right day or or you know a big analyst comes in with an upgrade that can push the stock higher. So I like the fact that you have potential catalyst just based on the numbers. The potential for a downgrade is is probably pretty low. Then earnings are are projected to grow. This is not a lian situation where it's going to triple in in a few years but earnings are projected to grow 20% between 26 and 29. So uh this is a growth story. Uh Wall Street hates it. the analyst hates it pays a a dividend that's rising in insurance markets that are strong uh and in an interest rate environment that's beneficial to them. So I really really like this company. >> I I love that that you already mentioned the analysts because I thought that was one thing that stood out about this name too is that yeah the analysts are not really bullish on this name. I want to talk a little bit more. You mentioned earnings and the outlook. Any concern about the small miss they had on their latest quarter of earnings report. uh when you look at that, is there anything that concerns you there? >> No, I and I don't really look at I mean I I obviously I do my analysis on the quarterly earnings report, but a miss uh or or a beat doesn't change my outlook. It it it depends on why the numbers are the numbers. Whether it's a penny lower, two pennies lower, or higher, I don't care. It's what direction are things moving? Why are the numbers that way? Are margins better? Are margins worse? So there is nothing in the quarterly report that concerns me at all. This is a this is a story that I really like and and they are expected to grow. That would be a problem if they they weren't, but the fact that this is still a growth story uh and a you know pretty conservative name uh that's been doing well for a long time is I think a great reason to own the stock. >> Yeah, I think this is another chance of a stock like this is a great uh story to show long-term investing in these slow and steady growth stories over time. You look at the one-year growth story on Affleck and right now it's up, you know, about 18%, just under 20% for the year, but you look at that five-year growth story and it's up 126%. So, it truly does seem to grow over time as a long-term investment for retail investors. Do you want to talk about the benefits of that too of having that slow and steady growth story in your portfolio? >> Sure. I mean, that's that's where real wealth is made. I mean, if you happen to own an Nvidia or a LIGAN, that absolutely takes off. That's fantastic and it's fun and it certainly moves the needle on your portfolio. But for most investors, the way they accumulate wealth in the market is is a position just like that that's, you know, kind of grinding higher year after year. Sometimes there are some down years, but you're you're growing your wealth by steady gains over time. And and the nice thing about kind of the the slow and steady wins the race type of gains is that they typically not always but typically will give you fewer reasons to panic. Uh so you know the the when it does turn lower it is often not as dramatic. You know it's not falling off a cliff and that makes it easier to hold on to. You know when when you own a stock and suddenly it drops you know 10% in uh in a week or two people start getting nervous and they start cashing in and very often you know a stock will come back after that. Could take a while could take a few weeks few months uh but very often a quality company after a downturn will come back and go on to new highs and you want to stay in the stocks as long as you can. I mean, the real way you make money in the market is by being in it for a long time. Uh, there's an expression, time in the market is more important than timing the market. So, the longer you can stay in a stock, the better. And a stock like AFLAC makes it easier to stay with it. >> Uh, such great information for viewers, especially those who maybe are new to investing or might be getting caught up in the hype story right now with all the the bigname stocks that are seeing these tremendous growth stories and just explaining the value of owning stocks like this too in your portfolio. Again, Mark, you're a great teacher. We've got one more name to get to that's even more on that dividend side of the story, which I know is your specialty. Again, if you want to learn more from Mark and get his free report on the 12 best dividend stocks he recommends every investor own for that slow, steady, and strong growth and building wealth over time. You can scan the QR code or go to that link in the description of this video to get that free report from Mark and his team. Again, there's also some bonus videos in there where you can watch Mark do some more education and training on exactly his passion, which is those dividend growth stories. All of that is in that link in this description. Okay, Mark, let's get to this last sector that you are looking at right now. >> Yeah, and that's the banking sector and especially the regional banks. I I I do like the the entire banking sector, but I I think the regional banks have the opportunity to to get you into some stocks that you may not have heard of before. I mean, everybody's heard of JP Morgan Chase and City Bank and all that. So, uh, the regional bank has opportunity for some smaller names. And like insurance, higher interest rates are better for the banks. They make more money when rates are higher. There's a balance. You know, if rates are are really too high, then, you know, loans dry up and they are forced to pay more on their deposits. So, I think we're getting close to kind of a sweet spot. I think, uh, you know, we can still go a little bit higher in rates without really slowing down the economy. uh but that will generate more interest income for these banks. So I really do like the the banking sector right now and we are