[SPEAKER_01]: On radio, on YouTube, streaming live on investtalk.com and for our podcast subscribers, this is Invest Talk.

[SPEAKER_01]: Independent Thinking, shared success.

[SPEAKER_01]: Invest Talk is made possible by KPP Financial, a registered investment advisor firm serving clients throughout the United States.

[SPEAKER_01]: Here is KPP Financial Portfolio Manager, Luke Guerrero,

[SPEAKER_00]: Good afternoon, fellow investors, and welcome back to the last edition of Investock for 2025.

[SPEAKER_00]: My name is Lou Guerrero, and it is December 30th Tuesday, December 30th.

[SPEAKER_00]: We are about to cross over into the new year.

[SPEAKER_00]: And you'll look around.

[SPEAKER_00]: Boy, his time flown by, the fourth quarter has all but disappeared.

[SPEAKER_00]: We have one short trading day left in 2025.

[SPEAKER_00]: And it's been a year.

[SPEAKER_00]: It's been a year of changes.

[SPEAKER_00]: It's been a year of themes.

[SPEAKER_00]: It's been a year that is worthy of reflection.

[SPEAKER_00]: And see it in Vestock, we decided to make an episode on our YouTube channel, where we did just that, we reflected.

[SPEAKER_00]: But you shouldn't wait till the end of the year to reflect.

[SPEAKER_00]: You should do reflecting.

[SPEAKER_00]: You should be reflecting each and every day.

[SPEAKER_00]: And so we hear an investor hope that we are a part of that process because our objective remains the same each and every episode to help make you a better and more informed investor.

[SPEAKER_00]: We do that by bringing the stories that matter to your ears, to your eyes.

[SPEAKER_00]: We also do that by most importantly, answering your finance and investment questions.

[SPEAKER_00]: To that end, in just a bit, we'll talk about today's market performance and run down those show topics, our final show topics for 2025.

[SPEAKER_00]: But let's tackle this color question now.

[SPEAKER_05]: All right, I was looking to get your take on stock advanced rated systems.

[SPEAKER_05]: The ticker is WMF.

[SPEAKER_05]: I'm looking to get some exposure in the water industry.

[SPEAKER_05]: Thought this might be a good start to add, Q&A, your thoughts in the cell.

[SPEAKER_05]: What do you think is a good price point would be to buy in.

[SPEAKER_05]: Thank you.

[SPEAKER_00]: This is one of many calls we've gotten recently, looking for some exposure into the water industry.

[SPEAKER_00]: Now, advanced drainage systems, ticker WMS, designs, manufacturers, and markets, thermoplastic, corrugated pipes and water management products.

[SPEAKER_00]: The Fairly Large Company, it's falls in the mid cap category 11.6 billion dollar market cap.

[SPEAKER_00]: Terms of debt?

[SPEAKER_00]: Well, not much, right?

[SPEAKER_00]: 1.4 billion in debt and revenue growth has been pretty solid over the past five years up from 1.6 billion to 2.9 billion as of March 2025 when their fiscal year ended, but revenue has fallen since 2023 down from 3 billion to that 2.9 projected to gain again to 2.9 and 9.4 billion this upcoming year.

[SPEAKER_00]: The same time net income has kind of been all over the place they lost money in 2020 started to just really grow into 2023 where they had 500 million in net income, but that's kind of stagnant.

[SPEAKER_00]: Now, in spite of that, you're today, they're up 27.12% up 27.97% in the past 52 weeks.

[SPEAKER_00]: That are really rough 2022, a crazy 2023, up 71% then another rough 2024 down 17.6 underperforming not only the market, but their industry as well.

[SPEAKER_00]: But a relatively strong 2025, and this is placed them in a position where they're now trading at about their average price to forward looking earnings.

[SPEAKER_00]: And then this company has beat recently, in recent quarters, that certainly has supported the share price.

[SPEAKER_00]: They have a big

[SPEAKER_00]: growth initiative that involves not just acquisitions, but internal utilization of revenue as well.

[SPEAKER_00]: And, I mean, infrastructure and construction demand, especially within the water space, especially for drainage and water systems.

[SPEAKER_00]: I mean, it's been influencing this company's revenue and the industry as a whole, it's led to a lot of growth.

[SPEAKER_00]: Now in the near term, what happens when infrastructure projects?

[SPEAKER_00]: Because spending tends to be cyclical, especially in this space, damn it's down a little bit.

[SPEAKER_00]: I mean, 93% of the revenue comes to the United States, 4% from Canada.

[SPEAKER_00]: Overall, I think the trends here,

[SPEAKER_00]: I think what is driving this industry is solid.

[SPEAKER_00]: And, I mean, look at that really strength, going back to 2019.

[SPEAKER_00]: So, advanced drainage systems, a bit of a pullback recently, only up about five percent over the past three months, put it itself once again into a more reasonably priced position.

[SPEAKER_00]: I kind of like it, advanced drainage systems to your WMS.

[SPEAKER_00]: Thanks for the call.

[SPEAKER_00]: And we've got a lot of ground covering the next 45 minutes or so, and you're just a little bit of what we have planned.

[SPEAKER_00]: My main focus point concerns this topic, the dogs of the Dow, a 2026 strategy.

[SPEAKER_00]: So we'll talk about the history, the mechanics of the dogs of the Dow strategy, and analyze how dividend yield is utilized as a valuation metric to screen for potentially contrarian trends within the index.

