The Hottest Sectors in the Market Right Now - April 2024 Training

Welcome to our show today. I'm going to get right to it. We're going to go over the hottest sectors in the market right now and tell you which stocks to avoid. As always, the disclosures and disclaimers are very important. We're here to provide you research. We are not advisors. Here's the agenda today. I believe every investor deserves access to the truth. We help professionals who get that Wall Street is looking to rip them off. I want to stop that for those that are here today. We're going to give you the 2 most attractive sectors, the 2 most dangerous sectors to avoid, and we're actually going to give you 3 stocks to dump immediately. And there's going to be a very special offer at the end. You guys know me. I've been in the business for 25 years. I've been in the belly of the beast. I was at— well, on Wall Street during the tech bubble. I've seen how the sausage is made. And I built the technology that gives investors access to the truth in a way that's never been done before. You can't get what we have anyplace else. And that's been proven by the Journal of Financial Economics, which is one of the top 3 financial journals in the world, Ernst Young, MIT Sloan School of Business, and Harvard Business School, not to mention tons of number 1 rankings for stock picking over the years. Our mission is to give people the truth about profitability and valuation. Because I think that improves the integrity of the capital markets. And that's important to me. I think as a citizen, we got to do what we can to make the world a better place. And to me, improving how we allocate capital in the United States could be one of the most important things anyone does. Because you think about the history of our country, 200 years ago, 250 years ago, we were nothing. And in a short amount of time, we rose to be the strongest and most powerful country in the nation. And what's the biggest defining factor about what makes the United States better and different? A better capital allocation system. Freedom of ideas, freedom of speech, freedom of capital. That freedom is not any good if it is accompanied with too much misinformation. Just like freedom of speech, if it gets censored, it ruins things. And we are here to uncensor the truth about stocks. I believe you deserve honesty and integrity. I believe you be— you should be able to retire comfortably. I believe you should be able to invest With real information and not be swindled. I think that's important to, to, to all of society. And look, financial advisors, you need to be able to fulfill your fiduciary duties. You need to actually invest with the truth and understand how often you're being misled by Wall Street. If this resonates for you, you're going to have a good time today. Now, before we get into the trading, let's talk about the current state of the market. I think today was the sixth day in a row that the market's been down. We haven't seen down days this time, this many times in a row in a long time. It's been all rah rah rah, and everyone's starting to get a feeling that the market is starting to turn. Why? Because the Fed's starting to squeeze the spigot a little bit more than people thought, right? Oh, they're not cutting rates. They might even raise rates. What? Money's not cheap and free anymore. You mean we have to be discerning about our capital? That's right. And we help you be discerning. We help you understand where the right money is, because as a lot of the pundits are saying, we're looking at, at a potentially really big decline in the stock market in the not-too-distant future. Here's why we're here. The market is risky. We're entering into one of the most risky and important earnings seasons in a long time. I want to help people succeed. We have a better mousetrap for doing research. I want more people to know about it, and I want to help people make real money. And earnings season is where we start. So before we get into the nitty-gritty details, I want to show you why our research is better than anyone, anyone else, and why our data is different. There's a lot of different stock ratings out there. You've seen them, you've heard about them all. They're popular. They spend a lot of money on marketing. We spend a lot of money on truth and technology. What makes us different? The fact is our rating and research data you cannot get anywhere else. It is different because it takes into account footnotes. It actually reads the filings and it's unbiased. We're not just an aggregation of other opinions or data that everyone else has. We've had to, we've had to pierce the veil of financial reporting and get into footnotes. Which no one's ever done before at scale to get to the truth. And we're here to make that available to the wider public today. How many people know how Wall Street makes its money? Is it in research? Is it in advisory? Yeah. Is it in selling stock? Yeah. Is it in research? No. How much money do the, do the research departments make? Zero. So you shouldn't be surprised that they're very bullish on all the stocks. There's almost no sell ratings. In my newsletter, my next newsletter, I'm going to reveal one of the most obvious pump-and-dump schemes by a Wall Street analyst you've ever seen. Wall Street's not here to make you money. They're here to make themselves money. I know from experience. Remember the tech bubble? Remember the biggest settlement of all time, $1.2 billion, the Spitzer settlement? The global research settlement because Wall Street analysts were lying in their research reports. They were busted for it. At my firm, they literally caught a guy writing an email to his friend saying, I can't believe anybody is stupid enough to