also starting to see them perform. Some of the big banks especially their stocks are are doing really really well. When you look at like a a city bank uh is is one in particular I think uh JP Morgan uh is another one that's doing quite well. Bank of America, Wells Fargo. So I think that it's now going to be time for the regional banks to play catchup. >> Yeah. Again, you've been on the show before and you've given us some of these other regional names that not very many investors look into. Give us a really interesting regional electric company that's been performing really well. And so, I'm excited to get into this regional bank. Why don't we get right to it because this is a name, it's never been on the show before because I don't think it's a name that very many people talk about. >> Yeah. Um, and you know, this is this is not uh Nvidia. It's not lien. It's not going to go up 200% in a in a year. But I think this is a a really quality company that is very much the kind of company that I recommend. I did recommend in the Oxford Income Letter. It's what I write about in my book, Get Rich with Dividends. It's it's it's that kind of company that you're going to sit there and hold for a long time and it is going to compound. It's called Atlantic Union Bank Shares. A UB is the symbol. It's a regional bank in the Mid-Atlantic, I would assume, unless you live, you know, in Virginia, Maryland, North Carolina, Washington. You probably haven't heard of it. It's got a three and a half% dividend yield, so decent. And has raised its dividend every year for 15 years. Uh, it's been around for 124 years. And just kind of a cool fact I love about this company. They've had only five CEOs in 124 years. Uh, the current CEO, John Asbury, has been CEO since 2016. So this is a company with a lot of continuity, a lot of consistency. You know, it's kind of like the Bailey Brothers building and loan from It's a Wonderful Life. You know, it's it's been around forever. It is managed by the same people for a long time and they manage it well. So Atlantic Union uh 1.9% cost of deposits is about 20 basis points or 210 of a percentage point below the national average. Not great if you're a depositor, means you're probably getting a little bit lower than the national average. But if you are an investor, um, then it keeps the cost down. Their return on assets, return on equity margins, all improving. And here's what I really, really like. Their non-performing loans accounted for just 0.36% of the portfolio was down from the fourth quarter. And net charge offs are almost non-existent at 0.02%. So net charge offs are when they can't collect on a loan anymore and they say, you know, basically this loan has gone bad. We're done with it. it we're never going to get paid back. So 0.02% is quite quite low. And management expects the tangible book value which is a way you value banks to increase uh by 12 to 15% this year. So that's a meaningful amount. So uh this is also a growth story even though it's kind of a sleepy regional bank. This is a company that's very much growing double digits. >> Yeah. Again a company that's been around for 125 years. It's hard to say that this is going to be that explosive growth story. And that's exactly what you said when you started that this is going to be that slow and steady growth story. It's clearly performing very well for investors, especially long-term investors. Uh but this is a great time to talk about the impact of that dividend for this one. How does that dividend compare to to other financial stocks or just other stocks in the market and and how does that compound for investors who might buy in and hold this for the next 10 to 20 30 years? >> The dividend is an important part of this story. No doubt about it. to 3 and 12%. It's It's a pretty solid dividend. It's not super high yield. 3 and 12% is kind of I would say at the bottom of my sweet spot. I generally want to see at least 3 and 12% if not more. So at 3 and 12% that that is a a very solid place for a dividend investor to be investing. But they're also growing that dividend. I mean they grew their dividend by nearly 10%. So a pretty meaningful raise. uh and they have been having meaningful raises for a number of years now. So, it's not just, you know, sometimes you'll get a company with a dividend raising streak where, you know, they're raising it by half a percentage point just to be able to still be in that conversation about companies that raise their dividend. This one does have meaningful raises. So, you're starting at 3 and a half% today. If you own it 5 years, 10 years from now, you might be earning 7%, 10%. And in fact, when I recommend a stock in the Oxford income letter that is a dividend grower, I'm expecting, you know, double-digit dividend yields within 10 years. So, you know, hopefully in 10 years, you're earning at least 10% on your money every single year. And that that can really make a difference. And especially if you're reinvesting the dividend, then it really kicks the compounding machine into overdrive. That's a really important part of this story. I I like the company even without the dividend, but the dividend is a is a very important part of the story. >> I love the education on dividends. Again, if you want to continue that, don't miss that special offer from Mark. You can scan the QR code or get that link right in the description. Again, don't let that free report go by because there's a lot of great dividend stocks in there and some more education on that, too. Mark, thanks for your time today. I know earlier on you mentioned short interest and what that can mean for a stock. We had a video just post yesterday talking about two potential short squeeze candidates that are looking like they're set up for that right now. If you want to hear from our market beats Thomas Hughes, you can watch that whole interview