Shownotes Transcript
On radio, on YouTube, streaming live on investtalk.com, and for our podcast subscribers, this is InvestTalk. Independent thinking, shared success. InvestTalk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States. Here is KPP Financial Chief Executive Officer, Financial Advisor, Justin Klein.
Good afternoon, fellow investors, and welcome back to InvestTalk. This is our Tuesday, February 18th, 2025 edition.
I'm excited to be with you for this holiday shortened week. I hope everyone had a wonderful holiday weekend. And the year is bringing fresh challenges. We have a new administration, a lot going on, and a lot of market moves underneath the surface, even though the market is kind of chopping sideways up a little bit so far this year.
There's a lot of volatility underneath the surface, and we'll dig into that story and much more on today's show. And this hour is going to be about you and your questions, your thoughts, your comments. We encourage all of them. That's what drives this show. I'll give you perspective and data that hopefully you can take back to your personal situation, but
Nothing will hit home to your personal situation more than an actual call from you. And so that's why our main job here is to answer your calls at 888-99-CHART. Anything money related, finance related, investment related, we are here to answer your calls. So don't hesitate to reach out.
four to five pacific time live we love talking to our live callers as well as those that record after hours if you're listening after hours no big deal call the same number and you can leave your message it will answer on a future show now in just a bit we'll talk about today's market performance and run down the show topics but first as usual we will hit our first caller question now hello
Hello, this is Brett from California. Hey, question, I like this Vital Farms, and I think you talked about it a while back. Just wanted to see if it's still something that you recommend or something close to it. If you have another recommendation of this type of stock, I'm just looking for a good egg company that's going to be a good growth company.
for the next five years. But if you give me some information on, I'd love to hear your, your information on what you think about that stock. And if you have another one that you think is better, I'd really appreciate it. Thank you. All right. Vital farms. I, I used to use their eggs more than I do do now, but, um,
Certainly, a company that's been on the rise. It's moved up from around the $11 range back in late 2023. And its recent high was around $46. Now it's trading around $34. And frankly, that's the thing that really hits me the most is that the momentum has slowed. It's been a big, choppy consolidation pattern between that. Actually, the high was as high as $48. And then the low recently was around $28.
And now we're kind of in the middle of that around 34. And it's oversold in the short term. But what I don't like about this name is that it's not only a month I'm slowing, but the fact that it's generally a commodity producer. Yeah, it's gained a lot of market share on store shelves, but...
egg prices are up and so they're making more money but that our egg price is always going to be up probably not in fact earnings are expected to slow this year fourth quarter earnings are supposed to be down two percent so they haven't reported fourth quarter quite yet uh but this quarter supposed to be down 15 next quarter down 17 so expectations are for the next three quarters profit profits to start to contract
That doesn't really jive with a 30 times market multiple. It just really doesn't. So I don't like the valuations that it's trading at. I don't like the slowdown in growth. It has a good balance sheet, no long-term debt. I like that. But it's just too expensive and the momentum slowing and earnings growth is turning negative. All of that, I don't like that picture, no matter what type of company it is. Now, are there others? Not really. I don't know anything off the top of my head that are public egg companies.
Now, there's probably ag companies that have a part of their businesses in producing eggs, but no pure play ag companies, shall we say. So this is a $1.5 billion valuation, still a small cap name, but I wouldn't be buying this name. It's too expensive and the momentum has stopped. Now, we have a lot of ground to cover over the next 45 minutes or so, and we have a
time. We'll get to all of it. Now, our main focus point will be about the great wealth transfer and how it's taking longer than expected. Some pretty interesting differences between generations and what they plan to do with their money. So we'll look at that story. Also, I want to touch a bit on
As I said at the top of the show, the fact that SP is up about 4% on the year, but underneath the surface, there's a lot of volatility. Some companies doing very well so far this year, the first six, seven weeks, others doing terrible. And a lot of times in the same industry. So it doesn't make a whole lot of sense, but what does it ultimately mean for the rest of the calendar year? Also fast food, fast food businesses, right?
A lot of people like to invest in them because they are non-cyclical. But in an era of inflation, their input costs go up, but their demand actually goes up as well because people's pocketbooks tighten up and they tend to trade down in food, right? Cheaper food, especially when most meals now cost 20, 30 bucks if you're going to eat out.
