Stock Talk - V-Bottom Recovery: Month 6 – What to Buy. Stock Market Update, Friday Sept 26, 2025

Starting point is 00:00:00 Hey everyone, it's Chris with O Carvis with another stock talk in our new format, so bear with me. Investors, if you waited on the Fed, you missed on about 14% year-to-date gain in the S&P 500 and almost 30% gain off the V-bottom low on April 8. The O'Carvis investment team has discussed for months, but it was our belief that we are in a V-bottom recovery, and in general, no one would get in at prices they really wanted. We messaged that a retest of those April lows was unlikely to come, and investors' time was better served studying the history of V-bottom recoveries and their paths. I know. Now the question is, where do we go from here and what should an investor buy if the V-bottom path continues to play out as we expect?

Starting point is 00:00:47 First, here's my trusty overlay of the S&P 500 during the dot-com Internet buildout in 1997 through 2000, first our current AI buildout. which started around the second half of 2023. As frequent followers note, it's been my belief that the October 1998 will owe during the long-term capital event, down 21% on the S&P 500, lined up almost exactly with our April 8th, 2025 event-driven tariff tantrum. Yes, that Liberation Day triggered sell-off amounted to almost the exact same minus 21% high to low move. investors after such a strong rally, many people are asking us, what should you buy if you're still positive in stocks? Do you buy the leaders year to date and the ones leading since April lows? Or should you hunt out amongst the laggers year to date?

Starting point is 00:01:38 History would say that it's best to stay with the winning sectors and groups and single stocks. However, we are near that time of the year where bottom fishing and lagging single stocks in the right sector should be on your radar. Historically, you want to stick with high or rising relative strength sectors and groups and those just breaking relative strength downts, but you can start to look beyond the top few names in these groups. Why? Because it's that time of the year where big institutional selling and lagging names is at or near its peak. Unlike many individuals who are on a calendar year closure, many institutional shareholders have fiscal tax years ending in September, and October. Why is it so early and not near year-end? Because it used to take months for their

Starting point is 00:02:28 accounting and tax departments to reconcile fund financials for year-end distributions to their shareholders. And those shareholders themselves had tax years ending on December 31st. Think about those mutual fund net realized gains distributions or mastered limited partnership K-1 statements going out to limited partners. Year-to-date investors, technology, communication services, financials, international equities, and many speculative and emerging thematic groups have led the S&P 500 higher. The AI CAPEX build-out cycle has lifted many names in the industrial sector, technology and semiconductor sectors, and many alternative energy sectors. Here's the broad year-to-dette sector performance. Investors recall back after President Trump was elected in November, many strategists,

Starting point is 00:03:16 in the media were calling alternative and clean energy and China markets, that dreaded word, which should draw investors' interests toward, not away from it. What's that word? That word is uninvestable. And behold, while the traditional energy sector has been a laggard here to date, these more speculative names in the solar, uranium, and nuclear sub-industries are some of the highest returning groups and sectors here to date. Here's a list of the top 20 names in the SMP 500 year-to-date. The top names, broadly, all have similar characteristics. Most outside of a few, like Palantir, started the year with lower PE valuations than the S&P 500. Names of the disc-drive industry, like Seagate or DRAM companies like Micron, started the year with

Starting point is 00:04:03 valuations under 10 times earnings, just as their businesses accelerated and turned up with AI orders and demand. Investors, those are the winners in the S&P 500 year-to-date, and here are the losers, the bottom 30 stocks so far. Many of these names are thought to be AI losers or companies whose unit growth has slowed or declined due to tariffs or a slowdown in demand while the economy is mid-year. There are a lot of consumer names on the bottom performing list here today. A lot of restaurant stocks or fashion-oriented mid-to-lower-end consumer names hit by deportations or a slowdown in hiring. B-bottom moves and seasonal history says the rally in technology stocks isn't over. We've covered the data the last few months on this.

Starting point is 00:04:51 Go check out our prior videos on this topic. Since we continue to mirror the same pattern back during dot com, almost to the day and week in the S&P 500, I'm going to go back once again to the dot com AI cycles overlay and look at sector performance in the second quarter of 99 through the first quarter of 2000. Recall mapping out a similar move since the V bottom low in April would project an S.P 500 target near 7200 in the first quarter of 2026 and 73 to 7400 in the second half at 26. Looking back to the month's 6 through 18 post the long-term capital October low, to the second quarter of 99, the first quarter of 2000, what were the leading sectors for those who weren't investing, trading, or even alive back then? Investors back then, as it is now, technology-driven sectors and industries led the market,

Starting point is 00:05:44 Here's the overlay of the Tech Heavy NASDAQ composite index during the two cycles. You'll notice that it wasn't over until almost a year after the October 1998 long-term capital management low that technology stocks went parabolic for five months to end. What would become known is the dot-com bubble blow off and crash. This analogy and overlay would say that a gently upward slope in trend would be most likely after a choppy end to September during October through the first quarter of 2006 in tech stocks. Investors within both the S&P 500 and the NASDAQ composite, some of the best performing stocks were in technology subsectors, including semiconductors and related equipment.

