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He’s been seen on CNBC, the Fox News Channel, and the Fox Business Channel. His articles can be found on MarketWatch, Seeking Alpha, TheStreet.com, and many other places. He’s the author of the weekly Best Stocks Now newsletter and the inventor of the Best Stocks Now app. He’s president of Gundersen Capital Management. Here is professional money manager Bill Gundersen.
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And welcome to the Tuesday Minnetonka, Minnesota edition of the Best Stocks Now show with professional money manager Bill Gunderson. And I’m not here with Barry Kite today, but he is here. He’s down weeding with some of the folks while I do my duties here on the show. And it looks like we’ve got day three of a round of profit-taking today. In the market, we’ll talk about that in a bit as to why, what might be going on. Is this the end of the bull market that’s been going since 2009? We’ll talk about all that in a moment. But right now we go to the Dow, which is down 156 points. That’s 31 basis points. The Dow’s at 49,529 after closing above 50,000 here recently. The NASDAQ is taking it the hardest, and most of the profit-taking continues to be in the AI section of the market. NVIDIA is going to report earnings tomorrow. That will be critical. And I’m seeing a lot of upgrades today to a lot of the AI stocks, which we’ll go over here in a bit. The NASDAQ’s down 256. That’s day three of some pretty heavy profit-taking in the NASDAQ as we wind up this current earnings season. The NASDAQ’s down 1% right now. The S&P’s down 46 or 60 basis points. to $73.56, and we’ve got to look at the two culprits right now. Culprit number one. Okay, we’ll open door number one, and that is the 10-year interest rate. Wow, 4.65% today. So welcome to today’s Best Stocks Now show with professional money manager Bill Gunderson. I don’t know how many years I’ve been coming to Minnesota. Quite a few, maybe a decade’s worth, maybe 10 years’ worth. But we’re in Minnetonka for the first time. Man, I got a beautiful view of lovely Minnesota. We’re right in front of the world headquarters for UnitedHealthcare, UNH, a member of the Dow. And, of course, you remember UnitedHealthcare in the news not so long ago in the streets of New York City when the co-CEO was gunned down by Luigi. uh… quite a story that was and of course the stock is not done very well it is up forty six percent i believe so for this year’s a lot of value players have uh… well they’ve uh… you know they’ve they backed up the truck loaded up some cheap shares but over time it it’s been a pretty poor performer i’m also right next to stratus this i remember stratus is for my early days in the business i’m gonna say stratus this was one of the very first of three d printer companies in the world So it’s kind of interesting to be here in the tech center of Minnetonka, Minnesota today. Okay, we’re on day three of a round of pretty heavy profit-taking and some pretty, you know, I would say extended, gleeful, euphoric types of stocks. The Microns, the SanDisk, the Nibiuses, the… videos of the world the AMDs of the world and I would say this number one I’ve seen this many times you know how many profit how many earning seasons I’ve been through well 26 times 4 what is that 96 earning seasons and I’ve always noticed there seems to be a pattern at the end of an earning season which by the way this one has been one of the best earning seasons I’ve seen in many years but that’s kinda like well that was the news now we’re looking ahead to you know to the next earnings season but we’re going to finish with about a 27 percent gain in earnings versus the same quarter last year that’s just phenomenal absolutely phenomenal and it appears that a lot of that was built into the stocks however when you when we go through some of these leading stocks in the market right now We’re going to see a lot of upgrades to those stocks and new target prices for those stocks. I don’t think they’re over. Even though the last three days you may say, oh, it’s all over. What should we do now? No, I don’t think it’s all over. We’ve still got a long ways to go in this current data center crunch that has hit the global economy. The two biggest factors right now, interest rates, the bond market. And, you know, it’s really nothing wrong with the U.S. economy. A lot of it’s coming out of the U.K. The U.K., the 30-year has just exploded to all-time highs as they have a crisis in the U.K. at the top with leadership and people wanting a change in leadership. And that has kind of set off a global bond rout. you could say and I pointed this out in my newsletter over the