Noland Langford on the Money Life Show with Chuck Jaffe

Noland Langford, Chief Executive Officer at Left Brain Wealth Management, is back on Money Life. We're talking stocks. It's Market Call time. Welcome to the Money Life Market Call, the part of the show where we talk with experienced money managers about how they do their job, what they look for that determines their buys and sells, what they see happening broadly on the market, and how they are putting it all together. And returning to the show today, Noland Langford. He's Chief Executive Officer at Left Brain Wealth Management. And yes, he's been on the Market Call many times, but he also was one of the people that, that was here when we were doing Left Brain Thinking. So in other words, Left Brain Wealth Management worked with Money Life to develop their own podcast and their own YouTube channel. So if you want to learn more about the firm, you go to leftbrainwm.com. If you want to see more of Nolan's thinking and what he and Brian Dress and others at the firm are doing, you can find them on YouTube, or you can look for the Left Brain Thinking podcast. Again, it started here with us on your favorite podcast app. Nolan Langford, it's always great to chat with you. Thanks for coming back.

Thank you, Chuck. It's always great to be here talking stocks.

At Left Brain, you guys have a methodology that, well, Anybody who remembers from when you were regular on the show might remember what it is, but we always have to refresh everybody's memory, and there are some newcomers here. So tell us how it works, because it is a very distinct style for you.

It is, Chuck. In the end, we're looking for winners. The way that we cast our net for winners, we're looking for securities on three fronts. One is fundamentally, they need to be attractive. What are the earnings estimates doing? What's going on with revenue? Do they have a strong balance sheet? So that's not that unique. But then we layer in the technicals. We like to buy shares when they're moving up and to the right and versus down to the left. And then last one, there's some proprietary quant factors that we're looking at primarily based around momentum. And once a security meets all three of those criteria, then it's a candidate for us to do a deeper dive.

What do you do with market conditions like we've had now? Because you like to see things moving up and to the right. And what we've had is a ton of volatility and industries that are more affected by non-fundamental geopolitical kinds of factors. So what has that got you looking at now? And how does that stuff impact the methodology?

You know, February 28th, when we launched the attack on, on Iran, things did go really wacky there for quite some time. In one way, it was a very, very difficult environment. And in the other way, it was much easier for the winners to stand out. So, a lot of temporary noise around, you know, oil and the blocking of the Straits of Hormuz and oil prices and chemicals and fertilizers. But at the end, fundamentals still went out. And so, it was easier to find where investors were really putting money because there were some securities that even did okay during that time period, which tells you they were in strong hands. So we sit here today as April, as we're in April, markets, you know, a lot more sunny skies. Market looks a lot healthier. It doesn't look like we're having a recession. Doesn't look like inflation's outta control. And so now it's back to focusing on the fundamentals. And there's a lot to like right now, a lot of innovation happening. So there's a lot to like right now in spite of the war.

You talked about innovation and it's hard for me to have a single conversation these days without people talking about AI and what that's doing. But since you are looking for growth and winners, where does that put you in something like an AI story? Because you can go with the big established names, but it means you're not necessarily looking for the what's next names because they haven't proven it yet. Or are you going for the picks and shovels types of things because they are the consistent ones regardless of what happens next? Like, where does it put you given your style in an industry that's evolving that fast, where there are winners to date, but they may not be winners forever.

You're right, Chuck. It's dynamic. We're early in the cycle. It's the fourth industrial revolution. Let me give you some numbers. AI spending on this buildout we're talking about, the estimates in 2026, about $347 billion in spending. But by 2030, that number is supposed to go to $1.2 trillion. So over the next 4 to 5 years, the number will probably 4x on AI spending. And if history is correct, that number's probably likely to be higher rather than lower. And you're right, the issue becomes, or the challenge becomes, how do you pick winners in an industry, in a marketplace that's growing this rapidly? Where do you put your chips? Where? Part in the pond. No part in the pond. Where do you put your chips? As far as who's going to be the biggest winner. We know there is going to be a big winner. You know, in every past cycle, there has been a big winner. In this case, um, it's— we're not really sure yet. What's scary, Chuck, is, you know, if you take a look at NVIDIA, who's the poster child for AI and, and semis and this new technological revolution, with a market cap at $4 to $5 trillion depending on the day you're looking at it, they're still seeing acceleration in their business. And there's no end in sight. So that tells me even with the biggest company on the block in AI, I think there's still room to run at the top. And the question becomes, do you stick with that as the sole winner, or do you look for other winners who may have higher upside even though the king at the top is still so attractive? So it's very interesting time to be in markets.

What does that do for holding periods for you? I mean, you you're looking for the winners? Are you holding them while they keep winning? Are you moving if you got a faster potential horse in the race at some point? How much do you build time horizon? Because there's a lot of things in your process. I mean, as you point out, there's some technicals in there as well. Technicals can make it that, you know, I got a long-term good story with a short-term bad story. So how do you match that all together?

