President Trump's 870-page tax-and-spending bill is as big as advertised. Whether it is a beautiful bill from an investment standpoint is in the eye of the beholder. Like most new legislation, the One Big Beautiful Bill Act (OBBBA) has winners and losers.

A larger tax credit, a bigger tax deduction, a more sizable write-off, a less-onerous regulation, or a booster shot from increased government spending can lift profits for companies that benefit.

On the flip side, the end of a sizable subsidy, the phasing out of a tax break or major cuts to government programs can impair sales, resulting in earnings headwinds for negatively affected companies.

Below, we list some of the biggest investment beneficiaries of Trump's Big Beautiful Bill, and some of its victims, too. Prices and returns are as of July 31.

Play offense with defense

Trump's signature legislation delivered on his promise to spend more to strengthen the military. OBBBA increases defense spending by $150 billion, pushing the U.S. defense budget for fiscal year 2026 over $1 trillion, the largest in U.S. history.

A sizable chunk of the money will go toward priorities such as the Golden Dome missile defense shield. Other imperatives include building naval ships and developing next-generation munitions and unmanned drone weaponry, as well as replenishing weapons stockpiles.

Increased military spending by European allies and unstable geopolitics add to the case for the defense sector.

You don't have to be an army general to conclude that weapons-related companies have a tailwind. "The defense industry is an overwhelming winner," said Michael Arone, chief investment strategist at State Street Investment Management.

Investors looking to boost exposure to the defense sector can mimic a precision-guided smart bomb and try to pinpoint individual stocks, or they can take a cluster-bomb approach and gain access to a wider array of munitions makers through a diversified exchange-traded fund (ETF) that tracks the sector.

Aniket Ullal, head of ETF research and analytics at CFRA Research, likes the iShares U.S. Aerospace & Defense ETF (ITA), which is up 36% this year and holds about 40 stocks, including top holdings such as GE Aerospace (GE), RTX (RTX), Northrop Grumman (NOC) and Lockheed Martin (LMT).

Another option is the Invesco Aerospace & Defense ETF (PPA), up 27% in 2025. Holdings include top defense contractors plus tech stocks with Pentagon ties, such as Palantir (PLTR), a data analytics company that uses artificial intelligence to support military operations and intelligence gathering.

Huntington Ingalls Industries (HII), a leading shipbuilder that earns 80% of its revenue from the U.S. Navy, "stands to benefit from the Department of Defense's renewed focus on expanding the Navy's fleet size," says CFRA analyst Matthew Miller, who rates the stock a Buy.

Seth Meyer, global head of client portfolio management at Janus Henderson Investors, is bullish on Howmet Aerospace (HWM). Its specialized aircraft components get kudos for being lighter, faster, stronger and more cost-effective.

Howmet's parts helped land the Apollo spacecraft on the moon and are used in military aircraft, such as Lockheed Martin's drones and F-35 fighter jet. The stock is a top-10 holding in the Janus Henderson Forty and Janus Henderson Contrarian funds.

Surf the reshoring wave

It's no secret that Trump wants companies to build their products on U.S. soil. The OBBBA offers tax incentives for firms to embrace the "Made in America" policy. "The bill is incentivizing behavior change," says Meyer.

Growth-friendly OBBBA provisions include making permanent a 100% bonus depreciation — a type of tax break that allows companies to deduct a percentage of the purchase price of eligible assets.

Companies can now deduct the entire cost (up from 40% previously) of qualifying property, such as machinery and equipment, in the year it's put into service — no need to spread deductions over multiple years and wait to realize the tax benefits.

The new law also allows full expensing of domestic research-and-development expenses in the year they occur, cutting corporate tax bills and boosting cash flow.

Another perk aimed at encouraging investment in the homeland is 100% expensing, or immediate deductions, for certain manufacturing spending, such as upgrades to factories or assembly lines.

Manufacturing and heavy-machinery businesses such as Deere (DE) and Caterpillar (CAT) will benefit if customers spend more on capital equipment due to savings on taxes, says Paul Stanley, chief investment officer at Granite Bay Wealth Management.

"If I need a new tractor, I'm going to invest while I know [the tax breaks] are on the books," he says. For broad exposure to the industrials sector, Stanley likes the iShares U.S. Industrials ETF (IYJ), a fund that owns about 200 stocks.

Among individual stocks, consider Trane Technologies (TT), best known for its energy-efficient HVAC systems, says Eric Teal, chief investment officer at Comerica Wealth Management.

Trane is likely to see higher demand from customers with more cash to plow into their business thanks to the OBBBA tax breaks, Teal says. Another plus: Trane has limited tariff risk, says Morningstar analyst Brian Bernard. (Trane is a member of the Kiplinger ESG 20, our favorite stocks and funds with an environmental, social or governance focus.)

Vulcan Materials (VMC), a producer of construction materials such as crushed stone, sand, gravel, asphalt and concrete, is a top pick of Sandy Villere, portfolio manager at wealth management firm Villere & Co. "There's going to be a big tailwind with all the incentives for U.S. manufacturing," he says.

Catch the AI train

The new law is a potential accelerant for the already fast-growing artificial intelligence business.

"Getting semiconductor production on-shore is a key strategic focus of the Trump 2.0 administration," says Meyer. The OBBBA gives semiconductor makers incentives to break ground before 2026 on new plants to build high-powered chips.

The carrot? Boosting the tax credit to 35% from 25%.

Capital Group portfolio manager Matt Hochstetler says tech stocks that can benefit include Micron Technology (MU) and Taiwan Semiconductor Manufacturing (TSM). (The latter is liable for U.S. corporate taxes and qualifies for the credit.)

There will be losers

Trump is not a big backer of clean energy. The OBBBA's December 31 phase-out of the tax credit allowing homeowners to deduct 30% of the cost of installing solar panels from federal taxes could lead to a 20% to 30% drop in home solar installations, denting the sales of U.S. solar panel makers, according to CPA firm Cerini & Associates.

And the end of the $7,500 tax credit on September 30 for the purchase of a new electric vehicle will cut into EV sales.

Sizable cuts to Medicaid are a negative for hospitals that treat low-income patients. Such hospitals may face lower revenues due to fewer patients, and they risk not getting paid by patients who lose coverage. The cuts will also harm health insurers that derive a large chunk of their revenue from Medicaid plans.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

Related content

• Five Stocks to Buy for a Trump Presidency
• The Best Aerospace and Defense ETFs to Buy
• No Social Security Tax Changes in Trump’s 'Big Bill'? What Retirees Need to Know

Analysts have been busy updating their discounted cash flow models and price targets for Nvidia (NVDA) after the most important AI company in the world failed to give the sort of blow-out revenue guidance Wall Street has come to expect.

Indeed, shares in NVDA, the world's second most valuable publicly traded company with a market cap in excess of $3 trillion, actually stumbled after posting Q3 results.

But then these sorts of things can happen when a stock is said to be priced for perfection.

Either way, it seemed like a good time to take a look at a few of the ways in which analysts' expectations have changed for NVDA stock in light of the company's latest guidance.

First, let's have a look at NVDA's price target. Although these targets are of limited utility, they do form the basis for declaring whether a stock is a Buy, Hold or Sell.

As of now, NVDA's average price target stands at about $170, up roughly 6% from the pre-earnings release target of about $160, according to data from S&P Global Market Intelligence.

NVDA's new average price target gives shares implied upside of about 20% over the next 12 months. The old price target – based off NVDA's previous level – gave the stock implied upside of about 13%.

It's hard to believe Nvidia has become a $3 trillion company because of its potential for 13% or 20% price upside over the next year or so. Heck, the stock nearly tripled over the past 52 weeks.

Price targets. Go figure.

Perhaps relative valuation can be more helpful.

Nvidia is cheap, relatively speaking

First, a caveat about valuation. While absolutely critical, valuation tends to play out on its own time frame. This time frame can be much longer than investors expect. Keep this in mind when looking at Nvidia, as the stock usually looks expensive and yet it keeps going up.

That said, NVDA's relative valuation does look increasingly compelling by some measures these days.

For one thing, while it's true that Nvidia changes hands at nearly 35 times analysts' average next-12-months earnings per share (EPS) estimate, this multiple represents a 20% discount to its own five-year average, according to data from LSEG Stock Reports Plus.

Perhaps more importantly, after updating their models, analysts' average long-term growth forecast now stands at more than 62%, per LSEG.

These revisions make NVDA look attractively priced once you consider how fast the stock is rising relative to its growth prospects. Indeed, by at least one metric – the price/earnings-to-growth (PEG) ratio – Nvidia stock looks very cheap on a relative valuation basis.

Here's why: since NVDA stock is trading at 35 times expected earnings and has a LTG forecast of more than 62, its forward PEG is 0.6. To put that in perspective, the S&P 500 trades at a PEG of 2.1.

By this measure, NVDA trades at a 70% discount to the broader market. That's not bad, but then Nvidia and the broader market are sort of apples and oranges.

That's why we want to look at Nvidia's PEG relative to its peers and itself. This gives us an idea of what sort of premium the market has been willing to pay for Nvidia's growth prospects in the past.

And what do we find? Bulls will be happy to know that with a PEG ratio of 0.6, Nvidia stock trades at a 70% discount to the semiconductor industry average.

Even more intriguing, however, is that NVDA stock also trades at a steep discount to its own five-year average. Indeed, per LSEG Stock Reports Plus, if Nvidia's PEG "returned to historical form," the stock would trade at $349.04.

That's not a price target, mind you, it's just some modeling. But it does give NVDA stock implied price upside of about 150% from current levels.

As for Wall Street's collective wisdom on this top-rated Dow Jones stock, of the 63 analysts issuing opinions on NVDA surveyed by S&P Global Market Intelligence, 47 call it a Strong Buy, 12 have it a Buy and four say it's a Hold.

That works out to a consensus recommendation of Strong Buy, making Nvidia one of the Street's top S&P 500 stocks to buy too.

Related Content

• If You'd Put $1,000 Into Nvidia Stock 20 Years Ago, Here's What You'd Have Today
• Nvidia Stock Is Joining the Dow. Is It Time to Buy?
• Best Blue Chip Stocks: 21 Hedge Fund Top Picks

Tesla (TSLA) stock soared on the outcome of the 60th U.S. presidential election, helped in no small part by CEO Elon Musk's ardent support of Donald Trump, now the 45th and the 47th man to win the White House.

Few things have greater allure for investors than the sight of rising prices, which leads to the question: should you buy Tesla stock?

To answer this question, it helps to look around one's physical environment. Are you reading these words at a desk with, say, six monitors displaying changes in asset prices across the globe in real time? Are these numbers fluctuating between the colors of red and green?

If the answer is “no,” then no, you should not buy Tesla stock based on the outcome of the election. After all, the idea is to buy low.

Besides, retail investors who own diversified funds that track the S&P 500, the Nasdaq Composite and the Nasdaq-100 probably have enough exposure to TSLA already. The electric vehicle maker's market cap of more than $920 billion gives it ample weight in these benchmarks.

TSLA stock: The Street weighs in

But let's say you are a stockpicker. Is Tesla a buy at current levels?

Certainly industry experts who cover the stock intensely should know. The problem here is that Wall Street is heavily split on the name.

Of the 52 analysts covering TSLA stock surveyed by S&P Global Market Intelligence, 12 rate it at Strong Buy, six say Buy and 19 have it at Hold. Furthermore, four call TSLA a Sell and seven say it's a Strong Sell.

This works out to a consensus recommendation of Hold. Meanwhile, the Street's average price target of $222.96 gives Tesla stock implied downside of more than 20% from current levels.

Part of the bear case on Tesla stock has always been its valuation, but that hasn't really worked out so far. The stock always looks expensive. Indeed, TSLA trades at 115 times expected earnings per share. And it has always been volatile. It sports a five-year beta of 2.3 and suffered a maximum all-time drawdown of 73%.

Volatility is a proxy for risk because it increases the odds of buying high and selling low.

And yet, despite these issues, Tesla stock has been a massive market-beater over the longer term. True, TSLA lags the S&P 500 badly over the past one- and three-year periods, but beyond that it has generated outstanding outperformance. Heck, over the past five years, TSLA beats the broader market by about 50 percentage points on an annualized total return basis.

On the other hand, as every prospectus says, past performance is not a guarantee of future returns.

If you were a Tesla bull before Tuesday night, hey, don't let the dream die. But adding exposure to Tesla stock when it's popping on knee-jerk trading action is generally not part of a sound investment process. At least not if you're not a professional.

Related Content

• If You'd Put $1,000 Into Amazon Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Apple Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Microsoft Stock 20 Years Ago, Here's What You'd Have Today

Whether your preferred cliche is "talk about buying high" or "better late than never," Nvidia (NVDA) will at long last replace Intel (INTC) in the Dow Jones Industrial Average.

Oh, and by the way, Dow (DOW) is getting the boot too. It will be swapped out of the venerable blue-chip average for Sherwin-Williams (SHW). The NVDA and SHW changes will take place before the market opens on November 8.

As much interest as such events generate, being tapped for the Dow is more symbolic than material. After all, the S&P 500 is the main benchmark for U.S. equity performance. That's why many trillions of dollars are invested in products that track the index.

For example, the largest exchange-traded fund (ETF) in the world, the SPDR S&P 500 ETF Trust (SPY), has more than $590 billion in assets under management alone. A comparable product for the DJIA, the SPDR Dow Jones Industrial Average ETF Trust (DIA), holds less than $39 billion in assets under management.

Also know that, unlike the S&P 500 or the Nasdaq Composite, the Dow is weighted by price rather than by market cap. Although Nvidia has an outsized influence on the movements of the cap-weighted benchmarks, at current prices NVDA stock will be as important to the DJIA as, roughly, 3M (MMM).

There's also the fact that it would have been nice if the keepers of the Dow had made this move sooner rather than later. Once Nvidia split its stock last spring, it became a good fit for the Dow.

Intel, on the other hand, has been dead weight on the Dow for decades.

Indeed, NVDA lapped INTC a long time ago as a credible representative of the semiconductor sector in a concentrated portfolio. (Recall that the Dow comprises just 30 stocks.)

True, NVDA's share price pre-split made it essentially ineligible for Dow membership, but it's impossible not to look back at the charts and wonder what could have been. The bottom line is that the Dow would be higher today had NVDA been a component rather than INTC.

Nvidia for the long run

As we have noted, anyone who put $1,000 into Intel stock 20 years ago has endured a destruction of their capital. Nvidia, on the other hand, has been among the greatest wealth creators of the past several decades. Have a look at what $1,000 invested in Nvidia stock 20 years ago would be worth today. If you wish you had a time machine, you are not alone.

Suffice to say the DJIA's performance would have been better with Nvidia in it. But that wasn't possible. So, is this better late than never?

That's harder to say. Ordinarily, one wants to buy low. Nvidia is up 178% so far this year on a price basis. Heck, shares have gained nearly 30% over the past three months. There's another Wall Street cliche about the easy money already having been made. And it is always true that past performance is not a guarantee of future results.

Either way, the DJIA is certainly more representative of whatever it's supposed to represent with NVDA in it rather than INTC. But apart from having the imprimatur of the editors of the Dow, nothing fundamental has changed.

This fact by itself should be of enormous comfort to Nvidia bulls, of which there are legions on the Street. Of the 62 analysts issuing opinions on NVDA stock surveyed by S&P Global Market Intelligence, 48 rate it at Strong Buy, 10 say Buy and four call it a Hold. That works out to a rare consensus recommendation of Strong Buy. Indeed, Nvidia routinely makes the list of analysts' top S&P 500 stocks to buy.

As to whether you should add to your exposure to Nvidia stock based on its inclusion in the Dow, the answer is no. If you own diversified funds or ETFs tracking, for example, the S&P 500, Nasdaq Composite or Nasdaq-100, you already own Nvidia – and it's probably enough.

