Nvidia Just Delivered Massive News for These 10 Stocks
Summary
Brian argues that society is at a crossroads with AI, where the desire to automate tasks is countered by the fear of autonomous agents escaping control. Brian states that this creates a significant engineering problem that will drive cybersecurity spending at a rate of 11% annually through 2030, though Brian believes this estimate is conservative as security becomes a top priority for every business. Brian views cybersecurity as a multi-layered opportunity covering the chip (hardware), the network, and the software, emphasizing that each layer must act as a 'playpen' to keep AI agents in check.
Brian uses a specific signal ladder system to evaluate stocks, focusing on fundamentals, moving averages (50-day and 200-day), and analyst profit forecasts. Brian classifies stocks into 'Buy,' 'Hold,' or 'Trim' categories based on whether the price has gotten ahead of the business growth. Brian notes that while the overall sector is bullish, the final investment call depends on the technical entry points and valuation metrics like the PEG ratio and price-to-sales.
Mentioned Stocks
Reasoning: Brian views Nvidia as a 'buy a lot' because the PEG ratio is only 0.36, indicating the stock is cheap relative to its growth. Brian notes that Nvidia integrates security directly into its hardware racks and analysts haven't cut profit forecasts since July. Brian predicts a 36% annual return over the next three years.
Reasoning: Brian suggests starting a small position in Salesforce as a value play since it is the cheapest of the 10 stocks at 14 times earnings. Brian notes a recent Golden Cross technical signal. Brian looks for the price to push through $250 to confirm the recovery.
Reasoning: Brian views Microsoft as a 'Hold,' preferring to pick up the stock on a pullback. Brian states that while the business is growing at 18%, the signal ladder suggests waiting for a better entry point despite the long-term 17% annual gain forecast.
Reasoning: Brian flags Fortinet as 'running hot' and recommends trimming positions. Brian notes that while the business is great, the price of 40 times next year's earnings is a problem and suggests waiting for the price to come down.
Reasoning: Brian identifies CrowdStrike as the most expensive stock in the group at $48 per dollar of sales. Brian is not comfortable with this valuation and flags the stock as running too hot, recommending that investors trim positions.
Reasoning: Brian warns that Palo Alto Networks is running 'extremely hot' at 92 times next year's earnings. Brian compares its current valuation to the losers of the 2020 security stock run and advises watching and waiting for a better valuation.
Reasoning: Brian considers Zscaler a 'Hold' until the company achieves a real operating profit under standard accounting. Brian states that if Zscaler turns a profit in the October quarter, it will become much more interesting for investment.
Reasoning: Brian places Cisco in the 'trim' category because the price has gotten ahead of the business performance. Brian observes that the 50-day moving average is heading downward, indicating the price has started to cool off.
Reasoning: Brian rates HPE as 'buy a little' because networking orders grew 36% year-over-year and it trades at a low valuation of 16 times next year's earnings. Brian highlights that the 50-day and 200-day moving averages are both climbing, signaling a strong uptrend. Brian's system forecasts a 17% annual growth rate.
Reasoning: Brian likes the business but states it is a 'Hold' because at 58 times next year's earnings, the comeback is already priced in. Brian is waiting for the price to reach a specific buy zone before adding it to a portfolio.