5 Stocks I’m Buying HEAVY Right Now July 2026

[00:00:00] Speaker 1: Hey Bowtie Nation, Joseph Hoag with your weekly stock market update Sunday at noon before the week starts with the stocks to watch and the stock market news you need to see. And Nation, the market just flashed one of the biggest warning signs I've seen in years. It doesn't mean a crash, but it has changed the way I'm investing. I'm going to reveal the one factor driving stocks right now along with the five stocks I'm buying this month and important updates to AI stocks and why Nike could be the biggest surprise of the week. I'm going to switch things up this week with our market outlook first, then to those five stocks I'm buying right now because you need to see why I'm going cautious on some of these. We're seeing some massive swings in stocks, not just individual names like Apple, which was hit with its worst day in a year last week, but market-wide swings with the Nasdaq index up past 27,000, then crashing 7% to 25,000 in a week, then back up 6% and down 6% the next week. The Nasdaq's volatility index, a measure of how violent those swings are up and down, and called the market's fear gauge spiking up from 15 past 22 just in the past month. And there is one reason for this new volatility, one factor driving the market, and it is a giant warning sign that you need to be watching because this has preceded every stock market crash in the past. Now, I did warn about this last month, but it's gone from bad to just plain scary in that time. FINRA just reported its margin debt, the amount investors are borrowing to invest in stocks. That number is off the chart here. Investors are now borrowing $1.4 trillion to invest, but even that number hides how bad this could be. That's because over the last month, investors added $111 billion, an 8% increase in borrowed money, both of those records for the biggest one-month change. Now, I realize that's all just numbers, and how can $1.4 trillion be that much worse than $1.3 trillion investors owed in the month before? But looking at a chart that shows this margin debt against the S&P 500, that main stock market index, and this picture changes. Investors have borrowed an additional $494 billion over the last year, shooting that margin debt up 53% and pushing stocks higher. Now, of course, all this works when stocks are going straight up. The NASDAQ is up 123% in the three years since that 2022 bottom, with the broader S&P 500 index up 84%. And with the exception of a few tariff and inflation scares here and there, investors have always been rewarded for buying those dips. So, borrowing that extra money, the $1.4 trillion in margin debt amplifies those returns. Invest $100 and that 84% return on the S&P 500 is just an $84 profit. Invest $100 and borrow another $50 to invest $150 though, that 84% return becomes a $126 profit. But nation, this is the important part. When the market gets expensive and when cracks start to appear, that's when this record borrowed money becomes a warning sign for that next crash. Margin debt peaked at $600 billion in 2000 before that 40% dot-com crash. It jumped back to $700 billion by 2007, just before stocks lost 50% in the 2008 crash. When borrowed money gets dangerously high like this, any correction lower in stocks is amplified as well. Investors are forced to sell and that pushes stocks further into a crash. What we see is that record high margin debt is maxing out how much investors can borrow. That means even the normal 3% to 5% dips that we see several times a year could quickly become a 10% correction as investors get those margin calls, are forced to sell out of their stocks to meet those calls, and that in turn pushes stocks even further down. Another reason we're seeing those bigger swings in stocks lately, something the margin debt is going to start feeding off of to create those even bigger dips, is that the overall market fundamentals are weakening. Against surprisingly strong profit growth of 23% expected this year, analysts believe next year is going to be a disappointment by comparison, with just 16% earnings growth. On top of that, the AI spending boom has made this market a lot more expensive than it appears. On a price to earnings basis, so that popular measure of how expensive stocks are, how much investors are willing to pay for every dollar in earnings, the market is trading for 20 times expected earnings. That's near the peak of the 2020 boom, but only about 20% more expensive than the longer term average on that ratio. But now, consider the price to cash flow measure, because high AI spending has really artificially skewed those earnings to look better than they actually are, especially when actual cash flow is much lower. When we see this, the market is trading for a price of 27 times that expected cash flow. So that price to cash flow, 27 times, that is 37% more expensive