Yeah, for us, the end of it is going to come back to the fundamentals. You know, we want things where we see acceleration— revenues are accelerating, are accelerating, free cash flows accelerating. And the big one that we look at, Chuck, it's one thing how much money you're gonna make, but it's quite something different how much investors are gonna pay for those earnings or for that money that you make. And that's what we call multiple expansion. So when we look for winners, we want things with what we call the twin engines of growth, things where you see an acceleration in the fundamentals and the price suggests that people could be willing to pay a premium for it in the future. And so that really is the deciding tale for us. And right now we're finding a lot of names where you see valuations that aren't demanding. And I think primarily because we're at the very beginning of this AI supercycle. You know, it started with the picks and shovels like you mentioned earlier, which means semis. And a lot of the semi sector, whether it's SemiCap or semi designers, manufacturers, doesn't matter. Has been cyclical. So you get a couple years where things go well, and then you get overstocking or a new technology comes in, and then you see a cooling off for a couple of years, and then the cycle repeats. And because of that, these securities have been given a cyclical multiple. But what if— here's what we ask ourselves— what if either A, we're at the beginning of a cycle, and it is the most powerful cycle from a spending and duration standpoint we've ever seen, And, um, what was used to be cyclical no longer is. And so I think if that's the case, if it's secular, not cyclical, you can get a bigger multiple. So I think we're still early and we're very optimistic on these names around AI, the AI buildout, and everything that's happening with the data centers and everything you need to power this fourth industrial revolution.

So give us a, for instance, what is a left-brain kind of stock in this market.

So a couple of the names that we like in this sector, uh, Chuck, the first one is TSM Taiwan Semi. And, uh, I mentioned NVIDIA earlier. NVIDIA designs these AI chips, but, uh, TSM is the foundry that actually builds them, and they have the dominant position in building all of the AI chips for most of the designers in the world. And it just reported earnings last week. Growing north of 30% on the revenue front, and they've just seen an acceleration. So there was a beat and a raise there. So that's an area that we like. We also like Arista Networks. You know, if you're in the data center, you know, you have these chips, they need to communicate with one another. And so networking becomes very important. And Arista Networks supplies the connectors that allows traffic to move a lot more freely and fast. And so Arista Networks is a name that we're seeing tremendous momentum from an earnings and revenue standpoint, and you're also seeing the acceleration. So Arista Networks is a name that we like, uh, as well as Dell. Most people know Dell from desktop computers, but now with the advent of AI, they're getting a real big tailwind from AI servers. So nice earnings report here, you're seeing acceleration. And it's a multiple that's not demanding, about 20 times forward earnings. We think those estimates are low and we think it's going to be a tremendous upcycle for Dell. So, we really like Dell. And then switching gears a little bit, we still like travel. We like travel a lot. Interestingly, we talked about the war that broke out February 28th, and you really did not see a decline in travel or travel spending. The airlines just reported Wonderful numbers in spite of jet fuel being up. Demand is insatiable. And where it's really insatiable is cruises. So Royal Caribbean, uh, from a new ship standpoint, we think has the best fleet in the business. They certainly have the largest ship on sea, and we think it's an area that's underappreciated. Cruise vacations are less expensive than land-based vacation. And so we think that there's room for that price gap to change. So Royal Caribbean is a name that, um, that we like a lot. And then the final one, let's go back to the, um, data center, and that company is Vertiv. VRT is the ticker. You have these data centers and these chips, and it produces a lot of heat. And so those data centers need to be cooled. Invertiv makes the, uh, the cooling equipment to power those data centers. So those are the names that our research and our, um, our philosophy has taken us to these days. And we think those are look really attractive in the year ahead.

So, Nolan, you know, you talked about things like the cruise industry and liking travel. How many of the players in an industry are you gonna like? Is it like, I can own one or two, I want the best in breed, I want the best one? Because when you're talking about the technology companies, you've got integrated stuff. Like when you were talking Virta, you know, obviously that's a play, but not the same as saying I'll do data centers or what have you. So when you're looking at something like cruising, there are other ships and other cruise lines. How many are you willing to do in an industry?

Yeah, cruise lines specifically, we have owned Carnival in the past. I think we've switched our allegiance pretty firmly to Royal Caribbean. Um, they all have sort of different niches and different brands. The reason that we prefer Royal Caribbean is they have the newest ships. You know, if you go back to what happened during COVID-19, as an example, Carnival had a lot more debt. And so now that things are back healthy again, their order book for new ships isn't as robust as Royal Caribbean. So Royal Caribbean was able to invest in their brand and build out these new innovative ships. And those bigger ships are more efficient, so they make more money per ship. And so if you look at the growth profile of Royal Caribbean, it's just much better. I think it's the best in the industry. And I believe it's in— starting in 2028, they're actually going to branch out a new branch and they're going to start doing river cruising. And we'll see, it'll be them heads up with Viking Cruises for the river business. So I think there's a lot of ways for Royal Caribbean to win, and in particular in cruises, this is the one name that we think investors should own.

