# 5 Stocks to Buy Before the Next Market Rotation I June 8, 2026 ## Метаданные - **Канал:** Morningstar, Inc. - **YouTube:** https://www.youtube.com/watch?v=4p4LskLqBs8 - **Дата:** 08.06.2026 - **Длительность:** 51:34 - **Просмотры:** 29,018 - **Источник:** https://ekstraktznaniy.ru/video/53049 ## Описание In this new episode of The Morning Filter podcast, co-hosts Dave Sekera and Susan Dziubinski preview the SpaceX IPO with Morningstar analyst Nic Owens. They discuss the company’s economic moat rating, forecasts for revenue and margins, and why SpaceX is worth less than half its IPO target. They also cover what this week’s inflation reports could mean for the Fed meeting later this month and whether Palo Alto Networks PANW, Crowdstrike CRWD or Broadcom AVGO look attractive after earnings. Tune in to find out if Berkshire Hathaway BRK.B is still a buy after its purchase of Taylor Morrison and its additional investment in Alphabet GOOGL. They close the episode with five stocks to buy to rebalance a barbell portfolio. Episode Highlights 00:00:00 Welcome 00:02:23 What this week’s inflation reports could mean for next week’s Fed meeting 00:06:02 Why long-term investors should sit out the SpaceX IPO 00:28:08 Do Palo Alto Networks PANW, Crowdstrike CRWD or Broadcom AVGO look like good i ## Транскрипт ### Welcome [] Hey. Hello and welcome to the Morning Filter podcast. I'm Susan Jabinsky with Morning Star. Every Monday before market open, I sit down with Morning Star chief US market strategist Dave Sakara to talk about what investors should have on their radars for the week, some new Morning Star research, and a few stock ideas. Now, before we start, there are a couple of housekeeping items. First, I hope to see some of you at the Morning Star Investment Conference in Chicago on June 17th and 18th. will be taping a segment for the Morning Filter at the podcast booth on Wednesday at 2:35 Central time. I'm sitting down with Morning Star senior technology analyst Will Kerwin to talk about many of the tech stocks he covers which include Apple, Marll Technology, Broadcom, and others. There's a link in the show notes with more information about the conference and how to register. And second, Dave and I are pre-taping today's episode on Friday, June 5th before market open. So, our comments don't reflect anything that's happened since then. And why are we doing that? Well, Dave is taking some welldeserved time off for a couple of weeks, but we'll somehow manage here on the Morning Filter without him. We have a couple of special episodes in the works while Dave is out. So, please continue to tune in. — All right, Dave. Well, I'm clearly jealous. So, share with everyone what you're going to be doing on this welldeserved break. Susan bonjouro in Italian mier. You know what? Almost 28 years and three kids later, my wife and I are finally making it back to Italy. Our first time since our honeymoon in 1998, — that's fantastic. — Yeah. — Have a great time. — But before you go, we will I need to ask you some questions about the market and stocks. So — market, what market? What stocks? Who knows? — Yeah. Clearly hopefully Dave doesn't have like one foot in vacation mode already. Okay, so let's get down to business. Uh starting with what's on radar this week on the economic front. ### What this week’s inflation reports could mean for next week’s Fed meeting [2:23] Now we have a couple of inflation numbers coming out. So what do you think investors should be watching for here? — So the question isn't, you know, is inflation going up or not going up, it's going up. So the question really is, you know, is this going to be a temporary increase in inflation or will this dissipate once oil prices finally start to fall? whenever we get some sort of agreement you know with Iran. I mean the real question being here you know is inflation at this point already starting to become embedded and does it actually start to continue to keep persisting you know even after inflation falls and of course if inflation you know persists afterwards that's certainly going to be you know a big you know negative for both the economy and I think you know the stock market so you're going to see a lot of analysis out there between the difference between headline inflation and core inflation so everyone is going to be really watching to see if inflation is starting to bleed into core from headline at this point in time. Now, I think core is probably still under control for now, but of course, you know, the higher oil stays for longer, it's eventually going to bleed into core inflation as well. Then the other thing to keep your eye on is going to be PPI. I don't know if we talk about PPI all that much. You know, PPI of course being a leading indicator for CPI, but really the thing to watch here most closely is going to be on input costs for manufacturers. Some of the ISM numbers, you know, ISM being the Institute for Supply Management, you know, they've been noting that, you know, a lot of manufacturers are telling them that not only are energy prices increasing, but they're just seeing a broad increase in commodity cross costs across the board, which means that it's not just energy. we are seeing inflation across all commodities, you know, at this point in time. So again, I'm very concerned about inflation. You know, I really hope that we get to the point where oil starts coming down meaningfully in the short term. If it's not, I think inflation, not only is it going to be here for months to come, it could be quarters to come as it works its way through the economy. — Well, given that, Dave, the Fed meets um later this month for the first time with Kevin Wars as Fed chair. Uh the meeting is of course a little bit a way out but you know as of today what's your expectation for that meeting? — I mean as of today I still think the Fed is on hold for the foreseeable future which is you know what you and I have been talking about for quite a while. You know inflation's heading higher. It's going to stick around for a while. But if you look at the economic indicators you know the economy is doing fine pretty well. You know if you look at the Atlanta Fed GDP now you know that's telling us the economy is running at about a 3% run rate right now. So, you know, better than kind of that long-term 2% that I think our economists expect, but not necessarily, you know, too hot at this point in time. I think the bigger question there with the economy is, you know, just how much of it right now is really being driven by the AI buildout boom and if that starts to slow, what happens with the rest of the economy? But for now, I think the Fed, it's probably more likely that they would have to be in a position to potentially raise rates, you know, later this year. You know, if inflation comes in too hot, you know, and or the economy starts accelerating from here, I think that they would have to bolster in uh the Fed funds rate. So, at this point, you know, we'll see what happens, but I think they're doing a lot of nothing for right now. But I do have a bet for you. So with, you know, Chair Walsh, you know, conducting the meeting. I'll bet you right now, you will not hear the word transitory this time around. — Well, [snorts] well, we will see. You'll probably still be in Italy, so I'll listen in and uh let you know how that bet turns out when you get back. All right. Well, the big news in ### Why long-term investors should sit out the SpaceX IPO [6:02] the stock market this week, of course, will be uh SpaceX's anticipated IPO. It looks like as of right now, SpaceX is pricing its IPO at $135 per share, which translates to a valuation of about $1. 