Transcript:
Caroline Woods: Joining me now, Robert Schein chief investment officer of Blanke Schein Wealth Management. Robert, great to have you here at the good.
Robert Schein: To be with you.
Caroline Woods: All right. So big day today. And Jensen Huang is out. And Nvidia (NVDA) the stock was plunging down about 5% right now. Do you look at this as a temporary leadership shakeup or is the fundamental story changing for Nvidia (NVDA) here.
Robert Schein: Well let’s be honest. This is as a month ago, the largest company in the world. Right. So this isn’t a little story. This is the story. And so what we’re seeing today, especially with the market basically trading down. And Nvidia (NVDA), it’s a market clearing event for the stock because there’s a lot that still is going to come out.
Robert Schein: We believe that on the stepping down wood Jensen did was the right thing to do. Because where there’s smoke, there’s fire and this thing is going to get drawn out further and further. So to for the for the greater good of the company moving forward. There’s 42,000 employees. Again, the most valuable company at the core of the AI buildout I think unfortunately, as as terrible as this whole situation has been playing out right now, live real time.
Robert Schein: You can’t make this up. This is like a made for TV movie, unfortunately. But that being said, for the greater good of the company, and the guidance moving forward, it’s a market clearing event and investors, if you’re not. And I couldn’t imagine most, if not all have exposure by way of the indices or the individual stock itself.
Robert Schein: But yeah, it’s giving investors a ride for their money right now. So it’s interesting.
Caroline Woods: It’s a market clearing event. Do you look at Nvidia (NVDA) more than 30% off the highs as a huge buying opportunity though. Or is this a turning point for the company.
Robert Schein: You know I think the leadership succession plan that they have in place right now, is Nvidia (NVDA). Nvidia (NVDA) is going to be fine moving forward. There obviously Jensen is hard to replace. He made a lot of those deals one on one handshake. And ultimately with Jensen was is access right as we’re finding out. So those that had front of the line access really put their company at a competitive advantage for the chips.
Robert Schein: Right. They’re jumping the line. They’re getting the most needed in the eye trade. Moving forward I think it’s going to be level setting and it’s going to be more for other companies. It’s going to be more of a competitive environment, I think more of a sort of a natural environment. If you’re asking about the demand, we’re going to find out about that about 109 billion next, next week.
Robert Schein: And in terms of what they’re supposed to be reporting, we expect that to be guided up to about 125 billion. So as an opportunity for investors, if you don’t own it moving forward, I still believe it’s one of the best stories in the AI play moving forward. And let’s be honest, we’re still at the early stages, the first or second inning of this great industrial revolution build out.
Caroline Woods: So do you buy here or do you wait until earnings next week?
Robert Schein: If you’re interested in a roller coaster ride, you buy it here, right? Because traditionally and historically in Wall Street, when you have that negative headline as you’re seeing today, moving forward again, the market clearing event, as I referred to moving forward, that has been the time to buy. If you’re really taking a look at the Nvidia (NVDA) today.
Caroline Woods: We’re also seeing a pop though in shares of Broadcom (AVGO) and AMD (AMD), some of Nvidia (NVDA)’s biggest competitors. If you could only buy one of those here, which one would it be?
Robert Schein: Broadcom (AVGO) is the one to go with right now the strongest position. But then AMD (AMD) is a close second. So those are going to be sort of the byproducts of this shakeout in this fall out of Nvidia (NVDA) again next week. We’re going to see on the earnings. Are there going to be any cancellations for these chips? I don’t believe so.
Robert Schein: But they would be the beneficiaries Broadcom (AVGO) and AMD (AMD).
Caroline Woods: Number one and two over Nvidia (NVDA). Or if you could if you were choosing between the three which would go.
Robert Schein: With Broadcom (AVGO) today. Just because if you’re staying away from the headlines and you have some certainty there.