Starting point is 00:06:30 Back then, these companies produced the essential components for computers and the internet buildout, driving the new economy. Back then, it was Qualcomm, whose share surged by 26. 600% in 1999. Yes, investors, Nvidia back then was a recently IPOed company on the back of its graphics controllers for gaming systems. There were internet and software companies back then. Many internet companies as well as established software companies saw their stock prices skyrocket during this period on the back of an acceleration and their unit growth and still early mobile phone adoption. Another leading group was communications and networking companies such as Cisco,

Starting point is 00:07:11 lucent technology, and Newbridge networks, experiencing huge gains on a boom and early orders for digital communication infrastructure. Other notable sectors performed well for most conservative investors as the market seemed to anticipate the other side of spending and a slowdown in the economy post the Y2K spending. What group was that? The energy stock saw a strong year in the second half of 99, driven by a spike in oil prices as the economy started to strengthen. This sector's performance was a barbell between speculative names like plug power and ballard power, as well as good performance in larger, slower growth names like Chevron and others. Other areas that were surprisingly strong real estate investment trusts and small cap stocks. Both groups had strong

Starting point is 00:07:58 1999 moves with small cap stocks being underowned and undervalued versus their larger cap names. Small caps were helped back then by less regulation by the federal government and talk of a pickup in mergers. I know that all sounds very familiar to today. Another group was materials. Finally, a bit surprising to many. Materially saw a strong returns in 1999. Back then, it was just the beginning of eight years of ramped up China spending on infrastructure for the 2008 Summer Olympic Games. Kind of it was their coming out party for their country to the Western world or so it was sold as. Think of it. That's all pretty crazy. The names have changed. And it was a general generation ago. But we continue to mirror that period in investor history. Back then, technology

Starting point is 00:08:47 led on the internet build. Back then, speculative energy had its day. Back then, material stocks were big outperformers. Investors, today the AI felt out is leading. Today, speculative energy in nuclear and alt energy is having its day. Today, uranium and gold stocks are ripping and leading the material sector higher. These high relative strength groups will likely, continue to work in the months ahead. Throw in some down and out software names who've been beaten up, but whose numbers have been beating, whose values have been cut in half by AI fear,

Starting point is 00:09:24 throw in some semi-equipment names who've also been out of favor on the back of Intel order cutbacks and China restrictions from the U.S. and others on leading-edge technology sales. They were latecomers that turned into leaders in the second half of the dot-com buildout. Why not again this time? Most tech cycles don't end until the semi-equipment stocks become market leaders for at least nine to 12 months. Investors, why not be prepared in advance of the fourth quarter 2025 to hear about the chase for performance into year-end before it takes place? Investors,

Starting point is 00:10:00 the V-bottom pattern continues its historical past, which I expect, expect some weakness into the September month end on repositioning and institutional tax. selling and maybe the first few days of October, which should be bought. V-bottoms historically do not end or do not have deep pullbacks on a percentage terms until after the 10th or 11th month as you approach a year-holding period for those investors who bought at or near the lows. For those of you who stuck with your financial plan amongst the tariff uncertainty in April, congratulations. Know that regardless of the path

Starting point is 00:10:38 of the economy and the financial markets over the next few months, the investment team at Oak Harvest will be here, manning the ship, adjusting our models, and our long, short, hedged equity fund where we can. Until next week, have a blessed

Starting point is 00:10:54 weekend, and know the Oak Harvest team is doing what we can to plan for you and your family's future regardless of what stage you're at in your career or in your retirement. All content contained with an Oak Harvest podcast expresses the views of the speaker and is for informational purposes only. It is based on information believed to be reliable when created, but any cited data, indicators, statistics, or other sources are not

Starting point is 00:11:21 guaranteed. The views and opinions expressed herein may change without notice. Strategies and ideas discussed may not be right for you and nothing in this podcast should be considered as personalized investment, tax or legal advice, or an offer or solicitation to buy or sell securities. Indexes such as the S&P 500 are not available for direct investment, and your investment results may differ when compared to an index. Specific portfolio actions or strategies discussed will not apply to all client portfolios. Investing involves the risk of loss, and past performance is not indicative of future results.

Stock Talk - V-Bottom Recovery: Month 6 – What to Buy. Stock Market Update, Friday Sept 26, 2025

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