8 trillion. Now, late last week, Dave sat down with Morning Star analyst Nick Owens, who covers SpaceX, and they talked about the company's economic moat, Morning Star's forecasts for revenue and margins, and what Morning Star thinks the company is really worth. Take a listen. Nick, thank you very much for joining us today. I know you've got an extremely busy calendar with everything going on, but so we've got the SpaceX IPO coming. We saw your note that you put out on morningstar. com about it. So, first of all, can you just really give us kind of that 30,000 foot view on what all does this company do and maybe kind of explain a little bit each of their main business segments? — Absolutely. Um, and so I cover aerospace and defense. And until February, I would say, uh, SpaceX was mostly an aerospace and defense company, mostly aerospace really. Um, they have a rockets business. They have a satellite communications business, which we think of as Starlink. Uh, and then now in February, they bought, uh, the XAI company from Elon Musk, uh, which is looking into AI, AI infrastructure, and potentially AI infrastructure in space. So those are the three buckets. Um and uh it's a sort of a fast-moving target given the some of the growth rates. — Could you give me a little bit more detail about like those three main business lines? — Yeah. And uh so in 2025 um the rocket business did four billion in revenue. Starlink did 11 billion. — Uh and the AI business uh posted three billion in revenue. And about half of that is advertising from Twitter. So, so that that's really like the startup uh version. And I think what most people may not realize is just how big Starlink has gotten. It's it's a really money spinner and we see a very highly uh like profitable growth coming out of there for years. — Okay. Now, of course, we wouldn't be Morning Star if we didn't talk about our economic moat rating. So in this case, I was hoping maybe not only could you describe what one the economic moat rating for the entire company is, but you know the primary moat sources that you know kind of back up that moat rating, but I'm also curious too, how do you really derive a moat rating for the entire company when you have three such very different types of businesses that make up the overall company? — Yeah, there's a lot there and I actually am really glad to be able to rely on the morning star methodology around Moz which I think is really rigorous. So given those three buckets, what I'll tell you is the first two, the rockets, the actual designing and making of the rockets and launching them and the Starling business which uses satellites that are lifted on the Starling on the SpaceX rockets. Um we believe those have a cost advantage and that's one of our core remote sources and within that the two sort of uh flavors of that cost advantage are the R& D. Basically, they've um built and tested these rockets to be able to lift more uh you know per kilogram than other rockets and that gives them an operating cost advantage. And then they also have done it more often. They've gone down the learning curve. They they've launched hundreds and hundreds of times more than the nearest competitor and launched thousands of more satellites than the nearest competitor. And so their average cost is lower. Their econom economies of scale uh have been I think firmly established. And so those two, let's say if they were standalone would have the characteristics of what we would describe as wide mo businesses. Um the wrinkle, if you will, is that we the stated purpose of the IPO is to raise money to invest mostly in AI. The the next, you know, phase, if you will. And there's the jury's out, I would say, on whether XAI or the SpaceX AI business has a moat and or what it might be. There's some scenarios in which it might benefit from some cost advantage like Starlink in terms of putting thousands of satellites in space and so forth, but that's far from certain. And they're going to go spend, let's say, tens of billions of dollars to find out. And so the in our methodology the risk of value destruction that might happen from that scenario let's say overshadows the some of the characteristics the wide mode characteristics of the other businesses. So we net it out to a narrow mode rating for the company particularly even though the XAI business is not a huge piece of the business today the planned investment and the capital deployed will make it a bigger piece in the future. So in a normal uh conglomerate, let's say we had three businesses about equal size and one was wide and one was narrow and one was none, we'd probably end up at narrow for those averaging reasons. This is a little different, but um worth I think acknowledging the core mode around the capabilities around launch is really quite uh impressive. — Okay, thank you. Now, of course, when we're talking about valuation and you know, Morning Star when we think about the value of a stock, it is, you know, the intrinsic valuation of the company ends up being the present value of all the future free cash flow that a company's going to generate. So, I guess even before we get into how you're valuing the company, how do you come up with forecasts for this company? I mean, are you really trying to forecast, you know, three individual companies and roll that up into one? You how do you drive that topline number, you know, overall and at each one of those segments? Uh the answer is yes. It's much easier to look at this as three pieces because they each have different economics. And so for the rocket launch, it's how many rockets at what cost times how many payloads. Uh and for the for Starlink, it's sort of