Caroline Woods: You talk about succession planning. We know Colette Kress the CFO, is stepping in as interim CEO. President Trump just weighed in on Truth Social, saying that former Apple (AAPL) CEO Tim Cook is the man for the job. Do you agree? I think what’s the likelihood that Tim Cook stepped in?
Robert Schein: I am so underqualified to answer that question. I think most are, I’m surprised that even President Trump or not surprised that he’s weighing in on that.
Caroline Woods: All right. So Nvidia (NVDA) is part of the Dow the Nasdaq and the S&P 500. It’s off more than 30% from the highs. As I said is this a market that can move higher if Nvidia (NVDA) remains a laggard.
Robert Schein: It already has. And we’re seeing the good news is if you look at the S&P 500, even this last quarter, over 80% of the companies have reported to date, in about a 31% increase in earnings. And it’s not just from the technology sector, the sector itself, the broadening out from all the other sectors. Obviously, energy is leading the charge this year.
Robert Schein: But industrials, health care, financials, once we get a handle on interest rates I think there’s a lot of opportunity. But the earnings underlying this market are really the bedrock and they’re increasing.
Caroline Woods: But it wasn’t all that long ago that Nvidia (NVDA) was at all time highs. We saw this kind of huge fall from grace just really over the past month or so. So the market already has, but it hasn’t been able to achieve new highs from here. So do you think that.
Robert Schein: Well, but if you let’s take a step back. If you look at the market weighted index it’s actually creating. It’s close to a new high year to date. And so the market weighted. So if you take out the weighting rate of Nvidia (NVDA) or some of these other tech heavy over weights, it just proves the thesis that I just laid out for you.
Caroline Woods: So you’re still targeting 8,000 for the S&P by year end.
Robert Schein: We can get there.
Caroline Woods: Are all of the ingredients for that rally then starting to come together or or is.
Robert Schein: There I mean last week we had one heck of a market, right. The drawdown on the Nasdaq was primarily S&P and the Dow. That was the story leading into this weekend. And then we got the news on Nvidia (NVDA) on Sunday breaking, which kind of just reset expectations moving forward. You’re seeing money move back into technology. And a lot of these names multiples are actually looking a lot better now as that we saw that market clearing reset.
Robert Schein: And so moving forward you know on the S&P 500 you have 17.7, you know, forward on a P/E multiple. And then earnings guidance for next year is across all the sectors looking very positive as well. Very strong.
Caroline Woods: So what is it that gets us there by December 31st?
Robert Schein: I think it’s going to be the other sectors, like I said before that outside of tech, I think technology is still going to be okay. But outside of technology you’re also going to see the industrials continue. Again, health care, there’s some names in health care. But also it’s been crazy creeping up lately is the consumer discretionary. And so that has had a rebound since this summer.
Robert Schein: A lot of the names have got we’re extremely beaten down. There’s a lot of opportunity. They’ve turned positive. And I believe the consumer discretionary sector will also see the market rise higher and could get us contribute to getting us to that 8,000 mark.
Caroline Woods: Okay. I want to get into all of your picks here. What to buy now, what to buy in a pullback. You say every good investor should have a shopping list for the next pullback, but shouldn’t try to time the bottom right. So how do we know when the pullback is enough and when it’s time to start buying.
Robert Schein: Well there’s a multiple factors that we look at. Not only the trend in earnings the forward guidance by management the sector itself. Is it cyclical in nature. Where are we in the business cycle as it relates to the economy, but also the technical aspect of the chart itself on some of these names and some of the names that I brought you technically are turning around from a chart perspective, which also provides an additional sort of litmus test for us to say, okay, this is an opportunity moving forward.
Caroline Woods: Okay. So we’ll get into the picks. The first pick here, it sounds like Nvidia (NVDA) is a pick at this point.
Robert Schein: I believe it is.
Caroline Woods: Okay so Nvidia (NVDA) check. Yeah Apple (AAPL) sitting near all time highs. So not necessarily a stock you’re looking for a turnaround for. But you think that this is a stock you can still buy here. Oh you move higher.