So we'll look at that story. And then lastly, if we have time, what's gold telling us? Gold is at an all time high. What is it telling us as investors?
Okay, so hopefully we'll have time to get to all of that on today's show, but we're going to a short break. And on the other side, we'll talk about today's market activity. We'll also get to your voice bank questions. One is on Sprouts Farmers Market. Another is on the S&P Home Builders Index, as well as questions that came in via the comment section over on our YouTube channel as well. We're ready to take your calls right now at 888-99-CHART. This is InvestLocked.
Invest Talk is made better when listeners add their voices. My name is Robert and I'm from Florida. Great show. I learned so much from just listening to you. Hi, this is Susan from New Jersey. I'm calling about AXOA. How much of the information that came out today on the whole AI play with deep seek and all that, how much of that information can you really trust?
And Justin Klein and Luke Guerrero are always ready to provide unbiased answers. I am very much a person that does not trust Chinese data. Net income is growing and margins are staying pretty steady. Let's go take a live call. Paul from Palm Desert. Let's go to George from San Mateo who has a question about index funds. Tell your friends, live a little, live a little. Call InvestTalk weekdays from 4 to 5 p.m. Pacific time.
Is that a good strategy or should I be looking at other things? 888-99-CHART
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Let's go talk to Chris in Atlanta looking at Medtronics. MDT is the symbol. Yeah, I hold this. I know you guys were fond of it at one time. The earnings came out. They looked good from what I saw. I read through. Everything kind of looked good, looked positive for the fourth quarter. It just seemed to have kind of a drawdown today. I didn't know if I'm missing something in the earnings that might have
triggered some of that no i mean it is down on the day so it closed on friday around what 92 dollars and change and now it's closed at 86 and change uh but it's really just back to the the 200 day moving average and if you look at the move it it's still up from where it does the beginning of the year which was right around 80 so you know it's still up
seven, 8% on the year, which is outperforming the S&P, right? So, you know, a lot of times you have to judge the full move of a stock kind of a month to six weeks leading up to earnings and after earnings. Because remember the market's starting to discount the whisper numbers and the expectations of what they will report.
And sometimes the market gets a little ahead of itself, right? Obviously, this is the case. Like I said, it rallied from 80 all the way to around 93 and change in the first six weeks of the year. And then it had earnings today and it gave a little bit of that back. The trends are still up, still making higher highs, higher lows. Its business is still good. So I wouldn't...
get too caught up in the weeds. You have to look at this in the bigger context and not just a one day move. Would you rather have gone up? Sure. But it doesn't change the fact that it's still beating the broader market this year and the earnings were solid. So yeah, I wouldn't
I wouldn't freak out about it. Yeah, I'm happy with it, and I have a good profit with it. I was just checking, looked through, and I just saw positive remarks going into the fourth quarter, and I didn't see anything negative. I was just wondering if I might have missed something. No, I'll say this. We did pick up this for new accounts today on the pullback. So we didn't see anything wrong with it. I looked through the same. Yep, exactly.
All right, man. Have a great day. No problem. Thank you for the call. Let's go take another live call. James in New York looking at REPX. Do you own it or looking to buy it? I own it. I've owned it for some time and I'm thinking of maybe adding to it. I've been doing well with it. Small cap, probably high risk, but I like the space and I might want to add to it.
All right, looking at Riley Exploration Permian. So they're engaged in the exploration, development, and production in oil and gas in the Permian Basin. The Permian Basin is where a lot of the growth
in supply in the shale region, uh, regions of the United States, uh, really are. And that's, this is, uh, kind of the swing producer these days is, is, is, uh, those that are drilling in the Permian. And when demand goes up, you know, they, they go in there and they, uh, expand their production. And so, uh, Riley is working in the right space. It's a small name, like you said, $756 million market cap. So, uh,
borderline micro cap year, but very profitable and it looks like pretty solid balance sheet, good free cashflow, about 128 million on enterprise value, about a billion. That's over a 10, that's about 12, 13% free cashflow yield. That's very good. I like that. It's certainly high risk because it is so small, but overall I think,
I like what I'm seeing here. The trends are positive, making a series of higher highs and higher lows. It's volatile, you know, move from 32 to 37 and then, you know, back again in a quick order. But that's what you should expect from from a name with this level of size, this market cap level. So I like it. I would hold it. You know, do you add a little bit more?