than the 20 year average price, and really shows you how expensive this market has become. So it's just this kind of vicious cycle that is feeding off itself, that breakdown in fundamentals is making investors twitchy at any bad news, sending stocks into those 3 to 5% dips. And while the bull market may recover, the bigger risk is that a 10% market wide correction here is those high flying tech stocks that we all love are going to plunge 30% plus, and you're going to be scared out and sell at exactly the wrong time. When the S&P index fell just 7% in March, the tech heavy Nasdaq lost 9%, AI stocks in the AIQ fund lost 10%, and King Daddy here, Nvidia, lost 13% in less than a month. And how many are out there? We're getting nervous at that point. Now nation credit is still flowing and investors are still borrowing more to push those stocks higher, but the bill always comes due. You have to ask yourself here, do I want to risk it, try to hold out until the very tipsy top, but also risk getting caught in that massive crash afterwards? Or do I want to just book some of the profits here, balance my portfolio against safer stocks outside of tech? Of course, that is not to say that stocks in the safer sector, like real estate, consumer staples, and healthcare won't fall in a crash, but they will fall a lot less, and most of them are going to pay a dividend while you wait. Nation, the fact is, we are three years into a bull market that started late 2022, with the S&P 500 up that 84% of cents. Now that's just shy of the average 4.3 years bull markets have lasted, and well under the 150% average return. Corporate profits are still booming, with earnings expected up 23% this year, driving those stocks higher. And every dip in the last few years has recovered to new highs, so you do want to stay invested in stocks to ride that trend higher. And while they say the bull markets don't die of old age, when those warning signs do start flashing, you better start getting picky about the stocks you do buy. And that's why for the stocks I'm buying this month, I'm filtering out for the very best in my three favorite growth themes, but also layering in some safety to start balancing out my portfolio against a market crash. I'll be using one of my favorite features on Seeking Alpha, the comparison tool to look at these stocks side by side. Here we can see platform rankings, compare the stock price returns, but more importantly, compare the stocks on all those fundamentals, like valuation, growth, and profitability, to narrow it down to the very best in the industry. Besides that comparison feature, I've used Seeking Alpha Premium longer than any other resource to make sure I'm getting the bull and bear case for a stock, and to sit in on a company's earnings report to get that inside information. And right now, Seeking Alpha is having its annual summer sale, 25% off the premium service, and the best deal of the year. Look for the link I'll leave in the description, and you're going to be able to try it risk-free for seven days. If you like it, that link is also going to get you a $75 off the subscription. Make sure you check it out now though, because the sale is only on through this week, so use that link or scan the QR code here. Here I've set up three groups of my favorite stocks using the comparison feature here in Seeking Alpha. AI Power Generation, Cyber Security, and AI Networking. Within each of these, I can compare the stocks in each industry together to make sure I'm comparing similar companies, getting that apples to apples comparison. I'll compare each across revenue growth and profitability to find the companies with that competitive advantage, taking that market share, but also then converting those sales into earnings for investors. I'll then compare them across valuations as well to find the best deal and narrow it down to just one stock in each industry. Power Generation continues to be one of the biggest bottlenecks in artificial intelligence, supplying those data centers with that ready electricity to run the models. I've recommended Bloom Energy, ticker BE, Vertive Holdings, VRT, and Quanta Services PWR on the channel in the past, but I want to put in all the names here in the space for comparison. But returns have been stellar across the board, with Bloom posting 190% return just this year, followed by Coherent, ticker COHR, with 106% return, Vertive at 87%, Quanta up 63%, Monolithic Power at 44%, which is still amazing for a six-month return. On the longer three-year time frame, we see exactly the same ranking, with Bloom at the top here and a 1500% return, that is 15 times your money. On revenue growth here, it's been Bloom and Vertive with their more AI focus, more of a pure play that they have set themselves apart. BE with 56% sales growth, and VRT with almost 29% sales growth over the last year. Monolithic has also done really well