[SPEAKER_00]: got a couple more important stories for you to wrap up the year, including one on International Stocks.

[SPEAKER_00]: They have done very well in 2025, so we'll talk about the reasons why.

[SPEAKER_00]: We'll touch on the Fed minutes, and why there should be a little bit of caution heading into 2026.

[SPEAKER_00]: And should we have time at the end of the show, you know, with the past couple years as the year turned?

[SPEAKER_00]: Well, people where we're a bit weary.

[SPEAKER_00]: Going into 2026 though, there is a lot of optimism on the horizon, so we'll touch on that.

[SPEAKER_00]: This is all some voice bank calls, ready to play, including one on precious metals, and another on IWM, the I shares Russell 2000 ETF.

[SPEAKER_00]: So, some questions that came in from the comment section of the Invest talking YouTube channel, and of course, I welcome your findings and investment questions now, or any time throughout the channel.

[SPEAKER_00]: We're going into Break, please remember that you can call any time and leave your questions on the Invest Talk Voice Bank.

[SPEAKER_00]: If you're listening via our live stream or possibly on a 1220 in the Bay Area, give me a call now at 80-8899.

[SPEAKER_00]: Hang on, because when we get back, we'll talk about today's market activity.

[SPEAKER_02]: For the holidays, KPP Financial is excited to introduce a high-value limited time offer, the holiday estate bundle.

[SPEAKER_02]: It's specifically designed to help new households quickly establish a solid foundation for their financial and personal legacies before the year ends.

[SPEAKER_02]: When you begin a financial relationship with KPP Financial and complete your onboarding by December 31, 2025, you'll receive essential estate planning documents as an added benefit and it's all powered by our trusted partner, Truston Will.

[SPEAKER_02]: Learn more about the holiday estate bundle now at investtalk.com and while you're there, fill out a portfolio review to get started.

[SPEAKER_02]: And now the phone lines are open and waiting for your finance and investment questions 88899 chart

[SPEAKER_02]: the new year is almost here.

[SPEAKER_02]: And it's a safe bet to assume you might have, finance and investment questions for Justin Klein and Luke Guerrero.

[SPEAKER_02]: Especially if you are wondering about potential tax implications.

[SPEAKER_02]: So what are you waiting for?

[SPEAKER_02]: Call in Vestock 88899 chart.

[SPEAKER_00]: 88899 chart is the number if you're trying to get through before the end of the year.

[SPEAKER_00]: Before we get to more questions, let's talk a little bit about the market today.

[SPEAKER_00]: U.S. stocks finishing lower overall and near their worst levels after remaining and what was a pretty fairly tight channel.

[SPEAKER_00]: for most of the session, the Dow Down 20 basis points, S&P 500 down 14, Nasdaq down 24, Russell 2000 down 76.

[SPEAKER_00]: Diving a bit deeper, the most shorted names, high beta names, momentum, small caps, all some of the worst performers, underperforming groups also included banks, investment banks, asset managers, credit cards, biotech, fairing particularly poorly today.

[SPEAKER_00]: Big Tech really overall pretty mixed meta was a notable gainer amongst that group, and then on the other side energy, managed care pressures, metal miners, PNC ensures and reads all fairing pretty well.

[SPEAKER_00]: Dollar Index was up 20 basis points, gold finished up 1% after losing more than 4% on Monday, silver settled up nearly 10% after losing 9% yesterday, and crude oil settled down at 20 basis points,

[SPEAKER_00]: off of some early in the day strength.

[SPEAKER_00]: Overall, though, I mean, it's pretty quiet, right?

[SPEAKER_00]: The market is preparing to close 2025 tomorrow and what is a holiday shortened session.

[SPEAKER_00]: No real directional impulses from any of the high profile headlines which included the December FOMC minutes.

[SPEAKER_00]: including some AI deals with meta acquiring Manus for $2 billion in video, reportedly in talks to acquire AI 21 labs for $2 to $3 billion soft bank, completing the $40 billion round of open AI funding.

[SPEAKER_00]: There was a big precious metals bounce that followed the Monday sell off, but none of that really turned out into the market ending the day.

[SPEAKER_00]: Positive, there's also no sign of that season of tailing at Santa Claus rally that seemed to find some traction in prior weeks.

[SPEAKER_00]: the December FMC really probably the big story of the day.

[SPEAKER_00]: We'll talk about that a little bit later, but it had very few surprises.

[SPEAKER_00]: I mean, most officials see more rate cuts in 2026, but only if inflation declines continue.

[SPEAKER_00]: And so there's a bit of caution.

[SPEAKER_00]: There's a bit of division that remains in that group.

[SPEAKER_00]: We're called the Fed cut rates by 25 basis points with three dissents tweaked their forward guidance maintained their median projection for one rate cut in twenty twenty six and announced forty billion dollars a month in treasury bill purchases.

[SPEAKER_00]: Elsewhere, initial claims data will be out a day early on Wednesday.

[SPEAKER_00]: The markets will be fully closed on Thursday for the New Year's holiday and we'll get the final manufacturing PMI's for December that will be the alone release on Friday.

[SPEAKER_00]: Well, we already answered a voice mail and we have not yet dipped into our Invest talk YouTube voice bank.

[SPEAKER_00]: So why don't we tackle a question right now?