As exciting and enviable as Nvidia's position in artificial intelligence (AI) may be, it is ultimately a chip maker. The chip industry is cyclical, and no stock has ever gone up in a straight line.

Related Content

• If You'd Put $1,000 Into Amazon Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Apple Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Microsoft Stock 20 Years Ago, Here's What You'd Have Today

Whether you like it or not, members of Congress are allowed to buy and sell stocks. True, federal law prohibits them from using "nonpublic information derived from their official positions for personal benefit," and they're required to disclose their trades.

That said, it's understandable if folks don't quite trust politicians to be on the up and up when their personal fortunes might appear to be in tension with their duties as elected representatives.

Perhaps this is unfair; even cynical. But to modify a famous quote from Upton Sinclair, it's difficult to get a person to understand something when that person's salary depends upon the person not understanding it.

Take, for instance, the uproar around President Donald Trump, who said shortly before announcing a reversal on reciprocal tariffs that it "is a great time to buy stocks."

The reversal sparked a historic stock market rally and has some high-profile Democrats questioning if anyone in the Trump administration profited off the announcement.

Disclosure rules are supposed to help mitigate this problem. Thanks to these requirements, the public can follow what members of the House and Senate are doing with their investments.

Before we go further, please note that this activity shouldn't be used for trading purposes.

After all, insider buying and selling at publicly traded companies is voluminously disclosed and analyzed, but it doesn't really tell us much. That's because insiders – the executives and board members who know what's going on – can sell for any number of legitimate reasons, from paying tuition to portfolio diversification.

When it comes to stocks, insider buying is actually a more useful piece of information. And even then, it's not exactly a screaming buy signal.

Using insider activity among members of Congress as the basis for some kind of trading system is not a rigorous idea.

With those caveats out of the way, it is indeed interesting to see which stocks, bonds and private investments are most popular with members of the House and Senate. Perhaps more interesting is how certain pols churn their portfolios, which is to be avoided if you're a retail investor.

Have a look at the below table to see which politicians were the most active traders by volume over the past 90 days, according to data from Capitol Trades.

Stocks politicians are buying and selling

Look past the municipal debt and investments in limited liability companies, and you can see that pols are pretty normal when it comes to their buys. Top-rated Dow Jones stocks, mega-cap tech names and reliable and rising dividend-payers routinely make the list of our representatives favorite names.

Both sides of the aisle like many of the hottest stocks, including Apple (AAPL), Amazon.com (AMZN), Oracle (ORCL) and Broadcom (AVGO) these days – but then so does pretty much everyone else.

Interestingly, as much as Representative Ro Khanna (D-Calif.) is associated with tech investing, a number of his most recent biggest buys were stalwart blue chips such as JPMorgan Chase (JPM), the nation's biggest bank by assets, and Warren Buffett's Berkshire Hathaway (BRK.B).

Meanwhile, in addition to buying shares in speculative artificial intelligence (AI) firm BigBear.ai Holdings (BBAI), Representative Lisa McClain (R.-Mich.) also picked up Air Products and Chemicals (APD), which happens to be one the best dividend stocks for reliable dividend growth.

Related content

• Investing Freebies: Perks You Get for Owning These Stocks
• The Most Tax-Friendly States for Investing
• Can Stocks Picked by AI Beat the Market? Three Stocks to Watch

If you needed more evidence that being added to the S&P 500 is what Wall Street likes to call a positive catalyst, witness what happened to shares in CrowdStrike (CRWD), KKR (KKR) and GoDaddy (GDDY) at the start of trading this week.

Shares in all three companies popped on the news that they will be added to the main benchmark for U.S. equity performance. KKR, CrowdStrike and GoDaddy will replace Robert Half (RHI), Comerica (CMA) and Illumina (ILMN) in the S&P 500 on June 24, S&P Dow Jones Indices said in a statement Monday. 

Stocks tend to get a lift from inclusion in the S&P 500 because many trillions of passive dollars are held in products that track the index. The SPDR S&P 500 ETF Trust (SPY), the largest exchange-traded fund (ETF) in the world, has more than half-a-trillion dollars in assets under management all by itself. The bottom line is that loads and loads of passive funds and ETFs now have to pick up shares in CRWD, KKR and GDDY.

As for the reason for the shakeup, S&P said that the changes "ensure each index is more representative of its market capitalization range. The companies being added to the S&P 500 are more representative of the large-cap market space."

Analysts' takes on CRWD, KKR and GDDY

As a reminder, being tapped for the S&P 500 is not an endorsement by the editors of the index to buy the stock. Rather, the stocks in question have merely met the criteria and are deemed better fits than the ones moved down into the mid- and small-cap indexes. 

As for CrowdStrike, shares gained nearly 50% for the year to date through early June, pushing the cybersecurity company's market cap up to $93 billion, or roughly the same size as current S&P 500 stock Starbucks (SBUX). Meanwhile, the Street likes CRWD's prospects going forward. Of the 51 analysts issuing opinions on CrowdStrike stock surveyed by S&P Global Market Intelligence, 34 call it a Strong Buy, 13 say Buy and four have it at Hold. That works out to a consensus recommendation of Strong Buy.

Analysts are bullish on KKR, too, although with slightly less conviction than they have for CRWD. Shares in the private equity firm added more than 30% for the year to date through early June, giving it a market cap of nearly $97 billion. That's a sum roughly equivalent to current S&P 500 constituent Palo Alto Networks (PANW). Analysts give KKR a consensus recommendation of Buy.

Web hosting company GoDaddy is another stock having a terrific 2024. Shares gained more than a third for the year to date through early June, pushing GDDY's market cap up to $20 billion. That's bigger than S&P 500 member Alexandria Real Estate Equities (ARE), which happens to be one of analysts' top S&P 500 stocks to buy now. The Street is bullish on GDDY, too, mind you, assigning it a consensus recommendation of Buy with strong conviction. 

Related Content

• Should You Invest in Nvidia After Its Stock Split?
• When Will the Fed Cut Rates? The Experts Weigh In
• Billionaire's Top Stock Picks

Venerable General Electric (GE), once the longest-serving member of the Dow Jones Industrial Average, will officially split into two companies at the start of next month.

And the old GE name is going away. 

GE will spin off GE Vernova on April 2, which will then start trading on the New York Stock Exchange (NYSE) under the ticker GEV. Holders of GE common stock will receive one share of GE Vernova common stock for every four shares of GE common stock held as of March 19.

Importantly, GE shareholders will continue to hold their shares of GE common stock – but now with the company name GE Aerospace, GE said in a press release. Meanwhile, GE Aerospace will continue GE's listing on the NYSE under the ticker symbol GE.

GE Vernova houses the former conglomerate's gas power and renewable energy business. GE spun off GE HealthCare Technologies (GEHC) in January 2023. 

GE first announced its decision to split into three companies focusing on aviation, healthcare and energy, respectively, in 2021.

Better times for GE stock?

GE stock is a long-time market laggard, but it has clobbered the broader market over the past year – and especially since its board set the GE Vernova spinoff date.

If you go back two decades, GE sports an annualized total return (price change plus dividends) of just 2%. The S&P 500 generated an annualized total return of more than 10% over the same period. Over the past 10 years, GE lagged the broader market by about 11 percentage points.

But GE's decision to split up helped change sentiment on the name. Its price performance is much more encouraging since it decided to split, with upside accelerating as the spinoffs came to fruition. GE's annualized total return easily tops the S&P 500 over the past five years, and doubles the broader market's returns for the trailing three-year period. 

Cut to today, and GE has been clobbering the broader market. Shares are up 85% on a price basis over the past 52 weeks, vs 26% for the S&P 500. For the year-to-date, GE is sitting on a 25% price gain, vs the broader market's 7%.

Even better, Wall Street likes the "new" GE's prospects as GE Aerospace going forward.

Of the 17 analysts covering the stock surveyed by S&P Global Market Intelligence, five call it a Strong Buy, two say Buy, six have it at Hold and three rate it at Sell. That works out to a consensus recommendation of Buy, with solid conviction. 

Bulls argue that GE Aerospace has significant advantages over rivals, among other reasons to be constructive on the stock. 

"Comparing its engine business vs its closest peers, we continue to see GE outperforming in the coming years," writes Morgan Stanley analyst Matt Akers, who rates the stock at Overweight (the equivalent of Buy). "GE's commercial engine fleet is approximately three times larger than its competitor's, giving it a bigger base to spread costs."

The analyst adds that GE's commercial engine fleet stands out vs peers due to better demographics. "Nearly two-thirds are mid-life engines in their prime aftermarket period," Akers notes. 

Related Content

• Pricey Super Micro Computer Stock Pops on S&P 500 Inclusion
• Stock Picks That Billionaires Love
• All 30 Dow Jones Stocks Ranked: The Pros Weigh In

Being tapped to join the S&P 500 is kind of a big deal. Witness what happened to shares in Super Micro Computer (SMCI) and Deckers Outdoor (DECK) on Monday.

Super Micro stock added more than 25% at one point during the session on news the AI server, software and infrastructure company will replace Whirlpool (WHR) in the S&P 500 on March 18. 

Not that SMCI needed another catalyst – shares have nearly quadrupled in 2024 alone – but the price action is a good (if exaggerated) example of the importance of being added to the main benchmark for U.S. equity performance.

Many trillions of passive dollars are invested in products that track the S&P 500. The SPDR S&P 500 ETF Trust (SPY), the largest exchange-traded fund (ETF) in the world, has $500 billion in assets under management all by itself. Hundreds of funds and ETFs now have to pick up shares in SMCI and DECK.

Meanwhile, over at DECK, the footwear and apparel company probably best known for the Uggs and Teva brands will replace Zions Bancorporation (ZION) in the S&P 500 on March 18. DECK stock enjoyed a more modest pop of 2.6% on the announcement, but then such is the difference in sentiment between the growth prospects for general AI and shoes.

SMCI and DECK became eligible for inclusion to the S&P 500 in part because of their respective soaring market capitalizations. In addition to a bunch of other criteria, a stock must have a minimum market value of $14.6 billion to join the benchmark index. 

By that metric, SMCI has been eligible for inclusion for some time, but the stock didn't definitively vault past the $15 billion mark until mid-January. Cut to today and Super Micro sports a market value in excess of $64 billion – larger than fellow S&P 500 stock PayPal (PYPL).

Deckers Outdoor stock, which has more than doubled over the past 52 weeks, crossed the $15 billion mark back in October. DECK's current market value is more than $23 billion. 

As for Whirlpool and Zion Bancorporation, they will replace Super Micro Computer and Deckers Outdoor in the S&P MidCap 400, respectively, said S&P Dow Jones Indices.

Analysts' takes on SMCI and DECK

Being included in the S&P 500 is not an endorsement by the editors of the index to buy the stock. Rather, the stocks in question have merely met the criteria and are deemed better fits than the ones kicked down into the midcap index.

So let's see what industry analysts have to say about these soon-to-be S&P 500 names.

Of the 15 analysts issuing opinions on Super Micro stock surveyed by S&P Global Market Intelligence, seven rate it at Strong Buy, three say Buy, four have it at Hold and one calls it a Strong Sell. That works out to a consensus recommendation of Buy, albeit with mixed conviction.

Goldman Sachs initiated coverage of SMCI on Monday with a Neutral rating (the equivalent of Hold) and a price target of $941. Wall Street's average price target stands at $795.04, giving Super Micro stock implied price downside of about 30% in the next 12 months or so. 

"SMCI is very well positioned to serve demand from AI [cloud service providers] over the next few years, but serving enterprise AI infrastructure demand in the years after likely will be more competitive, particularly given more enterprise-focused IT hardware suppliers such as Dell (DELL) and Cisco Systems (CSCO)," analyst Michael Ng wrote in a note to clients. 

Analysts are actually more bullish on the far more boring Deckers Outdoor. Of the 21 analysts covering DECK, 12 rate it at Strong Buy, seven say Buy and two call it a Hold. That works out to a consensus recommendation of Buy, with high conviction. 

That said, the Street's average target price on DECK gives the stock essentially no implied price upside in the next year or so. 

Related Content

• Stock Picks That Billionaires Love
• Best Dividend Stocks for Dependable Dividend Growth
• All 30 Dow Jones Stocks Ranked: The Pros Weigh In

If you're a long-time shareholder in Walmart (WMT) stock wondering why the world's largest retailer effected a three-for-one stock split near the end of February, well, the move wasn't for you. It was for Walmart's employees. 

After all, investors don't need stock splits anymore – not in a world where they can buy fractional shares for free on their smartphones. But Walmart, like a lot of companies, has a program where its employees can buy shares through payroll deductions. The issue? WMT's price was getting a little too rich for the program to work as intended.

After rising almost 18% on a price basis over the past 52 weeks, Walmart stock is trading at record levels. Indeed, at about $174 a pop, WMT stock stands 20% above its three-year average price of $145. Regrettably, the stock's high-flying ways put it out of reach for some.

"[Founder] Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates," said Walmart CEO Doug McMillon in a press release.

The solution? A three-for-one stock split ahead of the open on February 26. Recall that as much as the market likes stock splits, they're essentially immaterial. Nothing about a company's fundamentals or outlook changes. A stock split is like making change. I give you two $10s for a $20.

In Walmart's case, shareholders get three shares for every share held – and that could make a big difference to Walmart employees. That's because the company provides a 15% match on the first $1,800 invested each year by eligible associates. 

Walmart's company match works out to $270 – or not even enough to buy two full shares pre-split. After the split, however, that $270 match will buy more than four full shares of this blue chip stock. 

What it means for WMT investors

Not much. As noted above, stock splits get the market excited for maybe a minute, but they are meaningless. The arithmetic changes, but the fundamentals don't. 

For example, Walmart’s outstanding common stock will grow to approximately 8.1 billion from 2.7 billion shares. At the same time, the dividend per share will drop by two-thirds. Walmart, a member of the S&P 500 Dividend Aristocrats, just hiked its payout for a 51st consecutive year. For fiscal 2025, shareholders will receive an annual cash dividend of 83 cents a share on a post-split basis. That's down from $2.49 on a pre-split basis, but shareholders will own three times as many shares. 

If there's anything interesting about WMT's stock split, it's that it will greatly reduce the name's weight in the Dow. Unlike the S&P 500, which is weighted by market capitalization, the Dow is weighted by price. Pre-split, Walmart is the 17th most important Dow Jones stock with a 3% weight in the index. Post-split, WMT will drop to 26th place with a weight of 1%. 

Interestingly, Amazon.com (AMZN) will join the Dow at the beginning of trading next week. It will slot into the place formerly held by Walmart and its roughly 3% weighting in blue chip index.

AMZN has been one of the best stocks of the past 30 years, and anyone who put $1,000 into Amazon stock a couple of decades ago has done even better. Sadly, Walmart has been a market laggard over the last 20 years. 

If past is prologue, more AMZN and less WMT in the Dow will be good for this bluest of blue-chip market benchmarks. 

Related Content

• Analysts' Top S&P 500 Stocks to Buy Now
• 3 Stocks Warren Buffett Is Buying (and 7 He's Selling)
• 10 Big U.S. Cities With the Cheapest Apartment Rents

The S&P 500 Dividend Aristocrats index looks only a little different as we head into the second half of the year. 

Widely regarded as some of the best dividend stocks for dependable dividend growth, the S&P 500 Dividend Aristocrats is an index of S&P 500 companies that have raised their dividends for at least 25 consecutive years.

That's kind of a big deal if you are a long-term equity income investor. Regular dividend hikes not only increase the yield on an investor's original cost basis over time, often quite dramatically; they also help investors sleep better at night.

After all, any company that manages to raise its dividend year after year – through recession, war, market crashes and more – is demonstrating both its financial resilience and its commitment to returning cash to shareholders.

