In this episode, Bill elaborates on the exciting developments in the AI chip market. With Alibaba’s recent breakout, we gain insights into how their advancements in AI and chip manufacturing could fuel renewed growth. Bill also takes a closer look at the differences in investment strategies, discussing the allure of value investing against the momentum chase. Wrapping up, Bill highlights the dynamic pharmaceutical sector, shedding light on the valuation differences and growth prospects of companies like Lily and Pfizer. Tune in for a comprehensive discussion on navigating today’s investment landscape.
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.
SPEAKER 02 :
And welcome to the Wednesday morning, September 17th. It’s Fed Decision Day. And I think the markets will just kind of wait and see what happens later this day. But we do have the markets open. They are trading. We have another mixed market. This is Bill Gunderson. President of Gundersen Capital Management. I’m pretty sure we’ll get a 25 basis point cut. Will they go 50? You know what? I don’t know about that. Today the market’s mixed, but it’s usually the NASDAQ that’s up and the Dow that is down. Today it’s just the opposite. The Dow is up 244 points. That’s a half a percent. The Dow is above 46,000 once again. The Dow’s at 46,002. The S&P 500 is down two points. It’s at 6,604. The NASDAQ down a little bit more. It’s down a third of a percent. It’s down 69 points, which puts it at 22,264. And then over at the bond market, the 10-year is flat right now. On this Fed Decision Day, it’s sitting at 4.02%. So welcome to today’s Best Stocks Now show with professional money manager Bill Gunderson, president of Gunderson Capital Management. and broadcasting live once again from the heart of the Silicon Valley right here in Santa Clara, just down the street from the headquarters of Arista Networks, not too far from the original Intel plant. Of course, you’ve got the big stadium here where the 49ers play, Levi’s Stadium. And a lot of good people here in the Bay Area. We had a full house last night at our workshop. I didn’t take a head count. I know it was well over 100. That’s all I know. My voice is struggling just a little bit today. I decide, you know, I don’t need a microphone. We’ll just wander the room here and teach the different ways of looking at the markets and individual stocks, etc., And we had a really, really good time. The markets basically took the day off yesterday. This is a big deal. We haven’t had a rate cut for nine months. And it’s long overdue. And markets just kind of, you know, we’re just going to kind of meander today. The NASDAQ was down a little bit. The Dow was down a little bit. Today we kind of have the same thing going on with the NASDAQ down a little bit and the Dow up 247 points right now. Well, we’re starting to get more economic reports in, and most of the reports I’ve seen lately should steer the Fed towards that rate cut. The retail sales were good yesterday. Today we get the housing starts, the building permits in. They weakened more than expected in August. I had someone ask me last night in the hall before the concert, before the workshop, what’s wrong with the housing stocks? I said, well, you know, number one, that’s not a very good place to be right now. They have their moments. They do well in an easing cycle, which we’re entering into. But they’ve been kind of up against it here with the cost of new houses and the cost of the loans. And it hasn’t been a good thing for the real estate sector, the building sector. People involved in the mortgage sector, the home builders themselves, lumber prices are crashing. Housing starts building permits weaken more than expected. And, you know, that is a big part of our economy. That area of the market needs help. I would think that Trump would probably give that sector of the market more love than the rest, and I guess he’s doing it through putting pressure on the Fed to lower interest rates. I mean, he’s the builder-in-chief out there, but it continues to struggle and be a tough industry to be in right now. And these housing starts and building permits, you know, if