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CNBC
2 days ago
- Business
- CNBC
Best Stocks: What to do with two 'Best Stock' names that are failing
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — We're writing up stocks here all the time and doing our best to identify set-ups with either a strong ongoing trend, a technical catalyst on the horizon or something fundamental we think deserves exploring. While many of our stock write-ups have resulted in singles and doubles so far this summer, they don't all cooperate. Today, we're going to follow up on two names we've recently talked about that are still on the list, but in danger of falling off. The goal of this exercise is to share the other side with you — when Best Stocks fall off. But first, let's check in on where the list stands today. Sector Leaderboard As of 7/21/2025, there are 142 names on The Best Stocks in the Market list. Top Sector Ranking: Top industries: Top 5 Best Stocks by Relative Strength: Spotlight: Sean — Market breadth measures how many stocks are participating in a market move, offering a deeper view of underlying strength beyond index-level performance. It's a look under the hood to see what's powering the market. When breadth is strong — meaning a large number of individual stocks are advancing, or are above a certain moving average, or have a certain indicator/reading — it signals broad investor confidence and healthy market participation, not just gains concentrated in a few large names. Market-wide participation reduces the risk of fragility in the rally and suggests that momentum is sustainable. Strong breadth has historically aligned with bull markets, making it a bullish signal for investors tracking the durability of uptrends. While strong breadth points to a healthy market, it doesn't mean every stock is firing on all cylinders. Identifying laggards during a broad uptrend can be just as insightful as spotting the leaders. By examining the names that remain on our watchlist but are no longer showing ideal technical set-ups, we can better understand where momentum may be fading — or where risks are quietly building. We thought it would be interesting to see what names are still on the list, but technically are not setting up the way we'd like. Both of these names we mentioned in an earlier piece, and both recently broke below their 50-day moving averages. Expand Energy This is a 1-year chart of Expand Energy Corp (EXE) : We mentioned this on May 22, noting some fundamentals on the stock. It is one of the largest natural gas producers in the U.S. The stock broke through its 50-day moving average to start July and nearly tumbled to its 200-day moving average for the first time since the election. If this stock breaks below its 200-day, which is around the bottom level of support it's been building in the $100 range, the stock will have some further downside risk. Risk Management: Josh here — Above I am showing you the highly correlated peak for EXE stock and the spot natural gas price. Nat gas is down over 12% over the last month while crude oil is off 8%. This weakness in the underlying commodity prices has affected stocks like EXE across the sector. The recent firming up in energy commodity prices should enable Expand to hold its rising 200-day support level just above $100 per share. Both Mizuho and UBS have recently reiterated price targets in the 140s. For investors, I would leave it on this leash, checking back at the end of every week. Shorter-term traders should already be out of the name, watching from the sidelines to see if it sets up again. Momentum is almost washed out at a 40 RSI but it's not completely de-risked. Deere & Co Sean — Below is Deere (DE) , a stock we mentioned on June 5, with one of my favorite titles thus far: "An 'AI wolf in sheep's clothing' with a great entry point for investors": Similar to EXE, the stock broke below its 50 day moving average, and is threatening the support it's been building since it broke out this spring. Risk Management: Josh here — Deere deserves the benefit of the doubt given the recent pullback has not gotten anywhere near the rising 200-day but it bears watching. The company will report earnings on Wednesday morning August 13th before the market opens. The stock rallied hard after its last report despite giving relatively tame guidance, making an all-time high at $528 before pulling back. Tariffs are still a concern here and should the rhetoric from the White House continue to ratchet up, they may continue to sell this name. Shorter-term traders may want to watch from the sidelines rather than battle against the sellers. Taken together, these technical breakdowns in names like EXE and DE serve as reminders that even in broadly healthy markets, not every stock is participating. The optimistic take is, if we can see support in these names, these could be buying opportunities, but we have to let price dictate that. Monitoring these minor breakdowns alongside market leaders helps investors separate structural strength from surface-level momentum. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
CNBC
07-07-2025
- Business
- CNBC
Best Stocks: A capital markets name enabling the buildout of the digital economy