weekend I put a chart every week one of the charts that I always look at is I E F that’s the 10-year Treasury that is the most common bond that people look at as far as the benchmark goes that’s like the S&P 500 of US bonds And you will see in that chart last week that it actually broke down below support. And when it breaks down below support, guess what breaks out above? Resistance. Interest rates. And all of a sudden, we’re headed for 5%, it looks like. We’re at 4.65% right now. We were under 4 not that long ago. And there’s a couple of things causing it. There is some turmoil there, obviously, in the U.K., but these stubborn oil prices are bringing back fears of a second wave of inflation. Crude oil right now is down 1% today, but it still sits at $103.38. And fuel is a big part of the CPI and the PPI, and that’s going to show some hot inflation numbers. So therefore, investors are looking for higher interest rates to ward off the risk that they perceive from inflation. And interest rates are moving up. Right now, rates on the 10-year, investors are demanding 4.65%, which ain’t a bad return, really. Those returns are better than a lot of money managers and a lot of stocks over the years. You take a look at Disney, it’s averaged 1% a year for the last 10 years. 4.65% per year doesn’t look too bad on a U.S. Treasury right now if you hold it for the next 10 years. Or you can sell it along the way, whatever the case may be. And in the interim, you’re getting 4.65%, which is a pretty good rate. On what’s considered to be one of the safest? investments in the world today The other thing that we have going on is those bond yields as I just said are going to start competing with stocks Why would I own Disney? Why would I own Kraft Heinz? Why would I own any number of stocks that have delivered single digit returns over the last decade when I can buy something much, much, much, much safer with much, much, much less volatility than a stock, an equity, when I can buy a U.S. Treasury and get 4.65%. So therefore you see why all of a sudden bonds start to compete with stocks. So instead of money right now going into stocks, especially these big, slow, giant, moving, soggy stocks of yesteryear, and I can’t argue with the fact that personally, I’d rather own a 10-year yield, a 10-year bond at 4.65 than Disney, than UnitedHealthcare, than AT&T, than any number of stocks, Kraft Heinz that have returned single-digit returns. You know, the other day, last week I was in New York City. I was there for nine straight days, I believe. And I was at a place where I met a mutual fund manager. And I know the fund well. He works for Invesco. He’s a young guy, probably a Harvard Wharton School business graduate. And he told me that I run the Invesco program. Global International Value Fund, the Invesco International Value Fund. Well, I know quite a bit about international value funds because in San Diego we had one of the very best in that category in Charles Brandes. who was a student of Benjamin Graham, who also, he was the broker of the day one day in La Jolla, California, when Benjamin Graham walked in and said, I want to open an account. And it was Charles Brandes that was sitting there on call that day, like the car lot. Graham parks his car, walks onto the lot, And Brandis says, how can I help you? And they struck up a friendship. And basically, Brandis became a big disciple of the Benjamin Graham style of investing, which has not done well recently at all. Well, as I was flying out here yesterday from Charleston to beautiful Minneapolis. I sat with some characters. They had been golfing in Kiowa, which is pretty nice. The ocean course is where Phil Mickelson won the PGA several years ago in quite a stunning victory for a guy, you know, over the age of 50 or whatever he is. I think he was 56 when he won it. And they were kind of a bunch of yay-hoos, really. But they’re from Phoenix, and one knew a lot about San Diego. He says, have you ever been to Ocean Beach, Bill? I told them who I was and what I did, and I go, well, yeah, I grew up right by Ocean Beach, which ain’t much of a tourist attraction. It’s more of an enclave of former hippies, you know. Lately, I mean, out in Sunset Cliffs, there’s some pretty nice homes. We had a home out in Sunset Cliffs for a while, and I grew up not too far from Ocean Beach, but that was our beach. And going to Point Loma High School, most people, there were a lot of surfers and whatnot at Point Loma High. And I did some surfing and body surfing and boogie boarding. And I like body surfing the best myself. But I just want to give you something. This is about inflation because we’re looking for a second wave of