[SPEAKER_00]: This one from Java script Jolt and it is on ticker P-O-E-T which is poet tech knowledgeies.

[SPEAKER_00]: It says hi.

[SPEAKER_00]: I'm Tiffany from Indiana.

[SPEAKER_00]: What are your thoughts on the stock?

[SPEAKER_00]: Poet, the company has a low debt equity ratio and

[SPEAKER_00]: Well, taking a look, poet is a $1 billion small cap company that has about 600 million in debt.

[SPEAKER_00]: So I would say I actually have a decent amount of debt relative to their equity.

[SPEAKER_00]: What does it do though?

[SPEAKER_00]: It designs and develops optoelectronic and photonic integration solutions.

[SPEAKER_00]: Trying to speed up and improve data communication in a high performance computing AI system.

[SPEAKER_00]: So,

[SPEAKER_00]: Big investment is what they're looking for as the data center build out.

[SPEAKER_00]: Continues, right there, platform is aiming to integrate photonics circuits in order to speed up communication within these data centers with all the data that is stored there.

[SPEAKER_00]: My efficiency is the name of the game, especially when you're trying to iterate on top of consistent hardware.

[SPEAKER_00]: Now,

[SPEAKER_00]: Revenue growth has exploded from 2020 where they had $0 in revenue as a pre-revenue company.

[SPEAKER_00]: up to 552 million in 2022, but that all the way down to 41 million in 2024 projected to be 1.15 billion this year.

[SPEAKER_00]: So volatility all over the place.

[SPEAKER_00]: Same time, absolutely no money has been made for this company, net income is incredibly negative.

[SPEAKER_00]: Negative 20 billion in net income, EBITDA margins, negative 1,843.

[SPEAKER_00]: So certainly profitability is

[SPEAKER_00]: I wouldn't say on the horizon because frankly, you can't even see where profitability is yet for this company.

[SPEAKER_00]: Now, there's a lot of optimism because it's seen as a play on next gen connectivity and maybe it is certainly could be a play on AI infrastructure.

[SPEAKER_00]: But, I mean, they're in a pre-profit stage.

[SPEAKER_00]: They are raising a bunch of money, raising a bunch of money, likely deluding shareholders as well.

[SPEAKER_00]: And so, at a time when there's a bit of skepticism, already, of the amount of money that has been spent in the build out of data centers, build out of AI, is it wise to then go and say, okay, let's speculatively trade.

[SPEAKER_00]: It's not investing in this case, speculatively trade on a company that hasn't made money.

[SPEAKER_00]: The company that actually does have a decent amount of debt, again, 626 million on a $1 billion market cap company.

[SPEAKER_00]: A company that is inherently going to be volatile, not just because of its size, but because of its current fundamentals and its operation.

[SPEAKER_00]: So overall, unprofitable, early stage, potentially, potentially, I'm going to say it again, potentially next gen technology, a lot of execution risk, a lot of inherent volatility.

[SPEAKER_00]: So for P-O-E-T, poet technologies, for now I'm going to have to pass.

[SPEAKER_00]: Thanks for watching.

[SPEAKER_00]: Now I briefly mentioned it at the top of the show, and that's because I was really excited about what we did.

[SPEAKER_00]: And if you're trying to find a way to end your 2025 right, it's as simple as going over to our YouTube channel to search in Vestock with two T's and check out our holiday special.

[SPEAKER_00]: It was the first time we did this, it was really fun.

[SPEAKER_00]: I think you're gonna enjoy it of actually spoken to some people who did portfolio reviews who said that they enjoyed it.

[SPEAKER_00]: We reflected as one should about the lessons that we learned from 2025, what we got right, what we got wrong because everybody gets things wrong.

[SPEAKER_00]: And most importantly, how we can take those lessons into 2026.

[SPEAKER_00]: It is all available on our YouTube channel.

[SPEAKER_00]: I think you should go over there and check it out.

[SPEAKER_00]: We're moving a new break still to come.

[SPEAKER_00]: My focus point, more answers to your questions and hopefully somebody picks up the phone and dials 888-99 chart.

[SPEAKER_02]: In the early days, in Vestock was Jerry Klein and Steve Peasley.

[SPEAKER_02]: Now the torch has been passed and a new generation of hosts is on the job.

[SPEAKER_02]: Justin Klein and Luke Guerrero.

[SPEAKER_02]: So when you've got finance and investment questions, don't forget to call in Vestock.

[SPEAKER_02]: 888-99-Chart.

[SPEAKER_00]: Every December, the same investing strategy resurfaces and conversations among income-focused investors.

[SPEAKER_00]: The dogs of the Dow, the idea is simple, and can be a bit appealing.

[SPEAKER_00]: You buy the 10 highest yielding dividend stocks in the Dow Jones industrial average, and you hold them for you.

[SPEAKER_00]: Simple.

[SPEAKER_00]: on the surface, it sounds a bit counterintuitive to intentionally buy underperforming stocks, but the tension is exactly what attracts followers.

[SPEAKER_00]: The logic rests on the assumption that blue chip companies don't cut dividends lightly, even when share prices fall.

[SPEAKER_00]: When prices fall, but dividend stay intact yields rise, simple math.

[SPEAKER_00]: Signaling that may be their potentially undervalued, you know that might not be exactly what it means.

[SPEAKER_00]: But this strategy bets that prices eventually recover, while investors collect steady income along the way, and each year investors rebalance into a new group of dogs, equally waiting the positions, and letting the process repeat.