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh here — When the price of oil goes up and stays up, it doesn't take long for the oil services stocks to react, but there's always some lagging effect. The same phenomenon is taking place with capital markets stocks, which probably haven't fully priced in the raging comeback for risk-taking and deal-making that began in 2023. Any time stocks and bonds are in a bull market for an extended period of time, the companies that feast on asset flows and price momentum are going to start doing very well. It's not early for the capital market stocks, but it's also not late. Sean is going to show you one of the biggest companies in the space. Sector Leaderboard As of July 7, there are 131 names on The Best Stocks in the Market list. Top Sector Ranking: Sean — Financials take up 11% of our names on our list, which is the third highest out of all sectors: Top Industries: Capital markets, an industry that sits within the financial sector, is neck-in-neck with software in terms of the best stocks by industry: Sector Spotlight: Financials are the 4th-best performing sector year-to-date, up 9.7% in total return. This sector has a max drawdown of 15.5%, meaning this sector saw a 25% swing in the first half of the year: Seventy percent of financials within the S & P 500 are above their 20-day moving average, 50-day moving average, and 200-day moving average. Within the S & P 500 late last week, we saw 5% of constituents making new 52-week highs. Financials tripled that breadth with 16% of constituents making new 52 week highs. Some of the largest and most important banks are making new all-time highs. JPMorgan Chase, Morgan Stanley , Goldman Sachs , Wells Fargo are all trading higher than their pre-liberation day levels. Financials are showing strong and improving momentum as we enter the second half of the year. Despite experiencing a significant 25% swing earlier in 2025, the sector has climbed back to become the fourth-best performer YTD. Breadth is broad and building and the group is leading the market in fresh highs, more than triple the S & P 500 average. This resurgence in financials may be signaling renewed confidence in the U.S. economy. New Addition: BlackRock (BLK) Date Added: 6/26/2025 Sean — Last week, the world's largest asset manager was added to the list. The addition of BlackRock (BLK) to our list is more than just a stock update — it's part of an ongoing trend: the financialization of nearly every aspect of the economy. As money moves faster, markets become more democratized, and assets become more digitized, the infrastructure enabling those transitions becomes more valuable. Companies like Robinhood (HOOD) and Coinbase (COIN) are obvious examples of this. BlackRock is doing it with private assets. Financials are no longer just about banks and insurance companies. The lines have blurred between tech and finance, and capital is flowing toward platforms, processors, and enablers. As the world leans further into digitized payments, tokenized assets, and real-time settlement, the companies that provide the financial rails are gaining favor, similar to the industrial rail companies of the 1800s. Just as the railroads enabled the industrial economy to scale in the 19th century, today's financial infrastructure firms are enabling the digital economy to accelerate, and investors are recognizing that new reality. Risk management Sean — BlackRock saw a significant rounding top in the winter of 2024. The stock was sideways for two months before starting a downtrend culminating on "Liberation Day" in April. The stock has fought all the way back to new highs, but because this has been a longer-term move, it may take some false breakouts above that winter high to create new support. This one is worth being early, and anticipating the breakout given how long it has been in the making. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
CNBC
01-07-2025
- Business
- CNBC
Best stocks: The 10 most exciting names of the summer and one more on the verge of a breakout
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — With the first half of the year wrapping up, Sean and I are taking a look at the best stocks on our Best Stocks in the Market list so far this summer. We're using June 1st as the starting point to show you the names people have been most excited about on our list. The first thing that jumped out at me was the breadth of sector dispersion among the top ten Best Stocks this month. It's not concentrated to any one or two sectors, it's all over the map. This is what you want to see in a bull market, of course, because it indicates a bull that's being driven by multiple forces and not a singular theme, like rates falling or AI spending. Coinbase (COIN) , Oracle (ORCL) , Robinhood (HOOD) , Vistra (VST) and Roblox (RBLX) are your top five. That's two from financial services, one from information technology, one utility, and one from communications services. Over the past month, these stocks are up between 21% and 42% with billions in market cap gains for all of them. Coinbase has added $27 billion in value since the start of the month while Robinhood has added $22 billion, putting both companies higher in the Financial sector's overall weighting. Within the top 10 are Royal Caribbean (RCL) which is benefiting from the twin tailwinds of lower energy prices and a resilient consumer, and Cloudflare (NET) , a data center play. Then there's Ferguson Enterprises (FERG) , an HVAC giant I introduced the audience to on the Halftime Report back in December for the first time. Last but not certainly not least is KLAC and NVDA , two semiconductor giants, with