you can’t sell your inventory, you’re not going to be building new ones. until things get a little bit better, until the environment improves a little bit. China orders local tech firms to stop buying NVIDIA AI chips. Well, that’s gone back and forth a lot. I would say the biggest reason that NVIDIA has had its stops, its spurts here in 2025, is the China issue. The Cyberspace Administration of China has banned the nation’s largest technology companies from buying Nvidia’s AI chips, the Financial Times reported. Nvidia right now, last time I looked it was down about 1%. Nvidia does not obviously depend upon China for their success. They have plenty of demand coming from other areas. But at the same time, it doesn’t help them. Now NVIDIA is down 2.5%. And you can look at a chart of NVIDIA right now, and you can say, last night I did spend some time on technical analysis on those 1, 2, 3, 4 patterns. One is a sideways trend. Two is an uptrend. Three is a… topping out, you know, kind of you’ve been going up for a long time and now you’re leveling off. That’s probably a better way to describe it, leveling off. And then the worst trend of all is the trend that curls over and starts a new number four downtrend, right? As I look at NVIDIA, it’s in definitely a number three type of a trend, leveling off. And it’s even curdling over just a little bit, threatening to maybe break its support line. So we’ve got to watch that really closely on NVIDIA. They had a good earnings report, obviously, recently. But this whole China issue definitely is a bit of a drag on the stock. It would be nice to get that settled. I don’t see it being settled anytime soon. I haven’t heard how the talks are going in Spain between our trade representatives. NVIDIA regained permission to sell their H20 chip in July, but shipments have yet to begin, and they’re really not purchasing them in China. So we’ll just have to see how that kind of settles out here. But NVIDIA is still a very powerful company with tremendous growth ahead. Now, another issue that you have with NVIDIA, is China starting to develop their own chips. Alibaba’s AI chips get backing from China Unicom as a prominent client. Alibaba, by the way, that stock is breaking out. And we talked about breakout stocks last night, and I gave several examples of breakout stocks. Alibaba would be a classic. example of a stock that is breaking out and the way i explain it to people is imagine a floor and a ceiling and uh some kind of a pogo stick or whatever that’s the floor that’s the support where the stock has support and alibaba has had support in about the hundred dollar area over the last many months and then it bounces up and it hits its head on the ceiling which is the resistance area which has been at about 150 so Alibaba has been trading in a range of 100 on the downside and 150 on the upside and you can draw lines resistance lines and support lines We could call them floors and ceilings, okay? When it gets down to that floor level of 100, it finds support. And the pogo stick starts bouncing higher. But when it hits its head on that ceiling, it can’t quite get through. Well, one, two, three, four, five, six days ago, Alibaba finally broke through that 150 ceiling. and is now 165. It’s breaking out again today. It’s up 2.2%. And as I’ve said before, there’s a lot of factors here that you have to weigh in your own mind. It is Chinese. I mean, it’s a Chinese company. It’s $382 billion in market cap. It’s a competitor. It’s a player in AI. But the thing I think that it has going for it more than anything right now, it has a PE ratio of just 18. Obviously, NVIDIA is up around 50, or Amazon, or some of our other big tech stocks are trading at much higher multiples. And in a market that’s trading at high multiples, it would make sense somewhat for the market to look for AI stocks that are trading at lower multiples. And you’re not going to find them here in the Bay Area. Right now, you’re going to find them in China. And that’s an excellent breakout on Alibaba. We’ll be right back.
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I’ll be gone 500 miles when the day is done.