[SPEAKER_00]: Now, historically,

[SPEAKER_00]: The approach had a respectable run, averaging around 8-9% annually since 2000, depending on the period measured.

[SPEAKER_00]: The long-term record helps cement its reputation as a low maintenance alternative to stockpicking.

[SPEAKER_00]: But recent years have exposed the strategy's limitations, especially as market leadership has narrowed.

[SPEAKER_00]: This year, in 2025, the dogs did beat the broader Dow, but not because every stock worked.

[SPEAKER_00]: Performance was driven by a handful of winners, while at least one major laggard dragged returns down.

[SPEAKER_00]: Verizon became the absolute poster child for this risk, entering the year with the highest yield of delivering barely positive returns, competitive pressure, subscriber losses, and heavy capital needs, show that a high yield can sometimes be a warning sign, not a bargain.

[SPEAKER_00]: This is why some variations of the strategy emerge like the Dow 5 or the Dow 4, which

[SPEAKER_00]: Simply excluding the cheapest, highest yielding stocks materially improved results for 2025, the outcome highlights, but if a deeper issue with the dog's approach, it treats all yields equally regardless of business fundamentals.

[SPEAKER_00]: High yields can reflect temporary misprice it, but they can also reflect structural declines.

[SPEAKER_00]: In early decades and earlier decades, the strategy benefited from what we call mean reversion across mature industrial companies.

[SPEAKER_00]: Today's market is fundamentally different with technology, capital intensity, and competitive disruption, playing a much larger role.

[SPEAKER_00]: That shift has understandably then reduced the effectiveness of purely mechanical dividend screens.

[SPEAKER_00]: Another critique is that the dog strategy focuses on absolute yield, rather than relative yield.

[SPEAKER_00]: A stock yielding 5%, may look attractive,

[SPEAKER_00]: But if it's historically yielding 6-7, well, then it may not actually be cheap.

[SPEAKER_00]: Conversely, a stock yielding 3 might be compelling if the yield is high relative to its own history.

[SPEAKER_00]: Strategies that emphasize relative yield tend to avoid value traps and focus more on the dividend sustainability.

[SPEAKER_00]: This explains why some dividend-focused approaches have outperform the dogs over at longer periods of time.

[SPEAKER_00]: Still,

[SPEAKER_00]: The dogs of the Dow endure because they appeal to investor psychology, they offer structure, they offer easy discipline and they offer a sense of contrarian logic without requiring constant decision-making for some investors that simplicity is worth more than squeezing out incremental returns.

[SPEAKER_00]: The key lesson is that the dog's strategy is broken, but the dividend alone

[SPEAKER_00]: is not a sustainable substitute for business quality.

[SPEAKER_00]: We talk about this all the time because there are investors out there and you may be one of them and that's okay.

[SPEAKER_00]: Who just seek out dividend yield or dividends in general because they like the idea of income coming to them.

[SPEAKER_00]: But looking back historically, you see many companies that have zero dividends that still trade at reasonable valuations that perform better than companies

[SPEAKER_00]: which is why dividends should not be the only indicator.

[SPEAKER_00]: It should not be the only flag.

[SPEAKER_00]: It can be part of a holistic approach to identifying companies not because of what a dividend is, but because of what a dividend might signal that a company is mature, that a company has the ability to return capital to shareholders, that a company may be able to weather cyclical stresses.

[SPEAKER_00]: In today's market, dividend investing works best when income is paired with balance sheet strength with competitive position and with realistic growth expectations.

[SPEAKER_00]: Alone, dividends don't tell you much.

[SPEAKER_00]: But together, with all of this, they can tell you a great deal.

[SPEAKER_00]: Well,

[SPEAKER_00]: 2025 really, man, 2025 really came at you fast and it seems the old joke, our parents always told us our grandparents always told us that as you get older things started moving more quickly.

[SPEAKER_00]: But boy does it seem in 2025 that that is the case.

[SPEAKER_00]: And so I didn't

[SPEAKER_00]: Each and every day coming here, being a part of your journey to becoming a better and more informed investor.

[SPEAKER_00]: And so, as it did in 2025, our mission will continue in to 2026.

[SPEAKER_00]: But before that calendar turns, we still got plenty of show left today.

[SPEAKER_00]: We haven't had a call yet.

[SPEAKER_00]: I know some of you are on vacation, but hopefully someone wants to pick up the phone and dial 8899 chart.

[SPEAKER_00]: Either way, we'll see you on the other side in this very short break.

[SPEAKER_02]: Every investor is working to build a secure financial future.

[SPEAKER_02]: How they get there and when they get there, that depends on many factors.

[SPEAKER_02]: The more you learn about how the market works, the better your chances for success.

[SPEAKER_02]: So don't forget to call, in Vestark, 888-99 chart.

[SPEAKER_00]: I asked and James from Sonoma answered the call.

[SPEAKER_00]: Well, I guess we answered his call.

[SPEAKER_00]: James, how can we help you?

[SPEAKER_04]: Well, when you mentioned the date, I thought it was going to be a deep program.

[SPEAKER_04]: You mentioned the date.

[SPEAKER_04]: I said, this is why I started dialing.

[SPEAKER_04]: I'm looking at the IDVO.

[SPEAKER_04]: OK.

[SPEAKER_04]: It's an ETF covered call.