subscribers, right? This is a telecom business essentially. Uh subscribers, average revenue, incremental costs and so forth. Uh and we have some done some work on sizing what we think is let's say our view on the market opportunity there. Some of the numbers that are in the registration statement are very uh you know ambitious or sort of like a grand eyesized in terms of they might soak up all telecom spending uh you know globally. We don't need to believe any of that to get to a pretty healthy growth rate and a good business in Starlink for XAI. um spent a lot of time building out uh let's say a version of what that that business could look like and really has is hinged on this idea of can there if a commercial data center in space or GPU cluster in space is viable um what might it cost to own and operate and what might be let's say market rates for AI compute uh and and you know spanning that out uh I think we 15 years just to see how it looks. Um and again there's scenarios there. So we are able to do forecasted cash flows for all three and then we did probability weights uh on these sort of upside downside and base case scenarios which really hinge on what might happen at the AI uh division — and we were talking earlier about when we talked about the rockets division earlier. I believe you said that you can look at the launch schedule that's already out there and get a pretty good idea. And how far out into the future does that launch schedule typically go? — I mean, there's a uh FAA schedule. They're approved, I want to say, years in advance. Uh beyond that, we have a forecast that is more or less from the company's stated plan. So, they have plans for how many Starlink satellites they want to put out there. And then you have how many fit on a rocket? How many rockets do they own? have to build to basically continue building out uh the Starlink constellation? Uh most of the stuff that's that SpaceX puts up in space are Starlink satellites and then they kind of rent out their the extra space to others. Um and that's its own strategy in terms of decreasing their cost by by increasing their volume in a way inhouse. Uh but so that's where the forecast for that comes from. And uh there's one key assumption that the Starship, the newest, biggest rocket that they had a test flight for the other day, um that top stage has to be reusable for some of these numbers to really pan out. Uh the idea is to be able to fly the same actual rocket which is you know the space shuttle was the last time we had a upper stage reusable but it had to go into the shop for months and months to have tiles replaced and so forth. So the goal the engineering problem at hand is can you have an upper stage that's reusable in hours. Uh and I think there's a realm it's within the realm of possibility. It's just engineering. it's thermal resistance and metallergy and you know things that I don't have expertise in but I think is doable. Uh and so if you believe that then you get to these scenarios where it's worth you know that they can launch thousands and thousands of satellites sometimes launching the same rocket multiple times a day. — Well that actually goes right into my next question then talking about cost. So it's really the similar question. So you've gone through like how you forecast revenue. So how do you think about forecasting you know the operating margin? How do you think about it? Not only for forecasting, you know, maybe here in 2026, but trying to think about what's the path of that margin, you know, over the next couple years, maybe getting out through like your 5year forecast period. So, um, again, on the on the rocket launch, it's relatively straightforward, especially from my perspective covering other sort of airspace manufacturers and given the volumes that we're talking about. Again, if you assume viability of a reusable upper stage, then you're just looking at a manufacturing sort of supply chain and and cost curve where the there's some savings every doubling of how many you make manufacturing. And then there's the actual launch cost, fuel, and so forth where because the new Starship has a launch bay or a cargo bay that's so huge, the average cost to lift something into space goes down per kilogram every time they do it. And that this is an important part of what SpaceX has already achieved. You know, if you compare to the space shuttle, the launch cost today is 95% lower than it was then and continuing to go down. And so things that you would, you know, if you have a business plan that you want to do bio biology experiments on a satellite in space and you got a quote 10 years ago for how much that would cost to launch, you'd say, "Well, never mind. " But now um all kinds of things are possible because that dollar launch cost comes down. And so that's an interesting feature and then that dollar launch cost comes down for Starlink to put the radio satellites up there. So um for for space that's a fairly straightforward model. We we can look at manufacturing costs and these average launch costs and it's really dividing let's say by the kilogram capacity of the rocket. Then on the satellite side, telecoms is interesting because once you have the network set up, you know, traditionally we look at things like fiber optic or mobile cell towers, but there's an analogy here to a the satellite constellation. The cost to add a customer is very very low. So the incremental profit from growing your subscribers and and services is is uh very attractive. Um, and the other interesting aspect that we found is when you think about say cell towers or fiber, the investments that you have to make to go reach, you know, another 10,000 homes or something, they apply in that, you know, zip code. Whereas if you put a hundred new satellites up to widen your the available capacity or spectrum of that network, everyone on Earth could potentially be benefiting from those because they're spinning around and you know they they switch to other zones and provide coverage wherever they are. So um that is like dividing by a higher denominator in terms of the ROI for those investments. So that's an interesting aspect of how we modeled out the potential profitability for Starlink. On the XAI side still um it's it's just far less certain. Um we think that um it is also within the realm of engineering possibility to put a data GPUs in a satellite. They have solar cells. We think they can do sort of heat dumping on the backs of the solar panels. Uh and the open question is whether it's, you know, enough uh economic savings versus a terrestrial data center for it to be, let's say, compelling or just interesting. Um in in this sort of moonshot