S&P Dow Jones Indices, which rebalances the index quarterly, ditched Walgreens Boots Alliance (WBA) at the beginning of 2024 after the pharmacy chain slashed its dividend by almost half.

Walgreens had increased its dividend every year for nearly half a century before the cut. Analysts, who regularly give WBA one of the lowest rankings of all 30 Dow Jones stocks, applauded the decision to take cash earmarked for shareholders and invest it back into the business. 

Perhaps most interesting is what will happen to long-time member 3M (MMM). The Dow stock is on the Aristocrats chopping block after slashing its dividend as part of its Solventum (SOLV) spin off. 3M is expected to be cut from the list of dependable dividend payers when S&P Dow Jones next rebalances the index.

Dividend Aristocrats Fastenal and Kenvue

The Dividend Aristocrats membership list remains at 67 stocks, however, as Fastenal (FAST) was added to the index in the first quarter of 2024. The industrial supplier has raised its dividend for 25 consecutive years, making it available for inclusion in the index. 

Most recently, Fastenal declared a quarterly cash dividend of 39 cents per share to be paid on February 29 to shareholders of record as of February 1. The company generated more than $1 billion in levered free cash flow in fiscal 2023, and that was after paying out more than a billion dollars in dividends. 

Fastenal stock sports a dividend yield of 2.4%, which is fairly generous for an Aristocrat. The exchange-traded fund that tracks the index, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), has a dividend yield of 2.1%. 

Other changes to the Dividend Aristocrats over the past year include the removal of VF Corp. (VFC) and the addition of Kenvue (KVUE), which was spun off from fellow Aristocrat Johnson & Johnson (JNJ). 

Related Content

• Analysts' Top S&P 500 Stocks to Buy Now
• Stocks With the Highest Dividend Yields in the S&P 500
• Is Investing In Gold Worth It? How Gold Prices Have Changed

Walgreens Boots Alliance (WBA) stock tumbled Thursday after the pharmacy chain slashed its dividend by almost half. The move puts the company at risk of being removed from the S&P 500 Dividend Aristocrats, an index of S&P 500 companies that have raised their dividends for at least 25 consecutive years. 

At its old dividend level, Walgreens was one of the stocks with the highest dividend yields in the S&P 500. But that's about to change.

The company announced a quarterly dividend of 25 cents a share on Thursday, down from the prior quarter's payout of 48 cents a share. The dividend is payable on March 12 to stockholders of record as of February 20, Walgreens said in a news release. 

"This action reinforces our goal of increasing cash flow, while freeing up capital to invest in sustainable growth initiatives in our pharmacy and healthcare businesses, which we believe will ultimately improve shareholder value," Walgreen CEO Tim Wentworth said in a statement. 

At 48 cents per share per quarter, the forward yield on WBA stock comes to more than 7.5%. However, at the new rate of 25 cents per share per quarter, the forward yield on WBA stock falls to about 4.1%. That's still generous, but well below WBA's own three-year average dividend yield of 5.1%.

Analysts, who already give WBA one of the lowest rankings of all 30 Dow Jones stocks, applauded the decision to take cash earmarked for shareholders and invest it back into the business. 

CFRA Research analyst Arun Sundaram, for one, reiterated his Hold recommendation on WBA, noting the company is "on pace toward $1 billion of cost savings this fiscal year, in addition to about $600 million of lower capital expenditures and $500 million in working capital benefits."

Industry analysts have assigned WBA stock a consensus recommendation of Hold for more than five years, according to data from S&P Global Market Intelligence. Of the 18 analysts covering WBA today, two rate it at Strong Buy, one says Buy, 12 have it at Hold, two say Sell and one ranks it at Strong Sell. 

With an average target price of $26.67, Wall Street gives WBA stock implied price upside of about 12% in the next 12 months or so. Add in the dividend yield, and WBA's implied total return comes to about 16% in the next year or so. 

Walgreens earnings beat estimates

Walgreens also on Thursday posted better-than-expected fiscal first-quarter earnings. On an adjusted basis, which is what industry analysts care about, Walgreens earned 66 cents a share, easily topping Wall Street's average forecast of 62 cents a share. Sales of $36.7 billion also beat analysts' estimate. 

"WBA delivered fiscal first quarter results in line with overall expectations, reflecting disciplined execution in a challenging consumer backdrop," said CEO Wentworth in Walgreens' earnings release. "We are evaluating all strategic options to drive sustainable long-term shareholder value, focusing on swift actions to right-size costs and increase cash flow, with a balanced approach to capital allocation priorities."

WBA stock is a long-time market laggard. Over the past 20 years, shares generated a total return (price change plus dividends) of less than 1%. That lags the S&P 500's total return over the same period by about 10 percentage points. 

And the performance only gets worse from there. WBA stock delivered negative total returns over the past one-, three-, five- and 10-year periods. As wonderful as Walgreens' annual dividend increases have been, they have been more than offset by relentless share-price depreciation. 

Walgreens Boots Alliance stock is one of the top-weighted names in the Dividend Aristocrats and – by extension – the ProShares S&P 500 Dividend Aristocrats ETF (NOBL) that tracks the Aristocrats. Needless to say, WBA stock hasn't been doing investors in NOBL any favors. 

WBA may lose its status as a Dividend Aristocrat, but if these new capital plans can kick start its moribund stock price, long-suffering equity income investors will almost certainly come to forgive it. 

Related Content

• Best Dividend Stocks for Dependable Dividend Growth
• S&P 500 Stocks With the Most Upside
• What Are the Dogs of the Dow for 2024?

The earnings recession that started a year ago looks to be over.

With more than 98% of S&P 500 companies having reported quarterly results, it's fair to say the numbers are in and they're good. The S&P 500 is set to post year-over-year earnings growth for the first time since the third quarter of 2022.

Indeed, the S&P 500's Q3 earnings growth state stands at 4.8%, according to FactSet. That's remarkable considering that as of September 30, analysts forecast the S&P 500 to post a 0.3% decline in year-over-year third-quarter earnings. 

And make no mistake: this was a better-than-expected earnings season that delivered on a number of fronts.

Drilling down, 82% of S&P 500 companies exceeded analysts' average earnings per share (EPS) estimate vs a five-year average of 77% and a 10-year average of 74%. Looked at another way, the S&P 500's EPS beat rate hasn't been this high in two years. 

Moreover, companies beat Wall Street EPS estimates by an average of 7.2%. Although that's below the five-year average of 8.5%, it easily tops the 10-year mean of 6.6%.

"Positive earnings surprises reported by companies in the information technology, financials and consumer discretionary sectors, partially offset by downward revisions to EPS estimates and negative earnings surprises reported by companies in the healthcare sector, have been the largest contributors to the increase in the earnings for the index," writes John Butters, senior earnings analyst at FactSet. 

The consumer discretionary sector more than pulled its upside-surprise weight during Q3 earnings season, with Airbnb (ABNB), Amazon.com (AMZN) and Nike (NKE), a highly rated Dow Jones stock, delivering some of the biggest EPS beats.

In the tech sector, Nvidia (NVDA) – NVDA stock has tripled this year – Intel (INTC) and Intuit (INTU) all exceeded Street EPS forecasts by wide margins. The communications services sector was boosted by better-than-expected earnings from Meta Platforms (META) and Paramount Global (PARA), among other names.

Street slashing Q4 earnings estimates

The Street was too downbeat coming into Q3 and it's not much more optimistic about Q4. Concerns about a possible economic slowdown or recession have analysts lowering their Q4 EPS estimates by more than usual, per FactSet.

"During the months of October and November, analysts lowered EPS estimates for the fourth quarter by a larger margin than average," Butters notes. "The Q4 bottom-up EPS estimate decreased by 5% from September 30 to November 30."

For context, the average decline in the bottom-up EPS estimate during the first two months of a quarter is 2.9% over the past five years, and 2.7% over the past decade.

It's important to note analysts are taking cues from the companies they follow – and there's increasing pessimism to be found in the C-suite, too. The percentage of companies issuing negative earnings guidance for the fourth quarter stands comfortably above both its five- and 10-year averages. 

Of course, there's nothing wrong with talking down expectations. The more the Street lowers its expectations, the easier it is for companies to beat them.

Related Content

• Walt Disney's Dividend Is Back. Will DIS Stock Follow?
• Best Blue Chip Stocks: 21 Hedge Fund Top Picks
• Stock Picks That Billionaires Love

Birkenstock Holding (BIRK) is among the more recognizable initial public offerings (IPOs) of the fall, but retail investors who have long loved the company's clunky sandals would do well to steer clear of buying its stock, skeptics say.

Shares in the German premium footwear brand started trading October 11 on the New York Stock Exchange under the ticker BIRK. Birkenstock priced its IPO on Tuesday night at $46 per share. This was near the midpoint of its anticipated range of $44 to $49, which gave the company a market capitalization of roughly $8.7 billion. However, BIRK opened well below here on its first day of trading, at $41, before closing the session at $40.20.

The company's valuation is a big red flag for David Trainer, CEO of New Constructs, a research firm powered by artificial intelligence. The expected $8.7 billion valuation gave Birkenstock a larger market capitalization than peers such as Skechers (SKX), Crocs (CROX) and Steve Madden (SHOO), writes Trainer in a note to clients. 

"Even more shockingly, the only footwear companies with a larger market cap are Nike (NKE) and Deckers Outdoor (DECK)," Trainer adds. "While Birkenstock is profitable, we think it is fair to say that the $8.7 billion valuation mark is too high, especially for a company that was valued at just $4.3 billion in early 2021."

Trainer figures that to justify an $8.7 billion valuation, Birkenstock would need to generate north of $3.8 billion in annual revenue, or more than three times its revenue in 2022.

"We don’t see this happening anytime soon, if ever," he says. "We don't doubt that Birkenstock has strong brand equity and produces stylish sandals, but there is really no reason for this company to be public. We do not think investors should expect to make any money by buying this IPO."

Birkenstock joins crowded IPO club

Birkenstock joins a growing list of prominent names making their stock market debuts recently as the IPO market continues to wake up. Arm Holdings (ARM) enjoyed the most-hyped debut in years last month. Instacart (CART) and the Kellogg spinoff Kellanova (K) have also given equity investors more options for their portfolios.

Just be aware that retail investors typically don't get access to hot upcoming IPOs, which is really just as well. It's too easy to buy high under the best of circumstances. Frenzied opening day trading only compounds the problem.

Most importantly, experts say, is that the latest IPOs are having a hard time holding on to their initial excitement in the downdraft of the broader market.

"Investors should have learned a valuable lesson in the past few weeks when it comes to IPOs," writes Trainer. "Arm Holdings and Instacart went public at sky-high valuations, and the stock prices of both companies have fallen significantly over the past few weeks."

Related content

• Best Stocks to Buy Now
• What Are FAANG Stocks?
• If You'd Put $1,000 Into Walmart Stock 20 Years Ago, Here's What You'd Have Today

Imagine a company that's enjoyed overwhelming success in its key markets for ages and also claims one of the most valuable and recognizable brands in the world.

This company was so important to both its sector and the broader economy that it was a component of the Dow Jones Industrial Average for nearly a quarter of a century.

One would expect this blue chip stock to have been an outstanding buy-and-hold bet. To be fair, for a good long while, it was.

That was then. This is now.

Unfortunately, the former Dow Jones stock we're talking about is Intel (INTC).

Shares almost doubled in 2023, helped by a multibillion-dollar cost-cutting campaign and the generalized euphoria surrounding all things artificial intelligence (AI). Intel bulls harbored hopes that the year marked an inflection point for the long-time market laggard.

It hasn't worked out that way. Intel fell as much as 60% from its late 2023 peak before climbing back to about breakeven today. Heck, shares remain about 33% below their all-time high.

It's hard to believe now, but once upon a time, INTC was one of the best stocks on the planet. Cut to the present, and it's not clear if the company can reclaim its glory days.

Intel still dominates the markets for central processing units (CPUs) for PCs and servers, but it's been losing share to rivals at an accelerating rate for some time. Nvidia (NVDA) and Advanced Micro Devices (AMD) are just a couple of its formidable competitors.

Where the semiconductor company really went wrong — apart from execution missteps and manufacturing delays — is the way it missed some of the biggest changes in technology. Intel famously whiffed on mobile, and now Nvidia is running away in generative AI.

There's a reason Nvidia replaced Intel in the Dow Jones Industrial Average in 2024.

It's been a curious ride for INTC investors. Thanks to its dot-com era heyday, Intel was one of the 30 best stocks in the world from 1990 to 2020.

In those three decades, INTC stock generated more than $340 billion in wealth for shareholders, or an annualized dollar-weighted return of 16%, says Hendrik Bessembinder, a finance professor at the W.P. Carey School of Business at Arizona State University.

However, the past two decades of that 30-year span have been another story.

The bottom line on Intel stock?

If you go all the way back to Intel's debut in the early 1970s as a publicly traded company, it beats the broader market handily. The chipmaker's annualized all-time total return stands at 14.4%. The S&P 500's annualized total return comes to 10.8% in the same span.

If you look at pretty much any other standardized period, an investment in INTC has been a major dud.

Intel stock trails the broader market by distressingly wide margins in the past five-, 10- and 20-year periods. Indeed, its five-year annualized total return is negative.

What does this sort of performance look like on a brokerage statement? Nothing short of ugly.

Have a look at the above chart, and you'll see that if you invested $1,000 in Intel stock 20 years ago, today your stake would be worth about $4,000, or an annualized total return of 7.4%.

The same amount invested in the S&P 500 would theoretically be worth about $7,000 today. That's good for an annualized total return of 11%.

As illustrious and iconic as the Intel brand might be, Intel stock has been nothing but a sinkhole of opportunity cost for buy-and-hold investors for a very long time.

So where does INTC stock go from here? Wall Street is mostly sitting on the sidelines, giving it a consensus recommendation of Hold. Of the 47 analysts covering Intel surveyed by S&P Global Market Intelligence, eight call it a Strong Buy, one says Buy and 32 have it at Hold. Four analysts rate INTC at Sell, while two say it's a Strong Sell.

Among their worries: the company is in the midst of a major restructuring as it struggles to right its floundering foundry business. True, the federal government took a 10% equity stake in 2025, and that's given INTC stock a boost. However, the foundry business continues to generate operating losses and is having difficulty lining up outside customers, among other issues.

More Stocks of the Past 20 Years

• If You'd Put $1,000 Into IBM Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Microsoft Stock 20 Years Ago, Here's What You'd Have Today
• If You'd Put $1,000 Into Apple Stock 20 Years Ago, Here's What You'd Have Today

Sell calls are pretty rare on Wall Street, so when analysts collectively give any name a thumbs down it's probably wise to toss it in the stocks to sell – or at least avoid – pile.

Fortunately, as noted, such stocks are indeed unusual. To get a sense of just how reluctant industry analysts are to issue Sell recommendations, simply take a look at the S&P 500. Only five components of the benchmark index rate a consensus recommendation of Sell, per S&P Global Market Intelligence. 

Interestingly, four of these names happen to be members of the S&P 500 Dividend Aristocrats, an index of companies that have increased their dividends annually for at least 25 consecutive years. The Aristocrats are generally considered to be the best dividend stocks for dividend growth, and long-term investors shouldn't dump them automatically just because analysts are negative on them at current levels.

Remember: When an analyst rates a stock at Sell, all that implies is that the equity in question is forecast to underperform the broader market by some margin over the next 12 months or so. Income investors with extended holding periods – we're talking anywhere from five years to decades – needn't worry about such shorter term concerns. The magic of compounding will still redound to truly patient dividend-growth investors. 

Here's how we found the five stocks to sell or avoid now. Using data from S&P Global Market Intelligence, we screened the S&P 500 for the stocks with the highest-conviction consensus Sell recommendations by industry analysts.