[SPEAKER_04]: What makes it unique is the fact that it's a foreign stocks.

[SPEAKER_04]: Yep.

[SPEAKER_04]: has a history of not only going to happen value, but the dividend goes up.

[SPEAKER_04]: So for me, going to go in in the IRA, it's like a perfect thing.

[SPEAKER_04]: I'm reading a lot of things with paper that dividend or foreign stocks are liable to go up a little bit more this year than the F&P.

[SPEAKER_04]: Also, I want to comment on covered calls.

[SPEAKER_04]: I realize this limits the upside, but also to limit the downside.

[SPEAKER_04]: So have that at least.

[SPEAKER_00]: Awesome.

[SPEAKER_00]: Well, actually, that's a great question because it'll segue into a topic a little bit later on when we talk about the difference of returns between US stocks and international stocks this year.

[SPEAKER_00]: And over the past decade, we've really seen this US exceptionalism trade where US stocks, US assets are performed for various reasons, which we'll dig a little bit into a little later on.

[SPEAKER_00]: International markets and emerging markets came back to a war.

[SPEAKER_00]: this year.

[SPEAKER_00]: So this fund IDVO is the Amplify CWP International Enhanced dividend income ETF.

[SPEAKER_00]: It is a mouthful, so we'll go buy IDVO.

[SPEAKER_00]: And here today it's up 36.87%.

[SPEAKER_00]: It has about 619 million under management, so it's not the largest of fund.

[SPEAKER_00]: And its management fee is about 65 basis points.

[SPEAKER_00]: So

[SPEAKER_00]: But primarily exposure outside the United States.

[SPEAKER_00]: Now, when you're talking about international, right?

[SPEAKER_00]: This breakdown, if you're looking on my screen right here, shows you revenue by country.

[SPEAKER_00]: So even though you buy a company, that may be listed outside the US, you still have some US exposure, right?

[SPEAKER_00]: If they're selling their products there.

[SPEAKER_00]: So I like looking at revenue.

[SPEAKER_00]: Only 20% of the revenue comes from the United States for the companies in this fund, meaning that is far less than anything you would see that tries to invest in the US market, but the US consumers so powerful that you can't really outrun it.

[SPEAKER_00]: Now, a lot of exposure to Canadian consumers, a lot of exposure to Japanese Brazil all over the place.

[SPEAKER_00]: So what this fund does is it tries

[SPEAKER_00]: Targeting high quality dividend paying ADRs, American depository receipts.

[SPEAKER_00]: So it invests in those liquid tickers that are available in the US, but they are four international companies and it writes calls.

[SPEAKER_00]: It's a covered call strategy.

[SPEAKER_00]: We manage a covered call strategy at KPP.

[SPEAKER_00]: It is a similar way you buy these stocks.

[SPEAKER_00]: You write calls on them.

[SPEAKER_00]: You get some premium income.

[SPEAKER_00]: That's how it limits your downside because if the stock falls well You got some premium income.

[SPEAKER_00]: So it doesn't your return is at least a little bit better than the stock in that respect But it limits your upside because if the call becomes valuable it becomes in the money Well, then that stock gets called away.

[SPEAKER_00]: So you cap your upside.

[SPEAKER_00]: That's that downside protection, but it's not a free lunch You can't you can't have a free lunch in investing

[SPEAKER_00]: Now, I like covered call strategies, especially if you're looking for income, if you wanted to have some downside hitch, the only gripe I have here is that oftentimes they take that premium income and they lump it in and call it yield.

[SPEAKER_00]: And so that's the one concern I would have here, right?

[SPEAKER_00]: Is that it isn't a dividend that you're getting from this?

[SPEAKER_00]: There is risk inherently to the premium that you're getting because of that upside you're giving away.

[SPEAKER_00]: Either way, I kind of like this fun because you get the International Exposure, because it is a bit expensive, but given where it's investing, not crazy expensive at 65 basis points.

[SPEAKER_00]: And so if you're looking for income while getting that International Exposure and having some downside risk while understanding that your upside is capped, I think IDVO is a fine way to go.

[SPEAKER_00]: Thanks for the call, and happy new year.

[SPEAKER_00]: Thank you.

[SPEAKER_03]: Merry Christmas and Happy New Year, guys.

[SPEAKER_03]: I'm lucky and fortunate enough to always be able to max out my raw off around the start of the year.

[SPEAKER_03]: This year is the same, fortunately.

[SPEAKER_03]: However, I've always been an S&P 500 type of guy, typically I've stuck the BOO 100% exposure.

[SPEAKER_03]: I'm going to have it blister and it sounds like I might be a little over exposed and might want to diversify.

[SPEAKER_03]: or I put some of my allocations this year.

[SPEAKER_03]: I'm looking for a little mid-cap exposure.

[SPEAKER_03]: I've got two names, I'd hopefully like you to compare.

[SPEAKER_03]: I WM, that's a Russell 2000 ETF, and CALF, I see CALF.

[SPEAKER_03]: There's a 40 basis points, an expense ratio, more so.

[SPEAKER_03]: So it's a lot more expensive, but wondering if it's holding out way I WM, you can compare those two and let me know.

[SPEAKER_03]: That would be amazing.

[SPEAKER_03]: Happy New Year, guys.

[SPEAKER_00]: So, we're a bit of a nerd for index construction, and so this is a good question, because you have IWM, which is the I shares Russell 2000 ETF.