Well, now we're going to get your quick and dirty take on some stocks that my audience is particularly interested in. Quick and Dirty.

You smell what I smell?

Smoke?

Money.

Yes. It's time for our lightning round. We call it Quick and Dirty, and we're doing it with Nolan Langford. He is Chief Executive Officer at Left Brain Wealth Management, which is online at leftbrainwm.com. You can also search for them on YouTube and for the Left Brain Thinking podcast on your favorite podcast app. And of course, Quick and Dirty is our lightning round. It's where we put our guests to your test. You know how to do it, so send your requests in. But we're going to jump in, and most of these are going to be technology names. So we'll start with two requests we got from Dave in Jacksonville, Florida. The first is for EPAM Systems.

It's E-P-A-M. Yeah, EPAM, I think, is in a tough business right now. Them and Accenture dominate consulting. These consulting projects. And I think with the onset of AI, I think in this case, EPAM wants us to believe that AI is a friend, but investors treating EPAM not as if they're benefiting from AI, but as if AI is a foe. And so we wonder about the AI consulting business. Could some AI tool replicate what they do and tear away at their business some? So we're a sell on EPAM.

Sell it, Hockett! That's a sell or an avoid on EPAM, EPAM Systems. Dave's other request, software business, so I'm anticipating maybe, is Constellation Software. It's CNSWF.

Yeah, Constellation is a vertical integrated software player. Basically, they do M&A within the software space where they'll take their balance sheet and buy vertical software. Those are kind of point solutions. The problems with that is those type of companies are dead in the crosshairs of AI. It seems like every time Anthropic or OpenAI announce a new feature, uh, these type of businesses are impacted the most. So we'd definitely be cautious on, uh, Constellation, and we, we'd sell that name and look to do something different.

Sell it! I'm selling! So it's a sell on CNSWF Constellation Software. Richard in Chula Vista, California wants to know about Seagate Technology Holdings, STX.

All right, we like Seagate. We think Seagate's gonna be a winner. They dominate this business with hard disk drives. With the onset of, of AI, the storage needs are absolutely booming. And with them, it's only a duopoly. It's Seagate and Western Digital. So multiples are cheap because they're priced from a, uh, like they're a cyclical. But I think this demand cycle is gonna do really well for their business for an extended period. So we're a buy on Seagate here. Show me the money.

That's a buy on STX, Seagate Technology Holdings. Our next request goes to Peter in Wesley Chapel, North Carolina. He wants to know about ServiceNow. It's ticker symbol NOW.

Well, now is probably the time to hit the sell button. ServiceNow's definitely got problems. Uh, I believe their business survives. We just don't know if that multiple survives. So I think investors are not going to be willing to pay this multiple for this type of business, and, um, it's probably going to be that way for a while. So unfortunately, they're in the software doghouse, and, uh, it's going to be a while for this sector turns around. So we would sell ServiceNow.

So that's a barking dog. That's a sell on ServiceNow, ticker symbol NOW. And last, for Sean in Grinnell, Iowa, it's Rhythm Capital Corp, RITM.

Sean, I think you've picked a winner here. We like Rhythm. Uh, we think this name is misunderstood. It's priced as a REIT. It sits in the REIT sector. That's because their history with these mortgage servicing rights, but more and more Rhythm is moving into money management and financial services. They own a hedge fund, uh, and a lot of their distribution now is taking them more to the asset management side, which should get a higher multiple. So we like the fact that this dividend is 10%, and so that gives us a floor. But we definitely like the upside of Rhythm. And if nothing else, from an income security standpoint, I think you can sock this one in your portfolio, even if you only collect the dividend. Uh, we think that's an attractive place to put some money. So Rhythm is a buy for us.

So We finish on a high note with something you can buy for the income and maybe the appreciation beyond it in Rhythm Capital Corp, RITM. And it's good that we got to a goodbye before we got to the end, but now we've got to where we've gotta say goodbye. Noland, it is always great to chat with you. Thanks so much for joining me. We'll talk to you again down the line.

Be well, Chuck, and have a great summer.

That's Noland Langford, the chief executive officer at Left Brain Wealth Management. Leftbrainwm.com for more information. And again, Left Brain Thinking, their podcast and their very active YouTube channel. You can find it by searching for Left Brain Wealth Management. And we'll come back, we'll tell you where Nolan agreed or disagreed with some recent guests. We'll set you up for what's coming next week. So don't head off to the weekend till we wrap this show up right after this message.