scenario that we modeled, we're saying it's compelling. They might have some incremental cost advantage because sun is brighter above the atmosphere, solar power is free versus, let's say, natural gas or whatever on the ground, etc., etc. Um uh but even at a sort of um good enough, we think there's a sort of a niche that they could potentially uh serve where you have this let's say economically reasonable computing capacity in orbit. Uh it probably wouldn't have the same uh fast latency that your neighborhood data center would. Uh but so there's going to be tons and tons of demand for AI computing that might be like overnight jobs or our hour our you know hour delay or what have you. I mean the delays are not that long but categories of AI work that could make sense for this network uh are what we modeled in. — All right let's get down to the brass tax. So we've talked about how you forecast revenue. We've talked about margins. So maybe let's just get to your valuation. You know, in your base case based on, you know, your forecast and your analysis, you know, what do you think the intrinsic value of the company is today? And I guess, you know, the biggest question there too then is what do you think really differentiates, you know, your base case kind of some of those probability waitings that you've done versus, you know, what they're talking about that IPO being priced at in the market. — Yeah. So the the base case, we didn't really change our scenarios for rockets and satellites that much. So those two together add up to about $611 billion of enterprise value in our model. Um let's say across the board. Then it really the question mark the uncertainty in my view was around what could the AI business be worth and basically putting out there that there's some unproven things. So uh I'm starting to think of this as or Express this as like a nested probability of does starship turn out to be reusable let's say and really scalable and do data centers in space end up uh mathing out in terms of I think that the engineering is probably doable the question is just does it is it commercially uh successful or reasonable so we assign a 7% probability of both of those being true what we call the moonshot scenario and that actually gets us to a $1. 9 trillion dollar enterprise value which is very close to what they're talking about raising uh you know pegging the the enterprise value at the IPO and um let's say if if the data centers in space are completely unviable uh which is u well if we think there's a 43% chance that not both of those will be true um and [clears throat] that they would actually spend some money to find out about those data centers in space but then they would stop. And so that kind of subtracts a little bit from our base case scenario. But we think the most likely scenario is what we're calling a minimum viable product where they do have uh data centers in space. They may not be compellingly cheaper, but that they fill a niche and they work. And that um those three added up is what got us to the $780 billion average uh or weighted average uh enterprise value, which happens to come in very close to half of what the IPO price is. But I think the way I would kind of reframe that in specifically the morning star point of view, we talk about margin of safety and so forth. If the IPO is at 1. 8 or 1. 9 trillion market value and our upside scenario, which we think, you know, has some dependencies on it, is about the same number. Mhm. — What that's saying is as a disinterested investor who's looking for margin of safety, you wouldn't necessarily pay full value uh for that scenario. But that's what the IPO investors are, let's say, being asked to do, right? Pay me for what it could be worth in the best case scenario. And that I just think that's one way to think about it. Um — so we took the the weighted average and that gets you to a lower number. — Okay. Now, and I'm also thinking about when this IPO does occur, stock is now free to trade. You know, in the short term, I see a whole bunch of different technical reasons out there which are going to influence how that stock trades in the short term more than what the long-term intrinsic valuation of the company may be. So, you know, in the months after the IPO, maybe even like the next year or two after the IPO, like is there anything specific that you would really tell investors that they should be watching for that could maybe sway, you know, how that stock, you know, could trend either, you know, up or down both from our own intrinsic valuation point of view as well as how the market may price it? — Absolutely. So, I think I should answer that in two parts. the fundamentals, the things to look at are progress on Starship, you know, reusability, whether that's announcements or demos for better heat shielding, etc., the more certain that becomes over the next say 2 3 years, then these probabilities go up. — Uh probability of success, let's say. Uh and similarly on the data centers in space, again, the engineering we think is inside the realm of the possible. The question is what's the incremental cost and how that works through a commercial model for that. Um and I think we'll know more inside of two or three years uh how those play out. So that's and so those the changes in those probabilities as we get news let's say would change our fair value. — Mhm. — Um — and in many cases probably quite substantially then. — Yes. And that's what's uh particularly exciting about a company at this stage of growth and in this sort of moment right like you know uh takes more to move the needle on some of my other companies than just changing a probability. — Yeah. um the you know especially I guess because of the range of the outcomes you know we have negative85 billion in the no-go scenario and [clears throat] uh I think it's 1. 