[SPEAKER_00]: The way that is constructed is you take the 1,000 largest names in the U.S., you get rid of them, then you take the next 2,000 names, so it is primarily a small cap index.

[SPEAKER_00]: Okay, so that's why it's called the Russell 2000 US small cap index.

[SPEAKER_00]: It is style neutral.

[SPEAKER_00]: It is agnostic about whether you are value where you are growth, whether you make any money at all or whether you make a lot of money.

[SPEAKER_00]: It is purely a style neutral.

[SPEAKER_00]: benchmark index that tracks U.S. small caps, and so you see it's very inexpensive 19 basis points.

[SPEAKER_00]: A bit more expensive than its large cap counterparts because of the inherent cost of trading smaller names, but you get broad U.S. small cap exposure.

[SPEAKER_00]: Here you see small caps 31 percent, mid caps about 57 percent, but it's going to be in the lower end of that mid cap range.

[SPEAKER_00]: This is what you call style drift.

[SPEAKER_00]: Now, that is fundamentally different from our second ETF, which is CALF, the Pacer US SmallCap Cash Cows ETF.

[SPEAKER_00]: It matters what your investable universes.

[SPEAKER_00]: For the Russell, they make it super simple.

[SPEAKER_00]: They don't make any objective decisions.

[SPEAKER_00]: It is purely a name count number of names.

[SPEAKER_00]: Construction, S&P is different.

[SPEAKER_00]: The Pacer US SmallCap Cash Cows ETF

[SPEAKER_00]: which is chosen by a committee.

[SPEAKER_00]: So there are choices that are made here.

[SPEAKER_00]: Now they may call them objective, but there are choices here regardless.

[SPEAKER_00]: What do you get?

[SPEAKER_00]: Well, it's a bit more expensive, 59%.

[SPEAKER_00]: But you also end up getting something that is far less invested in small caps.

[SPEAKER_00]: And this is called the SmallCapCashCows ETF.

[SPEAKER_00]: This has half as much smallCap exposure.

[SPEAKER_00]: Now, you do get some things that I like here, right?

[SPEAKER_00]: They are screening out financial companies with the exception of REITs.

[SPEAKER_00]: They are looking for companies that have negative cash flows and they get rid of them.

[SPEAKER_00]: And they rank companies by profitability.

[SPEAKER_00]: And so what you end up getting here is some small cap exposure albeit less with a profitability tilt.

[SPEAKER_00]: That being said, you're looking for a small and mid cap exposure purely

[SPEAKER_00]: I think the Russell 2000 does it in a less expensive way and a more pure way because again, they're not making decisions as a committee of what is a small camp.

[SPEAKER_00]: So between these two, I think I would have to go with IWM.

[SPEAKER_00]: Thanks to the call.

[SPEAKER_00]: Well this is a good segue because of the live call we just got from James and that is to talk about how 2025 has delivered a rare reversal for global equity markets with US stocks lagging badly as gains elsewhere it clips to Wall Street for the widest margin since the 2009 financial crisis the S&P rose 17.4% on the year pretty solid

[SPEAKER_00]: But the MSCI All Country World XUS jumped nearly 30% highlighting how decisively, performance tilted away from the United States.

[SPEAKER_00]: Early optimism about AI helped US markets rebound from April's Tariff Dr. Vincel off but the momentum faded as valuation concerns started to resurface.

[SPEAKER_00]: President Trump's trade policies and broader economic agenda left a bit of lingering uncertainty, which is to be expected in an election year rather the year after an election.

[SPEAKER_00]: But it did reinforce a bit of worries about U.S. growth, about earnings expectations, and about how that may be peaking in an era where globalization is in retreat.

[SPEAKER_00]: investors increasingly started to question the heavy concentration of US stocks in global portfolios especially given elevated tech valuations and what has been historically crowded positioning many asset managers responded by actively reducing US exposure and looking for opportunities in markets investors had long ignored and those returns that I mentioned.

[SPEAKER_00]: weren't even after taking a consideration how much the dollar has fallen relative to a basket of international securities.

[SPEAKER_00]: So who emerged as the biggest beneficiary?

[SPEAKER_00]: Well, it was Asia.

[SPEAKER_00]: In spite of the priority of the trade war with China, right?

[SPEAKER_00]: Asia was helped by China's Deep Sea AI breakthrough, which challenged assumptions that U.S. firms would dominate AI at any cost.

[SPEAKER_00]: That moment triggered a sharp resessment of AI spending briefly knocking in video, and contributing to a broader loss of exuberance amongst U.S. tech, China acquiesced a strong comeback, with investors warming to signs of economic stabilization, and competitive innovation in technology.

[SPEAKER_00]: South Korea also stood out as one of the year's biggest winners driven by explosive games, and some of my conductor leaders tied to global tech demand.

[SPEAKER_00]: You're also enjoyed a renaissance, buoyed by Germany's fiscal stimulus plans and a renewed confidence in peripheral markets such as Spain and Greece.

[SPEAKER_00]: By year end, the dominant theme was diversification.

[SPEAKER_00]: As investors concluded that the era of U.S. only leadership had given way to a broader, more international market cycle as we head into 2026.

[SPEAKER_00]: Stackle and other YouTube comment section question.

[SPEAKER_00]: This one from our friend, Alex 34, there's about five L's in that screen name.