I wouldn't mind adding a little bit more as long as it's not an extreme weighting in your portfolio.
All right. Thank you much. No problem. Thanks for the call. Let's take a look at the market today. It was overall a positive day. You had both the NASDAQ and the S&P up about a quarter percent. The Dow, that was roughly flat, but really the strength was in the small caps. Small caps definitely did the best. If I head over to Morningstar, small caps were up about
85 basis points on the day, so nearly 1%, whereas the broader market, once again, only up about a quarter percent. So small caps definitely doing the heavy lifting in today's market because the mega caps didn't do so, didn't do terrible. Only meta was down more than 1%, about 2.76% of the large names. Google down 0.8%. Microsoft, NVIDIA, Apple down.
roughly flat. You had Tesla down about half a percent there, Amazon down nearly one percent. But then you look at the rest of the market and it was kind of green. And that was really lifting the overall market for investors. So that's where you got the green move overall in markets. It's a modest day, nothing too crazy. On the news front, you had Trump
reiterating the reciprocal tariffs and saying, you know, there could be tariffs on autos, semiconductors, pharmaceutical companies at 25% or even higher and said, you know, over time, tariffs could continue to rise. And he wants to give them a grace period, manufacturers a grace period to bring production home. Now, I'll tell you this. I know people who make somewhat sophisticated products overseas, right?
And it's just not possible in any short timeframe. It's going to take a while. So, you know, there'll be some companies on the margins that will move production back here. But I think these tariffs are, you know, the big question is how much, how real are these tariffs? And I think that's why the market hasn't moved a whole lot is because there's still a lot of
A lot of investors that aren't believing that these tariffs are real, that they're more of a negotiation tactic and like are the deal. You know, you ask for the world and you come to some more reasonable conclusion. I think that certainly could be the case over the next six months. And if it's not, then, you know, I think the market could start to react very negatively.
On the economic front, you had the February Empire Manufacturing Index that was much better than expected, expected to be negative 0.5. It was actually positive 5.7 from a negative 12.6 in January. But notably, you had...
Prices received and paid up much more than expected. So not good on the inflation front. You had the NAHB homebuilder sentiment dropped to 42 on the back of the terrace, worrying about the cost of building homes, labor, as well as the interest rate staying around 7% for the mortgage rate and that weighing on sentiment there. So that was the market today for February 18th. We're heading into a break. I'm ready to take your calls now at 888-99-SHARP.
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2025 rolls on and you've got finance and investment questions for Justin Klein and Luke Guerrero. Call InvestTalk 888-99-CHART. Now let's pivot over to our main focus point, and that is about the great wealth transfer. And this is...
a kind of major implications for the broader economy. You have $80 trillion mainly held by baby boomers, and they're trying to figure out how to pass on their wealth, either give it to the kids now or wait until they pass. And there was a recent study done by Charles Schwab
That's our broker, but pretty interesting with this study. Nearly half of high net worth baby boomers, this is ages between 60 and 79, with more than $1 million in investable assets. Nearly half say they plan to hold on to their wealth during their lifetime, meaning not pass that on to the next of kin. And for two main reasons. One, the rising cost of health care.
and number two living longer the fact that they feel like they're going to live longer than their their parents and makes them unsure of how much they should hold on to versus give away that's in stark contrast now the ages are very different but stark contrast to gen xers and millennials 97 of them say they want to share their wealth while they they're still alive so big difference here okay
And this also has a big difference in asset allocation. If you're going to hold on to your wealth, you're typically in your 70s, 80s. Are you going to be in equities? Probably not as much. So you might start transitioning that to safer vehicles, money markets, bonds, et cetera, gold maybe, and equity.
As opposed to if you pass that on to the next of kin, they might invest in equities because their time horizon might be longer. So that's one potential shift here. But ultimately, one of the main reasons that they don't know whether they can pass on their wealth is because most of them have not actually created a plan, a goals-based plan, something we do for our clients saying, okay, here's one goal, which is paying for healthcare. What's the likely cost of that? What about buying a second home?