invest in this piece of blank right after he published a research report saying everyone should buy the stock. Why is that? Because there's a lot of money in banking. Banking means selling stocks, investment banking, selling stock, IPOs, secondaries, selling debt. M&A transactions. That's how they make their money. So analysts that aren't bullish, don't have good relationships with companies, can't help the bankers improve their relationship with the companies to make them more likely to do their Wall Street business with that investment bank. You know what happens to those analysts? See ya. They don't get— they don't stay around for very long. I actually worked with one of the best analysts on Wall Street, and I saw him get fired a couple of times because you know what? He was on. And by the way, their stock picks don't do very well either. I don't know, like, if you're professional, you know this. I had a meeting last night with some investors, professional investors, and, and I was talking about, hey, you know, our stock ratings outperform Wall Street analysts. They're like, yeah, you know what, that's a low bar. It really is. But we're superior for a lot of reasons, and we're beating those guys. That's why you can trust us, not just because the data is there, but the performance is there too. Another example. Of how so many of the companies in the S&P 500 have a buy or equivalent rating. Again, these analysts are in the business of courting favor with companies, not giving you the truth. Why is Wall Street so positive? I was just telling you, but let me let me reiterate it again: conflicts of interest between research analysts and investment banks. Big reason, right? The analysts aren't there to make you money; they're there to make the investment bankers money because the investment bankers. Write their paychecks. There's a lack of rigor, right? Who needs analysis if my job's to sell stock? It's not to be rigorous. In fact, the less rigor I do, the less guilty I feel about writing research I probably don't really believe in. One of the bigger— another bigger conflict of interest is, is these analysts don't want to tick off their biggest clients. Their big client could be T. Rowe Price. They own a whole bunch of money in the stock. They got a ton, like they got $50 billion in, in, in, you know, across all their funds in GM. Oh, I can't say anything bad about GM, or maybe it's Tesla they got a bunch of money in. Better not say anything bad about GM. Also, as I mentioned before, you don't want to offend the bankers. The big takeaway is that Wall Street misses out on big fees if a client's— if a research analyst's rating is sell. And then there's just the lack of rigor. I mean, how many different versions of earnings are there out there? Non-GAAP EBITDA, non-GAAP earnings, non-GAAP pro forma earnings, Wall Street earnings, analyst earnings, GAAP earnings. There's really one real true number for earnings, and it comes from New Constructs because we're the only firm that can prove it. And by the way, if you ask the CFOs, they'll tell you they fudge the numbers. You know what else they'll tell you is that the Wall Street analysts don't fix it. They fudge the numbers by a big amount, and the analysts don't fix it. 10 cents on the dollar, they don't fix it. The bottom line is beware of other research firms. Make sure they've got proof that their research works. Ask them for it. They won't show it to you. They change the subject. Red flags, right? Understand the rules aren't written in your favor. They're written in the favor of the bigwigs. Wall Street. So what makes us special? No conflicts of risk— of interest, focus on the truth, unrivaled rigor. I'm in this for the right reasons. That's the bottom line. And I created special technology to get superior data. This technology is called our RoboAnalyst process. No one else has this AI. I think it's the only real AI out there. There's a lot of great AI. It does all the, you know, ChatGPT, but you can't trust it. What good is AI if you can't trust it? It's like full self-driving. You can't totally trust it. Oh, I'm gonna let the computer drive, but I gotta pay attention. No, that's not really AI. It's assistance. It's not real AI. AI is something that builds something you can trust because you know that the inputs are good. That's what makes our AI different, better than any other AI out there that I know of. Tell me another firm that's developed an AI on as complicated a problem as analyzing financial statements and footnotes and getting it to work, and I'll do a backflip. So roboanalyst AI, how does it work? You got to go get the data first and foremost. You've got to understand how to deal with all these accounting machinations, different subtle things that happen, you know, for one company in one sector and a different company in another sector. Even for some companies from one quarter to the next, you know, we had to update our AI. You know, this is a long time ago, but like they report things in the, at the end of the year on one thing and they report things, you know, in the next quarter in a different way. Income statements change, balance sheets change, footnotes change a lot. They hide it the best way they can. And I've been doing this for 25 years. When I first started looking at 10-Ks, they were like 15, maybe the long one was 30 pages. Who knows how long they are now? Anybody? And don't forget to hit me up in the Q&A or the chat with questions, or if you want to answer my questions, hit the chat too. Anybody know how long annual reports are these days? All right, all right, we got, we got a, we got a poser in the crowd. We got, we got a known guy in the crowd. And Kyle, he's, he's logging in here too. Stephen knows