A note on how the ratings system works: S&P surveys analysts' stock calls and scores them on a five-point scale, where 1.0 equals a Strong Buy and 5.0 is a Strong Sell. Any score higher than 3.5 means that analysts, on average, rate the stock at Sell. The closer a score gets to 5.0, the stronger the consensus Sell recommendation.

After running the screen we were left with the five following names. Although they come from sectors as diverse as consumer staples, financials and utilities, they all have one thing in common: The Street expects them to underperform the broader market over the next year or so.

Market data and analysts' recommendations are as of March 8, courtesy of S&P Global Market Intelligence. Stocks are listed by strength of conviction of analysts' Sell calls, from weakest to strongest.

• Market value: $18.7 billion
• Analysts' consensus recommendation: 3.52 (Sell)

Clorox (CLX) stock is off to a strong start in 2023 – up 8.7% vs. 4.3% for the S&P 500 – but analysts don't expect the outperformance to last. That's because the consumer staples stalwart is dealing with both a post-COVID-19 hangover and higher input costs.

"The company had benefited from increased sales during the pandemic as demand for cleansing products spiked," writes Argus Research analyst Taylor Conrad, who rates CLX at Hold. "As benefits from the pandemic have subsided, inflation has put sales and margins under pressure. The company's revenue has fallen from peak pandemic levels, with sequential declines in five of the past eight quarters."

Of the 21 analysts covering this blue chip dividend stock tracked by S&P Global Market Intelligence, one calls it a Strong Buy, one says Buy, nine have it at Hold, six rate it at Sell and four call it a Strong Sell. Their average target price of $141.40 gives Clorox stock implied downside of about 6.5% over the next 12 months or so. 

• Market value: $32.6 billion
• Analysts' consensus recommendation: 3.56 (Sell)

Founded in 1823, Consolidated Edison (ED) provides electric, gas or steam services to roughly 3.6 million customers in New York City and Westchester County. ConEd also happens to be one of North America's largest solar power providers.

ED stock tends to lag the broader market over pretty much any time frame you care to chart, but it never really underperforms to a disastrous degree, either. Wall Street has never expected much in the way of outperformance, anyway. Indeed, ED has carried a consensus recommendation of Hold or Sell for more than 20 years. 

No, ED won't wow investors with its price potential, but few names are more reliable at raising their dividends. This Dividend Aristocrat has hiked its disbursement annually for 49 years. 

Ten analysts rate the stock at Hold, three say Sell and three call it a Strong Sell. Their average price target of $88.50 gives ED implied downside of about 4% in the next year.

• Market value: $17.3 billion
• Analysts' consensus recommendation: 3.59 (Sell)

Global macroeconomics aren't being very kind to transportation and logistics services companies these days, and Expeditors International of Washington (EXPD) has been no exception.

"We expect the current environment of weak demand and significantly lower airfreight and ocean rates to persist in 2023," writes UBS analyst Thomas Wadewitz, who rates EXPD at Sell.

Wadewitz has plenty of company on the Street. Of the 17 analysts covering EXPD tracked by S&P Global Market Intelligence, 11 call it a Hold, two say Sell and four rate it at Strong Sell. That works out to a consensus recommendation of Sell, albeit with moderate conviction. Meanwhile, the Street's average price target of $99.87 gives EXPD stock implied downside of about 11% in the next 12 months or so.

Income investors can at least count on EXPD's regular dividend increases. The company, which pays a semiannual dividend, has hiked the payout annually for almost three decades.

• Market value: $14.2 billion
• Analysts' consensus recommendation: 3.69 (Sell)

Franklin Resources (BEN), along with its subsidiaries, is best known as Franklin Templeton investments. The global investment firm with $1.5 trillion in assets under management is among the largest in the world.

BEN stock was beating the S&P 500 by about 4 percentage points for the year-to-date through March 8, but the Street doesn't expect the lead to last. Mutual fund providers are under pressure as customers eschew traditional stock pickers in favor of indexed investments. That trend in outflows has much of the Street worried about BEN's prospects. 

On the other hand, this Dividend Aristocrat's reliable and generous dividend history should not be overlooked, analysts note.

"While ongoing net asset outflows temper our view, we think the shares are worth holding amid an expected tailwind from an equity market rally and the potential for further industry consolidation," writes CFRA Research analyst Cathy Seifert (Hold).

Seven analysts rate BEN at Hold, while three call it a Sell and three rate it at Strong Sell. Their average price target of $26.92 gives shares implied downside of about 5% in the next year or so.

• Market value: $19.6 billion
• Analysts' consensus recommendation: 3.71 (Sell)

No stock in the S&P 500 gets a lower consensus recommendation from Wall Street than Principal Financial Group (PFG). 

Of the 14 analysts covering the investment and retirement management firm, one calls it a Strong Buy, five rate it at Hold, four say Sell and four call it a Strong Sell. Although their average target price of $83.08 does give shares implied upside of about 3% in the next 12 months or so, analysts expect PFG's total return to lag that of the broader market.

If PFG is expected to disappoint this year, that's partly due to the fact that it has so overwhelmingly outperformed in the recent past. Shares returned almost 33% over the past 52 weeks vs. a decline of 2.7% for the S&P 500. The trailing three-year annualized return likewise clobbered the broader market, with PFG up 30% vs. 12.1% for the S&P 500. 

PFG faces fundamental hurdles as well, such as lower performance fees and higher expenses, notes Credit Suisse analyst Andrew Kligerman, who rates shares at Underweight (the equivalent of Sell). 

It's understandable, even forgivable, if our current environment of rapidly rising prices has left investors at a loss.

After all, with inflation running at levels not seen in four decades, few folks have firsthand experience managing their portfolios against this kind of backdrop of rising prices.

Probably the first thing an investor needs to know about investing for rising prices is that some stocks actually benefit from inflation. Companies that have pricing power can have distinct advantages at times like this.

Conversely, companies with weak pricing power are at the mercy of rising prices. Rising prices increase their costs, which saps their margins and, by extension, their profits. A company that can't pass its rising costs onto customers by raising prices tends to be a bad bet when inflation runs hot.

Ideally, investors want to own stocks in companies with strong pricing power, and avoid those with weak pricing power. Helpfully, UBS Global Research has developed a proprietary framework to assess pricing power at the stock level.

UBS's Tactic for Tackling Inflation

Pricing is a lever to fight inflation, UBS says. Unfortunately, it's not one that every firm or industry can use.

"With inflation pressures surging, pricing power relative to cost exposures will be a key theme and source of [absolute outperformance] for global equity markets," writes the UBS Equity Strategy team.

Indeed, UBS finds that historically, whenever the two-year U.S. breakeven inflation rate has topped 2.5%, "companies with strong pricing power have outperformed their weak counterparts by nearly 14% on average over the next 12 months."

If shares in companies with strong pricing power have delivered those sorts of returns in the past, well, investors would do well to adjust their portfolios accordingly.

Let's explore UBS's best and worst stocks to buy for rising prices. The best stocks have pricing power and are Buy- or Neutral-rated by UBS industry analysts, while the worst stocks have weak pricing power and receive Neutral or Sell ratings.

You can see the full list of stocks below, with a few highlights of companies with the strongest (and weakest) pricing power.

The Best Stocks for Rising Prices Include…

• Apple (AAPL, $170.40) gets a Buy rating from UBS analyst David Vogt, who cites its ability to maintain and raise prices. "End-market demand has been improving year-over-year leading to elevated 'wait times' despite increased product procurement/production," the analyst says.
• Hasbro (HAS, $83.80) enjoys "pricing power because demand has held up well, while supply has been constrained given port congestion and difficulty to get product into the U.S.," notes UBS analyst Arpine Kocharyan (Buy).
• Nvidia (NVDA, $222.03) "is increasingly monetizing its software solutions more directly which should translate to higher margins and a greater component of revenue from recurring sources," writes UBS analyst Timothy Arcuri (Buy). "It continues to use software to open new markets for its unique hardware solutions which should provide headroom in terms of pricing."

The Worst Stocks for Rising Prices Include…

• Campbell Soup (CPB, $45.81) gets a Sell rating from UBS analyst Cody Ross. "Since 2017, packaged food companies' pricing power diminished as barriers to entry eroded," Ross writes. COVID-19 boosted demand and gave the industry a pricing-power boost, but Ross expects that to "diminish and revert to historical levels over the long-term."
• International Paper (IP, $47.05) suffers from the fact that pricing power for containerboard and paper products is mixed. "Paper products are largely commoditized and traded globally," notes UBS analyst Cleve Rueckert (Sell). "Producers rely heavily on third party logistics and freight in their domestic markets where inflationary pressures have been difficult to pass on."
• Universal Health Services (UHS, $148.96) struggled to control costs in Q4, "something we expect to continue through at least Q1," says UBS analyst Andrew Mok (Sell)." While the nursing labor market should improve throughout the year, we're normalizing to a market that's structurally weaker than it was in 2019. Even then, labor had already been a multi-year headwind for UHS."

Listen now:

Subscribe FREE wherever you listen:

Apple Podcasts | Google Podcasts | Spotify | Overcast | RSS

Links mentioned in this episode:

• Meet the Architect of the 401(k) Plan
• Kiplinger’s 2022 Investing Outlook
• PODCAST: Investing for Income with Jeffrey Kosnett
• James K. Glassman’s 10 Stock Market Picks for 2022
• The 22 Best Stocks to Buy for 2022
• 5 Stocks to Sell for 2022

Transcript:

David Muhlbaum: No doubt stocks in 2022 are going to have a tough time topping 2021’s stellar performance, but rise they will, Kiplinger is forecasting. We’ll dig into the year ahead with investing editors Anne Smith and James K Glassman and see what individual equities they’re recommending as well. Also, what the architect to the modern day 401(k) plan thinks of his idea today. All coming up on this episode of Your Money’s Worth. Stick around.

Welcome to Your Money’s Worth. I’m kiplinger.com Senior Editor David Muhlbaum, joined by my co-host, Kiplinger Senior Editor Sandy Block. Sandy, how are you doing? How is Detroit?

Sandy Block: Cold, David, very cold, but otherwise just fine.

David Muhlbaum: Good, good. You interviewed somebody this month, somebody who seemed to me like one of the unsung heroes of personal finance. I know there are probably people outside the benefits world who have heard of him, but I’m guessing not that many. I’m talking about Ted Benna here. Am I overstating or understating his celebrity by calling him an unsung hero?

Sandy Block: Well, not really if you are someone who makes your living writing about the importance of saving for retirement. I think that Ted does deserve that honor.

David Muhlbaum: Which is, the father of the 401(k) plan. I am willing to bet a tiny, tiny, tiny bit of my 401(k) savings that the vast majority of our listeners have, or had a 401(k), but I doubt the vast majority know how this massively popular savings plan got its start. So tell us about Ted Benna’s role.

Sandy Block: Well, I think the best way to explain it is to say that Ted figured out how to turn an obscure provision in the IRS code, that was originally used, I think, by senior executives to pad their pensions, into a savings plan for the masses. And what he came up with are things that seem very routine now, but weren’t 40 years ago. One was payroll deduction, which means that your contributions are taken out of your paycheck. You can’t spend money that you don’t have, and that’s a huge thing. And the second is matching contributions, which is the way that you encourage people to sign up. If you know your employer’s going to kick in some money, you are more likely to put in some of your own.

David Muhlbaum: And that was the sweetener that he had to add to get it off the ground when he was conceiving how to implement the 401(k).

Sandy Block: Right. I think that was something that made it worthwhile for people to do. And I think it also coincided with the disappearance of traditional pensions. So we needed something for people to save for retirement because they could no longer count on a traditional pension. But it’s still hard to get people to save and I think those are the innovations that we really give Ted a lot of credit for.

David Muhlbaum: So 40 years on, how does the father of the 401(k) plan think it’s going?

Sandy Block: Well, he basically thinks that the biggest... There are a couple problems he sees. One is, in some cases, expenses are too high and it’s too hard to figure out how much you’re paying. I think that’s not the case for very large companies, but it can be a problem for small companies. And on that-

David Muhlbaum: Those are the expenses that a firm incurs to have a 401(k) administered for it?

Sandy Block: Right. The expenses the firm incurs which is sometimes passes on to employees. And also, the expense of the funds themselves. If you work for a really big company that has a sophisticated HR department, they will probably negotiate with Fidelity or Vanguard or T. Rowe Price and get you some really low cost, great funds. But if you work for a company with 50 people and the CEO is also the guy who decides which funds to put in your 401(k) plan, he might just go with funds he heard about from a pal, or something like that. And in fairness too, may not have the amount of assets to get the lowest fees available. So I think that’s really where the problem is. I think for people who work for big companies, fees aren’t a problem. For people who work for small companies, it can be.

David Muhlbaum: And at the individual level, Benna is still gung ho on the idea of the young investor or the young employee getting in on it?

Sandy Block: Right. Yeah. And he does some pretty smart math elsewhere in the story that I wrote for the February issue, which has this interview with Ted. He says, "It’s never too early to start investing even if it’s only 1% of your pay." And one point he made I thought was really interesting in the story is, if you start very young, even if you invest only a small amount in your 401(k) contribution, by the time you retire, the majority of the money in your account will probably be from investment gains, not the money you put in. But if you start, say, in your forties, the majority of money in your account when you retire is going to be money that you contributed, which means you have to contribute a whole lot more to get to the same place.

So, he really encourages people who are just starting out, even if it’s a small amount to get started, because they really are in a position to benefit. And the other thing, he sort of discourages people from taking loans from their 401(k) plans, even though they may look very attractive. They do slow you down because you’re taking money out and reducing the amount of compounding while that money’s not in your plan.

David Muhlbaum: So 401(k)s today, huge industry, trillions of dollars of money in them collectively, where does Benna think it still needs to go, what could get better?

Sandy Block: What he says needs to make it better is more opportunities for people to participate. Because if you work for a major company, this is not an issue. Even if you work for a mid-size company, it’s probably not an issue. But if you work for a company with 10 employees, 20 employees, for those companies or those employers offering a 401(k) is just too much work. The administration, the implementation is just very hard for them. His recommendation is that small employers that don’t have a 401(k) plan should be required to offer a savings plan for their employees that offers payroll deduction and auto enrollment as well. It doesn’t have to be a full-fledged 401(k) plan, but it should be some kind of savings plan. And I think he has a model IRA that does this, that offers the things that encourage most people to participate, which is payroll deduction-

David Muhlbaum: And pre-tax.

Sandy Block: Yeah, pre-tax, payroll deduction and auto enrollment. Because one thing we’ve learned fairly recently is that if you require people to opt out, instead of opting in, if when you take a job you’re automatically enrolled in a 401(k) plan, even if you have the option of opting out, most people don’t. It’s a huge incentive. And there’s just been a huge increase in people participating in these plans, if they’re auto enrolled. So he would like to see a model savings plan for small employers that is low cost, maybe doesn’t offer all the bells and whistles of a 401(k), but does offer payroll deduction and auto enrollment. And he thinks we’ll see a lot more people saving for retirement if we have something like that.

David Muhlbaum: Do you think he ever regrets not trying to trademark this? I mean, it could have… We have the Roth. We have the Roth. We could have the Benna-fit.

Sandy Block: The Benna?

David Muhlbaum: The Benna-fit!

Sandy Block: No, I think the Roth was created. And I think the 401(k) was…

David Muhlbaum: Was interpreted…

Sandy Block: Engineered, reverse engineered.

David Muhlbaum: Yeah. Implemented or yes, well. Well, we still can give him our thanks for putting a lot of Americans on a safer road to retirement with their 401(k) savings. Thank you, Mr. Benna. Coming up next, the year ahead in investing.

The 2022 Stock-Market Outlook with Anne Smith and James K. Glassman

David Muhlbaum: Welcome back to Your Money’s Worth. You can’t talk about investing without talking about time. How did a stock or fund perform over the last year, five years, 10 years. And then there’s your personal timing as well. How soon might you need to cash out your investment? Well, there’s another timeframe, the good old calendar year. And that’s how Kiplinger, like other prognosticators, likes to look at investing trends. How did stocks do in 2021? How will they do in 2022? And then, of course, there’s breaking that down. How will sectors or even individual stocks fare in the year ahead?