inflation. That’s what the market’s worried about right now. If you’ll notice, when you go to the beach where there’s surfers, the surfers aren’t not facing the beach where all the girls in bikinis are. No, no, no, no, no. That’s for the landlubbers. The surfers are facing the ocean, and they’re sitting on their board, and they’re looking out on the horizon, and they’re looking for swells. And there’s some big ones. Oh, I’ve been there. I don’t personally get out there when they’re 23-foot swells, but some of the guys do. No thanks. I’m going to watch for my car in the parking lot. while the lifeguards in the jet skis try to rescue them. Out at Suami’s off of Encinitas, I’ve seen 25-foot waves out there, just like the North Shore of Hawaii. But in Ocean Beach, we face the horizon. We face west, and we see a swell coming. Did you know that the ocean has a rhythm, that it has a pattern? It has a pattern of threes, believe it or not. The first swell that comes along looks pretty good. The second one behind it is even bigger and the third one is the climax and it’s called the set. Here comes a set of waves. And the smart surfer waits for the third set because that’s going to be the monster to ride in to the beach before you paddle back out and wait for the next set to come along. Well, we’ve had the first wave of inflation. It was pretty bad. Maybe we had the third wave first when we got up around 9%, 10%. That was very bad. And now we’re sitting around 3%, 4%, somewhere in that range. We’ll call that maybe the first set. We’re back to the first set. And we’re hoping the first wave of the set, we’re hoping that the one behind it doesn’t take us back up to 5% or 6%. And there seem to be two major factors right now that are causing that fear. I would say number one without question is oil still sitting at $103 per barrel because it is a big component of the CPI and the PPI. And it greatly impacts the consumer. I can’t remember the last time I filled up my SUV and it was $96 when I got home from New York. $96 to fill up the tank. Well, I said, okay, I just spent $96 on my, I’m not going to go in and get a bag of Cheetos. I’m not going to go in and get a thing of a green monster energy. I just spent all my money in the stupid gas tank. Well, you know what? That ripples across the economy. And also you have a lot of companies that look at airfares right now. I mean look at the cost of shipping things right now because of the price of oil. That is bringing about a second wave of inflation fear as investors scan the horizon waiting for the next swell to come along. Right now 40% of investors are citing it as their top concern. Well Here’s the good news. Earnings are not the top concern of investors. The economy is not the top concern. The job market is not the top concern. No, they’re worried about inflation. What does inflation have to do with the stock market? Inflation impacts the multiple of the stock market. So these last three days, we’ve seen some multiple contraction, the P-E ratio that people are willing to pay for stocks. As bond yields rise, you have P-E ratio shrink. And the only way to shrink it, you’re not going to shrink the earnings. The earnings are there, so you have to shrink the P in P-E, which is the price of the stock. So you’ve seen about maybe a 5% correction in some of the higher price stocks right now because of the fear of this second wave of inflation that’s going to keep interest rates elevated. for longer than we had anticipated. Now, what would bring interest rates down? Well, that’s a very easy answer. What would bring interest rates down would be getting oil back down into the $80, $70, $60 range. That would bring interest rates down very quickly. What’s the likelihood of that happening? Well, it all really is in Iran’s hands. Do they want to negotiate and bring about a peaceful resolution to this conflict? Or do they want to incur the wrath of the U.S. military and be forced into a resolution which may not be peaceful of this conflict? But basically, one way or another, the conflict in Iran needs to come to a head. It needs to be resolved. And oil prices will tumble if that were to happen. And that will bring down interest rates. So it’s as simple as that. I mean, that’s what it all comes down to. And that’s why everybody really is watching the daily news, which there has not really been any kind of a break whatsoever other than, He did postpone a full-on attack against Iran. Now, it’s in my opinion that he’s waiting for some stability at the top of the leadership of Iran. You can’t really make a deal with somebody that’s not going to be the leader two weeks from now or three weeks from now. For me, that’s