Robert Schein: The innovation is continuing. We’re seeing the iOS devices that are just now we’ve got a new generation of the flip phone or the fold phone I believe is incredible. So their installed base of just those that have to re-up on improving or upgrading for Apple (AAPL) is just a it’s a cash cow.
Caroline Woods: So yeah. Okay. So Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT) and Amazon (AMZN) both on your list as well.
Robert Schein: Yeah. Both Microsoft (MSFT) and Amazon (AMZN) Microsoft (MSFT) very specifically is showing that you can preserve your cash flow. You don’t have to spend all that’s on your net free cash flow at the bottom of your balance sheet and still show profitability in the AI spend, and with Amazon (AMZN) specifically, if you look at their cloud computing, this last sector or this last quarter, they’re up 39% just on AWS, about $46 billion.
Robert Schein: They reported for that component of the company. If we go back to 2020 on AWS’s, Amazon (AMZN) just earned more in one quarter than they did for all of the calendar year for AWS’s in 2020, what that shows, what that tells us is that they have leverage in the ramp up is real, and that story is not going away.
Robert Schein: It’s just increasing. So that’s one of the reasons why we like Amazon (AMZN) as well. Margin expansion as well. So but yeah okay.
Caroline Woods: And noticeably missing meta (META) alphabet (GOOGL) Tesla (TSLA) intentional or did you just not let us know that those are your picks as well?
Robert Schein: I think that’s who we like right now in terms of the Amazon (AMZN) and the Microsoft (MSFT) Meta (META) is very interesting. But it’s also very volatile. But I think it’s it’s poised for a quality 2027 as well. And then, you know, Tesla (TSLA) is they’re going to go through some who knows what Elon’s going to do with SpaceX and Tesla (TSLA) next year, but it’s not on our buy list right now.
Caroline Woods: Alphabet (GOOGL)’s 30% off the highs. That’s a pullback.
Robert Schein: It’s very attractive. You’re not buying. Well I think in this last quarter. What was concerning is is how much chat or all the other applications that are out there are actually taking from the search capabilities of alphabet (GOOGL). And the advertising revenue, I think was a little bit they got a little bit weaker. So I don’t know about you, but if you go to Google right now and search something where you can go to chat or one of the others in search something, they’re going to search about 20 websites versus just one.
Robert Schein: And then this timesaver is really the story here. So the question is can you trust the information that you’re getting out of but that’s the case for any, any one of the search engines.
Caroline Woods: You have picks outside of tech that we will get to. But just going back to Nvidia (NVDA) for just a second, what would make you change your mind about Nvidia (NVDA)?
Robert Schein: Again, the market clearing event today for the stock was very positive. Next week’s earnings is going to tell us a lot more that we don’t know right now.
Caroline Woods: So what could you hear next week or what is it that would make you say, you know what I think you sell here or you certainly don’t buy here?
Robert Schein: I think there was a breach of national security and a level that now is being disclosed that nobody knows internally. So again, if if this story continues to evolve internally and then the more that everyone learns, I mean, there’s investigations the FBI, DOJ, like this thing could, could really turn into something where no one has ever expected or anticipated.
Robert Schein: So yeah. So if but I believe that the negative headline is really clear the market right now and Nvidia (NVDA) and I’m really curious to see what the forward guide looks like.
Caroline Woods: Okay. All right. Outside of big tech like visa (V) up about 20% year to date 4% off the highs. You waiting for a pullback there you’d buy here.
Robert Schein: No we would accumulate. We’d love the dividend growth story for our clients. Love companies that grow their earnings but also grow their dividend. Visa (V) grew their dividend last quarter by 2,017%. And they’ve had 17 consecutive years of raising their dividend. So it’s rewarding shareholders especially in the market today where you have a lot of retirees that are living off of income.
Robert Schein: It’s always nice to have that phone call to them and say, hey, listen, you’re getting an increase in income.
Caroline Woods: And we use our visa (V)’s to buy our discretionary purchases. You mentioned that consumer discretionary is has been really in favor for the past few weeks. Back in favor today as well. What names do you like in the consumer discretionary space.