David Muhlbaum: And we’re joined today by two people whose specialty that is. One is Anne Kates Smith, the executive editor of Kiplinger’s Personal Finance who coordinates that publication’s investing coverage. The other is James K. Glassman, who’s been a columnist for us since 2004, which is, of course, just one of his gigs. He’s been a newspaper and magazine publisher and undersecretary of state, which means we could, and maybe should, call him Ambassador Glassman. He’s written a number of books as well. The most recent being Safety Net, The Strategy for De-risking Your Investments in a Time of Turbulence. Welcome to you both.

James K. Glassman: Thank you.

Anne Kates Smith: Happy to be here.

David Muhlbaum:

Great. So going from 2020 into 2021, everybody kind of knew the story, "Good riddance to the great dumpster fire of 2020. Hello, fresh start." And that was the broad theme, not an investing-specific one, and 2021 didn’t necessarily live up to expectations. I think most people were hoping to have seen the end of the pandemic, but no. However, in terms of stock investing, 2021 was, well, is so far, just spectacular. Before we move on to 2022’s forecast, Anne, can you give us a recap of 2021?

Anne Kates Smith: Yeah. It was a crazy year for stocks, it was such a juggernaut. The S&P 500, which is everybody’s favorite broad market measure, has returned 26% so far this year as the small cap, Russell 2000, is up only about 10%. The aggregate bond market index is down about 1.5% as interest rates started to creep a little bit higher.

Sandy Block: Okay. I think, at this point, we have to point out that there’s two trading weeks left to go, so let’s not jinx things. Right?

David Muhlbaum: Right, yeah. Stock market is off December 24th, but a full trading day on December 31st. I guess I got to clear all the year-end stuff.

Sandy Block: Right. So 2022 forecasting, David did all his disclaimers about calendar years being a somewhat arbitrary approach to investing horizons. But, you know, it is what it is. If 2021 was so red hot, Anne, what’s the story for 2022?

Anne Kates Smith: Well, we might have been a little too cautious in our prior year outlook. For 2021, we told people they needed to moderate their expectations and that was a big mistake. But sticking with that game plan because, hopefully, and I say this with a little bit of caution because of the Omicron variant that’s spreading, but you can only reopen an economy once. I’m really keeping my fingers crossed on that. So there was explosive growth by almost any measure in 2021 that you just can’t replicate again. So, for instance, in 2022, we’re looking for, Kiplinger is looking for, about 4% percent economic growth. That’s down from what we think will be 5.6% this year. Earnings growth, which is really the driver of the stock market, we’re looking at 50% almost in corporate earnings growth for this year.

Anne Kates Smith: That’s not going to happen again in 2022. In fact, analysts think that it’s going to revert back to more, the long term average, which is about 7 to 8%. So given those more modest parameters, we are telling people to moderate their expectations for the stock market. You can’t expect 60+ all time highs in another year. So we’re looking for high single digits, which again, is about an average return for the stock market, maybe a little bit lower even. But we’re looking about price returns of 7 to 8% and maybe between another one to two points, percentage points, from dividends.

David Muhlbaum: And I want to give you props for getting Omicron right. For those of you who heard me pronounce it wrong a couple of weeks ago, cut me a little slack. The term was like an hour old then and I guess maybe my classical Greek isn’t so hot.

Anne Kates Smith: I studied classical Greek in college.

David Muhlbaum: Well, there you go.

Sandy Block: After that interesting opening, I think the people are interested in specific stocks to buy or sell, and yes, we have recommendations, Jim too, we haven’t forgotten about you. But before we move into ticker specifics, Anne, I want to ask about what you so aptly called, "The elephant in the room," inflation. We just got the November consumer price index numbers. The annual inflation rate in the U.S. accelerated to 6.8% in November of 2021, the highest since June of 1982, which is when I was just out of college. Is that going to continue and how can the bulls stand up to this beast?

David Muhlbaum: Ooh, the animal metaphors are flying.

James K. Glassman: Well, Kiplinger’s inflation forecast for 2022 is quite a bit lower at about 2.8%. I think the thinking on Wall Street is that inflation is going to run hotter than it has for years, which is 2% and below. But it’s going to be right around that 3% mark, which is, again, the long term, going back to 1926, the historical average. So higher and sticky and more persistent, but not 1970s levels at all. But that said, you’ve got to be thinking in your portfolio about protecting yourself from inflation. And if you bought tips earlier this year, good for you. Congratulations, they’re very expensive now. But the good news is that stocks in general, because of their growth component, are very good inflation hedges. Stocks over time will generally, not all the time, but over the long haul will keep up with inflation so that the stocks are a good place to be.

David Muhlbaum: I’m glad you mentioned TIPS, treasury inflation-protected securities, because we actually did a segment with Jeff Kosnett a couple weeks ago. And I’m going to put a link into it because, frankly, today we’re just going to blast right past fixed-income investments and stick with stocks. So as you said, Anne, stocks are a good investment for an inflationary environment. Are there some that are better than others? What stocks, if you will, are inflation ready?

Anne Kates Smith: Yes. You definitely want the inflation fighters. And those are companies that can keep their costs low. They have a handle on costs so they’re not suffering by paying more for rising input costs. They’re companies that can raise their prices because they enjoy such strong demand or because their market share’s expanding so strongly that they can go ahead and raise prices. And I’m thinking of companies like Netflix (NFLX), the streaming giant, they raise their prices and people keep paying them. Farm equipment maker Deere (DE), is another one with a strong market share. We also recommended AmerisourceBergen (ABC), which is a healthcare distributor. They enjoy very low labor costs per employee. So they have a handle on costs.

Sandy Block: So Jim, in your column, in your January column, you said that you like PepsiCo (PEP) because it stands to benefit from general inflation, from aggressive price increases. And you also mentioned, I love this example that you like Public Storage (PSA) because they can raise their prices and people are not going to go take all their stuff out, which I think is a really good point. Any other thoughts on, maybe you can expand a little on the types of stocks that you think benefit in this environment and maybe some that don’t.

James K. Glassman: Well, Sandy, I agree with what Anne said. I think that growth stocks benefit more than value stocks. And I also think that there are a lot of extremely profitable technology companies that have not done a lot of price raising, and I think of Amazon (AMZN) being one of them. And I also think, maybe not so much Apple (AAPL), but I also think Microsoft (MSFT) can raise its subscription fees fairly easily. These companies have been basically sitting on very close to the same kinds of fees for a long time. So I don’t think they have a hard time raising their prices. Also, I mentioned, my pick for 2022 is Starbucks (SBUX), although Starbucks, I believe, already has been raising prices because coffee prices have gone up, I think they’re also in a position where they can raise prices.

I don’t have a great fear of inflation. I also agree, as far as stocks are concerned in general, unless inflation obviously leads to the Fed doing enormous amount of tightening and that causes the economy to go down. And also, I generally agree with what Anne was saying. I don’t really see inflation being, certainly not being, over 3% next year. So I’m not sure how much the Fed is actually going to tighten, to tell you the truth. But I think in general, look, investors are always choosing between stocks and bonds. And for the past 10 years or so, bonds have just not been a choice at all, unless you want to get one or 2% on your money. And so that could change and I think that will change. So that could have a depressive effect in general on the market.

David Muhlbaum: Well, since you brought the Fed up, Jim, you and Anne are both pretty bullish on financial sector stocks. I was wondering, do you feel like last week’s announcement by the Federal Reserve, the Bank of England, does that confirm your expectations that the sector will do well in 2022?

James K. Glassman: Yeah. I think the issue is whether this is already kind of baked into the cake because financial stocks have been rising, but I don’t think it has been completely. I mean, the problem for banks, let’s say, normal commercial, large commercial banks, like Bank of America (BOFA), which is one of our picks, one of our 10 picks for the year ahead, is that there hasn’t been much of a gap between what the bank pays for deposits and what it gets when it lends that money out. And as interest rates rise, that gap increases and they make more money. And again, unless rates rise in an extreme way and really harm the economy, banks will benefit from higher interest rates and these rates have been anticipated for a long time. So I think it’s one of the reasons that stock prices have gone up for banks like Bank of America. But I think there’s still room to grow.

Anne Kates Smith: Yeah. One of the ways we like to play financials is with Invesco S&P 500 Equal Weight Financial. That’s an ETF, symbol RYF. And why we like it, is that it gives as much weight to the smaller regional banks as it does to the big money center giants. And we think it’s nice to have exposure to those Main Street banks that will do well as the economy improves and things pick up again. So that’s one way to play financials that we like.

James K. Glassman: And Anne, I’m a big fan... I’m sorry, Sandy. I just want to say, I’m a big fan of Main Street banks. I cut my teeth on Main Street banks and I should be doing a column on that subject soon.

Sandy Block: Okay.

James K. Glassman: If you’ll permit-

Sandy Block: Put a pin in it.

Anne Kates Smith: Check.

Sandy Block: Anne and Jim, we’ve been talking about domestic stocks, but China did not have a great year last year. And some of the news coming out of there, I think was concerning. Are you still long-term bullish, Jim, on China? Do you think it has a place in investors’ portfolios?

James K. Glassman:

So my answer to that is yes and yes, but I also warn investors that China’s very risky. But I see China, at least as far as what they’ve done with some of their larger companies, eventually coming to the party, eventually coming to its senses. But I just want to say that the worst performer on the 2021 list, on our 2021 list, was in fact Alibaba Group Holding (BABA), which fell by nearly half. So that’s not good, but on the other hand, it’s not easy to find bargains. And I think China is a place to do it, but you just have to understand that there’s risk. So for this year’s list, 2022, I’m not giving up. And we’ve got on our list is Tencent Holdings (TCEHY), which has also been clobbered. But for that reason, it’s good value.

Anne Kates Smith: We also put Alibaba on a list of stocks to buy for '22, but reiterate the comments about risk there.

David Muhlbaum: And to explain a little bit about the list that Jim is referring to, every year since, oh gosh, we figured out last year, since like 2006 or so, for Kiplinger, he’s put together a list of 10 stocks for the year ahead, but can you explain a little bit more about how you go about making that list, and FYI for everyone listening, I’m going to put in a link to it because we’re probably not going to get to every stock. But Jim, tell us a little bit about the process if you would.

James K. Glassman: Sure. David, and actually this list goes back to pre-Kiplinger days when I used to write a column for The Washington Post. So I guess it’s well over 25 years at this point. So what I do is, I look at people that I trust, so either managers of any kind of fund, but certainly a mutual fund or probably less likely than an exchange traded fund, but look at managers of mutual funds. Look at analysts. I’ve been using Terry Tillman for a number of years now. It’s like eight years in a row, the guy has beaten the S&P 500, he’s a software analyst. And compile a list which are really my choices, but they’re picked from the choices of others. And then I also add a stock of my own, which, by the way, in 2021 was the best performing stock. That’s not always true on my list at all.

David Muhlbaum: What was the 2021?

James K. Glassman: Well, that’s a stock that I like to call ONEOK, and other people call it ONEOK (OKE). I actually don’t even know how to pronounce it. But it’s a gas pipeline company, it is a fabulous company. It’s a really good way to play energy certainly at lower volatility than buying an exploration and production company. But its price does rise as the price of gas and energy, petroleum rises.

David Muhlbaum: And for 2022?

James K. Glassman: But it’s a really good company, it’s over 100 years old. It’s based in Oklahoma. And you know, they’re not building a lot of pipelines anymore. Maybe we should be, but we aren’t. And so, they have a wonderful market.

David Muhlbaum: And for 2022, it was, as you mentioned, Starbucks. So I guess we get to find out if people are going to need their caffeine as much as they need their energy.

James K. Glassman: Yeah, good point. Yeah, so Starbucks, I just think if you look at Starbucks, and I’m a long time owner of Starbucks, actually like Netflix, things will happen and it scares investors off and the stock will drop, maybe drops 10%, or something like that. I’m not necessarily a buy on the dips person, but I think with certain stocks, you can see this pattern quite often. And this is what’s happened with Starbucks, mainly because of China, to tell you the truth. I mean, they got a lock on their market and they actually have benefited from COVID because a lot of smaller coffee houses that have been competing with them are out of business and they’re still going strong. Now they may have a union problem. I kind of doubt that. I mean, there’ve been some Starbucks stores in the Buffalo area that have unionized, but Starbucks really does take very good care of its employees. And I don’t see that as a big problem.

David Muhlbaum: Yeah. They’ve been famous for their healthcare benefits. It’s time to throw a few companies under the bus, I’m afraid. I’m talking about the sell calls here, which are, as you mentioned, Anne, they’re harder to make than buys. But buy and hold doesn’t mean buy and hold forever. So can you give us a highlight or two for five stocks to sell for 2022, and a bit about why?

Anne Kates Smith: Okay. Well, I hate to answer this question. This is-

David Muhlbaum: Nobody wants to be negative. I understand.

Anne Kates Smith: No, it’s not that. I love being negative. The problem is, this is the hardest call to get correct. Stocks go up over time, so just in general, it’s hard to find stocks to sell.

David Muhlbaum: Well, how about-

Anne Kates Smith: When I tally up our record every year, this is not the one I like to promote.

David Muhlbaum: Well, can you talk about Nike (NKE), for example, because I thought that was such an interesting example.

Anne Kates Smith: Well, yeah, there’s two on here. There’s a couple of different reasons to sell a stock and Jim has written about this very articulately in the past. One is if the business model has changed, or the management has changed, and something that you liked about the stock is no longer present. We’ve got two stocks on this sell list. One is Nike, as you mentioned, the other is TPI Composites (TPIC). They’re not bad stocks, they’re just badly priced.

David Muhlbaum: And TPI Composites, we’ve talked a lot about that. We were talking about that one last summer.

Anne Kates Smith: That’s a green stock. They make components for the wind industry. So they’ve got a long runway for growth as does Nike, but here’s the other thing. In a market that is up so strongly this year, you might want to trim some of your winners. When you sell a stock, it doesn’t always mean jettison every single share. It might just mean trim some of your winners in the normal course of rebalancing. Well, which ones do you want to trim, maybe these two.

David Muhlbaum: Right. And maybe that’s why the traders are working all the way until the end of the day on December 31st is those last-minute adjustments.

Sandy Block: Last-minute trims.

Anne Kates Smith: Yes. The old window dressing as they call it.

David Muhlbaum: Yes. Well, don’t forget the wash-sale rule, people.

James K. Glassman: I just want to say that I agree with Anne. I think I once wrote a column about this, about just how hard, I mean, I’ve written columns about when to sell, but I think I wrote a column about stocks, actually about how hard it is to pick stocks that you should sell. It’s very, very difficult. And my hat’s off to anybody who tries it. I think I tried it once.

Anne Kates Smith: This is a much harder call to make. It can also be a lot more fluid.

David Muhlbaum: Well, as I’ve said to Anne before, thank you for sticking your neck out. And I think we might have a return conversation here too, to talk about that psychology of when to say, "Sell."

Sandy Block: When to break up with your stocks. We’ve done that, yeah.

Anne Kates Smith: I’ll tell you a call I feel much more comfortable with, is our call to buy dividend stocks. Dividends historically have been responsible for about a third of your stock returns, but dividend growth has lagged way behind earnings growth. And I think there’s a number of reasons for that to turn around and catch up. One is that demographics as we age and retire, demand goes up for dividends. There’s a lot of scrutiny on companies that spend their money buying back stock and a potential tax on buybacks. That’s going to make dividends on the margin slightly more attractive for companies. We think dividends are going to potentially be a much bigger component of your total return as price returns start to moderate in 2022. So I feel a lot more confident about that call.