what’s taking place right now. Obviously, I’m sure we’re in there. We know what’s going on at the top. We’re waiting for the people to finally get in there that we can work with And I just see this still as a temporary hiccup in a raging bull market that is being fueled by earnings, earnings, earnings. Well, if you’re in the Minnetonka area today, or tonight, or Wednesday, or Thursday, stop on by. You might want to call first. Call 855-611-BEST. 855-611-BEST. It looks like we’ve got a full lineup of appointments over the next three days. you never know there may be a cancellation every once in a while hall’s chop house will call me from downtown charleston say mr gunderson we have a cancellation would you like a table for two at 5 p.m sure i’ll be there okay that’s like the hardest reservation to get in in charleston and i’m a pretty tough reservation to get when i come to towns too but we’ll see if we can work you in while i’m here i like to I put forth a lot of effort to travel to these cities. I love doing this. It’s one of my favorite things. And if we can work you in, we will work you in. Once again, 855-611-BEST. And, of course, tonight at 7 p.m., it’s Gunderson Live from New York City. No, from Minnetonka, Minnesota. I will be teaching. I always talk about my background a little bit, my kind of belief system of the market, my philosophy behind the market, how I became a half value and half momentum kind of investor and what that means. I’ll be talking about the current state of the market, valuations, and areas of the market that still look fertile. To me, that usually takes an hour, hour and a half, hour and 45 minutes, and I leave 15 minutes at the end for questions. We have a drawing at the end for some prizes. And you can also call to reserve a seat. I haven’t seen the room yet, but you just have to call to see if there’s space. 855-611-BEST. 855-611-BEST. Okay, back to the market, the chip trade. The AI chip trade is getting crowded fast. Large global semiconductors have emerged as the world’s most crowded trade, with 73% of investors identifying the position as the top consensus bet in Bank of America’s latest Global Fund Manager survey, according to the strategist at Bank of America. So it’s way up, meaning that maybe that it’s a little bit overblown here. The survey points to investors doubling down on the AI-driven chip trade. Now, okay, what do we mean by AI-driven chip trade? We mean Micron. We mean SanDisk. We mean SK Hynix. We mean Samsung. We mean Broadcom. We mean NVIDIA. which, by the way, is going to report earnings tomorrow. And then some of the second-tier stocks. You can even kind of count Intel in there right now. What’s the one that the – oh, I can’t think of it right now. The fiber optic chip stock is one also out there. And, of course, ASM Lithography. There’s news on that here today. So we’ll be talking about that. B of A Strategist. For what that’s worth, that’s basically Merrill Lynch, said the positioning backdrop leaves markets vulnerable to profit-taking, especially if bond yields continue to climb. Well, it doesn’t take a rocket scientist to figure that out. But will we get interest rates to start coming back down? Will we get oil prices back down? That seems to be a more likely scenario going forward. then months and months and months of high oil prices and raging inflation. I have a hard time believing that the current administration would allow that to happen. But B of A is entitled to their opinion on that. And I do agree. We’re going to see profit taking until things look better on that front in the Middle East. A jury ruling. You know, Musk got beat. The odds, I remember the prediction markets here recently were leaning towards Musk prevailing against open AI. I just don’t know that Musk can find a jury that’s on his side anymore. He seems to have made a lot of enemies lately. The fact that the jury ruled in favor of OpenAI in the Elon Musk lawsuit against it removes a significant overhang against it and paves the way for an initial public offering, otherwise known as an IPO, says Woodbush Securities. I personally, and people ask me all the time, Bill, would you be buying the SpaceX IPO? Would you be buying the OpenA IPO? Would you be buying the Anthropic IPO? No, I would not be. Because you’re getting it. You become the ATM machine for all the people that are in the stock at a much, much lower price. And I got to believe that these stocks, these companies are still losing a bunch of money They still have a lot of capital expenditures ahead of them. They’re burning money like crazy. That just to me is not a good backdrop. And overall, IPOs have underperformed the market big