SPEAKER 02 :
And welcome back here to the second quarter of today’s Best Stocks Now show. I want to just mention a little bit more about this Alibaba story. Alibaba needs to get back to being a double-digit grower once again. I think it can. Their last quarter was about 8% growth, but I think now that they’re really getting into this AI and even getting into the building chips, AI chips for Chinese companies, I think you’re going to see the growth pick up once again. So, you know, if you look at the Best Docs Now app, that’s another thing we did at the workshop last night is I talked about how I come up with those five-year valuations on those stocks. I actually learned to do the five-year valuations from a mutual fund manager here in the Bay Area that I used to visit in my early days in the industry. He said, look, analysts come up with five-year growth rates. That’s very common lingo. in the industry whether it’s venture capital whether it’s a startups where it’s a private equity whether it’s publicly traded companies you’re looking at pro forma extrapolating out where you think you can be five years from now now you can put any numbers down on the paper you want or in the spreadsheet that you want but it has to be realistic okay Those five-year growth rates are generally out there on most companies. It’s the analyst consensus five-year growth rate. Yahoo Finance, for instance, has them. And other different facts that research has them. Others have those five-year growth rates. And so if you extrapolate the earnings out over the next five years, I mean, that’s what we’re doing. When we put a 12-month target price on the S&P 500, we’re not looking at the earnings today. We’re looking at where we think the earnings will be down the road a couple years from now. And those numbers are also out there. available to the public okay and okay once you figure out where those earnings could be uh two years from now three years from now four years from now five years from now then it’s time to select a multiple and i had questions about that i always do uh select a multiple to apply to those earnings to come up with a target price and it’s been my experience i did a major study on different multiples for different industries and came up with a basic multiple to start with whether it’s the building industry the aerospace industry the financials they all kind of have their unique multiples based on the industry that they’re in and obviously the tech stocks uh get much loftier multiples. Software companies, because of their profit margins, are going to get much loftier multiples than a company home builder that is very, very cyclical. I mean, it’s going to be a multiple in the 10, 8 to 10, 11 area. whereas a software stock might be in that 30 to 50 area. The growth also has a lot to do with a multiple. A company growing by a 20% growth rate is going to command a much higher multiple than a company growing at 2%. And you can see that when you look at P-E ratios of stocks. And that’s one of the reasons why Alibaba is trading at 18 right now. It hasn’t had the big growth that it had in its early days. And what has to happen is, I mean, it’s got to have this Oracle-like moment, this NVIDIA-like moment where all of a sudden, you know, it’s an AI stock and it’s back to 12% to 15% growth once again. And if you look at the app right now, Alibaba’s price target is based on an 8% growth rate. That’s the consensus out there. But I, a lot of times, overwrite those consensus multiples. I do in many cases. I come up with my own multiple if I think it’s off. And in the case of Alibaba, you know, I have recently raised my growth rate over the next five years to 15% per year. And that will change the price target of the stock because it’s one of the big components of calculating that target price. Eli Lilly posts detailed results from the obesity pill. Another big topic, another big subject that I talked about last night was this whole concept of being a disruptor. You want to invest in companies that are disrupting, doing the disrupting, not being disrupted. And as I look across the pharmaceutical industry, the drug industry, Where are the disruptors? Where are the new drugs coming from? What are the pipelines look like? And it’s pretty obvious that there’s a lot of leaders in the industry and there’s mostly laggards in the industry. If you don’t have a pipeline, if you don’t have new drugs that are ready to be released, you know, you’re going to get a very low multiple on your earnings. You take Pfizer, for instance, okay? Why is Pfizer, this plays into this whole multiple discussion, why is Pfizer trading in a multiple of seven? That’s its P.E. multiple, seven. and Lilly’s got a P.E. multiple of 47. Well, there must be a logical reason for that, and there is a logical reason for that. Lilly has a blockbuster drug in their ZepBound. Their earnings are going to be up 76% this year versus the same time last year. Next year, they’re going to be up another 32%. Whereas Pfizer has nothing that I know of in their pipeline. Their growth is 0% this year and 2% next year. Who’s going to get the better multiple here? You’re going to pay more for Wagyu than you’re going to pay for garbage meat from some little butcher shop down the street that’s selling wholesale beef or whatever the case may be. One is going to get a prime multiple, and the other one is going to get a bargain basement. You really got nothing going on right now, multiple. And look at the difference. Pfizer’s trading at seven times earnings. Now, obviously, if Pfizer can get something going on here and get their multiple, most of the times pharmaceuticals trade in the mid-teens to high-teens, okay, the Johnson & Johnson’s of the world market. the Pfizer’s of the world, the Merck’s of the world. But if you don’t have anything in your pipeline and no new drugs coming out, your multiple is going to take a big hit. And that’s exactly what you’re seeing in Pfizer. Now, the other school of thought when we come back is there’s those in the market that like companies that are flourishing. Or those that are hoping to flourish are completely out of favor right now and looking for their way, trying to find their way, and people like to buy down and out companies as value plays. We’ll talk about that a little bit more when we come back. This is Bill Gunderson.
SPEAKER 01 :
Thank you for tuning in to today’s Best Stocks Now, Best Inverse Funds Now show. Now, back to the second half of the show. Thank you.