because he's heard me say this before. Yeah, over 200 pages on average. There's some that are 2,000 pages, right? Financial statements maybe take up 4 or 5 pages at most. Why are companies making their filings longer? Because they want to intimidate you. They're in cahoots with Wall Street. They're there to make themselves a lot of money, not necessarily you. And when it comes to footnotes, there's like 20, 30 of them. We've got like 30 white papers on our website in the education section. We explain what they are. Because we want you to understand how much work we're doing for you. Show me another company that will explain to you all their footnotes adjustments. Remind me to get— come back on that later because that's a very interesting point. No one else is going to explain it to you. They don't even want you to know, right? And one of the big points here too is, you know, it's income statement, balance sheet, cash flow statement, and the footnotes. All of it all the time. Otherwise, you're driving at night. Without headlights. So here comes the proof point, and I really want to challenge everybody for any other research that you look at. Can they prove they're superior? I don't think in the history of the world that any other firm has had papers written like what you see for us. Harvard Business School and MIT Sloan professors together wrote a paper called Core Earnings: New Data and Evidence. A paradigm shift, a new realm of fundamental data created by us. That paper was so good that it was published in the Journal of Financial Economics, a top 3 peer-reviewed journal in the world. That means it's fact. It's fact. Peer-reviewed journal. They had to get it past all their peers. By the way, it wasn't pretty. Other academics didn't want to know that, hey, we got 40 years of research on this old S&P copy stat. Cash flow, Wall Street earnings, all these other rate, all these other data systems, all now proven to be inferior. Oh no, no, that's not good for me. We had to show pictures. We had to use all of the tools that we have available to demonstrate the proof because you can audit our research. It's really cool. We could, you know, the professors would actually go in and say, well, hey, New Constructs made these adjustments. Where are your adjustments, Mr. Legacy Data Firm? And you know what the answer was? We don't know. They won't show you and provide definitions on footnotes adjustments because they don't know if they're making them or not. A lot of these firms probably don't even know what the footnotes are. Otherwise, they'd be doing what we're doing. So it's better not to talk about it at all. Name another research firm that talks about footnotes, and I'll do a backflip. So far, I'm not having to do any backflips. I don't think it's going to come close. All right, so it's one thing to have better data. Let's talk about better modeling. Ernst Young, accountants. What do accountants care about more than anything else besides crunching numbers? Number 2 on the list, reputation. They don't have a good reputation, who's going to hire them? So why would they publish a report about the superiority of our models? Because they think it's a risk to their reputation? No, it boosts their reputation. It makes them look smart that they know about a better model. So I think that's a really strong endorsement. And then superior stock ratings. Harvard Business School and other professors wrote a paper about that. We didn't even know about that one until it was done. That's a pretty nice surprise. Hey, by the way, did you know your ratings outperform Wall Street ratings? Not surprised, but we're glad that you said it. And the great thing about our studies, right, is that they're independent from third parties. It's not done by us. People outside of us did it. That's why I say I don't think you'll find anyone else with the same thing. So let's get to it. The 2 least attractive sectors in the market right now, the 2 most attractive, and 3 stocks to avoid. Now let me first start with saying, listen, sector narratives are not my thing. There's no substitute for doing the work to analyze every company, every filing, every financial statement, every footnote. I'm reading that one because that's important. There are no shortcuts. I'm going to give you big picture and little picture. Can't do it all today. But I want you to know that just because a sector has a good or bad rating doesn't mean all the stocks are good or bad. That's why it's— that's why there's diligence. That's why we do this work. So much of the world is about like, oh, let me do a big screen and make my work easier by lumping all the stocks into one bucket. I'm going to put— I'm going to invest in good stocks in the tech sector. I like the tech sector. Maybe the tech sector is good. No, the tech sector is not all good. There's good stocks and bad stocks in every sector. It's the way it's always going to be. So let's get down to it. The 2 least attractive sectors right now, real estate and utilities. Been that way for a while. Cost of capital going up doesn't really help utilities, utility sector stocks, because earnings aren't growing. Cost of capital up, price down. Real estate, these have looked expensive for a while. And this has been something that we've been warning about, and I think a lot of people are starting to come, you know, these chickens have been coming home to roost. You know, we saw a couple of banks go down because of bad real estate investments. So let's have a look. Let's do a little bit of a deeper dive on our system. Let's go into the rating system here and look at sectors. Here you can see real estate and utilities, right? And if you want to get a deeper detail, let's take a look at utilities. What's