time. Big time. That’s all you have to do is look at the Renaissance IPO fund. You want access to IPOs? Buy the Renaissance IPO. That’s the symbol E-T-F. They buy IPOs. That thing has underperformed the market on a wide, wide margin over the years. ASML’s new high NA machines will create chips, will arrive in a few months. This is a major, major step up. in the chip making process and let’s not forget that ASML is the only company in the world that has this kind of technology and machines. Well, by the way, you can pick up a machine. Maybe you can get one on eBay. Look it up. Tell them you want an A-S-M-L-N-A machine that’s coming out here in a few months. And they might be able to find one for about $400 million. That’s what one of these machines cost. That’s more than a Ferrari. $400 million for a machine that makes high-speed chips like the ones NVIDIA makes. Now, what does NA stand for? High Numerical Aperture. I knew that. Numerical Aperture, or NA. Extreme Ultraviolet, or EUV. Okay, not UVA. EUV machines are next-generation lithography systems used to print nanometer scale blueprints for advanced AI logic and memory chips. The machine will reduce costs for patterning or creating the circuitry of the most advanced chips for both logic and memory applications. Wow. In the next few months, we will be looking at the first few products wherever in memory and logic being exposed on the high NA system. So there you go. Fouquet’s comments come on the heels of customer Taiwan Semiconductor holding back on buying the high NA UV machines due to the higher cost. Well, come on, 400 million. Let’s add a few of those to the assembly line there over at the Taiwan Semiconductor. NVIDIA is going to report tomorrow. HSBC ups their target price for NVIDIA. Let’s see. Lee, this comes from an analyst, Frank Lee. He reiterates his buy rating on NVIDIA and ups his target price to $325 from $295. Now, let’s check in on Nvidia today, and we’re going to look it up in the Best Stocks Now app to see how it measures up there also. But we are getting another analyst out there who follows the stock closely, upping his target price. So Nvidia is currently trading at 219. It hit a new all-time high one, two, three, four days ago. And now we’re in the third day of a correction in this area of the market. So it’s come down from about $245 to $220 or so. It’s done about $25 a share over the last couple, two, three days. He’s upping his target price to $325. That’s a year out. It’s currently trading at 219. So if you believe him, it has more than 50% upside potential over the next 12 months, which is pretty good if you want to believe him. Now, I’m going to go to the Best Stocks Now app and see what the app has to say about a target price. It remains one of the greatest stocks we’ve ever found. N-V-D-A, NVIDIA is going to be in the news big time. That’s all they’ll talk about all day on CNBC, all day long. Probably this evening, the morning, after the market, blah, blah, blah. NVIDIA, NVIDIA, NVIDIA. Well, NVIDIA is currently a, oh, the market cap right now, $5.38 trillion. There’s never been another stock in the Dow Jones Industrial Average or in the U.S. markets that I know of that’s hit that kind of market cap. And obviously, most analysts believe that it can go higher. Okay? It can go higher. Well, we have… I can’t believe people call me during the radio show. Don’t they know I do a live radio show? Okay. Looks like it’s our new Treasury Secretary calling. No, I’m just kidding. Okay, NVIDIA. Let’s look it up on the app, okay? NVIDIA. Its track record of performance, Jensen Wang at the helm. Over the last 10 years, NVIDIA stock has averaged 71.7% per year. Now that’s past, it’s looking in the rear view mirror, but that’s cool. Over the last five years, it’s delivered 73% per year, while the market has delivered 15%. The difference between 73% and 15% is what we call alpha. Over the last three years, NVIDIA has delivered 97% per year. That’s basically doubling every year over the last three years, and we’ve owned it much of that time. The SP’s averaged 26%. NVIDIA slowed down a little bit this year. Over the last 12 months, it’s only up 65%. Market’s up 25%. And year-to-date, it’s really slowed down. NVIDIA is only up 19.2% year-to-date, but the S&P is up 8.1%. So there’s your track record looking in the rearview mirror. It earns a performance grade of A+. This is graduation time of year, right? A lot of graduates, high school, college, junior college, you name it. There’s usually a valedictorian, head of the class, top of the class. I would think a company, a stock that has averaged those kinds of returns over the years, it’s definitely at the head of the