3 trillion on top of the 600 in the upside — in terms of things that could move the stock price and milestones to look at. I would simply think of that as in terms of supply and demand. Um they're only selling a couple percent of the company here in what we think is next Friday. M uh and there's more where that came from. There's lots of investors who've invested as a private entity in the company over the years and they most of them have, you know, agreed to lock up. So they're 180 days out or in the case of the chairman Elon Musk a year out but there's still supply of shares out there — and then there's also I would argue unprecedented demand or fervent demand right so it's part of the AI trade the AI story uh and you will have some portion of index funds um buying it because it's going to be included in the NASDAQ 100 I think 15 trading days so th those are things to watch and some of them are unprecedented um you know the price of a stock is set by the marginal buyer — seller and um you know also what's frankly par for the course on an IPO part of what you are um hiring the investment banks to run the books for is they they can intervene in the market they you know they want to let's say smooth out supply and demand you know over trading sessions and so forth especially if they know that some more shares are going to come online or if there's another buyer who's going to take some of them out of circulation, etc. So, um, you know, can we use the old phrase, the market's a voting machine in the short term and a weighing machine in the long term? — Where things stand today, the market conditions seem quite favorable for an AI related uh stock and I think there will be plenty of demand, you know, almost for the foreseeable. Um, and again, they're only floating a few% of the company today. Mhm. — Um but there's going to be supply and it's the explicit aim of some of the existing investors to you know liquidate uh or at least diversify uh they're holding some of them been holding it for almost two decades. So um that's just something to bear in mind you know as the market unwinds and basically what we conclude is at the IPO on the day of I don't see there being any margin of safety to that price. Um, and it is more likely than not in my view that investors, especially long-term investors, will have an opportunity to buy at a better margin of safety. — Got it. Well, thank you very much, Nick. I really appreciate your time. And I also really like in your article, too. So, I think investors really would behoove them to read it on morning. com. But in there, too, I think one of the big takeaways is it's not like we don't believe in the company overall. when I look at a lot of the revenue forecasts you have out for 2035, you know, in many cases they're multiple times, you know, greater than the amount of revenue this year. So, I think, you know, that additional clarity that you provide in the article, I think, will really help, you know, investors kind of encapsulate their own view, you know, as well as kind of understand what it would take to actually get to what that market price is today. — Thanks, Dave. Thanks for having me. — All right. Well, that was some good stuff. There's a link in the show notes to Nick's analysis on SpaceX for those of you who are interested. — All right, Dave, let's get to some other ### Do Palo Alto Networks PANW, Crowdstrike CRWD or Broadcom AVGO look like good investments after earnings? [28:08] new research from Morning Star and we'll start with one of your longtime favorite names in cyber security and that's Palo Alto Networks. Now results came in pretty strong and the stock you know it initially rallied after hours but then it kind of pulled back. So what Morning Star think of the results? — I mean from a fundamental point of view like you said it was pretty strong. I mean, revenue overall was up 31%. Now, specifically, the company called out their next generation annual recurring revenue of up 60%. Now, the operating margin was a little disappointing. It contracted 30 basis points, but at this point, I'm not all that concerned about that slight contraction. I mean, overall, when I read through our note, talked to our analysts, there's really just no change to our investment thesis overall. So in this case when I'm looking at how the stock is trading I think it's really still being impacted more by that on again offagain trade you know the sentiment that we have between you know AI hardware versus software you know still a lot of concerns out there that over time AI is going to disrupt or displace you know software overall so a lot of the days that you see the AI hardware stocks do very well the software stocks you know all sell off and conversely when AI hardware doesn't do so well and sells off that's when you see the strength you know, in the software sector. So, I don't think it really had anything to do with the company results, you know, per se. I think it's really just more about, you know, that thematic trading that we're seeing, you know, in the marketplace. Overall, we actually increased our fair value. You know, that was driven by an increase in both the short-term and medium-term growth forecasts specifically for their firewall business. You our analyst noted that he's just looking for firewall demand to increase. you know, as data centers are being built out, they need more and more firewall security equipment. So, that's a good tailwind for at least a multiple quarters yet to come for this company. All — right. So, Morning Star's new fair value on Pelo Alto is now $285. So, given that change in fair value, is the stock still a buy from your perspective? — So, I just have to, you know, first kind of just note here. I mean, even after this pullback, the stock is still up 50% year to date. So again, to some degree, some people probably just out there, you know, taking profit in this name. I don't think that this is like any big change in the trend and how this stock is going to trade. You know, at this point, it is a three-star rated stock. It's only a couple percent below fair value. Now, of course, we always prefer to have, you know, some sort of margin of safety. You really don't get that margin of safety in this name right now. But at the same point in time, you know, I I'm a big fan of investing in the cyber security space overall. I think Paula Alto is one of the leaders here. So if you don't have exposure to cyber, you want to get some exposure, you could certainly start a small position here, you know, at fair value, but I would just leave enough dry powder so that if it does sell off, you know, then you can dollar cost average into the name. Or if you don't want that single stock exposure like we've talked about in the past, you could look to buy a cyber security ETF, the one that we've talked about in the past. The ticker is Bug Bug. All right, so let's stay with the cyber security theme for a another minute or two. We had Crowd Strike report was down a bit after earnings. Morning Star raised its fair value estimate on the stock to $530. So, you know, unpack those results, what happened and how the stock looks from a valuation perspective after earnings. — Again, strong fundamentally revenue up 26%. In this case, their adjusted operating margin actually expanded by five percentage points. And again, their annual recurring revenue, what they call ARR, was up 24%. So again, very strong, you know, topline growth. You, as you noted, we did increase our fair