SPEAKER 06 :
We got to get together.
SPEAKER 02 :
And welcome back here to the second half of today’s Best Docs Now show. You know, I used the room last night as kind of a little bit of an example. We had three columns. We had people sitting in the middle aisle of the workshop last night on the right side and on the left side, three different aisles. I said in the market over here on the left, you’ve got the deep value investors, the Benjamin Grahams, the Warren Buffetts, the Charles Brandises. There’s a lot of very well-known value investors. Michael Price was another one. And they really are interested in low multiple stocks. So they would be definitely doing their homework on a stock like Pfizer, trading at just seven times earnings right now. They’re also known as contrarians, okay? Contrarians, you know, the old saying goes is you want to buy the umbrellas in summer because that’s when they’re cheap. And that’s what contrarians do is they buy things that are out of season, that are out of favor, and are basically, you know, companies that kind of need a turnaround, right? Something’s got to happen over there at Pfizer to wake things up and get that multiple and get those earnings growing again. And then over on the far other side of the room, you have the momentum investors that don’t care anything about valuations. And the valuation guys don’t care anything about momentum. They don’t look at charts. They don’t look at relative strength. They don’t look at the stock’s performance over the years. They’re betting that eventually the value that they calculate is there. will be discovered and the stock will start moving higher. You have to be very, very, very, very patient to be a value investor and a contrarian investor. And to be honest with you, contrarian investing has not done very well over the last decade. You’ve got a decade where the S&P 500 has averaged 23% per year. And most of that performance is coming from stocks that are in favor, stocks that are flourishing, stocks that are growing, stocks that are innovative, stocks that are participating in new trends that we have in the world today. And the contrarian investors really have not done that well. If you compare value funds over the last 10 years, that’s another thing you can do with the app. You can compare a deep value ETF or mutual fund with the growth mutual fund. You’ll find that the contrarians have been way out of favor. That investing style has been way out of favor. But that doesn’t stop the contrarian because, you know, usually once a contrarian, always a contrarian. And they’re going to stick to their contrarian ways of buying those stocks that are trading at low P-E ratios and not pay much attention at all to a lousy stock chart, a stock that’s not performing, a stock that’s not growing. Their earnings growth is zero. It’s low single digits, but they don’t care. They’re patient and they’ll wait. And the momentum, guys, I don’t care if it’s trading at 47 times earnings. Look at the growth and look at the market they’re addressing. Look at the market that Lilly is addressing. The obesity issue is one of the biggest issues. Pardon the pun. out there and it’s also a massive health care issue in our whole health care system so they just care more about relative strength and the market share that the company can attain the growth that the company currently has and then sitting in the middle is where i’m at where i think you have to have be able to make sense of that value that valuation i mean you can look up my five-year target price on lily and i’ve been in and out of lily a few times lily’s had some starts and stops along the way but i think the pill is going to be a big boost to getting more and more help uh… for people uh… that have an obesity issue when i was flying out here from charleston uh… one of the stewardesses okay she was quite overweight i mean maybe four hundred pounds and it’s not easy to get around an airplane pushing those carts and what not it’s already tight quarters and i just thought about how many people you know have that issue and there’s help there is help for them uh… we have uh… an employee that’s lost ninety pounds on the lily uh… zep bound okay if there’s help for you I just think there’s a huge market that has not been addressed yet for the Lilly drug. Lilly stock is starting to perk up. It completely lost its momentum and its relative strength, but it’s starting to pick it up again. And I think the catalyst is the pill. And there is a new study out on the pill. And I always look at how the stock is reacting to the news. Lilly continues to break out here. right now, LLY, it is up. Well, that’s a very good chart on you, Lily. It finally bottomed out in the 600 area, and now it’s back to 774. It’s up $9 a share, or 1.2% today. So in my opinion, there’s a good example. Pfizer is a deep value stock that has no momentum. Lilly is a stock that’s gaining momentum, but I can also make a very good argument for it from a target price