with almost 24% growth, along with 21% on Quanta. But those data center powers a much smaller percentage of their total revenue, so this growth is not quite as high as we see with Bloom and Vertive. And it's nearly the same picture here looking forward, with analyst forecasts for 63% revenue growth at Bloom and 30% for Vertive, 27% for Monolithic, though Coherent is expected to improve its growth with 26% sales growth. On profitability, all you out there in the nation know, I like to focus here on the EBITDA margin, or the OP margin, which is that core operational profitability. That's earnings before interest, taxes, depreciation, and amortization. Now, it shows us how well management converts that revenue into those core earnings after paying suppliers, production, staffing, all those other costs, before really the accounting and the financial costs like depreciation, interest, and taxes. Here, Monolithic leads with a very strong 29% margin, followed by Vertive and Coherent, each around 20% profitability. On this, Bloom and Quanta are quite a ways behind here, with just 9% profitability, probably due to higher spending for that growth. And the valuation is just as important with these growth stocks, because even a good company can be a bad investment if you pay too much. So, I like to look at this price to earnings, but also adjusted for growth. So that PEG ratio, which helps show you the growth stocks at the best prices. Now, I'll also use the price to sales ratio here to see valuation on that top line number. So, how many dollars are investors paying for every dollar in sales generated by the company? And with any of these, the lower the better, right? As if you can pay less, less dollars for every dollar in sales, every dollar in earnings generated by the company. It's going to be a better deal if all those other factors, the revenue growth, as well as the profitability, are basically equal. Now, on a PEG basis here, Quanta and Monolithic are quite a bit more expensive than Vertive, Coherent, and Bloom. On that price to sales ratio, Quanta is actually the best deal. But while its revenue growth is okay and the valuation is good, profitability means that Quanta won't make my top pick for this one. Here, I'm going to have to go with Vertive Holdings, VRT, for its lower price to earnings ratio, along with that solid revenue growth and profitability. And what's important here, when you're picking your stocks based on the fundamentals here, that you don't go off any one number in isolation. You're going off of all three, revenue growth, profitability, and that valuation, really putting them all together to find the best deal you can get. Cybersecurity may not have that explosive growth of AI infrastructure, but you know it's one of my favorite themes. We heard over the weekend that Anthropic got approval to release its Mythos model to select companies, and that's the model that, in the wrong hands, could lead to a boom in hacking and cyber attacks. Now, I already hold shares of Palo Alto Networks, ticker PANW, CrowdStrike Holdings, CRWD, Zscaler, ticker ZS, Okta, OKTA, and Fortinet. So, most of the group here, I want to line them all up, along with Sentinel-1, ticker S, and Cloudflare, NET, show which I want to buy now. Now, it has been a mixed bag over the last year, with all of these falling from that October peak into the AI software scare, but that thesis for higher cybersecurity demand has come back out, and most of these have rebounded. Palo Alto and Fortinet have outperformed here with 50% and 45% returns, while CrowdStrike isn't too far behind with a 38% return. Zscaler has been the most disappointing, though, with its 57% loss. Clearly, it's here that Wall Street thinks that ZS is the most at risk to that AI replacement idea. On the longer 3-year timeframe, CrowdStrike has been my best pick here, with 394% return, followed by NET, Palo Alto, and Fortinet that have all more than doubled. On sales growth, Sentinel-1 and Cloudflare have done really well, with 30% annualized revenue growth over those 3 years, though CrowdStrike and Zscaler aren't far behind. Both growing sales by about 28% a year. Okta, Fortinet, and Palo Alto have been the laggards here. Okta and Fortinet both specialize in the slower growth segments of identity access and endpoint, though Fortinet is also in cloud security, so it should have faster growth than this. On a forecasted basis, Palo Alto is making a lot of acquisitions lately that is going to help boost its growth, while CrowdStrike, Zscaler, Sentinel-1, and Cloudflare all expected to post about 20% plus growth. Profitability is really the deciding factor in cybersecurity, with some of these companies sacrificing those profits now for higher growth spending and higher earnings in the future. Fortinet is the clear leader here, with an EBITDA margin of 33%, which is almost three times higher than the