value. Really, that was just a matter of increasing kind of that long-term profitability and growth estimates. your analyst team, you know, following the earnings in the conference call, they just have greater confidence in the AI strategy, AI associated revenue here. You know, for example, they talked about AI detection and response. ARR grew more than 250% sequentially. Having said that, after the fair value increase, it is still a twostar rated stock, meaning that we think it's trading, you know, on a riskadjusted basis, you know, too far ahead of our long-term intrinsic valuation. Broadcom stock was down more than 12% after reporting. So Dave, what unsettled the market there? And then of course, what did Morning Star think of the results? I — mean, the results themselves were fine. I mean, we thought they're in line with what our own expectations were. We thought the company gave, you know, what we would consider good guidance for the July quarter. You know, management maintained their own outlook. But I think right now we're just in an environment specifically for AI stocks where good enough isn't good enough. And in this case, because of that, the stock tanked. Everyone's looking for companies, you know, to continue to keep, you know, increasing their own guidance. And that's not what we saw here. In fact, our analyst thinks the company's actually guiding pretty conservatively. You know, the company had quote more than 100 billion in AI revenue for 2027. Our own forecast is for higher revenue than that in fiscal 2027. And we're looking for that to grow quite substantially. We're modeling close to 200 billion in AI revenue in fiscal 2028. Now, in this case, our analyst says he has a lot of confidence in those forecasts, you know, based on what he can see out there. He says he has pretty high visibility, you know, based on the forecasted growth for anthropic and open AI XPU ramps. So, again, this is one where, you know, you've got a 40% compound annual growth rate for revenue over the next 5 years. little bit of margin expansion on top of that gets you 46% earnings growth over the next five years on a compound annual growth basis. You know, stock you know maybe it looks a little expensive here based on 2026 earnings estimates of 35 times but based on our growth estimates for 2027 that drops to 21 times. — So then Dave you know given those forecasts and Morning Stars you know valuation on the stock is Broadcom attractive? It is. And in fact, I think this is still like one of our top picks in the tech team's, you know, list. It's a four-star rated stock at a 37% discount. And this is one of those stocks, and we haven't talked about it in the past, and maybe we should do a future show on what GARP means. That's growth at a reasonable price. And I think this really kind of fits that definition when you look at the amount of growth that we're modeling in over the next couple years. and look at even though that PE ratio might be relatively high on a forward basis based on this year just how quickly that f that forward multiple comes down in 2027 and 2028. — All right. Well, I've just made a mental note of that Dave future show GARP. Got it. Okay. So, uh one of your picks ### What to make of Berkshire Hathaway’s BRK.B shopping spree [34:56] Berkshire Hathaway, was in the news last week after it made actually made a couple of investments and put some of that massive cash stockpile to work. So, first Berkshire bought Taylor Morrison home. So, what are your thoughts on that acquisition? — I mean, in the greater scheme of things, when you look at Birkshshire and just the size of Birkshshire, realistically, this really isn't all that meaningful one way or the other. Now, as far as like Taylor Morrison, that's not a company we covered. So, I have no opinion specifically on the valuation there. But I think what's more interesting would be to try and know, you know, was this a purchase because, you know, Greg Ael is now making a timing bet on home building and the recovery there. Are they starting to see a recovering in home building, you know, here in the short term? Or is this maybe just a company where they've had their eye on it for a while? Home building, of course, you know, being somewhat in the doldrums, those home building stocks having relatively low valuations. So maybe it's just a matter of they wanted to buy this company for a while now and now they finally got the opportunity to do that. But I think it's interesting because you know the company has a number of other positions in home building stocks. They own Clayton Homes. So this might be a case where maybe they actually have a little bit better insight than the market you know on the home building sector. — Oh that's interesting. They also have I think a couple of um home building stocks in the public portfolio. So you know it'll be interesting to see if they do anything with those. All right. — Yeah. Well, Berkshire Bergkshire's other big news this week was that it plans to invest an additional $10 billion in Alphabet as part of Alphabet's $80 billion announced equity raise. And you know, Bergkshire doing that will lift Alphabet's um up to about a 9 and a half% waiting in Bergkshire's portfolio. So, what are your thoughts on that one, Dave? Well, obviously now, you know, Alphabet is a core holding, you know, in their public equity portfolio. And I think this to some degree shows how management under Greg Ael is now more comfortable with investing in technology, you know, as opposed to historically, you know, they kind of steered clear that, you know, under Warren Buffett. So, we'll see if this is maybe a trend, you know, going forward. I also wonder, too, with Greg Ael taking the reigns here relatively recently, I wonder if maybe he's starting to feel some pressure, you know, to put that huge cash pile to work. So this might be a case where we start seeing a lot more of these larger investments over the next couple of months. — All right. So then just strictly from a valuation perspective, how's Bergkshire look today? Uh would you still consider it a pick? — Yeah, I mean in fact you can't be any more of a value stock you know than buying into Birkshshire or Hathaway? It's a four-star rated stock. Trades at a 7% discount. Now, a 7% discount may not necessarily sound like that much, but you have to remember I think it's like what a third of their portfolio is in cash. Cash is always worth you 100 cents on the dollar. So, the way I look at this, you know, that 7% discount really should be attributed mostly to the private equity portfolio that they own. So, that tells me you're buying that private equity portfolio at a much larger