NVDA nearing a $4 trillion market cap. Additionally, Hilton (HLT) hit our list last week. We just saw a golden cross happen as the stock climbs out of its April "Liberation Day" lows. The stock was in a 24% drawdown and is now back to within 4% of a 52-week high. Welcome to the list, Hilton. Sector Leaderboard As of 6/30/2025, there are 120 names on The Best Stocks in the Market list. Top Sector Ranking: Sean — June 2025 was a standout month for the U.S. stock market, with the S & P 500 and Nasdaq both closing at record highs amid renewed optimism around AI and easing geopolitical tensions. Tech stocks led the charge, with names like Nvidia and Oracle driving performance, helping the broader market shrug off lingering concerns about inflation and trade policy. Industrials and tech take up the lion's share of our list at a combined 40% exposure out of all 11 sectors: Top Industries: Software, Capital Markets, and Aerospace and Defense have been the strongest industries for the first half of 2025: Crypto was another theme within our list that had a great June. COIN was the best performing stock on our list for the month of June, up a total of 42%. Robinhood, a capital markets stock but one that earns a massive amount of revenue due to crypto trading, was the 2nd best performer on our list for the month of June, up 41.6%. In Q1 2025, HOOD reported $252 million in crypto trading revenue, which was up 100% year-over-year. That same quarter, its total transaction-based revenue amounted to $583 million, meaning approximately 43% came from crypto alone. Hotels, restaurants and leisure is another interesting industry to point out. Within the leisure, lodging, and travel service industries in the S & P 500, every stock is above its 50-day moving average, and all but one stock is above its 200-day moving average ( Norwegian Cruise Line is below that level). The median RSI for an S & P 500 stock in these industry groups is 66, higher than the median reading of 55 for the S & P 500. Top 5 Best Stocks by Relative Strength: New Addition: Hilton (HLT) Sean — Hilton (added to list on June 27) is benefiting from multiple tailwinds heading into the back half of 2025. Business travel demand has rebounded strongly, with corporate bookings and group events coming back online. At the same time, Hilton's diversified brand portfolio of affordable to ultra luxury positions it well to capture an evolving consumer during times of heightened macro uncertainty. HLT's earnings report last quarter was a strong one: Q1 2025 saw 6% adjusted EBITDA growth, $300 million in net income, a 7% pipeline increase and $927 million returned to shareholders. Full-year guidance projects up to $1.75 billion in net income and $3.3 billion in capital returned to shareholders. (data via Quartr.) Last week we saw a golden cross - which is the 50-day moving average cross through and above the 200 day moving average, which is a bullish formation. The stock is breaking above some recent congestion and deserves a spot on your watchlist from here. Risk management Josh here — Hilton is a potential breakout, not a breakout in progress. Pure technicians would wait to see how it handles a retest of the old highs from February in the low $270s. For investors, if you're going to pull the trigger early in anticipation, I like $240 as a line in the sand, just below the rising 200-day. Update each week as the closing prices come in. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
CNBC
20-06-2025
- Business
- CNBC
Best Stocks: An under-the-radar play on the AI buildout that was founded more than 90 years ago
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — During the last earnings season, the hyperscalers all affirmed their guidance for capital expenditures this year. The AI data center and infrastructure buildout is not slowing down. Earnings results and AI-related commentary from Oracle and AMD over the past week make it clear that this theme remains on fire. Lots of the companies on the Best Stocks in the Market list are direct or indirect beneficiaries of all this spend. Today we're going to introduce you to a name you may not have heard much about yet. In 1932, inventor Arthur Schmitt founded a company to produce electrical connector components for radios in Chicago. Before long, military demand for these components and others skyrocketed thanks to the run-up into World War II. Nearly a century later, Schmitt's company, now called Amphenol (APH) , is still supplying these components to customers around the world. If it has cables, printed circuit boards, sensors, antennas or modules, it needs connectors to make all these things work together. Amphenol's products enable secure, high-performance connections, especially in harsh or high-speed environments where durability is not optional and only the top quality components will do. Amphenol is in three businesses: Harsh Environment Solutions sells ruggedized connectors, cable assemblies, and sensors for aerospace, defense, industrial, and automotive applications. Interconnect & Sensor Systems is made up of commercial electronics, automotive sensors, and fiber‑optic/copper connectors. But it's their third and largest business that we're focused on today. Despite the diversified nature of the company, the upside surprises are coming from their involvement in the global data center build-out. This vertical — Communications Solutions — is 45% of Amphenol's business and growing