next most profitable, Palo Alto Networks. But then you pay for that growth in cybersecurity, with the valuation measures much higher than we see in a lot of other industries. Sentinel-1 is the least expensive by far here, but I just never liked its lack of profitability. Maybe it's cheap enough to buy here, but here I'm going to have to go with Fortinet Best, ticker FTNT. It's not as cheap as ZS or Okta, but still relatively better deal than those others, and is a clear choice in terms of profitability. And while memory chips have gotten all the news lately, networking equipment was the first AI bottleneck I discovered more than a year ago, and it's been very profitable since. I own all three of the leaders here in this space, Arista Networks, ticker ANET, Estera Labs, ALAB, and Broadcom, ABGO. Where Arista and Estera are the more pure play focused on networking, though Estera has expanded out into chips as well. And Broadcom is the giant here, with an ecosystem of products from networking to accelerators, and a lot of that data center infrastructure play. Over the last year, Estera has been the blowout return, up 300%, though ANET and Broadcom have still outperformed the overall market. On the longer three-year chart, it's again Estera that, thanks to its smaller size, has boomed almost 1000% higher, making it that 10x stock. But again, I'm more than happy with this 300% plus returns on ABGO and Arista as well. On the three-year annualized growth, we see why Estera has done so well here, with sales up 120% a year, more than four times the pace of growth at its competitors. On a forward basis, Estera is still expected to keep up a very strong 77% revenue pace. Arista isn't too bad here at 27% pace, but what interests me here is Broadcom's forecasted sales growth of almost 50% as it starts really coming through with those TPU chip deals with the hyperscalers. In profitability, we see that Estera is really spending for that growth, so sacrificing a little bit more on that near-term profits. Broadcom and Arista, though, have really strong profitability given their growth, ABGO in particular at 55% margin, especially considering that 50% pace of revenue growth. Here, I was surprised that shares of Arista were trading so expensively on that price-to-earnings-adjusted-for-growth basis, basically even with Estera Labs. I do like Estera's revenue growth, but here, the profitability, the growth, and that rock-bottom valuation of just .68 times on a PEG basis makes Broadcom the clear buy of these three. There are a lot of good stocks in those three groups, and all of them are big in the AI revolution, but again, at this stage in the bull market, and with that margin debt warning sign, I want to start being more selective and then layering stocks from safer sectors that can help cushion the higher volatility in the market. That's why I'm also adding shares of the Consumer Staple Sector ETF, the ticker XLP, with its 35 stocks in food, beverages, and household products. We booked a 366% return on an options trade on shares of Campbell's ticker CPV earlier this month, but I still like the stock and the sector overall for that safety in any market downturn. The XLP fund is going to give you exposure to the largest companies in this space, like Walmart, Costco, Altria, and Pepsi, companies selling things that people are going to buy no matter what happens to the market or the economy. The sector is up just 22% over the last five years, the second worst performing, but is showing signs of life with an 8.7% return so far this year as those companies slowly pass on some of that inflation to consumers and see their margins improve. I'm also adding shares of the real estate sector ETF, the ticker XLRE, which holds shares of 31 real estate investment trusts, those REITs, and gives you broad exposure across commercial real estate. We've been watching the data center REITs like Equinix and Digital Realty for the last year in that AI theme, but all of these bring that inflation hedging strength of property and the cash flows that are going to support these stocks. Real estate has been the big laggard over the last five years, with the Fed's interest rate hikes in 2022 completely destroying this sector, but it's starting to rebound now, the fifth best sector this year with a 10% return. And neither this or the XLP staples fund is going to make you rich overnight, but they both pay solid dividends and add that cash flow stability to your portfolio that is going to be very welcome as tech stocks wobble all year. We've got a big week coming up for AI stocks, along with earnings from Nike, which could be the biggest surprise of the week. I'm going to show you what I'm watching this week next, but if you've liked the video so far, do me a favor and tap that like button. I appreciate it and it helps us get this video out to more in the community. If you've got an