Robert Schein: Well it’s.
Caroline Woods: Worse. Would you avoid.
Robert Schein: Yeah a turnaround story is Estée Lauder (EL) right now I think if you look at it, their top five brands internationally, it’s more of an international growth story. Number one, their top five brands are really seeing traction for their last earnings report in China. And so the growth of even that consumer, particularly for all of their brands within Estée Lauder (EL) are very attractive.
Robert Schein: The stock was down about 35% this summer and now it’s turned positive. We believe that they’re still, it’s a turnaround story that we can continue to see operating leverage. And so it’s a quality brand, basically a collection of brands, but not just for the United States, but globally as well, and that there’s evidence of growth across the globe on that.
Caroline Woods: Any other names in the consumer discretionary space that you like right now?
Robert Schein: You know, you asked me earlier what I would avoid. I’d say, you know, it’s a crowded space in the consumer discretionary environment. The one name I would avoid still is like Lululemon (LULU), okay. Because there’s so much competition. And, you know, I have three, you know, daughters that are like 20 something to, you know.
Caroline Woods: And they’re not wearing it.
Robert Schein: Well, I have you know, I have the Peter Lynch ability, right where I you know, Peter Lynch was famous in the 1980s going to this, you know, the mall with his daughter and finding Gap (GAP) and gap (GAP) became one of his best contributors. So I do take notice when my daughters give me the sort of a Christmas list, if you will.
Robert Schein: But Lululemon (LULU) hasn’t been on the top of that for the last 2 or 3 years. There have been other competitors, the Alo Yogas, the Vuoris and a few others in that. So it’s a crowded space and they they could be a turnaround story, but I would avoid the.
Caroline Woods: Lululemon (LULU) certainly a pullback if that is that criteria. What about Nike (NKE).
Robert Schein: Nike (NKE) is very interesting. Now I think they they just it could be a serious turnaround story. The brand is not going away. So if they get their story right moving forward and they get a lot of their cost controls, moving forward, Nike (NKE) is attractive, especially at these depressed levels. So but I don’t see Nike (NKE) for the, you know, long run.
Robert Schein: Yes. In the short run, I think there’s other opportunities.
Caroline Woods: So that one’s not on the Christmas list either.
Robert Schein: For my son. It is.
Caroline Woods: So you you mentioned the health care industrials. What other areas of the market should investors be focused on right now if they already feel like they have enough exposure to tech?
Robert Schein: Yeah, healthcare is very interesting. As I said, we’ve been a long holder and believer in Eli Lilly (LLY). The GLP one market again is in the early stages. And you’re seeing, you know, even if the consumer who might not want a shot a week can take a pill. So I mean they’re constantly evolving at Eli Lilly (LLY). Lilly the the results are there.
Robert Schein So it’s really impacting the health in a positive way, not only in America but but also outside the US. But we can see that story continue for many years. The total addressable market is unbelievable.
Caroline Woods Which names it sounds like all of those names you would buy here. So which names are on your pullback list? Which names are you waiting for a better entry point on?
Robert Schein I think Eli Lilly (LLY) is at a close to a all time high, so I would be waiting for an opportunity for that one. But you know, we’ve had like I said before last week we had a market’s pullback. And I believe that we’re still going to continue to see strong earnings not only for the fourth quarter but foreseeable future.
Robert Schein And so I think right now depending upon each name is is unique. You got to watch where the valuation is. And the P/E is But at the end of the day, there’s a lot of attractive things that that.
Caroline Woods Bringing it back to tech with big tech and AI stocks swinging ten, 20, 30%, you know, in a matter of sometimes days, weeks. How can investors tell the difference between okay, this is a good buying opportunity or okay, the investment thesis has changed here because we’ve seen this in the memory space in the neoclouds. You know, there’s still stocks that look like they’re on pretty steep sale.