David Muhlbaum: Is any of that a hangover from 2020 when some firms cut dividends or suspended, and they just have resisted a return?

Anne Kates Smith: Yeah. Those dividends are coming back for sure, so that’s part of it. But also just going forward in a more moderate price return environment you’re going to be looking for, or you should be looking for, that dividend component to give you more of your total return.

David Muhlbaum: Excellent. Well, thank you both very much for joining us. And I’m wishing everyone a prosperous end to 2021 with what little of it remains. Get those trades in. And we’ll talk to you again in 2022. Thanks so much.

Sandy Block: Thank you both.

Anne Kates Smith: Alrighty. My pleasure.

James K. Glassman: Thank you.

David Muhlbaum: That will just about do it for this episode of Your Money’s Worth. If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and a review. And if you’ve already subscribed, thanks. Please go back and add a rating or review if you haven’t already. To see the links we’ve mentioned in our show, along with other great Kiplinger content on the topics we’ve discussed, go to kiplinger.com/podcast. The episodes, transcripts and links are all in there by date. And if you’re still here because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly podcasts@kiplinger.com. Thanks for listening.

They say bull markets climb a wall of worry. And with stocks setting record highs seemingly every other day, it's understandable if some investors are feeling a bit jittery.

Markets never move in a straight line, after all. Valuations, in many cases, do indeed appear to be stretched; the cyclically adjusted P/E (CAPE) ratio of S&P 500 stocks, based on average inflation-adjusted profits over the past 10 years, is at its second-highest level ever. And some of the market's highest-flying bets on economic recovery seem to be getting riskier by the day.

To get a sense of where some of the more dangerous names in the market might lurk right now, we tried something different and turned to quantitative analysis.

Quantitative analysis employs mathematical and statistical models to value stocks. The idea is that a rigorous and dispassionate analysis of fundamentals, technicals, investor sentiment and other factors will yield better stock picks.

Refinitiv Stock Reports Plus provides just such quantitative analysis. The platform employs a weighted mathematical and statistical model that scores stocks on six factors – earnings, fundamentals, relative valuation, risk, price momentum and insider trading – then spits out an overall, or average, score. The scoring scale runs from 1 to 10, with 10 being the best possible grade.

Given investors' heightened awareness of risk in a market that perhaps feels a bit "toppy" these days, we looked for S&P 500 stocks with the worst combination of risk and average scores based on current valuations. For good measure, we also took a look at what Wall Street analysts have to say about some of these riskier names.

Have a look at 10 S&P 500 stocks that quantitative analysis flags for having poor combined risk and overall profiles in this red-hot market. This certainly isn't to say these companies are destined for failure, it's just at current valuations, investment opportunities may fall on the riskier side.

Stocks ranked by risk score, from least to most risky. Share price and other data as of May 7. Quantitative analysis courtesy of Refinitiv Stock Reports Plus. Analysts' consensus recommendations and related data courtesy of S&P Global Market Intelligence, unless otherwise noted.

• Market value: $647.4 billion
• Dividend yield: N/A
• Average score: 5
• Risk score: 5
• Analysts' ratings: 9 Strong Buy, 3 Buy, 10 Hold, 5 Sell, 3 Strong Sell

If volatility is a proxy for risk, then Tesla (TSLA, $672.08) stock is always going to be on the riskier side.

Anyone who follows this rollercoaster of a stock chart already knows that. But it shows up in TSLA volatility data, too. For example, shares in the electric vehicle maker have a beta of 1.86, per Refinitiv Stock Reports Plus. In theory, they are 86% more volatile than S&P 500 stocks. What that means in practical terms:

"On days when the market is up, TSLA shares tend to outperform the S&P 500 Index," says Stock Reports Plus, "However, on days when the market is down, the shares generally decrease by more than the index."

Sign up for Kiplinger's FREE Investing Weekly e-letter for stock, ETF and mutual fund recommendations, and other investing advice.

That volatility contributes to an overall risk rating of 5 from Stock Reports Plus. To put it in perspective, the S&P 500 gets a risk score of 8.6.

Also hampering TSLA's risk rating is that it actually correlates closely with the broader market, in both the short and long term. Although TSLA tends to move more dramatically than the overall market, the high degree of correlation means it provides "only low levels of diversification to a portfolio similar to the broader market."

At the same time, TSLA gets an overall average score of just 5 out of 10. Although it stands out for high marks on fundamentals – scoring a perfect 10 thanks to strong margins, high revenue growth, a solid balance sheet and high earnings quality – other quantitative factors are more neutral to negative.

A trend of insider selling, mixed earnings expectations and performance, and a poor score for relative valuation all contribute to the middling overall rating on Tesla stock.

Wall Street, as a group, tends to agree with Stock Reports Plus' assessment. The 34 analysts covering TSLA tracked by S&P Global Market Intelligence give the stock a consensus recommendation of Hold.

Credit Suisse analyst Dan Levy, who rates TSLA at Neutral (the equivalent of Hold), points to "lumpy" first-quarter earnings, as well as downside risks such as increased competition and "misexecution" on its growth plans.

• Market value: $8.4 billion
• Dividend yield: N/A
• Average score: 4
• Risk score: 5
• Analysts' ratings: 5 Strong Buy, 4 Buy, 9 Hold, 1 Sell, 0 Strong Sell

Apparel company PVH (PVH, $118.67) – whose brands include Tommy Hilfiger, Calvin Klein, Van Heusen and Izod – gets an average score of just 4 from Stock Reports Plus, led by low marks on fundamentals and insider trading, and a merely middling rating for risk.

Not only is PVH's risk rating "significantly below" the S&P 500's, but shares have been especially jumpy of late. Over the past 90 days, PVH's daily price fluctuations have exceeded that of 91% of the other S&P 500 stocks.

This drama is nothing new. Over the past five years, PVH logged a monthly best return of 36.4%, while in its worst month it lost 49.2%. By comparison, the S&P 500's best and worst months of the past five years comprised a gain of 12.7% and a loss of 12.5%, respectively.

Price momentum is problematic, too, given that shares are entering a period of poor seasonality. Over the past decade, PVH generated an average return of -5.5% in May.

Weak profitability and an unattractive balance sheet contribute to PVH scoring a meager 3 on fundamental strength. And PVH scored a 2 on insider trading, hurt by trends of both short- and long-term insider selling.

Lastly, PVH garnered a neutral rating of 5 on relative valuation. Although shares trade at a 17% discount to the S&P 500 on a forward price-to-earnings (P/E) basis, they also trade at a 21% premium to their own five-year average.

While PVH garners a consensus Buy recommendation, the Street's average price target of $112.16 gives the stock implied downside from current levels. Worse? Analysts expect earnings per share (EPS) to contract at an average annual rate of 6.3% over the next three to five years.

"While we acknowledge PVH's solid execution in a tough backdrop, we view current valuation as appropriate until there is further visibility around the recovery of North America," writes Deutsche Bank analyst Paul Trussell (Hold).

• Market value: $10.2 billion
• Dividend yield: N/A
• Average score: 5
• Risk score: 5
• Analysts' ratings: 7 Strong Buy, 2 Buy, 16 Hold, 2 Sell, 2 Strong Sell

Under Armour (UAA, $24.47) stock gets a neutral rating for risk, and that's actually one of its better scores when it comes to Stock Reports Plus' grading of various quantitative factors.

True, the athletic apparel and footwear company gets a 7 for earnings, thanks to a relatively high number of analysts upgrading their recommendations. In the past six months, UAA has enjoyed five upgrades vs. just two downgrades.

And UAA gets its highest mark thanks to some technical strength in the S&P 500 stock. The company scores a 9 for price momentum, partly due to positive seasonality. Over the past 10 years, UAA has delivered an average gain of 8.7% in June and another 3.3% in July.

Additionally, the stock's relative strength indicator – a price momentum tool used in technical analysis – is significantly higher than the industry average over the past one-, three- and six-month periods.

Where UAA falls short is in grades for fundamentals and relative valuation. The company gets a lowly 2 for fundamentals, hurt by declining revenue and negative net margins. As for relative valuation – where UAA garners a score of 3 – the stock looks stunningly expensive when compared to the S&P 500, as well as its own five-year average, on a forward P/E basis.

As Kiplinger has noted, UAA is actually a stock worth considering, but only at a much lower price. Meanwhile, analysts' consensus recommendation comes to Hold, according to S&P Global Market Intelligence.

"The second half of 2021 is implied to be flattish/slightly down on the top line given some headwinds such as exiting undifferentiated retailers, fewer off-price sales and demand constraints, as well as uncertainty internationally as COVID continues to see a resurgence in select markets and strong competition in the space," writes B. Riley analyst Susan Anderson (Neutral).

• Market value: $22.1 billion
• Dividend yield: N/A
• Average score: 4
• Risk score: 4
• Analysts' ratings: 9 Strong Buy, 2 Buy, 3 Hold, 0 Sell, 0 Strong Sell

Caesars Entertainment (CZR, $105.75) is considered by many analysts and investors to be a classic COVID-19 recovery play. But the S&P 500 stock might have traveled too far too fast, at least by Stock Reports Plus' reckoning.

The company, which owns the Caesars Palace, Paris Las Vegas and Bally's Las Vegas, among other properties, was hit hard by the pandemic, and now shares are roaring back in anticipation of a return of customers.

CZR gets a score of only 5 for earnings, hurt by a history of negative earnings surprises. Fundamentals also garner a score of 5, as a decent balance sheet and earnings quality offset poor net margins and a negative return on equity.

But as much as the stock has recovered in 2021, it remains a fairly risky proposition. Shares are more than twice as volatile as the S&P 500. That's great for shareholders on up days – but not so much fun when the market is selling off.

That volatility has been especially noticeable of late. "Over the last 90 days, CZR's daily price fluctuations have exceeded that of 94% of S&P 500 Index firms," says Stock Reports Plus.

Although technical traders will applaud CZR's score of 8 for price momentum, other investors might not be thrilled with its bottom-basement rating for insider trading.

"Caesars Entertainment Inc currently has an Insider Trading Rating of 1, which is significantly more bearish than both the Casinos & Gaming industry average of 4.00 and the Hotels & Entertainment Svcs. industry group average of 4.14," says Stock Reports Plus.

The Street is more bullish on the name than Stock Reports Plus' quantitative assessment would suggest. Indeed, analysts' consensus recommendation stands at Buy. In the bull camp, Stifel analyst Steven Wieczynski says the company's $17 billion merger with Eldorado Resorts last year has yet to get its due.

"We confidently continue with our Buy rating on CZR shares, as we believe the market is largely overlooking the value that stands to be created by combining the legacy Eldorado and CZR portfolios," Wieczynski writes in a note to clients.

• Market value: $13.3 billion
• Dividend yield: 2.7%
• Average score: 3
• Risk score: 4
• Analysts' ratings: 1 Strong Buy, 3 Buy, 16 Hold, 2 Sell, 0 Strong Sell

Gap (GPS, $35.44) and other mall-based retailers were mauled by the pandemic. Now, as a COVID-19 recovery play, GPS stock is roaring back to the point where it landed among the best stocks of President Biden's first 100 days in office.

The downside to all that GPS upside is that the S&P 500 stock is now too expensive, according to Stock Reports Plus – and it's volatile to boot.

GPS gets a borderline-negative score of 4 for risk, hurt by high volatility vs. the broader market, wide intraday swings and a poor record of adding diversification to a broad-market portfolio. In the past three months alone, GPS has recorded a daily best gain of 7.6%, and a daily worst loss of 7.7%.

Furthermore, GPS' wildness precedes the pandemic by some time. Over the past five years, the stock logged a record best month of a 41.8% gain, and a record worst month in which it fell almost 51%.

As for relative valuation, GPS gets a score of 1. Thanks to a red-hot rally, shares now trade at an 87% premium to their own five-year average by forward P/E. They are 17% more expensive than the S&P 500 by forward P/E, as well. Lastly, the stock is pricey compared to peers, trading at a 30% premium to the rest of the apparel retail industry.

Gap's fundamental score also wallows at 1, with negative revenue growth, negative return on equity and negative net margin, as well as several unfavorable debt metrics.

Although GPS gets the lowest mark possible for insider trading, it does garner a 9 on price momentum, thanks to a number of favorable technical indicators. Shares are heading into a period of strong seasonality, with average gains of 4.1% and 5.6% in June and July, respectively, over the past 10 years.

Still, the Street's consensus recommendation stands at Hold, citing many of the issues noted by Argus Research below.

"We are encouraged by the company's aggressive moves to transform its business and improve performance, and would consider an upgrade on signs of sustained earnings improvement," writes Argus Research analyst Deborah Ciervo. "However, given recent weak comparable-store sales, product assortment issues, and slower traffic trends, along with continued economic uncertainty, our rating remains Hold."

• Market value: $17.6 billion
• Dividend yield: N/A
• Average score: 3
• Risk score: 4
• Analysts' ratings: 2 Strong Buy, 3 Buy, 18 Hold, 2 Sell, 0 Strong Sell

Discovery (DISCA, $37.56) posted disappointing first-quarter streaming subscription growth and advertising sales in late April, which only added to analysts' mostly cautious view on the media company's stock.

A quantitative look at DISCA's prospects is likewise lukewarm to negative. Discovery, which owns cable channels such as HGTV, TLC and Animal Planet, gets a risk score of 4 and an overall score of just 3.

Interestingly, over longer time frames, DISCA is actually less volatile than the broader market. It tends to underperform when the S&P 500 is rising, but holds up better when the index is falling. At the same time, it offers little in the way of diversification, and lately has been jumpy on a daily basis.

"Over the last 90 days, the stock's daily price fluctuations have exceeded that of 99% of S&P 500 Index firms," says Stock Reports Plus.

Where shares really fall short are in evaluations of earnings and price momentum. DISCA gets a score of 1 for earnings, hurt by a slew of downward revisions to analysts' earnings estimates. Over the past month, 20 analysts have cut their EPS forecasts, vs. just three upward revisions.

DISCA gets a score of 1 on price momentum, as it's currently in a period of poor seasonal performance. The S&P 500 stock has lost an average of 4.3% in May over the past decade.

Valuation doesn't make a particularly compelling case for DISCA either. The relative valuation score of 6 reflects the fact that shares trade at massive premiums to their own five-year averages by both trailing and forward P/Es.

Indeed, UBS Global Research slashed its recommendation in late March, citing valuation.

"We are downgrading DISCA to Sell from Neutral as the risk-reward has become more challenging at current levels," writes analyst John Hodulik. "While discovery+ appears off to a strong start, we remain concerned regarding the ultimate scalability of the service in relation to the decline of the linear business and longer term impact on financials."

The Street's consensus recommendation on DISCA stands at Hold, per S&P Global Market Intelligence.

• Market value: $21.5 billion
• Dividend yield: N/A
• Average score: 1
• Risk score: 4
• Analysts' ratings: 5 Strong Buy, 2 Buy, 7 Hold, 2 Sell, 2 Strong Sell

Cruise line stocks have caught a strong tailwind in 2021 on expectations the major lines will hit the open waters again this year, but Wall Street pros harbor concerns that some names may be too pricey or risky at current levels.

Royal Caribbean Cruises (RCL, $84.29), which gets a consensus Hold recommendation from analysts and the worst possible average score from Stock Reports Plus, looks like a name from which most investors should jump ship.

RCL gets an average score of 1, led by grades of 1 for both fundamentals and insider trading. The risk score of 4 actually helps the stock in that light, but that's not exactly reassuring.

RCL is roughly twice as volatile as the broader group of S&P 500 stocks. High volatility is generally bad because it increases the number of opportunities for investors to buy high and sell low.

Meanwhile, daily returns over the past three months range from a gain of 9.7% to a loss of 5.6%. On a monthly basis going back five years, the range widens from a gain of 45.4% to a loss of 60%.