investing idea or a theme that you'd like to see covered, please go to the comments below, put it in there, and I'm going to try to get it on the list. Now onto the stocks I'm watching this week. AI stocks have been even more volatile than the rest of the market lately, with the GlobalX AI and Technology ETF ticker AIQ down nearly 5% on the week and seeing some big daily swings. The data center build out and the AI boom isn't over, but affordability is becoming a big issue that could derail revenue growth. Micron Technology's blowout earnings sent the shares up 15%, but it was also based on a giant gross margin of 85%, and a big warning if you read between the lines here. That's because that gross margin, or the profitability, was from the runaway prices on Micron's memory chips booking 300% plus revenue growth as it raises its prices on the biggest shortage for AI hardware. The problem here is that revenue for Micron is a massive cost increase for everyone else down the AI value chain from those hyperscalers like Amazon and Alphabet to the LLMs like Anthropic. That shortage of memory chips like the ones made by Micron used not only in data centers but all across electronics, so bad that Apple was forced into a rare mid-cycle price increase across its products. Now the memory and storage producers like Micron, Seagate Technology, STX, Western Digital, WDC, and SanDisk, ticker SNDK, they're still going to be winners here as there just isn't enough production and prices are still going up. I outlined last week that the open source AI models like Quinn by Alibaba, ticker BABA, are also going to benefit as the AI users are being forced to look for those lower cost options. BABA is down lately on geopolitical worries, but it's one of the best open source AI models along with the best of breed position in e-commerce and search in its markets. But then relative losers in this AI cost trend are going to be the hyperscalers, the cloud, and the neocloud providers most exposed to those higher prices. This would be cloud services like Oracle, SpaceX, Nebius, and CoreWeave all down double digits last week while Amazon was managing to hold up but still down about 5% on the week. We also saw space stocks all falling in sympathy with SpaceX which was down 12% last week and back to its opening price on the IPO day. It's still up from that $135 IPO price for those early investors but well off the high of $225 a share. All these stocks got bid up into that SpaceX frenzy so it is normal for them to come back down and I do like the upside left in Rocket Lab, ticker RKLB. After last week's brutal 19% sell off and at a $53 billion market cap it's still trading very expensive at 58 times expected sales but those sales are expected higher by 51% this year and the valuation puts it pretty much even with SpaceX on a price to sales ratio. Rocket Lab's upcoming Neutron medium lift rocket is going to lower its cost to about $4,000 per kilogram on 13 tons of payload. The company has 70 launches on backlog, a $2.2 billion backlog for revenue that should keep these sales growing. And Nike ticker NKE is going to be a giant read on the health of the consumer and possibly the biggest surprise of the week when it reports earnings on Tuesday. It's not necessarily the consumer is in great shape but the stock has plunged 36% this year and I think the worst is already baked in for the price. Between tariffs, inflation and a weak consumer Nike is expected to report sales were down 2% last quarter from the year before and earnings were basically flat here. Full year revenue is expected flat as well at $46 billion with earnings plunging 30% to $1.51 per share. The earnings expectations for last quarter and the current quarter have come way down over the last few months from forecasts of $0.21 and $0.62 in earnings to just $0.13 and $0.45 in per share profits for those quarters. But management has done a great job of beating those forecasts in the past. They've surprised by 24% in February report alone. Despite those earnings beats though, shares have been slammed double digits in each of the last two reports and options pricing is predicting a 7% plus move either way on this quarter's report. As we see some of the worst tariff effects lapping and coming off and gas prices coming down a little bit, I think management is going to be able to talk up optimistically about the current and the coming quarters. Trading at 26 times on a PE basis and just 1.3 times on that price to sales evaluation. This is 20% plus discount to a historical valuation that opens up to a big upside if earnings can surprise higher. Don't miss that summer sale on Seeking Alpha Premium. Try it risk free for 7 days and get a 25% discount but only for the next week and with the link below. Don't forget to join the Let's Talk Money community by tapping that subscribe button and clicking the bell notification.