[SPEAKER_00]: That's why I sounded like that when I said that.

[SPEAKER_00]: And it's on ticker OC, which is Owens Corning.

[SPEAKER_00]: It's at high.

[SPEAKER_00]: I hold a small position with Owens Corning, ticker OC, and I'm hoping to give your thoughts on whether to hold by or sell this stock.

[SPEAKER_00]: Well, heading into 2024 relative strength of solid here.

[SPEAKER_00]: You had a company that had performed very well, relative to the S&P 500.

[SPEAKER_00]: 2020-25 has been rough down 33.57% down 33% in the past 52 weeks, underperforming

[SPEAKER_00]: the S&P by 50.8% underperforming its industry by 21.1.

[SPEAKER_00]: Now, what is Owen's Corning?

[SPEAKER_00]: Well, it's a $9.4 billion market cap company.

[SPEAKER_00]: That is based in the United States and is a building materials, manufacturer best known for insulation, for roofing, and for fiberglass composites.

[SPEAKER_00]: What is really caused some of these issues?

[SPEAKER_00]: is that this company is inherently exposed to the cyclical nature of building roofing makes up 36% of this company's revenue.

[SPEAKER_00]: Insulation makes up 33% of this company's revenue.

[SPEAKER_00]: And so you see a revenue growth, slow dramatically.

[SPEAKER_00]: It was averaging 9%.

[SPEAKER_00]: Even taking a consideration, slow growth in 2024, 2023.

[SPEAKER_00]: From one period to the next, averaging 9%.

[SPEAKER_00]: Now it's projected to go from 10.9 billion down to 10.1 earnings have been,

[SPEAKER_00]: a bit rough.

[SPEAKER_00]: valuations were also very high relative to where they've been for some time.

[SPEAKER_00]: It has come back down to its average over the past five years now sitting at 10.2 times, price to four looking earnings, five times price to cash flow.

[SPEAKER_00]: It was as high as 15 times price to earnings at one point.

[SPEAKER_00]: And so at a time when there's softer demand in the building sector, residential and

[SPEAKER_00]: has softened.

[SPEAKER_00]: Understandably, Owens Corning has performed poorly.

[SPEAKER_00]: In their recent earnings, wasn't great.

[SPEAKER_00]: Guidance wasn't great.

[SPEAKER_00]: I think for now I would keep this on my watch to say, I know you're a holder of it.

[SPEAKER_00]: Maybe do some tax loss harvesting if you bought it at the high.

[SPEAKER_00]: But either way, I don't see much of a catalyst in the near term to change this trajectory.

[SPEAKER_00]: So for now, on Owens Corning, going to have to pass.

[SPEAKER_00]: Thanks to the call.

[SPEAKER_00]: What are you trying to squeeze in another call a question before I next break?

[SPEAKER_06]: Hey Justin look, this is the anthem on the pre-kinatic question about the precious metals seem to be they were they were all down today and if you haven't covered it yet on your show and I was wondering why you know silver steel, upper gold is all down.

[SPEAKER_06]: Thanks very much.

[SPEAKER_00]: Great question.

[SPEAKER_00]: So I'm assuming that this call came in on Monday because there was a big down day in gold and silver and copper in metals.

[SPEAKER_00]: And there has since been a subsequent rebound today.

[SPEAKER_00]: Honestly, this is a lesson in something that we haven't seen in quite some time, because gold has been so bullish for so long, because silver has been on a dramatic explosive march over the past couple months, because copper is having a moment as well, but this is a lesson that commodities are inherently volatile.

[SPEAKER_00]: Gold is an incredibly liquid market.

[SPEAKER_00]: Right?

[SPEAKER_00]: Silver far less so.

[SPEAKER_00]: The reasons that are driving each of these things are a bit different gold US dollar debasement, massive fiscal deficits, printing money, international central banks trying to move away from US dollar denominated assets.

[SPEAKER_00]: Silver, supply dynamics, silver is inherently a byproduct of other metal mining, meaning that if the prices of other metals go down,

[SPEAKER_00]: that the demand for producing copper would then inherently fall, and so would silver.

[SPEAKER_00]: But it doesn't change the inherent supply dynamics of a metal that is incredibly important in the industrial space, incredibly important in the AI build-out.

[SPEAKER_00]: And copper as well, with database production, with the electric transition.

[SPEAKER_00]: And so you can't let an individual day of movement.

[SPEAKER_00]: override, the overarching themes that are driving these commodities higher.

[SPEAKER_00]: This goes back to the number one lesson of investing from in Vestock, understand what you own.

[SPEAKER_00]: Buying commodities is going to be a heck of a ride, but the trends, especially for these three metals, are still pointed in one direction.

[SPEAKER_00]: This is in Vestock.

[SPEAKER_00]: I'm the Greer, we have one goal here.

[SPEAKER_00]: And that is each and every day to get you to leave a better and more informed investor in order to help you achieve your financial freedom.

[SPEAKER_00]: We did it all through 2025 and we will continue to do it through 2026.

[SPEAKER_00]: Our work continues after this break, our final break of 2025.

[SPEAKER_00]: So get your questions in now or hold on to until next year.

[SPEAKER_02]: 2025 is almost out the door, but you've still got finance and investment questions and Justin Klein and Luke Guerrero are on the job.

[SPEAKER_02]: Call anytime 24-7 in Vestock, 888-99 chart.

