Colin’s Note: My expertise lies in opportunities in tech and artificial intelligence… And I believe those sectors are going to help a lot of people build their wealth over the next couple years…
But one question I get all the time is about what other sectors and stocks I recommend… where else should folks look to add a little diversification?
So, in today’s video, I’m going to share some of the other sectors I think are worth investing in… Plus a few of my favorite ways to play them.
It’s all in today’s video. Just click below to watch… Or read on for the transcript.
What’s going on everybody? Hopefully, you guys are doing well. Today, I’ll be answering a question I get asked quite often. I’ll also be sharing five stock recommendations with price targets… So you might want to grab a pen and some paper out to jot those down.
Folks ask me constantly here on the channel, “Hey, Colin, you talk a lot about artificial intelligence and technology… I certainly appreciate it, but what are some other sectors and stocks that you like?”
Before I get into the answer, I want to remind you of something I talked about in a video I sent out last week. In it, I talked about how in the stock market – and life in general – there are specialists.
If you need guitar lessons, you’re probably not going to seek an expert trumpet player. If you need a haircut, you’re likely going to see a specialist for it. Heaven forbid it, but if you have a medical situation, you’re certainly going to find a specialist to help you. You need your clothes cleaned, you’re going to find a dry cleaner.
It’s the same thing in the stock market. If you want tech stock advice, you should find a tech expert. If you want insight into bonds, energy, or Bitcoin, you should find an expert in each of those sectors.
A huge red flag in the financial services world is somebody who claims to be an expert in everything.
They claim to be a healthcare expert, but they’re also experts in consumer discretionary and consumer staples. And, oh yeah, they know everything about the bond and crypto markets. Oh, and equities, of course. Not only here in the U.S., but worldwide.
It’s a huge red flag, and I would run as fast as you possibly can from that person’s advice.
But people who find a specialized lane – like I have in technology, artificial intelligence, large mega-cap software stocks – tend to devote most of their time and life to just that sector and that stock. And they tend to have opinions I’m more likely to trust.
But today, given that background, there are other sectors and other stocks that I do invest in.
The first one, if you want some diversification outside of technology, is healthcare. Healthcare is one of the largest segments of our economy. As we have an aging population, it’s a sector that will see more and more attention – and money – flow into it.
Also, I imagine the mega-cap technology stocks will eventually realize that’s the sector they can expand into. You saw mergers and acquisitions as it relates to Amazon in the healthcare field last year. I think that’s something that goes forward as these companies, at least from a regulatory perspective, are not allowed to make acquisitions inside of their core competency.
So you spend years trying to find that undercover biotech stock… And then it does get bought out for a nice premium, but that’s all your upside. You don’t get those multi-thousand-percent gains that you sometimes see in the tech sector because one of the big guys comes in and buys it.
Now, if you want to go a little more speculative in the healthcare sector, there’s biotech.
Many of you know I don’t touch the biotech sector with a 10-foot pole. Technically – and more often than not in the biotech sector – your upside potential lies in Eli Lilly, Johnson & Johnson, Merck, or Pfizer buying the company.
So you spend years trying to find that undercover biotech stock… And then it does get bought out for a nice premium, but that’s your upside. You don’t get those multi-thousand-percent gains that you sometimes see in the tech sector because one of the big guys comes in and buys it.
But if you do want to play in that sector, I think an ETF is appropriate for that as well. I tend to focus on the iShares Biotechnology ETF (IBB). You can probably purchase shares of the IBB as we speak.
Next, there’s also the financial sector. It’s something I’ve covered often here on the channel. We don’t only focus on the big guys – the mega banks, Wells Fargo, JPMorgan, Bank of Americas, and the like… But we also cover your fintech sector – think PayPal, SoFi, Square, LendingClub even… the smaller fintech companies and those that have gone public over the past couple of years.
I tend to stick with the big guy in this case… And that big guy is JPMorgan (JPM). Now, JPMorgan has done something savvy that a lot of the other megabanks haven’t over the past couple of years. They didn’t load up on low-interest-rate treasuries and mortgage-backed securities.
If you look at Bank of America, they’re sitting on massive unrealized losses on their balance sheet. It means that they bought things like mortgage-backed securities and treasuries at a low interest rate.
But when interest rates go up, the price of the bonds goes down. It’s an inverse relationship. So, as interest rates have gone up, those bonds and that paper have disintegrated. And so, Bank of America and a lot of large banks have to recognize that on their balance sheet as an unrealized loss.
JPMorgan didn’t do that. They didn’t load up on that really low paper. And it’s put them in a great position. They’ve got solid leadership in Jamie Dimon, and I think you can buy shares of JPM for $150 or less. I’d wait for a pullback on that.
Now, on the consumer side, I think there is a clear winner. Obviously, as most of you know, I love Amazon. You can throw Walmart in there too. Those two companies are staples of American retail.
But there’s actually a third staple of American retail, and that is Costco (COST).
Shares of the wholesaler have skyrocketed. If you look at a chart of Costco, it’s pretty much straight up in the air. So you’re going to have to wait for pullbacks. I’d say wait for less than $650 on Costco.
But the way they lay the stores out, the way they treat their employees, the way they run their company, the $1.50 hotdog, the $5 rotisserie chicken… A lot of things going well and going right for Costco. I don’t see their business model being disrupted more or less anytime soon.
Now, the last two stocks also come in a pair. They also focus on the consumer side, but they specialize in real estate and construction materials. You probably can know the companies off the top of your head. It’s almost a duopoly, if you will.
There’s Ace Hardware, sure. There are some other smaller regional hardware stores. But the two big guys are Lowe’s (LOW) and Home Depot (HD).
I’ve sold on Amazon… Actually, I continue to sell casually on Amazon. I sold on eBay as early as 1999. I think my first time in online retail, I bought and sold something on eBay. So I’ve been buying and selling stuff online for a long time. And for the most part, anything that you can sell in a retail store, you can also sell on Amazon. You can also sell at retail.
Home Depot and Lowe’s are different. Yes, a lot of their SKUs, a lot of the stuff they sell in the store can be – and is – sold on Amazon, but there’s a lot that isn’t.
You can’t necessarily buy a two-by-four on Amazon. Or live plants. Sometimes you want specific screws and bolts and those types of things, and typically they’re better had and better found at a specialty store.
And I think Lowe’s and Home Depot, their business models will be durable going forward. But Lowe’s, you can probably buy right now. I’d wait for pullbacks in Home Depot south of $320.
Folks, don’t take this video as me bailing on the AI and the tech sector. In fact, I think our track record over the past couple of months recommending technology stocks is stellar.
We’re also heading into a week where all the major technology stocks from Microsoft to Google, to Apple, to Amazon, Meta, AMD, they’re all reporting earnings this week. And I think, for the most part, it’ll reinforce that tech is and AI are the sectors where you’ll be able to easily grow your wealth over the next couple of years.
Hopefully, you guys have a wonderful day out there. My name’s Colin Tedards. I’ll see you again later this week with more from The Bleeding Edge. Good luck with your investments.
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