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TOP PICK

Verizon Communications Inc. is a holding company. The Company, through its subsidiaries, provides communications, information and entertainment products and services to consumers, businesses and governmental agencies. Its segments include Wireless and Wireline. The Wireless segment offers communications products and services, including wireless voice and data services and equipment sales, to consumer, business and government customers across the United States. Social media mentions are up 1300% in the past 24h.

COMMENT
Markets.

Nice to have two very nice years, but there's a cost to everything. As prices go up, value tends to drop, and that's what we've seen. We're slightly overvalued on PE ratios against historical levels. 2025 will offer opportunity, but we have to be realistic. The Mag 7 contributed over half to S&P returns for 2024.

Those who have benefited from the momentum plays of 2023-24 should be quite careful, lots of air under those stock prices. Unlike quality companies that are well valued against their historical norms, the high flyers don't have that valuation floor you can rely on when markets get scared. 

COMMENT
Company focus.

Make sure we're grounded in our stock choices, in a risk-off mentality. You just have to do your work. It's pure stock-picking and factor analysis as to what's going to drive the market. 

He looks for earnings, earnings growth, positive earnings revisions, quality balance sheets, and strong moats.

COMMENT
Will rotation to small caps continue?

He believes so. His small-cap portfolio had another good year. Valuations are quite a bit lower than those in the big-cap S&P 500, both in absolute terms and compared to historical norms. Lots of opportunity there. 

Much is due to smaller companies being more domestically based, so they don't face the huge headwinds of a strong USD. And the regulatory environment is positive. Changes to corporate tax policies will be most beneficial to domestic companies.

DON'T BUY

Company fundamentals are challenging. On paper, looks like a good model. But in practice, fail after fail. Overhang of healthcare malaise. Doesn't matter what the price is, you need fundamental quality to create value. Pass.

BUY

One of the most mispriced stocks around. Idea of win/loss in the space is simplistic. Good quality companies will get their piece of the pie. Well-respected brand, good app penetration. Growing at 25% annual clip on topline and earnings. Advertising is the fourth leg of the stool, and this is just getting started.

BUY
Buy around $250?

He'd buy today. Off highs. Benefits from positive bond market. Strong risk management. Fourth largest in world, largest P&C. Great combined ratio.

COMMENT
Effect of Trump policies.

In general, try to exclude the political rhetoric and how it will impact individual companies, though you have to be prepared for what might come. With Trump, every 10 pounds of words leads to about 1 ounce of action. To try to react to the words will take you to bad places. Put your noise cancellation headphones on, and let the company do the talking.

BUY

Can almost say it benefited from EVs having put the brakes on; parts of the technology are not as easy to use as most car owners would like. Doesn't mean there's no future in it, just that it's slowed down. Compelling valuation. Big stock buyback on the table. His favourite in the group.

BUY

Still positive. Trades around the market multiple, yet growing 3-4x the economy. Lots of different opportunities to do well. Main source of income is Search, but YouTube and Waymo monetization opportunities are immense. Plus there's AI.

PARTIAL SELL

He trimmed just the other day by about 25%. Still likes the company, just not the valuation.

BUY

The best in cybersecurity. Unfortunate software update meltdown could have happened to anyone. He doubled down when the stock bottomed. Growing rapidly. Probably biggest competitor is SentinelOne.