class in the Dow 30. It’s not UnitedHealthcare. I’m right here in front of UnitedHealthcare’s headquarters, world headquarters. They go up against NVIDIA in the Dow, an index called the Dow. NVIDIA, now we have to look forward, not backwards, forwards. And that’s where the valuation comes in. And I’ll be talking about that tonight at my workshop. If you want to learn how to value a stock, at least using my methodology, which is an earnings-based methodology, there are several definitions. different methodologies, discount to cash flow, discounted time, over time, what today’s cash flow is worth, these kinds of things. I use an earnings-based, which most analysts in my industry use. I have a target price of 452 five years from now, which would put Nvidia above 10 trillion in market capitalization. It is an A+. No, an A. Strong buy. It’s an A. And out of 5,218 stocks in the market today, NVIDIA comes in at number 23 overall. And it continues to be a large position. Now, I don’t know what they’re going to report tomorrow. I would expect you to see some pretty strong earnings today. The question is, how much of that is already built into the cake, right? How much is that baked into the cake already? Is there any frosting left on that cake? Can we light some more candles on that cake? Well, we’ll find out tomorrow. I’m more concerned with where it will be tomorrow. two, three, four, five years down the road than what it does tomorrow. That’s the way I look at it. Now, two other stocks that I want to get to in the final two minutes of the show today that are also receiving a lot of attention recently, and they’re also part of this kind of round of profit-taking that we’re undergoing in the market right now. SanDisk in focus as Citi ups price target more than 50%. They’re raising their price target from $1,300 to $2,000. That’s Citigroup. They’re a little bigger than Gunderson Capital. Citigroup, the boys over Citigroup. I want to say they ended up with Smith Barney. I’m not sure about that, but that’s where I think Smith Barney ended up when we had all those shotgun weddings. So with a $2,000 target price on SanDisk, SanDisk is currently trading at $1,300. So that’s a pretty lofty target price being put on them by Citigroup. And the last one I want to talk about is the other elephant in the room as it relates to memory chips. Micron sees bullish view at Citi. Same group again. If you like Citi… They’ve got pretty bullish view on both Micron and on SanDisk. And on Micron they have, they’re upping their target price. Listen to this. Listen to this. Citi raises their price target on Micron to $840 from $425. Well, I would say they’re a little bit behind the curve. Myself, when you raise a target price that much, that means you were pretty far behind with your target price before you had to take such drastic action. Kind of reminds me of the Fed having to do 475 rate hikes in a row because they were so far behind the curve. The analyst said he was way behind the curve. He had a $425 price target on Micron, which is now trading at $677. And someone asked me, is Micron still a buy? Look it up in the app yourself. They’re putting out an $850 target price, which is significantly higher than the 678 that it’s trading at today. So there you go. And you’re going to get rounds of profit taking in these kinds of stocks along the way. That’s part and parcel of being in the market and being in some of these high growth stocks. Eventually it will be over. DRAM prices will start falling. Demand will start to fall. And the prices will collapse. The stocks will collapse. But we’re not there yet. I don’t see that yet. And I think that’s evidence. A couple of witnesses. Well, one, we’ll give it Citigroup as a witness to what I believe in these stocks. All right, well, we are out of time. I’ve got a full day of meetings ahead. No rest for the wicked. I’ll be down there meeting with the folks. And tonight at 7 p.m., man, I can’t wait. I love to get in front of a live audience. That’s one of my favorite things in life to do. And I hope that I have a lot of very useful information. 7 p.m. at the Minnetonka Marriott, 855-611-BEST. or GundersenCapital.com. GundersenCapital.com. Have a great day, everybody.
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This show is not a solicitation to buy or sell any securities. Bill Gunderson or clients of Gunderson Capital Management may have long or short positions in stocks mentioned during the show. Past performance is not indicative of future performance. Gunderson Capital Management is a fee-based registered investment advisory firm. All accounts are held at Charles Schwab. Schwab is a member of SIBC and FINRA.