Robert Schein You know you want to look at the the second derivative beyond the Nvidia (NVDA) right of the AI story or the tech story. We’re in a technological revolution. And that’s going to continue the amount of efficiencies and scale that’s bringing to every business throughout. You know, we’re talking about how energy is impacting and tariffs are impacting the consumer technology.
Robert Schein In terms of the inflation technology is the deflationary counterbalance to that. So within technology, one could say a company, you know, one could say even Apple (AAPL) is too expensive today, but they’re waking up every single day reinvesting and innovating for something that no one’s even thinking about or considering for tomorrow. So that’s not priced into today’s multiple. That’s not priced into today’s earnings.
Robert Schein I made reference to Amazon (AMZN) earlier. If you look at Amazon (AMZN)’s AWS right the cloud computing space five, six years ago they just started it. Now it’s contributing over, you know, $150 billion of revenue with the bottom line that didn’t exist, didn’t exist five years ago.
Caroline Woods Those are second derivative plays.
Robert Schein Yeah. Especially on the, Amazon (AMZN) cloud space.
Caroline Woods Okay. And what derails this bullish thesis? You know, you think we don’t have that much time between now and year end S&P 8,000. What gets in the way of it?
Robert Schein Well we have the Federal Reserve in December.
Caroline Woods So S&P 8,000 if we see another. So we have a rate hike.
Robert Schein No I think 25 basis points already factored in, especially the economic data that’s just been released. And I think if the fed goes with 50 basis points, which I don’t think it’s a bad idea, to be honest with you. Let’s get that in. Let’s maybe shake the market out. That could not have us achieve the 8,000 mark by year end and sort of push pause on the Santa Claus rally.
Robert Schein So it’s not know for ever. But it’s no, for right now. I do believe we’ll see the 8,000 mark. But if you were to ask me, it’s the Federal Reserve historically has been the one that has stopped a lot of these bull markets in the past by being too aggressive. But I don’t believe they would be super aggressive at this point in time.
Robert Schein I think a 50 basis point is called for. If we look at ten year Treasury and now we’re back above 5%, we are about 5.30. Just about a month ago. And so we could see that would be a welcome, like, let’s get it over with. And that provides cover for the fed in 2027 to a pullback if needed.
Caroline Woods But would that end the bull market or it would just cause additional volatility.
Robert Schein Just additional volatility.
Caroline Woods And would you change anything about your investment strategy? If the fed does hike by 50 basis points, you would just be ready to buy anything or we’d take.
Robert Schein Advantage of that. And also where we have been the last quarter and even as early as this summer, re a debt repricing of readjusting risk for our client portfolios. By that I mean when we got up to over 5% on the ten year or even the 530, as I mentioned earlier, treasuries are sexy again, right? Bonds are sexy again.
Robert Schein We haven’t been able to say that for a good long time. So we’ve been strategically rebalancing, de-risking client portfolios, selling into the strength of some of these names or some of these sectors, and then reallocating into the fixed income market. One, just to be prudent. That’s our job at the same time is adjust the risk. But two, we also have some dry powder, right.
Robert Schein If we do see a drawdown beyond a 5%, that we would see something greater. If we do see, let’s say the fed does get out of hand, we could take advantage of that volatility.
Caroline Woods So for a risk on portfolio. So mine okay I’ll take the free investment advice here. I have a ways to go before retirement. How much of my portfolio should be in cash right now and how much should be in bonds.
Robert Schein Again thanks for put me on the spot on that one.
Caroline Woods And don’t even say it depends on your situation. I don’t know enough.
Robert Schein You know, I think over equity is right now, given where inflation is, is not a bad idea for real assets, equities, real estate, private equity, commodities, gold. So those are growth assets that stay above inflation over time. We’re in an inflationary environment. And so you need that growth in the portfolio. Again everyone’s living longer I have a client that’s 104 years old.
Robert Schein She’s completely independent. She takes her portfolio every single day. And if a dividend doesn’t hit I have to say Nettie, refresh the browser and then it shows. Right. I don’t think that’s what most Americans are actually thinking about, is they’re still in the. You know, I’m only gonna have 20 years in retirement. I think you could have 30, maybe 35 to 40 years plus adding in the health care costs.