RCL's bottom-basement score for fundamentals hinges on collapses in revenue, gross and net margins, and a negative return on equity. Indeed, RCL has the lowest gross margin – the difference between revenue and cost of goods sold – in its industry.

The insider trading score of 1 stems from short- and long-term trends of insider selling. And second-quarter insider selling hit a five-year high for that three-month period.

The bottom line on the Street is that analysts' consensus recommendation stands at Hold, per S&P Global Market Intelligence.

"While the vaccine rollout has provided some optimism, the timing for a potential return to some semblance of normalcy seems highly tenuous at best," writes CFRA analyst Tuna Amobi (Hold). "A return to pre-pandemic revenue seems several years out."

• Market value: $14.1 billion
• Dividend yield: N/A
• Average score: 3
• Risk score: 4
• Analysts' ratings: 2 Strong Buy, 0 Buy, 9 Hold, 3 Sell, 7 Strong Sell

American Airlines (AAL, $22.00) gets a rare consensus Sell recommendation from Wall Street analysts and doesn't fare much better in grades from Stock Reports Plus.

Although some air carriers are thought to have potential as recovery plays, analysts and quants see better alternatives to AAL in the industry. Indeed, American Airlines' risk score of 4 is actually one of its better grades. High volatility – especially over the past three months – hurt its risk profile, as does a history of large intraday swings.

Although AAL gets an impressive 8 out of 10 for earnings – thanks partly to analysts upgrading their recommendations and EPS estimates – most other quant measures come up wanting.

Price momentum scores at 3, hurt by poor seasonality. AAL has lost an average of 4.1% in May over the past 10 years. June and July have delivered positive returns, albeit ones that lagged most of its industry peers.

AAL receives a score of 4 for insider trading, which is another negative factor in Stock Reports Plus' calculations. The mark is, however, higher than the industry average of 3.38.

Fundamental factors are where AAL's assessment really gets ugly. Its lowest possible score of 1 stems, in part, from having the highest debt-to-capital ratio in the industry, as well as declining revenue and a lack of profitability.

As noted above, analysts' consensus recommendation stands at Sell, according to a survey by S&P Global Market Intelligence. Argus Research won't go that far, but it remains steadfastly cautious on the S&P 500 stock.

"We are maintaining our Hold rating on AAL, which had been hurt by the grounding of the 737 MAX, is wrestling with COVID-19 and high debt levels," writes Argus Research analyst John Staszak. "With air travel demand only now beginning to increase, we think that lower operating expenses and a low interest rate environment will provide only partial relief to American and other airlines."

• Market value: $25.6 billion
• Dividend yield: 0.2%
• Average score: 2
• Risk score: 3
• Analysts' ratings: 5 Strong Buy, 0 Buy, 17 Hold, 2 Sell, 2 Strong Sell

Oil and gas companies are some of the hottest recovery plays to be found. Some might say they are also among the most speculative. Occidental Petroleum (OXY, $27.39), with a consensus recommendation of Hold, poor quant scores and a soaring stock price, appears to fit both bills.

OXY, up by more than half so far in 2021 and by 150% over the past six months, gets a risk score of 3 due to high volatility. With a beta of 2.29, it tends to greatly outperform the S&P 500 in up markets, but fall much more sharply in down ones.

Over the past 90 days, OXY has generated an average intraday price swing of 4.9%. It's best single daily return came to 12.8%, but it slumped 8.3% in its worst trading session. In other words, its daily price fluctuations have exceeded that of 98% of S&P 500 stocks in the past three months.

With all the demand destruction COVID-19 brought to the oil patch, it should come as no surprise that OXY gets a fundamental score of 1. Among the lowlights are declining revenue, a lack of profitability, negative return on equity and blemishes on the balance sheet.

Where OXY shines is in its score of 7 for earnings, helped by upward revisions to EPS estimates and analyst upgrades. Five analysts have hiked their recommendations on the stock over the past six months vs. two downgrades.

An insider trading score of 4 is neutral, but on the cusp of negative, while a negative price momentum score of 3 suggests investors shouldn't expect much help from the stock's technicals.

CFRA Research rates OXY at Hold, which is by a wide margin the Street's majority view on shares.

"We think management will focus near-term on debt reduction, and so long as crude oil prices stay buoyant in the $60 per barrel range, we think this is very possible," writes CFRA Research analyst Stewart Glickman. "The risk in our view is that crude prices once again relapse, which could jeopardize non-core asset sales at the same time as cash flows suffer."

• Market value: $16.7 billion
• Dividend yield: N/A
• Average score: 3
• Risk score: 2
• Analysts' ratings: 7 Strong Buy, 6 Buy, 6 Hold, 0 Sell, 0 Strong Sell

Enphase Energy (ENPH, $122.96) gets a solid consensus Buy recommendation from the Street, but even bullish analysts worry about its risk profile.

ENPH, which provides solar power and storage systems for individual homes, was one of the hottest green energy stocks of 2020, gaining more than 570%. But shares have tumbled by nearly a third so far this year, hurt partly by the global semiconductor shortage that's wreaking havoc across a multitude of industries.

The share price's longer-term rollercoaster ride, as well as wide daily price swings, give it the worst risk score of any S&P 500 stock on this list. To get a sense of the drama, over the past three months, ENPH logged a daily best return of 12.6% and a daily worst loss of 14.1%. Furthermore, it sports an intraday average swing of 7% over the past 90 days.

Also knocking the stock's overall rating is relative valuation, which garners a score of 2. Even after plunging 37% over the past three months, shares still look expensive. The forward P/E multiple of 61.3 is almost a third higher than the stock's own long-term average, and far exceeds that of the S&P 500, which stands at around 23. Shares are even more expensive on a trailing earnings basis.

Happily for shareholders, ENPH gets a perfect 10 on fundamentals. Even more impressive is how that score compares with peers. Stock Reports Plus notes that the renewable energy services industry carries an average fundamental score of just 5.4.

Fundamental highlights include high revenue growth, healthy margins and a solid balance sheet. The company scores a middling grade of 6 for earnings, however, suffering 17 downward revisions to EPS estimates from analysts over the past month. No analysts upped their earnings estimates over that time period.

As for insider trading, ENPH gets a score of 1, hurt by higher-than-average insider selling recently.

Supply chain concerns, tighter competition and an overcrowded trade have some analysts sounding a note of caution on the name.

"Enphase remains among the most crowded trades in clean tech," writes Raymond James analyst Pavel Molchanov, who rates the stock at Market Perform (Hold). "Our fundamental concern is the risk of medium-term margin pressure to below-target levels, amid increasing competition in microinverters and (especially) batteries."

Listen Now

Subscribe FREE wherever you listen:

David Muhlbaum: Every so often the stock market has a “Wait, what?” moment when things don’t go quite as expected. The most recent instance was wild trading in a relatively obscure stock called GameStop. Senior investing editor Kyle Woodley breaks down what happened and what it means to all of us. Also, General Motors says it’s going electric, basically. So will your next car be electric? That’s all coming up. Stick around.

David Muhlbaum: Welcome to Your Money’s Worth. I’m senior online editor David Mulbown, joined by my co-host, senior editor, Sandy Block. Sandy, how are you doing?

Sandy Block: I’m good. The groundhog saw his shadow and that means we’re going to have six more weeks of winter, but also that 2021 will be better than 2020.

David Muhlbaum: Oh, Punxsutawney Phil, what’s his name, he’s been expanding his forecasting, huh?

Sandy Block: Yeh. Even that ritual has gone virtual. He’s on Instagram now.

David Muhlbaum: Do you remember when Bill de Blasio dropped the groundhog?

Sandy Block: What?

David Muhlbaum: Yeah, the mayor of New York. He dropped the groundhog. This was in 2014. The groundhog died, but not right away. There was a coverup.

Sandy Block: This sounds so New York. It’s sad. And funny.

David Muhlbaum: Yeah. I like groundhogs.

Sandy Block: Well, I do too, with onions and carrots usually. Remember where I’m from, folks.

David Muhlbaum: Yeah, put them in the Instant Pot!

Sandy Block: They’re a little tough; you need to cook them long enough. But okay. So since you’re the car guy around here, I wanted to ask you what you thought about General Motors’ announcement that they’re going to phase out selling gas and diesel vehicles by 2035.

David Muhlbaum: Oh, is that because they’re getting out of the car business? I mean, their market share has been declining for decades. I’m sorry. Dark joke. I mean, part of the reason this announcement got buzz is because General Motors has a lot of history in the American economy, and a significance that goes way beyond its current sales or market cap. You know who sells way more electric cars than they do and, whose stock is worth way more? Name starts with a T.

Sandy Block: Oh, I don’t need the T. It’s Tesla. And they only sell electric cars.

David Muhlbaum: Yeah, exactly. Yeah. In all honesty, Sandy, I don’t like talking about electric cars all that much or writing about them. It’s stressful and it attracts hate mail. As for GM’s announcement, color me cynical. 14 years is a long time. Even in car development cycles. The problem with electric cars, or maybe it’s just the problem with writing about electric cars, is that on one hand, they’re clearly the future. Their carbon footprint is much lighter than internal combustion vehicles. They also accelerate like a startled cat. They are fun. The problem, is they’re the future, they’re not the now. Electric cars, it’s still a tiny percentage of new car sales, like 2%. And the bulk of those are darn expensive Teslas. So when does the future become now? When is an electric car, just a car? That’s one of those things I’m extremely loathe to predict.

Sandy Block: You know, EV haters gonna hate, and I see you’re a little touchy about this, but you did just write an article for Kiplinger’s Personal Finance, about electrics, which you gave a very Kiplinger spin. It’s about saving money with an electric car. And I think that you can, right?

David Muhlbaum: Yeah, you can. I did my best to get past the politics of the things and yeah, you can save money with an electric car and come on, who doesn’t like saving money. Can we agree on that please?

Sandy Block: Everybody likes to save money, David.

David Muhlbaum: Okay. Thank you. So yeah, you can save money with an electric car. The main way is because they have a lower cost per mile to operate, mainly because it takes less energy to get an electric car a given distance than one that’s gas powered, but also because they cost less to maintain. Consumer Reports has some solid numbers on this. The hitch is this: electric cars cost more than their rough gas-car equivalents. So basically you have to find one that’s cheap enough that you can recoup the higher upfront costs with the per mile savings in a reasonable time. This takes calculators and spreadsheets, and it’s not easy with $2 gas.

Sandy Block: Okay, but I’m putting on my tax hat now and reminding you, David, that there is a very generous federal tax credit up to $7,500, dollar for dollar reduction in taxes, if you buy certain models of electric cars, right?

David Muhlbaum: Yeah, that’s true. I mean, $7,500 is big money but it comes as a tax credit. So it comes off your taxes, which is part of what makes it really weird. There’s not a line on the bill of sale that takes that $7,500 off. It comes off later, when you file your taxes ...

Sandy Block: You’ve got to go get it.

David Muhlbaum: It makes it weird. There are many things that make that tax credit weird, even if generous, one is that it’s linked to the manufacturer. So once the manufacturer sells X number of cars, it’s no longer available. And this has the perverse situation that when a manufacturer — and GM and Tesla are actually a couple of the ones who’ve done this — sells a lot of electric cars you don’t get the credit for them anymore. You want to get a credit? You have to go buy something that doesn’t sell.

Sandy Block: Right, like a Porsche

David Muhlbaum: Like a Porsche. Yeah.

Sandy Block: So when we were talking off mic, David, about whether it’s a good idea to lease or buy a used electric car, but you don’t get any tax credit for doing that. So why might that be a good idea?

David Muhlbaum: Well, okay. First of all, with leasing a new electric car. I mean, lease versus buy is one of those eternal debates in car buying. I think with electrics, it almost always makes more sense to lease. And you are correct that you, the individual, don’t get the tax credit if you lease. But the manufacturer or, essentially whatever leasing entity owns the car, they do. But they almost always pass it on to you in a discount or subsidization of the lease payment. So in a way you do, if the credit is available, you do get it upfront and you get it regardless of your own personal tax circumstances, which is another complication that we’re just going to breeze right by here. So that’s one reason to lease is that it makes the tax credit more accessible. Again, if it’s available.

David Muhlbaum: The other reason to lease is that electric car technology is changing quickly and all those issues of, “Oh my God, am I going to put up all this money upfront in a car whose value is very much tied into this battery whose technology I may or may not trust for the long run?" Well, you know what, if you don’t own it and you just lease it for three years, nevermind. However, and this, this discussion is full of howevers, but however, you have to keep in mind that you might not necessarily realize those cost savings of the more expensive electric car over that three-year lease. Again, it takes some spreadsheets to sort this all out.

Sandy Block: And finally, you mentioned used. I actually am in the market for a possible new used car because as we talked about a while ago, my car almost broke down out in the middle of nowhere. Why might I want to buy a used EV?

David Muhlbaum: Used electrics have depreciated massively. This is in part because technology advances quickly on electric cars and newer ones have more range. So again, we still have the question of don’t buy the car unless it’s something you can work with. If you’re in the situation where you need a secondary vehicle—

Sandy Block: Drive around town.

David Muhlbaum: To drive around town, that doesn’t have to go terribly far, that presumably you can recharge at home or at your office in a fairly convenient and low-cost fashion, electric cars can crush it. A used electric car can totally crush it on a per mile operating costs. I mean, just pennies. And like I said, you have to live with certain limitations, but if you can make those work for you, you can pay very little to operate an electric car, much less than a gas equivalent, even a well depreciated used car, which is what we tend to recommend to people.

David Muhlbaum: Coming up next on Your Money’s Worth: GameStop. What was that all about? Kyle Woodley, senior investing edito,r will help us understand.

David Muhlbaum: We’re back with Kyle Woodley, senior investing editor for kiplinger.com, to talk about the GameStop phenomenon that has roiled markets in the past week. You don’t have to be a trader yourself to find this interesting — many people have found it scary, in fact, one of those events that just shakes confidence in the system. Welcome Kyle.

Kyle Woodley: Hello. Hello.

David Muhlbaum: As Kyle knows, because I sometimes edit bits of his content. I missed the early phases of this drama. Last week. I was literally in the desert living in a camper van, largely off the grid. In fact, it was my daughter who piped up once we were finally in range of a cell tower to say, “Dad, there’s something going on with the stock market.” So, yeah, I came back into what has been a wild time for market watchers. I mean, I think Michael Lewis has this next book here, what, with the hedge funds involved and these characters with names I can’t say out loud on a family podcast. It’s got generational drama, all kinds of stuff. And, it’s still unfolding.

David Muhlbaum: But at the same time, Sandy and I, well, we’ve seen a few market crises come and go before. And, and one of my challenges to Kyle has been for him to tell people who follow the buy and hold pick good stocks, Buffett-esque investment guidance that we preach here at Kiplinger asking him, why should we care about the explosion or the implosion or whatever of this smallish possibly failing video game business with a book value in the tens of millions. But before we even get to that, Kyle, please in three sentences, perhaps if other people have been in the desert or not paying attention as closely as you, what the H-E double hockey sticks is going on here?

Kyle Woodley: This is the oversimplified, I’d stress, oversimplified short version: A group of traders, some savvy, some less experienced, belonging to a community on a social app called Reddit, orchestrated a move to squeeze the stock higher. They piled into a few stocks, including GameStop, that’s ticker GME, that a lot of Wall Street was betting would fall. And that triggered a cycle of buying that made the early purchasers massive gains. And it also punished a lot of bearish traders along the way. But this also ended up messing with some market mechanics, and several brokerages even had to go so far as limiting trades on some stocks.

Sandy Block: So speaking of bets, it’s probably a safe bet that there are more of our listeners who don’t own GameStop and may not have ever even seen a GameStop or any of these other so-called meme stocks, at least not directly in the sense of, “I own a hundred shares of GME.” Mutual funds are the name of the game for most people, but a lot of those people are really scared and concerned anyway. I literally got an email from a family member asking me if she should sell out of mutual funds in her 401(k) plan, because of all the hubbub over GameStop.