rapidly, fueled by incredibly strong demand coming from broadband, mobile networks and data center interconnects. After the last earnings report, which Sean will detail below, Wall Street woke up to the fact that there's no AI without connections between the chips and the hardware, the servers and the electrical equipment, the architecture and the energy. Amphenol's products are involved at every stage of this. Best Stock Spotlight: Amphenol Corp (APH) On the list since: 12/16/2024 One-year price chart with moving averages, RSI: Sean — Amphenol has as pretty of a chart as you'll find. Below is a total return price chart over the past 5 years using a logarithmic scale (On a log scale, equal vertical distances represent equal percentage changes, so a move from $10 to $20 - a 100% gain - looks the same as a move from $100 to $200, it helps visualize longer term charts): The stock has seen some downtrends over the past 5 years, but its long-term trend is incredibly consistent - up and to the right. Looking at the stock on a weekly basis, buyers have tended to come in around the 50-week moving average. And if you're lucky enough to have a shot at the 200-week, investors are hammering the buy button. Every move toward the 200-week was followed up with heavy buying volume over the past 5 years: There are not many stocks that have shown this type of strength over long stretches of time. Going back to June of 2020 (5 years), this stock has spent 82% of its time above its 200-day moving average. Comparable to Nvidia Nvidia (NVDA), which is possibly the best stock to have ever existed, spent about 80% of its time the past 5 years above its 200-day moving average. Not to proclaim that this is the next NVDA, but this highlights how strong of a stock this is, and more importantly, how difficult it can be to wait for a dip. The stock is just as strong on a fundamental basis. From its Q1 earnings, Amphenol hit a record $4.8B in sales, up 48% year-over-year. EPS came in at $0.63, up 58% year-over-year. The company achieved record adjusted operating margin of 23.5% in Q1 2025, representing a 250 basis point improvement from 21.0% in Q1 2024 (1 basis point equals 0.01%0. Earnings growth and margin expansion were primarily driven by strong operating leverage on stronger sales volumes. The most significant growth driver was the IT datacom market, which represented 33% of sales and grew 134% organically year-over-year, with particular strength in artificial intelligence-related applications. (Earnings data via Quartr) AI is a massive driver for this company. The CEO had this to say on what's going on with AI: "It is a revolution that creates for our industry a disproportionate opportunity because of the unique nature of the architecture and the intensity of the interconnect solutions that are associated with that architecture. And so when you stack that all together, it's a great revolution. It's a more interconnected intensive revolution, and we've taken more than our fair share of that. The result has been that our IT datacom business has grown very robustly." This stock has a great story, strong technicals, and exciting fundamentals. What more could you ask for? Risk Management: Josh — It's tempting to look at the chart of Amphenol and say "Well, I guess I missed it." And, of course, you're certainly not looking at a ground floor buy-in here. But it's been my experience that more stock market opportunities have been lost by people thinking they already missed their chance than for any other reason. If you've been investing for a while, it's likely you already have some of your own war stories of this variety — Tesla, Bitcoin, Netflix, Nvidia, Broadcom, Palantir, etc. It's really hard to buy a stock that's just doubled. It's even harder to imagine a doubling happening again. Having a solid risk management plan in place prior to entry can help investors over this mental hurdle. APH is currently in the process of consolidating its huge post-earnings rally. RSI has cooled off to just below 70 and that's a good first step. I'd be watching for a price dip into the high $80s, which would be a retest of the most recent breakout area before entering the position. The risk of waiting for that lower entry is you may not get the chance. It happens. Traders will want to keep an eye on the rising 50-day, currently $81.50, as a place to lighten up or exit. Investors will want to give this situation the benefit of the doubt and a little bit of a longer leash. There's a gap below $71, I like that level as a stop as it would tell me the sellers have taken control and something may have changed with the story. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
CNBC
05-06-2025
- Business
- CNBC
Best Stocks: An 'AI wolf in sheep's clothing' with a great entry point for investors