discount. — All right. Well, speaking of picks, it's ### Stocks to buy to rebalance ahead of the market’s next big shift [37:57] time for the stock picks portion of the program. Now Dave recently published a new stock market outlook and you can find a link to that in the show notes. Now Dave in that report Dave suggesting that investors return to a barbell construction with their stock portfolios and today that means taking some profits in that AI growth stocks portion of the barbell and investing the proceeds in value and energy. So Dave's picks today are undervalued value stocks to buy to restore that balance in the barbell. Okay, your first pick is Verizon. Run through the numbers on it. — Yeah, you and to be honest, it's been a while since we've talked about Verizon. Now, I can't remember when we first started talking about the wireless sector, but it was, you know, three or four years ago, I think, at this point. And our pick originally was AT& T, but then we swapped to Verizon after AT& T, you know, quickly moved up. So, I think the first time we recommended Verizon was on the July 2024 episode of the Morning Filter. We re-recommended Verizon a number of times in 2024 and in 2025. At this point though, it still looks pretty attractive. It's at a 15% discount. Puts it in fourstar territory. Still a very attractive dividend yield. It's over 6% at this point. And again, medium uncertainty, narrow economic mode. So again, it's just kind of got all of those, you know, traditional value play metrics that we're looking for. — Yeah. you know, I mean, it's definitely lands in that large value part of the style box and again has that great dividend yield cushion. Why else do you like it for the barbell in particular? — Again, traditional value play. I mean, fundamentally, results, they're just kind of chugging along. Company is certainly not a fast grower. We don't expect it to be a fast grower, but when I look at our model here, I think it's still on the conservative side. If I look at the top line, our revenue 5-year compound annual growth rate is only 2. 4%. So essentially maybe just you know kind of the Fed's 2% you know inflation target plus a little bit you know earnings we're looking for compound annual growth rate of 8. 3% because we are looking for margin expansion over the next 5 years. Now I have to admit our original investment thesis is probably playing out more slowly than what we expected. I mean the wireless business is still very competitive. We expect it to remain competitive. We are looking for it to become more of an oligopoly over time. So essentially there's really only the three main wireless providers out there today. We expect over time they'll compete less on price, compete more on other types of, you know, factors in the wireless business. As such, we are looking for that margin expansion. Today, that stock only trades at nine times forward PE multiple based on what we're expecting for earnings this year. And like I said, you're still picking up over a 6% dividend yield. All right. And your second pick this week is from a sector that's considered defensive and that's healthcare. The stock pick is Thermoffisher Scientific. So give us the highlights on this one. — So Thermoscientific is a four-star rated stock. Trades at a 14% discount. Not much of a dividend, well under 1%. But I would also note the company does use a lot of its free cash flow to buy back their stock. I think on average they buy back, you know, 1 to 2% of the outstanding stock every year. and they do use other free cash flow to make smaller, you know, tuck in acquisitions. So again, you may not necessarily be getting anywhere near the dividend yield you would like to, but again, this is a company that's always used their free cash flow, you know, very wisely. We rate the company with a medium uncertainty and it does have a wide economic mode. — Now, the healthc care sector overall is undervalued. So, why do you like Thermmo Fisher specifically above other stocks in the sector? — I mean, personally, I followed for thermo a number of years. I've always thought that it's just been a very high quality company. If you look to the price to fair value chart on morningstar. com and if you look over the past decade, there's only been a couple of opportunities where you could buy this stock at, you know, that discount at that margin of safety that got you into that four or five star territory. So in this case, it's a large cap value stock in the healthc care sector. Company sells scientific instruments, lab equipment, diagnostic consumables, life science reagents. So again, to me, it's a very defensive type of name. Now, this was a five-star pick in mid 2025. Stock from there ran up 50%, got it well into three star territory, and over the past couple of weeks, it's now given back some of that rally. To some degree, I think this is just a story where the market, for whatever reason, just isn't interested. It's not an exciting growth story right now, but the results were fine for the first quarter. guidance may be a little subdued on China weakness. That wasn't necessarily a surprise to us. And again, when I look at our forecasts, you know, going forward compared to what this company has performed at in the past, looks conservative to me. So, our 5-year compound annual growth rate is only 5. 5%. We're looking for some margin expansion as things normalize. So, our earnings 5-year compound annual growth rate is 11. 6%. And if you look at the multiples, pretty reasonable in my mind. you know, 19 times this year's earnings, 16 and a half times next year's earnings. — Well, your next stock pick is Duke Energy. It's from another sector that's traditionally been considered defensive, which is of course utilities. So, tell us about it. — So, it's currently a four-star rated stock. Trades at a 7% discount, has a 3 and a half% dividend yield. We rate the company with a low uncertainty and a narrow economic mode. — Now, the utility sector is fairly valued and Duke's a little bit undervalued. So besides that relatively attractive valuation, what else do you like about Duke? — So well, first of all, Duke is the largest regulated utility by market cap. We think that they're generally located in very favorable regulatory environments. And one thing I like about this one versus some of the other utility stocks is a lot are still in overvalued territory. I mean, a lot of them have come down from where they were earlier this year, but they're still not attractive because we think that there's too much growth that's being priced into those stocks based on AI. In this case, Duke is not an AI play. Most of its jurisdictions we think are in areas where, you know, AI data centers are not being built, but they have very good demographic growth profiles. So if you look at their business, I think over a third of their business is in North Carolina, another quarter of it in Florida, 12% in South Carolina. So all states that's seeing, you know, population and demographic growth. The other areas they're in are like Indiana, Ohio, and Kentucky. So this is just a story between, you know, improving rate regulation, improving operational execution. You know, we are forecasting at the very high end of management, you know, 5 to 7% annual earnings growth guidance. All right, next pick is a real estate investment trust is Realy Income. Give us the key metrics on it. — So, Realy Income is a four-star rated stock at a 20% discount to our fair value, 5. 