point of view. If I extrapolate their their growth, their earnings over the next five years and apply. I’m not going to apply a seven multiple to Lilly, the same multiple that another big, large pharma has. The other one is a troubled company with nothing going on for it. So it’s going to get a very discounted multiple. Whereas Pfizer is going to be at the upper end of the multiple range. You know, I remember when Regeneron had the macular degenerative drug, ILEA. It got a glamour multiple for several years. I remember when Gilead Sciences had the pill that eliminated the need for a liver transplant. It had a glamour multiple for many, many years. So anyways, that’s kind of how that momentum versus value dynamic works in the market. And usually people will find themselves in one or the other camps. And I would say another characteristic of the two disciplines is Value investors are many times buying stocks that are hitting new lows, okay? And the momentum guys, they love stocks that are breaking out and hitting new highs. And now I say come in the middle. I like stocks that are hitting new highs much more than I like stocks hitting new lows, obviously. But I need to make that valuation case for the stock. Okay, another one I want to bring to your attention here today. I didn’t really know this about the stock until now, but I’ve been watching it, and I’ve owned it in the past, New Market. which is N-E-U. New Market, the description in Marketsmith doesn’t really tell the story. It manufactures coating systems for automotive refinished and light commercial vehicles. That’s not the story at all. They need to change their… their description of the company. But this is a stock that’s been hitting new all-time highs. Not only does it have very strong momentum, It’s trading at a PE ratio of 16. Okay, so what’s their claim to fame? Newmarket is, I learned this by doing my research in the mornings and going through the news headlines. Newmarket is going to acquire a company called Kalka Solutions. All right. Based in Lake Charles, Louisiana, Kalka is a hydrazine producer, a critical chemical used primarily as rocket fuel. and a propellant for spacecraft. It is currently a portfolio company of private investment firm AE Industrial Partners. Now why do I bring that up? If you look at my sector rankings in the market, there’s about 65 to 70 sectors that I follow in the market, one of the best performing sectors right now is space, rockets, space exploration, drones. How many rockets is SpaceX firing into space? They’ve launched, I think, 30,000 or more satellites now for their internet space link. And other companies, Amazon is launching rockets. You’ve got a lot of private companies, rocket labs, et cetera. And so I didn’t really know what the buzz was around New Market, but now I know. It also is involved in the rocket industry. The symbol is N-E-U. You can look at it. I don’t own it. But I found that story to be very interesting, and it opened my eyes to why this stock has the kind of momentum that it has behind it right now. Another one that’s catching my eye right now, Quantum. And this stock… It catches my eye because it’s breaking out. Okay, sometimes the chart brings you to a stock first. It’s breaking out to new highs. And then you look underneath as to why it’s breaking out to new highs. More on that when we come back. The final segment of the Best Stocks Now show. This is Bill Gunderson.
SPEAKER 08 :
Do what you want to do with it.
SPEAKER 02 :
And welcome back here to the final segment of today’s Best Stocks Now show. You know, and then, of course, there’s another way. There’s the value way. There’s the momentum way. And then there’s that valuation in the middle. But what about stocks that don’t have any earnings yet? What about companies that, you know, the smaller nuclear stocks would be good examples. Oklo and SMR. and nano, etc. What about the quantum computing stocks, the Rigettis of the world, and the IonQs of the world? Well, in that case, you have to pretty much, number one, you’re going to lean heavily to the momentum side, okay? If a company is acting and behaving very, very well, you should take note of that. And then if you look and say, well, they’re still losing money, that just means they’re in an earlier stage of their cycle, right? And that’s where you then have to start looking into some of the analysts, the stories that are being written about the stock. And those guys value companies in a little different manner. I mean, they know the sector that they’re in. They know the time frame that the company is shooting for. They’re getting guidance from the management on when they think that sales will start to come in and hopefully start to fall to the bottom line. Sometimes it’s a two-year trajectory out. Sometimes it’s a three- to five-year trajectory out there. But, you know, before a company ever goes public, The example I’m going to give you is IonQ, which is headquartered in College Park, Maryland. They develop