Tech Stocks Finally Breathe A Little Bit

[CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Tech Stocks Finally Breathe A Little Bit The monster rally by tech stocks is showing signs of cooling down, as China’s ban of using iPhone in sensitive departments dragged down Apple’s shares in the last two days. Keith Lerner of Truist Advisory Services expects the market to be choppy over the next few weeks. The Fed will not meet until late September, so catalysts are likely to be incoming economic data until the next earnings season. - “We expect market choppiness to persist near term,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. - “September, like August, has tended to be a more challenging month, and there remains a dearth of obvious near-term upside catalysts as stocks continue to digest the big year-to-date gains.” Keith Lerner, co-chief investment officer at Truist Advisory Services (Photo: CNBC) Could this be the beginning of a bear market, or a simple pullback from the Nasdaq 100’s nearly 40% run-up? Some metrics show that the valuation is getting inflated in tech stocks, so a correction may be necessary to breathe a little bit. Bank of America’s data showed that active managers are turning defensive by loading up on utilities stocks versus historical averages. Two Fed Reserve officials’ takes: Fed Bank of New York President John Williams said yesterday that the current rate policy is “in a good place,” but officials will need to remain data-dependent from now on to decide on the next moves. - “We’ll have to keep watching the data carefully analyzing all of that and really asking ourselves the question: is this sufficiently restrictive,” he said. - “Do we need to maybe raise rates again to make sure that we’re keeping that steady progress in terms of shrinking imbalances in the labor market and bring inflation back down?” Fed Bank of New York President John Williams (Photo: Al Drago / Bloomberg) Chicago Fed President Austan Goolsbee also spoke yesterday, hinting that the Fed is close to ending its rate-hiking cycle. The conversation would shift to how long they should keep rates unchanged before cutting again. - “We are very rapidly approaching the time when our argument is not going to be about how high should the rates go,” said Goolsbee. - Instead, “it’s going to be an argument of how long do we need to keep the rates at this position before we’re sure that we’re on the path back to the target.”  Boring Makes Money, Right? The #1 Boring Stock To Own Right Now Today’s Stock Pick: Comfort Systems USA, Inc. ([FIX]() Comfort Systems is a sneaky business. The reason is simple. Its industry will not make your heart pound faster. It is a national mechanical, electric, and plumbing installation company. A boring business, right? But boy, you should see its shareholder’s equity growth. Not enough investors pay attention to this metric. As a friendly reminder, shareholder’s equity is what you have after subtracting assets by liabilities. In short, it’s net worth. It is an intrinsic value in the business, and it often offers a “floor” to the stock’s price. Now, Comfort Systems grew its shareholder’s equity from $306 million (2009) to $1.11 billion (2nd Q of 2023) in more than a decade. (Source: MacroTrends) How did they grow so well? One word: acquisitions. Building installations require a local presence, and it means vans, offices, and local staff. Naturally, the industry is fragmented. What does it mean? Plenty of opportunities to acquire companies and grow their earnings. Backlog: The future earnings look secured with its big backlog. Right now, it has about $4.1 billion of backlog that hasn’t been recorded as revenue yet. That’s about equal to 2022’s total revenue of $4.1 billion: (Source: Comfort Systems) Disciplined capital allocation: Believe it or not, Comfort Systems achieved positive free cash flow for 24 consecutive years. And it increased dividends for 11 straight years. But like we talked, its true power came in acquisitions. Comfort spent 75% of its free cash flow on acquiring companies and 15% on buying back shares. (Source: Comfort Systems) Plenty of room ahead: Comfort mastered the art of bolt-on acquisitions, but is there room for some more? Certainly! It has a strong presence on the east coast, but there are plenty of rooms on the west coast. In fact, Comfort hasn’t entered California yet which is the biggest economy in the country. (Source: Comfort Systems) Bottom line: Comfort Systems is a boring business, and its strategy is nothing exciting. They grow through same-store sales and disciplined bolt-on acquisitions. Good enough, its stock price grew more than 3x faster than S&P 500 in the last five years. Boring but it works! Grab this stock now and reap the rewards for 10 years or longer.   [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS](     © All Rights Reserved, Trade Alliance If you no longer want to receive these messages, you may [click here]( to unsubscribe.