[SPEAKER_07]: Hey guys, just wanted to get your thoughts on Red Cat Holdings, Pickerssemble RCAT.

[SPEAKER_07]: Now listen for your answer on the show and hope you have a happy New Year.

[SPEAKER_00]: Well, first happy new year to you as well, and everybody out there listening.

[SPEAKER_00]: So this is our last question of 2025.

[SPEAKER_00]: Let's make it a good one.

[SPEAKER_00]: Red Cat Holdings is a US-based drone and unmanned services technology company.

[SPEAKER_00]: What they do is they develop an integrate robotics, hardware, software solutions, primarily for defense, government, and commercial purposes.

[SPEAKER_00]: 100% of their revenue comes from the United States.

[SPEAKER_00]: It's portfolio, if you will, it products.

[SPEAKER_00]: Primarily focuses on these short-range reconnaissance drones, like it's black widow, maritime unmanned systems at other autonomous systems.

[SPEAKER_00]: And drones have, certainly, for multiple purposes, commercial purposes, research purposes, defense purposes, have a lot of press recently.

[SPEAKER_00]: There has been a huge amount of demand in the defense space.

[SPEAKER_00]: A lot of competitors out there as well.

[SPEAKER_00]: Now this company is a very small company, 976 million dollar market cap they have over a billion dollars in debt so they have more debt than they do have a market cap value.

[SPEAKER_00]: United out 39.38% down 44.71% over the past 52 weeks, volatility is the name of the game here going back to 2019.

[SPEAKER_00]: Revenue is exploded.

[SPEAKER_00]: It is absolutely exploded for this company, but net income is not followed suit.

[SPEAKER_00]: Even to margin, still the negative hundreds.

[SPEAKER_00]: Profitability is very far out for this company and so you would get when you would expect, right?

[SPEAKER_00]: For an unprofitable company with negative earnings, it's not yet delivering consistent profits or any profits at all whatsoever.

[SPEAKER_00]: So you're gonna get this high volatility.

[SPEAKER_00]: It's going to be subject to the cost of financing for it.

[SPEAKER_00]: And an inherently competitive,

[SPEAKER_00]: Business where there is a lot of execution risk as you're trying to scale, deliver on your defense contracts.

[SPEAKER_00]: That's going to mean you have a lot of volatility here, which is what you're seeing.

[SPEAKER_00]: So I tend to not want to buy companies that produce good profits when they're falling like an I-th like this.

[SPEAKER_00]: I certainly would not suggest to do so for a company that isn't producing profits at all.

[SPEAKER_00]: So on Red Cat Holdings anchor, ticker, R-C-A-T, gonna have to pass.

[SPEAKER_00]: Federal Reserve minutes were released today and they showed that the decision to cut rates was far from unanimous, with several officials already signaling reluctance to support more easing any time soon.

[SPEAKER_00]: While most policymakers still believe rates could eventually move lower if inflation cools further, the debate has become much tighter as price pressures prove, it's a tough one to say.

[SPEAKER_00]: I've been more stubborn than hoped.

[SPEAKER_00]: The Fed ended 2025 with three consecutive quarter point cuts, aiming to cushion a softening labor market after holding rates high for most of the year and even so, some officials said that December cut was finally balanced and others openly preferred, leaving rates unchanged, amid concerns that progress towards 2% that inflation target, it's stalled.

[SPEAKER_00]: The most recent vote exposed growing divisions inside the central bank with three decents including two opposing any cut in one favoring a larger move.

[SPEAKER_00]: Several policy makers suggested that holding rates steady for some time.

[SPEAKER_00]: For some time, may now be appropriate, raising the odds of a pause at the January meeting.

[SPEAKER_00]: Inflation data released after the meeting, showed cooling in November, but economists warned those figures may be distorted by the government shutdown and missing October, data, meanwhile, economic growth, that surprised at the upside.

[SPEAKER_00]: Supported by strong consumer spending, even as employment has drifted higher to 4.6%.

[SPEAKER_00]: The Fed's benchmark rate now sits between 3.5 and 375, the lowest level in three years.

[SPEAKER_00]: And resistance to further cuts has grown with each move since September.

[SPEAKER_00]: And the Fed's latest dot plot, the median official projected just one additional cut in 2026.

[SPEAKER_00]: Highlighting this cautious shift towards fine tuning rather than aggressive easing.

[SPEAKER_00]: Futures markets, they largely agree pricing in a pause in January unless the upcoming December jobs report delivers a clear shock.

[SPEAKER_00]: Either way, looming over all of this political pressure is a change of the Fed.

[SPEAKER_00]: And so, as 2025 brought us a lot, so too, shall 2020, six.

[SPEAKER_00]: I'm Lou Guerrero, and this completes our final Invest Talk program for 2025.

[SPEAKER_00]: Justin and I thank you for listening, not just today, but each day this year, and we are very excited to head into 2021.

[SPEAKER_00]: So don't forget to get your episodes of Invest Talk on iTunes or Spotify, watch our videos over on our YouTube channel.

[SPEAKER_00]: just search in Vest Talk with two T's and tell just one friend, one family member, make listening to or watching in Vest Talk part of their 2026 New Year's resolutions.

[SPEAKER_00]: Independent thinking shared success.

[SPEAKER_00]: This is in Vest Talk.

[SPEAKER_00]: Enjoy your new years and see you in 2026.

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