going on, utilities? What looks bad? Well, the fundamentals, not so good. Valuation looks worse. Let's check out some subsectors. Natural gas looks a little bit better. Water utilities, eh, none of them look very good. How about real estate? Overall, not as bad as utilities. Real estate operations and residential commercial REITs, They all look pretty bad. The amount of work that goes into analyzing all 161 stocks in this subsector, all 194 stocks, there's 39 ETFs, 148 mutual funds. We analyze all of them. No one does that kind of work. No one else does that kind of work. Utilities got 78, 10 mutual funds and 38— 10 ETFs and 38 mutual funds analyzing them all. Why? Because we can. Because that's what proper diligence is, and we care about doing proper diligence. So let's talk about the actual underlying unattractive stocks, the ones you need to clean out of your portfolio. Equinix, number 1, looks about like the sector. Digital Realty, number 2. I'm going to take a second to dive in here a little bit. We actually I had a conversation with Jim Chanos about these stocks and he helped put us on to like taking a deeper dive here. These are companies that own big data centers. They're losing market share. They have actually— Equinix has recently been targeted by one of the big short shops, you know, about a year after we wrote about it. But, you know, good for them. They caught up eventually. But a year after we wrote about warning it, saying that these guys were inappropriately capitalizing expenses to overstate earnings. Guess what? We saw that coming 2 years ago because we do that work every day. That's why we warned about it a long time ago. Digital Realty and then Southwest Gas Holdings— 3 stocks you need to get rid of, especially as the market becomes more discerning. Now's the time. If you made money in them so far, great. Now's the time to jump off the ship because that Headlight you're seeing coming down the tunnel is a train coming the other way. All right, let's talk about a couple of attractive sectors. Remember I told you that my favorite sectors might not necessarily have a good rating, right? Energy, very attractive. Technology, very neutral. Why is one sector neutral and the other one attractive, right? They're more linked than you think, these 2 sectors. We've been talking about all this AI stuff for a long time. Oh yeah, everything. Nvidia going to the moon. Right? People are overlooking one really important fact. What's going to power all this AI? How's it work? Is it mice running on a, running on a wheel? No. This is electricity. Lots of it. And so energy demands are going through the roof. And by the way, energy demand is growing way faster than alternative energy is coming on online. So traditional energy sources are going to be in use for a long time. Don't throw all the energy companies off the bus. All right, let's take another look at the energies. Let's take a look at the positive sectors. Let's talk energy. Energy's been good for a while. Those of you who follow our research, we've got a ton of really, really in-depth long ideas. In fact, we just published an amazing report today on an energy stock that is very much like an energy stock that we've looked at in the past. Uh, that has been a super great performer. We found another one, and those of you on our list, you'll see, you'll recognize the subject line in the email as something that we've seen before. And that's been a super good pick. It's really pretty great. So energy sector, one of our favorites. And let's see what else we got. Again, how many stocks? 176. 34 ETFs. 71 mutual funds. Coal. What does that look like? Oh, hint hint. Yeah, that's one of the better looking subsectors. Oil and gas looks good. Oil and gas equipment, not quite as good. Renewable energy, uranium. We cover them all. Uranium looks a little overhyped, probably because the economics haven't turned yet. Let's hope for our own good, for all of us. We wake up a little bit and figure out that maybe, maybe nuclear is a good way to go. But that's a different story. Let's take a look at the tech sector. What are we seeing here? 606 stocks, 95 ETFs, 135 mutual funds. Neutral. So here's where the getting gets good, right? What's good about the sector? What's bad about the sector? Well, the economics look good. It's the valuation. Not so good. Let's take a look here. Where is it worse? Software and IT services looks exactly the same. How about semiconductors and semiconductor equipment? Exactly the same. Office equipment, maybe a little better. Electronic equipment and parts, bad also. What do you got to do to find the good stocks? You got to do the diligence. There's a lot of great ones. In fact, there's some AI stocks you never heard of That we've called out over the last, I don't know, 6 or 12 months. And they've done amazing because guess what? They weren't popular. We got to them before everyone else did. They're not popular. Popular is not necessarily a good reason to invest. So we created a lot of value today. 24 minutes, huge value. What are we covering? Talking about the stock market has been rising. Risk is rising. Wall Street conflicts—they're not there for you. And we're gonna, and we showed you the critical information you need to survive—the best and worst sectors, some of the worst stocks. Thank you very much for being with us today. Love, love to be able to take care of you. Please feel free to join us on our webinars. Join us on Circle, our Society of Intelligent Investors. I would love to talk to you. We're here to help. And if we weren't convinced today. Send us an email. Tell us what you need to understand why we're superior, why you can't trust Wall Street, because that's the truth. Thanks and good night.