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh here — There will always be an agriculture cycle and companies in the agriculture space will always be, to some extent, beholden to it. In fact, companies in most sectors of the economy must contend with one cycle or another — commodities, interest rates, housing, capex, etc. But in the digital age, companies have found ways to annuitize their businesses and transcend this cyclicality. Converting traditional transaction-based business models into subscription or annually recurring revenue (ARR) business models has been one of the keys to the stock market's relentless rise over the last ten years. When companies begin to generate earnings growth reliably, the multiple investors are willing to pay on those earnings re-rates higher. This is why the market's multiple has trended higher over the last 20 years. On average, we are paying more for stocks on a price-to-earnings basis because the companies these stocks represent have gotten better at building predictable, reliable cash flow streams. In our Best Stocks in the Market column, we have written about Spotify and Netflix recently, both of which are great examples of what I'm referring to. One used to buy CDs or DVDs, paying for each product at the time of use, with the purveyors of movies and music awaiting our next purchase. Now we pay subscriptions and have access to as many songs or movies or TV shows as we want. Consumers love it and Wall Street does too. Annually recurring revenue models are all the rage (and the market capitalization) these days, even in unexpected places — like tractors and farming equipment. Today, Sean is going to tell you about Deere (DE) , a 188-year-old American stalwart that has set a goal for itself of converting 10% of its revenue to an ARR model by the year 2030. In 2024, the ag equipment giant did $51.7 billion in sales. Assuming it can get to its own stated target, the company would have approximately $5 billion or more of consistent top line revenue which The Street would gladly pay a premium for, just as it does with other companies in other industries. This is yet another example of how corporations are adapting to the new age of technology and capitalism. Best Stocks spotlight: Deere (DE) On the list since: 5/9/2025 Sean — Deere is the world's leading manufacturer of agricultural and construction equipment. The brand is synonymous with reliability, quality, and a deeply rooted connection to American industrialism. Its iconic green and yellow color scheme is recognized by many people, without having used or experienced their products at all. The company officially started using the iconic green and yellow color combination around 1910. The green and yellow colors serve a larger purpose than branding — the green helps machinery blend into agricultural fields, reducing the visual impact on the landscape and the yellow provides contrast for when operators are looking for their machinery. Every detail is thought about through the lens of the operator. DE is incredibly focused on innovation and quality. In 1837, John Deere (a blacksmith in Illinois) developed the first commercially successful steel plow. Deere's innovation dramatically increased farming efficiency and helped fuel agricultural expansion in the United States. In 2025, they're still pushing the boundaries of agriculture. Today, 50% of operating earnings come from Production and Precision Agriculture — their largest and most profitable segment, focused on transforming farming into a tech-focused, data-driven operation. AI of agriculture DE has a fleet of IoT devices and they are all connected to the John Deere Operations Center — a cloud-based farm management platform that optimizes operations through data-driven insights. DE is tracking data, gathering insights, and deploying machinery in a smarter and efficient way in real time, saving farmers time and money — it's the AI of agriculture. Via Quartr, tariffs are expected to have a pretax impact of over $500 million in fiscal 2025, with roughly $400 million of that falling in the second half, adding some headwinds to margins. However, the company is taking actions to mitigate these impacts through supply chain adjustments and targeted pricing adjustments for 2026 and beyond. As of their last earnings call, the U.S. represented 79% of its complete goods and 76% of its components. Tariffs will impact DE, but not in a meaningfully detrimental way. John Deere is an industrial company, but they've built a cloud-based, AI-capable software as a service platform within it. DEs Production and Precision segment is forecasting 15.5%-17% operating margins for 2025. The company is expecting 18% EPS growth in the next year. DE trades at a 25x trailing PE and a 23x forward PE. The company has a competent and experienced management team, an exciting growth story, a defensible moat, and a reasonable valuation. On a technical basis — DE is reflecting strength. Over the last 3 years, DE has touched its 200-week moving average once on a weekly closing basis: Looking at the 1-year chart earlier in the article, the rising 200-day moving average is serving as strong support. DE is an AI-wolf in sheep's clothing. At first glance, the tariff narrative may seem like a headwind for DE. But look a little deeper, and it's clear the company continues to innovate with the same spirit it had in the late 1800s. Risk management Josh — This one is simple to me. As you can see in the one-year chart above, DE buyers have respected the 200-day moving average since November. There was a false breakdown below it this April during the tariff announcement that was cleaned up relatively quickly. I would trail a position here with a rolling stop just below the 200-day. The stock has cooled off from its high in early May but the uptrend is intact and an RSI reading in the 50s is a better entry point than when the stock was making fresh highs and RSI was pushing 75. This is my kind of set-up. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . 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