Robert Schein You’re going to need something that’s going to grow way above and provide that opportunity in the future.
Caroline Woods So how much in cash? How much in bonds for me? Zero.
Robert Schein No that’s not we always have cash. So typically we have anywhere from 5 to 10%. We say cash equivalents okay. So I’ll break down the asset allocation for you. So 5 to 10%. We we traditionally carry 5% for just about all of our clients at the bare minimum in a in a client portfolio, simply because we take advantage of the volatility.
Robert Schein And again that cash is not cash. It’s an alternative, investment that’s actually in the cash money market, if you will, that’s earning over 4%, up to 10% depending upon risk tolerance and age moving forward, maybe another 25% in fixed income and the remainder in equities.
Caroline Woods And where specifically in fixed income right now.
Robert Schein So we like the basically the middle of the yield curve right now. Again, we were short duration for the longest time. But as rates rise we’re going further out. So the 7 to 10 range again treasuries are looking really good. Some of the corporates even municipal bonds, that we have for our high income earners.
Caroline Woods Okay. All right. I think this is a great thank you for that advice. I think this is a great time to pivot to our rapid fire round of this or that you’ve played before. Our quick questions, quick answers. No hedging okay. Are you ready bringing it back to Nvidia (NVDA) Nvidia (NVDA)’s next move. Rebound or more pain rebound. Nvidia (NVDA)’s next CEO Tim Cook.
Caroline Woods Or a new face.
Robert Schein It’ll be a new face.
Caroline Woods Next AI leader chipmakers or software.
Robert Schein Software.
Caroline Woods Software name you like here that’s not Microsoft (MSFT).
Robert Schein ServiceNow (NOW).
Caroline Woods Now AI spending boom continues or slowdown ahead.
Robert Schein Oh boom continues.
Caroline Woods AI selloff: bubble bursting or a buy the dip moment.
Robert Schein Buy the dip.
Caroline Woods Market’s next big move for tech led or broad based rally.
Robert Schein Tech. Red tech led.
Caroline Woods Bigger risk missing the rally or getting caught in a sell off.
Robert Schein Missing rally.
Caroline Woods Cash smart protection or missed opportunity.
Robert Schein Smart protection.
Caroline Woods Fed rate hike, rally killer or market noise.
Robert Schein It will be market noise.
Caroline Woods More likely in 2027. S&P 7,000 or 9,000.
Robert Schein 9,000.
Caroline Woods Market leadership in 2027. Mag Seven or the other 493.
Robert Schein The other 493.
Caroline Woods Finish this sentence. The biggest market catalyst for 2027 will be.
Robert Schein It’s a good one. The biggest.
Robert Schein Say it again.
Caroline Woods The biggest market catalyst for next year will be.
Robert Schein It’ll be the it’ll be interest rates coming down.
Caroline Woods That’s the biggest surprise for investors in 2027 will be.
Robert Schein Interest rates coming down.
Caroline Woods The stock market is most wrong about.
Robert Schein The a story where we are in a cycle.
Caroline Woods Where are we in the cycle?
Robert Schein Early.
Caroline Woods The S&P 500 will end 2026 at.
Robert Schein 8,000.
Caroline Woods And I will turn bearish if.
Robert Schein Inflation continues to get out of hand.
Caroline Woods What does out of hand look like.
Robert Schein Above the Fed’s target for a sustained period of time and stubbornly, really dipping into the consumer’s pockets.
Caroline Woods Okay. All right. Thank you so much I think that was great. Really appreciate it. That’s Robert Schein, chief investment officer, Blanke Schein Wealth Management. If you like what you’re seeing, check out our ETF spotlight with Jonathan Molchan He breaks down how investors can navigate tech volatility while generating income along the way. And don’t forget to like, subscribe, comment and check out our community polls to share your take on the market.
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