Kyle Woodley: That’s a pretty easy question to answer, which is to tell them “No, don’t!” But I do understand the concern. There’s a big difference between caring and worrying. Should most investors care? Yes. Should they worry? No. But let’s start out with that pretty big group, people with 401(k)s, like Sandy’s example, and we can lump them together with other long-time long-term investors who mostly own diverse funds and big blue-chip stocks.

David Muhlbaum: The sort of investments that we recommend as the core of most people’s portfolios. You’ve heard it before. You’ll probably hear it here again.

Kyle Woodley: Bingo. Bango. Clearly, if you weren’t invested directly in say GameStop or these other Reddit stocks, you weren’t dealing with like 30%, 40% swings in your portfolio. Very few funds actually owned large positions in these stocks. A couple did. There’s the Wedbush ETFMG Video Game Tech ETF, ticker GAMR. That’s a smaller thematic ETF that held quite a bit in GameStop, but you won’t find all of that in your 401(k) and most retail investors that hold it, they probably have the sense to not put all of their money in it.

Kyle Woodley: But still, the GameStop drama affected just about everyone who’s a stock investor in some way. On January 27th, I think it was the volatility from these meme stocks and to a certain extent, certain institutional investors’ exposure to those stocks, caused a lot of pros to reduce risk. Reducing risk is a fun way of saying, sell all their stocks. And that likely contributed to the draw down we saw that day. Fortunately, this sort of butterfly effect appears to be pretty short lived, but it was there. Also, realize that all the money flowing into the Reddit stocks didn’t come out of thin air. Some of it likely was pulled from other potentially larger momentum plays, which would have weighed on their share prices and thus any indexes that they belong to.

Sandy Block: So, anyone who was just sort of cruising the internet headlines on that particular day and panicked and sold all their 401(k) shares, they wouldn’t have been affected by all this because stock prices were lower during that drama, right? Let me put it another way, when this year is over and we see how the big indices did, is GameStop going to have any impact on those numbers?

Kyle Woodley: You know? I don’t think so. What’s interesting is, at its peak, GameStop was actually larger than about half of the S&P 500’s components, but it’s not in the S&P 500 or the Dow or the NASDAQ, so it’s not contributing to those. And with this whole frenzy dying out, I don’t think it has a meaningful effect on the major indices longer-term either, from a volatility standpoint or anything like that. I should point out that GameStop is in the small-cap Russell 2000 index, and it even became its largest component. At one point how much it ends up moving that index remains to be seen. But if the squeeze continues to just fizzle out, it will likely have a minimal impact on its year-end finish.

David Muhlbaum: Okay. So if the ultimate impact on stocks writ large is probably not much, then who does the game drama affect? I mean, certainly the players. So tell us a little bit about the who of this story.

Kyle Woodley: One thing to keep in mind is that a good chunk of the players involved are relatively new to stock investing. In many cases, they were using newer trading platforms like RobinHood and Public, which have really taken mobile investing to the next step. So there is a generational component to this. A lot of new investors have joined the fold over the past year, whether it was joining in 2020’s big dip, or getting excited over this latest Reddit rush. They’re not all young, but many are.

Sandy Block: So, okay, wait. So, using the phone, I can just sign up and trade stocks on margin whenever I feel like it? What happened to all the qualified investor restrictions and that sort of thing to, you know, save people from themselves?

Kyle Woodley: Well, so enough people can trade enough money including on margin to the point that it matters. Like a lot. That’s how we got here. But I think the biggest element here that sets the past few weeks apart from short squeezes of the past, think Piggly Wiggly, Volkswagen, just Hertz last year, is the social media component. Essentially, people teamed up using Reddit. As I mentioned earlier, the community involved was called Wall Street Bets or WSB. It’s a pretty colorful place.

David Muhlbaum: They use swear words, don’t they?

Kyle Woodley: They do. But I mean, so do some of your favorite baseball players, you know? That said some of their messaging is actually pretty crude and tasteless, but they make four-figure, five-figure option trades, or if you’d like, bets. And there were thousands of them. Multiply that and you start to tack on some dollar figures with a lot of zeros behind them.

David Muhlbaum: Yeah. Enough zeros to, to go up against the hedge funds, the smart money, the man.

Kyle Woodley: Ah, yes. The man. Sticking it to the man. That expression is older than you are, man. But yeah that’s wholly part of the narrative today, but let’s back up real quick and explain the situation a little first and talk about GameStop itself. GameStop, by the way, is a retailer that sells and resells video games. They’re usually found in strip malls.

Sandy Block: Okay. I don’t play video games, I read books, but as I understand it, people download games right now. I mean, this sounds like the last Blockbuster.

Kyle Woodley: What is this book you speak of? What is a book?

Sandy Block: You can download that, too.

Kyle Woodley: So, one of the longer-term theses out there is that they’re doomed and maybe, maybe not, but that was a lot of Wall Street’s thought. And so there were a number of large hedge funds that shorted GameStop shares. That is they borrowed shares from other people and then immediately turned around and sold them on the assumption that later on they’d be able to buy shares for less and replace the ones they borrowed pocketing the profit in between. Whoever loans the shares, they get a fee for their services; they collect interest. And whoever actually makes the trade can make a lot of money this way. Or, they can lose their shirt. Also, that’s a very reductive explanation of short selling, which is a trading process that confuses a lot of people. So I’m going to refer people to a story we put up on kiplinger.com by Dan Burrows that does a good breakdown of what actually went down here. It’s called GameStop: How WSB Beat Hedge Funds at their Own Game. And David, you’re going to throw a link into that, right?

David Muhlbaum: That’s right. You don’t have to memorize what Kyle just said. There’s going to be a link in the show notes and the transcript. You bet. So, back to the little guys and the big guys.

Kyle Woodley: Yep. Actually real quick, let’s clarify something here. The little guys, not necessarily so little. One of the big narratives of all this was that there was this group of average Joes going out and sticking it to the man, as we discussed. That’s easy to get behind. Big money carries all the advantages on Wall Street. Everyone hates that the banks were bailed out in 2008, 2009. And it’s so many of the people responsible for that mess, they didn’t really face any consequences. That resonates with people. No doubt about it, but let’s not pretend that this was just some rogue group of nobody’s just out to ruin Melvin Capital. That was one of the hedge funds that was shorting GameStop. The guy over at WallStreetBets who helped orchestrate all this, who goes as “Roaring Kitty,” as well as another alias that would get bleeped out here is a financial advisor. Some of these people were actually really savvy traders and they knew that they could make serious money triggering this epic short squeeze. There’s nothing wrong with that, but like, let’s call a spade a spade.

David Muhlbaum: That’s interesting. So, I mean, it’s maybe not really a David-Goliath angle. The questions of who the winners or losers are, is interesting. And so who are the good guys and who are the bad guys?

Kyle Woodley: So, okay, the past two weeks or so, they’ve simultaneously been one of my favorite periods of covering the markets and one of the most infuriating, maddening, perplexing. It was fascinating to cover ourselves. I also geeked out reading some of the other great coverage of this saga, people like Dave Nadig, Eric Balchunas, Lily Francus. They did some of the best work I’ve seen just laying everything out on Twitter.

Kyle Woodley: The difficult thing has been watching people loudly weigh in on every aspect in black and white terms, whether that’s misunderstanding some of the market mechanics, conspiracy theories about RobinHood, even who the supposed heroes and villains of this story are. There are too many hot takes on what is a complex, nuanced moment in time. One that sort of set the stage for the next few decades for a whole lot of people. And I’m thinking specifically about the new traders who joined the game recently, maybe this was their first rodeo, a few of them, freshly minted millionaires, well money talks, and probably doesn’t want to hear from us. So if you want to spread the love around, I’ll shoot you my Venmo.

David Muhlbaum: Yeah. I mean, part of the reason for that drama and those hot takes is because the internet’s a player in this and the same sort of fractious discussion that we’ve had politically is playing out here in stock trading as well. But that’s just one thought the other is that I’m guessing that the new millionaires, they’re the exception to the outcomes. I don’t think I’m really going out on a limb there.

Kyle Woodley: Precisely. The two subgroups of the newer traders that we really need to address are those that did OK; maybe some big gains, but with small money, maybe small gains, but they got enough of a taste to get interested. And then, there are the people who didn’t do OK — at all. I’m thrilled for the former group, they whetted their appetite for investing. Now they want to learn more. A few of my friends actually fall in this group. And so I’ve spent the past couple of weeks fielding a bunch of their questions. And not things like, “Hey, will GameStop go to the moon?” But “How do I know if a company is actually a good value? and “What is a diversified portfolio?” and “How do you even make it diversified?”

Kyle Woodley: If you’re in this group, if you’re suddenly hungry to invest and you just want to learn as much as possible, welcome to the club. Seriously, like I’m excited that you’re excited! Learn as much as you can. Kiplinger, whether it’s the mag, the website, our income product, whatever, we can help there. Brokerage education centers, another great place where you can log some serious hours and get some serious knowledge. Doubling your money in a day is not common, all right? This is all really weird. But you can grow your wealth in the stock market over time. So just stick with it, like we’ll help. Let’s go ahead and do this.

Kyle Woodley: The latter group, the ones that didn’t do OK, they were abandoned at sea and this is where the whole WallStreetBets story just goes sour. So you have a bunch of people who saw all their buddies, or even just random people on the internet, getting rich. And not only was the WallStreetBets crowd screaming for these new traders to buy and shoot GameStop to the moon. And for that matter, a big rallying cry of this whole movement was to hodl or H-O-D-L, that’s an acronym. They’re saying "hold on for dear life." But some extraordinarily high-profile venture capitalists, CEOs, other big financial names, they were egging these guys on too

Kyle Woodley: So the new investors, they finally caved and they threw some money at GameStop or AMC Entertainment or whatever. And they did so at the peak. And then they saw a third of their money, half of their money, whatever disappeared, very literally overnight. Those venture capitalists and CEOs, by the way, suddenly real quiet about GameStop. And while WallStreetBets got all this credit for making millionaires, where’s the finger pointing over the nasty side effect of what was, legal though it might’ve been, stock manipulation? Meanwhile, these people that got fleeced, these are people that might never come back. Think about the Depression or the Great Recession when people said, “Screw banks, I’m putting the cash under the mattress.” These are people that might never look at the stock market the same way; might never engage with it again. That could hobble them financially down the road.

Sandy Block: Well, that’s mighty generous of you, Kyle, I imagine there were more than a few people, people who have "diamond hands" in their S&P 500 index funds, and they’re listening to this tale and they think, “Well, them's the risks you take, cowboy. Like, this is speculation, not investing. If you’re going to play the game, you might lose. Suck it up!”

Kyle Woodley: So caveat emptor and all that, right? But that’s knowledge that comes with education or experience. And a lot of these people didn’t have either. I know what they were doing was far more speculation than investing. I get that. But like, I still can’t help feeling bad for them. They got swept up into a frenzy by a lot of people who claimed to know what they were doing. The best thing I can say to those people is eventually, give it another try, but do it “the right way.” That doesn’t mean never taking a moonshot. That doesn’t mean just buying a single index fund and doing nothing else for the next five decades or whatever. But learn. And again, this is what we write about: how to build a diversified portfolio and know that you can actually set aside a little of that portfolio where you can take a couple of exciting bets with money that you can afford to lose.

David Muhlbaum: Yeah. I think, Kyle, that’s a very important balancing point. I mean, on one hand, we do have, and we do advocate and we do discuss a diversified portfolio that has, depending on your age and all the other variables that go into that, the appropriate conservative balance. But part of diversification involves having a chunk that is either more aggressive or even borders on the speculative because frankly, for a lot of people, that’s where the fun is. That’s where you put aside an amount of money that you can afford to lose and hey, maybe you will double it. It has to be within proportion.

David Muhlbaum: And of course, very glad that you mentioned all the wonderful, fine Kiplinger products that we have that provide guidance for that. But I also appreciate that sometimes, we can come off sounding a bit like killjoys. Playing the market is a legitimate thing to do for people who can compartmentalize the amount of money that they can do that with, and, you know, go forth and prosper!

Kyle Woodley: Right? And that’s something that’s going to change over time, too. Your ability to make, or whatever, your ability and willingness to take moonshots is going to look a lot different at 25 than it does at 35, than it does at 45, as various financial needs start popping up as you need to start saving towards things, and as you start to value security over gigantic gains. So that’s something that’s different for every person, but the thing that sort of weaves it all together is that staying engaged, it helps. I mean, it really is a psychological bonus. An index fund is great. It really is the best piece of advice to just get into an index fund and ride it forever. But it’s too boring for a lot of people. It doesn’t engage them.

Kyle Woodley: And I would rather a person become engaged by also holding a couple of exciting stocks that they like, have the index thing as a base, but just have a couple of stocks that they can follow. It keeps them checking in on their IRA or their brokerage account or whatever. And maybe you lose a half percentage point more in a year than you would have, but like, you at least got invested to an extent that you might not have before because you weren’t interested, because it was boring. Ultimately, you end up the winner because you decided to get in the game in the first place. So yeah, index funds? All well and good, but taking a few risks here and there isn’t necessarily bad.

David Muhlbaum: Awesome. Thank you so much, Kyle. This is always fun.

Kyle Woodley: Thank you. Have a great one.

David Muhlbaum: No lighter closing segment for you today, sorry. In fact, I’ve got to do some cleanup on an error we made a few weeks ago, when we had Catherine Siskos, the managing editor of Kiplinger’s retirement report on to talk about the future of Social Security. We gave the impression that the Biden proposal to raise Social Security taxes would lift the Social Security wage cap, which is now about $143,000 to $400,000. That’s not actually how it would work. And a few of you eagle-eared accountants and others wrote in to point that out. Instead, the Biden proposal would not do anything to raise the cap, whose increases follow the inflation metric. Rather, his proposal would reinstate the OASDI tax on income over $400,000. Everything between the current cap and 400,000 would continue to be exempt, everything over $400,000 — and remember, this is wage income — would be exposed to the tax.

David Muhlbaum: And that will just about do it for this episode of Your Money’s Worth. If you liked what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and a review. If you’ve already subscribed, thanks. And please add a rating review if you haven’t already. To see the links that we’ve mentioned on our show, along with more great Kiplinger content on all the topics we’ve discussed, go to kiplinger.com/podcast. The episodes, transcripts and links are all in there by date. If you’re still here because we’ve got something wrong and I really hope we didn’t, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

Did the market gyrations of late January rattle your faith in the market, or did you shrug at another "short squeeze?” Senior investing editor Kyle Woodley provides his insights on the drama over Gamestop. Also, how the ultimate penny-pincher car might be a used electric.

Keywords: Gamestop, short squeeze, shorting stocks, Robinhood trading, electric cars, save money with an electric car.

David Muhlbaum: That will just about do it for this episode of Your Money’s Worth. If you like what you heard, please sign up for more at Apple Podcasts or wherever you get your content. When you do, please give us a rating and review. If you’ve already subscribed, thank you. Please add a rating or review if you haven’t already. I keep harping on that because those ratings and reviews are a key metric that help other people learn about the podcast, virtuous cycle, all that. To see the links we’ve mentioned on our show, along with more great Kiplinger content on the topics we’ve discussed, go to kiplinger.com/podcast. The episodes, transcripts, and links are all in there by date. If you’re still here because you want we got something wrong — and I really hope we didn’t — you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at podcast@kiplinger.com. Thanks for listening.

Subscribe FREE wherever you listen:

Links and resources mentioned in this episode:

• Save Money with an Electric Car
• Consumer Reports: EVs Offer Big Savings Over Traditional Gas-Powered Cars
• How WSB Beat Hedge Funds at Their Own Game