What about living to 100? All of these can be easily planned out with the right tools, software, etc. And needs to be consistently updated, which, once again, takes a little work. But what's interesting here is that high net worth millennials and Gen Xers are more than twice as likely to share their wealth with the next generation over their lifetime. And one of the big reasons is because most of the younger people are cognizant of their the luck that they had in life.
And they tend to be more giving. At least that's what they're saying. Now, Schwab's data says that majority of boomers are planning to only distribute about 40% of their assets while they're living. And only a quarter of Americans with children have discussions about their generational wealth, what to do with the money. And even when they do, most of the time it's very vague.
And it's not properly laid out. It's one reason we pay for wills and trusts for our clients through Trust and Will is so that it's laid out. You can share your password with your next of kin so they know exactly where to get the documents, for example. And what's interesting here is that younger generations are actually getting better at this than the older generations.
63% of wealthy individuals are starting to plan before the age of 45. I always say it's never too early to start saving and investing. It's also never too early to lay out these plans. And so this is a very interesting study. I loved going over it because, you know, just different mindsets for different generations, and that's fine. But at the end of the day, it's really about planning.
planning, modeling it, understanding what likely outcome is as opposed to kind of shots in the dark. And so that's why I encourage everyone to get a plan, build a plan. There are some tools online. Most advisors have better tools and we have better tools, but don't be afraid to put the plans on paper, share it with the next of kin, whatever that is so that your wishes are executed on effectively. Now, what are we going to do? Let's head over to a caller question.
not a color question a question submitted via the comment section over on youtube channel max z says hi do you think it would be safe to hold money in something like j a a a instead of s gov let's take a look at this j triple a i'm assuming this is a triple a collateralized loan obligation etf so i don't know how old this this uh the person asking this question is but
Clutter has a loan obligation. It always hits back to 08. That's a big part of the financial crisis. The person that submitted this says, I'm taking a lot more risk for the actual return. I can see far enough back to see how it would have done during the recession. Or I can't see, is what he said. And you're right. It might have been around. Let me see if it was around. J-triple-A. Monthly chart here. Yeah, this is the only one back to 2021.
So, no, I mean, you're going to get five, a little over 1% better. I don't think this is, this is just junk, short-term junk bonds. I wouldn't get too excited about this. Not a place I would be parking. I'm Justin Klein. I'm ready to take your questions now at 888-99-SHARED. At some point in just about everyone's life,
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InvestTalk. Tell your friends they can listen live, download the free podcast, or watch InvestTalk on our YouTube channel. And they can leave their finance and investment questions anytime on 888-99-CHART.
Hello, Luke and Justin. This is Matt from Minneapolis, longtime listener to the show. Thank you, gentlemen, for everything you teach us. We all appreciate it. I have a quick question, hopefully you could help me with. With rates being what they are and different policy changes right now, I own an ETF that is XHB. A lot of the housing sector area and
Different stocks, well, you can see there all the stuff is in that area. It started off doing well when I first purchased it. I have made some money in it. Now for the last, I don't know, 10 months to 12 months, it hasn't done a lot. It just hovered around the same area. I was wondering if this is just dead money, if I should look at putting it in something else.
Let me know what you think of this ETF. Should I dump it or hang in there for a while longer and the housing sector will come around eventually? Thank you. Have a great day. Well, this is a tough one. First, I want to start off with I like the fact that you understand this is not just a pure play home built ETF. This is a great lesson for everyone out there when you're looking at ETF names to know that
Just because it says one thing doesn't mean that's exactly what you're getting when you buy it. So this is the Spiders, this XHB, Spiders S&P Home Builders ETF. So you would think it's filled with a bunch of home builders and there are a lot of home builders in here.