4% dividend yield. We rate the company with a low uncertainty and no economic mode. But in this case, I'm not concerned about no economic moat because there's very few REITs, very few real estate plays that we do assign an economic mode. Now you know real estate's having a decent year but the sector overall is trading below Morning Star's fair value. So given that why is your pick realy income specifically? — Well like you said I mean real estate has actually been kind of you know very quietly having a very good year. If you look at the Morning Star US REIT index it's up almost 10% you know year to date. So, I think this is just one of those ones where it's been an undervalued sector, but it has been so overshadowed by the media focus on AI that people really haven't been, you know, paying attention to it. Now, in this case, realy income has been one of our go-to picks for a long time in the REIT sector. You know, the company has what we consider to be defensive characteristics. The type of leases, you know, that they sign are called triple net leases. So essentially they can directly pass through any of their own inflationary cost increases directly to tenants. They're also very long leases. So that does lower the risk of you know near-term lease reductions. Very broadly spread out. I think they have over 15,000 tenants. Generally they're very serviceoriented retail type of tenants. So you know the largest type is convenience stores. That's over 10% of their retail base. Then you have grocery stores for 8%, dollar stores for 7%, drugstores maybe 6 to 8%, quick service restaurants, home improvement. So again, these in my mind are very defensive type of tenants. We've talked about for years now how I prefer still steering clear of urban office space. Fundamentally, performance is in line. Last quarter, re-leasing spreads were up 3. 4%, leases to new tenants up 7. 5%. We've seen the company make what we consider to be some pretty sound acquisitions at reasonable cap rates. And the stock's only trading at 13 and a half times price to funds from operations. — All right. And your final pick this week is from the energy sector. It's Devon Energy. Give us the highlights. — Yeah. So Devon is a four-star rated stock at a 16% discount, two and a half% dividend yield. Although I would note that they have what's called a fixed plus variable dividend model. So as oil prices are high and they have you know more free cash flow they will pay a variable dividend on top of that fixed dividend. Now we do rate it with a high uncertainty which of course you know in the energy sector and being a oil producer you know is not surprising but we do rate it with a narrow economic moat you know based on their cost advantages. — So talk a little bit about why energy may still be attractive this year you know given current events and then explain why Devon is your pick specifically. Well, if you remember coming into the year in our 2026 outlook, we noted that energy was one of the most undervalued sectors and as part of the original barbell strategy, we started the year off with in the value sector, we highlighted, you know, energy as being one to overweight. Then on the March 30th episode of the morning filter, it was when we recommended to start selling those energy and those value stocks to be able to reinvest into the growth category, specifically tech and AI because value had done very well at that point. It was up, you know, 3 to 4% whereas growth stocks and AI and tech stocks had really gotten hammered. And it was just at that point the valuations were telling us to change that barbell into being overweight growth stocks. Now, at this point, you know, we have seen energy stocks, you know, sell off of their highs. You know, energy prices, oil prices still above $90 a barrel. So, we're now at the point where some of these energy stocks are starting to look attractive again. So, I think this is one where Devon has long been kind of that go-to pick here. I mean, originally it was Exxon, but once Exxon moved into three stars, you know, we moved to Devon. And, you know, we've talked about this one many times in the past. I don't think there's a lot of need to cover, you know, old ground. I think in my mind this is more about managing your portfolio positioning than it is about Devon you know specifically. So in this case you I think you can repurchase the stock here at cheaper than you know where we had recommended to sell it at you know end of March you know beginning of April and in this case you know if we do have a resolution with you know Iran in the near term and oil prices fall I still don't think they go right back to pre-conlict you know type of levels I think it'll take a while for oil prices to normalize and in our model I mean we still look for oil prices well below even where they were you know pre-conlict levels so I think you still have a margin of safety in this name even when oil prices come down. In the meantime, you know, if there's no resolution for a while, oil prices, you know, maybe move up higher as we start using up, you know, more and more storage and inventory. This would be the one that I still think has kind of that upside potential to get back to, you know, its highs, if not even go higher from there. — All right. Well, thank you for your time, Dave, and have a wonderful break. We will miss you. — Thank you. Uh viewers and listeners who'd like more information about any of the stocks Dave talked about today can visit morningstar. com for more details. Now, we hope you'll join next Monday for the Morning Filter podcast at 9:00 a. m. Eastern, 8:00 a. m. Central. Next week, Dave and I already have a special episode for you, our audience in the hopper. We'll be talking about core stocks to buy at the right price. But until then, please like this episode and subscribe and have a great week. Yeah.