trapped ion quantum computers for the purpose of commercial, industrial, and academic applications. They do actually have some sales. IonQ over the last 12 months has had about $50 million in sales. So they’re a little further along than some of the other quantum computing stocks. But obviously they don’t have enough yet. I mean they’re still putting a lot of money into R&D. into their sales efforts etc etc etc but in the meantime you have a stock that’s breaking out the new fifty two week highs on very large volume and that’s something that you have to take note of and you know so from my perspective that’s why i have a fourth portfolio that i manage You know, the premier growth are established companies and some of the best growth stocks in the world today. The ultra growth company are stocks that are just taking off the runway and are really starting to ratchet up growth. Okay, especially earnings growth and that earnings growth is there and it’s coming and it’s now and the stocks are flourishing now. That fourth one is down in that emerging growth portfolio. It’s my most aggressive portfolio. And a lot of times, you know, Barry will talk to people and say, people will say, you know, we want a little bit of exposure down in that area. You know, we’ve nailed some big winners down in that. And it only takes two or three, four big winners to really kind of carry that whole portfolio. But a lot of times people will say, And that’s why we’ve created hybrid portfolios that are a mix. You can mix and match. Like McDonald’s, they have a menu. You get two of these for $5, okay? And there’s a picture of an Egg McMuffin and maybe a, I don’t know, a burrito, sausage burrito or whatever. Well, some people will choose to pick the one that is a mix of the large cap, premier growth, the middle tier, the altar growth, and some of the emerging growth stocks in there. And you know, in today’s world, without any trading fees, I can do a pretty good job of building a portfolio from the best, from those three different strategies, right? You can have some emerging growth portfolios, stocks in your portfolio. You can have, and each one are equally weighted, about two and a half to three percent. You end up with 30 or 40 stocks from three different walks of life. And that’s a good way to do it. It’s kind of a blend of all three portfolios. But a stock like IonQ, I don’t own it, but I have owned some of these portfolios. You know, when I kind of got disgruntled about the quantum stocks is when Jensen, our friend Jensen Wang came out and said, ah, now these stocks are a decade away. But he’s definitely backed off of that stance. And these stocks are behaving a lot better here now than they were back then. And they’ve recovered. I mean, IonQ got down to $3 a share. Now it’s at $63 per share. It’s up 14% today. Okay, so that’s something to take notice of. What’s wrong with having a growth portfolio? You know, you’re 50 years old or 55. You’re still in the accumulation phase. You’re not in the distribution phase yet. of taking income from your portfolio what’s wrong with having a little bit of stocks like that mixed in that are down there on the emerging growth side so I’m just giving you an example of the different categories of stocks okay and then you know above the next level if you’re a premier growth stock if you’re a meta in the world today and you’re still growing 20 25 eventually you’re going to become a cisco eventually you’re going to become a uh an intel eventually you’re going to become a johnson and johnson where the growth is now single digits uh the multiple goes way down and you’re paying a dividend okay My problem with that area, I tried to make something of investing in dividend-paying stocks, thinking that, well, that gives you kind of a safety net underneath. They just don’t perform very well. It’s hard to get any inefficiency in that world because it’s so popular. I mean, buying dividend-paying stocks, and that’s why all your Wall Street firms are loaded in these big dividend-paying stocks, but they end up being soggy. and not providing very good return. So, you know, that’s part of Barry’s job as our certified financial planner is deciding the mix. that might be appropriate for you based on your risk tolerance and your growth objectives and where you are at in your own cycle. Are you retired? Are you living off your money now? Are you still in the growth phase? Are you going to pass the money on to your kids? Are you now growing this money for your kids? All of that comes into play. To set up an appointment with us, 855-611-BEST. 855-611-BEST. To get a sample of the newsletter, the app, and the live trades for the next four weeks, next month, go to GundersenCapital.com. And let’s hope for a 50 basis point hike. You’ll hear a cheer out of Silicon Valley. I know that. I don’t think it’ll happen, but you never know. See you tomorrow. Have a great day.
SPEAKER 03 :
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 SIPC and FINRA.