But what's its top holding? Williams-Sonoma. We like Williams-Sonoma, but it's not a home builder, right? It sells home goods. Then you have Johnson Controls, Masco, Advanced Drainage Systems, Home Depot. And the first home builder you get to is Taylor Morrison Home, okay? So what you can see here is it's a lot of companies adjacent to home building, but it's not PurePlay Home Builders, even though that's the name of the ETF.
so that's lesson number one here understand what's actually in there now what i will say as i like actually like this better than the pure play home builder etfs why is that because i rather oh i want to own a piece of the remodeling market because so many people are locked in three percent mortgages they're not going to sell their home they're not going to give up the three percent mortgage but maybe they want to refresh their home and you know redo their kitchen and
you know buy new stuff for the kitchen and bathrooms and new flooring etc and they're they're more likely to do that especially because they have equity so they pull out a home equity that a credit and they're able to do that so i like that you have this has a lot of exposure to the other names for example we own we've owned williamsonoma for a long time uh for our clients been very well and so um you know
That's one way to look at this is that you're getting good exposure to the remodeling market here. The home builders generally, I think, are still going to do fairly well. Now, there's a lot of overhang here with imports, import costs, tariffs, right? And so that's kind of an overhang. Near term, I don't see home builders doing fantastic. That's near term. Long term, mortgage rates come down. They'll be able to find ways to continue to make money.
i still think there's more downside for home builders in the short term so i don't like that but i think the remodeling market is going to kind of continue to go as we talked about the boomer generation a lot of them are locked in those three percent mortgages they're remodeling homes they have a lot of wealth and and equity and so i like exposure to that so in general i like this etf uh but i don't think home builders specifically will turn around in the short short term because those high rates
Let's play two in a row from 888-99-CHART. Hi, Justin Luke. This is Andrew from Santa Cruz. I got a question about Sprouts, ticker Sam Frank Mike. I bought it back when it was $25 a share. Ten shares I bought. Didn't pay attention to it.
Now it's like $150 a share. I'm more of a dividend investor. Just curious, does this stock still got legs or should I take the win or should I buy more? I look forward to the answer of your question. Thank you. Bye.
All right, looking at Sprouts Farmers Market. This is another one of those names we owned a long time ago. I think we bought it in the high teens. Now it's at $171 per share. We bought it back then because it's secular growth. Sprouts sells a lot of produce and fresh foods and organic foods, and they've just really knocked it out of the park with their growth. And once again, the secular tailwinds that have been behind them.
So we still like sprouts as a company now is a bit expensive at these levels. Probably we've been slowly trimming, you know, up here above 150 to 171. Now is had a pretty decent down day about 3%, but still that's 3% off. It's 52 week high. So although being down 3%, it's still, you know, pretty elevated to me, this is more of a time to be trimming than buying more. Uh,
Once again, I don't think it's everything back to the teens, but, you know, could this pull back into the 120s, 110? I think that would be a more reasonable price to pick this up for sprouts. So right now it's just trim, hold and trim. You know, we've trimmed slowly throughout the years. Obviously, we should hold on to the whole lot. But, you know, that's called risk management. And so, yeah, I think this is a time where you trim, not necessarily hold.
buy. Thanks for the call. That was Sprouts SFM. Now let's pivot over and talk about underlying market right now. It's a really interesting market. It has to be up about 4%, but the VIX still hanging around 15. It peaked recently around 18 and change. Historical average though is 19 and a half. And it shows you that the volatility of the broader index is still pretty low.
But if you look underneath the surface, there are a lot of names that are up. A lot of names are down. And the volatility of the actual names within the S&P are elevated. And you can even see that with the MAG7 overall. Collectively, this year, they're down 0.8% since January 24th when they had the deep seek news. But some companies are up. Meta is up 10.6%. Alphabet is down 8.2%.
And so what you're seeing is an increasing dispersion of the equity market. More of a stock picker's market this year. That's what this is kind of saying. And more and more stocks are less correlated. And so there's not broad-based selling. There's not even broad-based selling within particular sectors. Wolf Research has a basket of...
Companies that are vulnerable to protectionist policies. These are companies like Caterpillar, Hasbro, Dollar General. And you would think that they would go up and down with tariff announcements, right? That's what this index is all about. But there's also dispersion in that. So it's not like the market's treating all of them the same. Now, what is causing this? I think the main culprit here is the option market. Option dealmakers are...
trading much higher notional value than they ever have. And a lot of it has to do with those single day options, zero DTE options that people are trading. And hedge funds are actually going, they're short index volatility and they're going long single stock volatility. So it's exacerbating both of those moves. But we know throughout history that tends to unwind at some point and it likely will. One thing I want to highlight too is that
just flows flows from 401ks robo advisors going into indexes that kind of helps keep the broader index even but when it comes to individual companies markets will move that
But overall being the S&P will dampen both directions, dampen the volatility in both directions. But what it shows you is that the market is caring what's happening underneath the surface of these names and moving them in many ways, dramatic fashion. And so I don't expect this to continue. As I've said before, there's a lot of market structure issues that are keeping volatility muted. But as we saw with COVID, when there's something big enough to shake it out of,
that malaise shall we say then that's when you can get the big moves and so i would not rule that out for happening at some point this year especially surrounding tariffs if they are truly implemented now let's put it back to the a question from the invest stock youtube channel says are bdcs like g sorry cgbd and maine in the category of kkr and apollo companies with levered balance sheets that you suspect might be in trouble well
This is a great question. So there are, they're called these BDC, these corporate debt companies, BDCs. And let me, what was the example of one? CGBD, CGBD, yeah, I'll type that in. So that'd be Carlisle Secured Lending. So this is more private lending, private debt. And in these private vehicles, they're very similar to private equity. They're very opaque companies.
They're there. You don't know what's in them. You don't know how they're structured. And there's a lot of risk here. And you even see with this one, CGVD earnings are expected to decline this year by 6% and 12%. Sorry, 6% full year next last year. And then this year down 12%. So what you're seeing is that 9% yield. But overall, that yield is not going to be supported. So if I look at CGVD.
if you saw me on uh on youtube if you head over youtube you'll see what i'm looking at um and if you look at let's look at its cash dividend payout ratio so we can see how much yeah so its pay ratio is 98 meaning that it's paying out all of its earnings and if those earnings are declining guess what's going to happen to that payout that payout is going to drop as well
And the market is seeing that. When you see a 9%, 10% yield, understand that that is the market saying that's high risk. There's a high likelihood that at some point in the medium term future, that dividend is going to change and we're discounting accordingly. And this has already come down. So its dividend was $0.48. Now it's down to $0.45. In 2022, it dipped all the way down to $0.32.
So the dividend is not steady. It's all over the place. It's going to be based on the underlying quality of the credits that it's lending to. And that's what this company does. It's a specialty finance company. This is a closed and they have closed end funds, externally managed funds, et cetera. And so are they similar to KKR and Apollo? Well, KKR and Apollo are more private equity companies.
Now, they probably have private debt funds. They're a little bit more risky than the private debt funds, but they still have their problems. It was actually interesting as of late. Those KKR is down pretty nice from its 52-week high around 170. Now we're down to 140 in just a matter of two, three weeks. So you're starting to see some weakness out of private equity. And is this...
The start of the ultimate unlined of the large S around private equity and poor allocation of capital in that space, potentially something I'll be on watch for. Now, are you ready for this market change? We've already seen, I've talked about the market volatility underneath the surface in today's market. You see inflation starting to re-accelerate. So what does that mean for the dollar? What does that mean for the trends in the market, different industries? What is the
What do the tariffs mean for different sectors as well? And how does that play into the risk in your portfolio? And how does that risk and strategy apply to your broad financial situation? That is a big question. And if you'd help understanding where you're at, where you're going, and how to improve on your situation, don't hesitate to reach out to myself and my company, KFP Financial, where we practice parallel investing, which means we invest right alongside our clients. And we practice...
Unbiased guidance, both on and off air. So if you need help, don't hesitate to head over to investstock.com. Click on the portfolio review button. Fill that out and we will get to you and get you on our calendar for that portfolio review. Now let's squeeze in another caller question now. Hi, I'm calling about Ford. I'm looking to see if I should buy, sell or hold. I have purchased it.
several shares several months ago and the stock keeps coming down. So I keep purchasing more to average down. I also own a Ford. I don't believe that the company is going to just disappear. So I have faith in it. And I'm just wondering at what point should I stop buying more? Thank you.
Well, I don't know what a percentage of your portfolio it is, but it's usually not a good idea to keep throwing money at a company that's in a downtrend, especially a company that's in a downtrend with a lot of debt on its balance sheet. And in a highly cyclical industry, we saw in 08, right, they needed to bail out. And, you know, will the next administration, whether that's Trump or whoever's after Trump, will they be in the mood to continue to bail out shareholders? Maybe not.
right we're in a more populist environment i don't think that would be very politically palatable to bail out a company even if it's you know ford so you may like fords but that doesn't mean that it's a good investment simple as that i see this all the time oh i like the company i don't think they're gonna why can't ford go away just because they were bailed out once easily could any company with a lot of debt can easily go away and so
I wouldn't be on. We don't own this. The car business is notoriously a terrible business to be in. It's very low margin. It's highly capital intensive. It's very cyclical. And it's just not a great place to really allocate money. It's interesting. It's more consumer facing. So a lot of people try to invest in car companies. But I much rather own...
like auto manufacturer, auto OEM manufacturers, you know, things that they sell to Ford to build their cars, for example. So no, I wouldn't be owning Ford. I think you're throwing good money after bad. That was the best talk. I'm Justin Klein. We have one goal here each and every weekday, and it's help you achieve your own version of financial freedom. And our work continues after this final break. So get your questions in now at 888-99-CHART.
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It's an InvestTalk Tuesday. Justin Klein is here today taking your calls live. You've got questions, so call InvestTalk. 888-99-CHART. Let's go pivot over to a YouTube question. Corey Paulbrook says, thoughts on ticker symbol AES. Am I catching a falling knife buying here or is it a good time to buy for the long-term hold?
looking at a e s corp and this is a large utility company 7.3 billion dollar market cap now 7.3 sounds pretty big but it used to be much larger price was around 30 per share that was back in 2022 now it's down to 10 per share and there's a big reason for that free cash flow went deeply negative
It had been in 2021 nearly a billion dollars in free cash flow. Now it's negative 5.7 billion. And you have debt that is massive, $29 billion in long-term debt and a $7 billion market cap. And this is a name that really invested in renewable energy. 53% is renewable energy.
But what we've seen is a lot of times renewable energy is not very efficient, not very effective, not very cost effective. And it turns good companies into companies that just burn capital. And in the age of Trump, you know, I don't know if they really have a future going in that direction. And a name like this with so much debt in a deep downtrend, relative strength is seven, horrible. It's not a name that I want to own.
I you know that dividend is likely going away and that's what the market is telling you here and so I think this is a zero I think this company probably eventually goes bankrupt so I think you are catching a falling knife now could I be wrong absolutely could they turn around their free cash flow absolutely good but as it stands today especially with the trends in earnings expectations for this year and next year which continue to be negative for analysts I
would not be jumping on the train. Now, it was up nicely today. Could this be a nice short-term bottom? Sure. I think that it's kind of set up for at least a bit of a bounce, maybe back up into, you know, 13, $14 range. For a trade, maybe. But as a long-term hold, I just don't like the look of that free cash flow as well as that level of debt. Now, lastly, let's talk a bit about gold. What's gold telling us? Gold's up dramatically over the past four months.
approaching uh you know it's it's at its all-time high once again today up over 10 so far this year and really this is all about buying gold from places like europe gold funds took in 3.4 billion the highest inflow in almost three years that's in europe chinese central banks increased their gold holdings for the third straight month in january and according to the world gold council
inflows into bullion-backed ETFs were $3 billion last month. And that's without the dollar really going down. So what you're seeing here is, first off, technical. It's breaking out and people chase names that are going to all-time highs. And there's more uncertainty geopolitically as well as economically. And when uncertainty rises, the demand for a safe haven like gold rises as well.
So I think that's the big driver here that nobody is really paying too much attention to is that when a firebrand like Trump comes in and promises to disrupt everything, and then he starts to for good or bad, however you want to look at it, it creates uncertainty. How is this going to go? Is this going to go smoothly? Is this going to cause major problems?
And so when uncertainty rises, once again, the demand for gold goes up as well. So it's a combination of factors, but it's telling you that things are changing in a big way. We're in the fourth earning and how this all shakes out will ultimately be told in the gold chart.
Now, I'm Justin Klein. This completes another InvestTalk program. We thank you for listening. We encourage you to tell your friends and family about our free podcast downloads, which you can find anytime at iTunes, Spotify, Google Play. Be sure to rate and review on iTunes as well. And if you need help understanding your risk tolerance level, your risk in your portfolio, and whether you are able to reach your financial goals, I encourage you to reach out to us at investtalk.com. Independent thinking, shared success. This is InvestTalk. Good night.
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