Transcription
So, Tom Lee just released his five stocks to buy right now to become a millionaire. These five stocks are going to be listed in this video, as well as the five categories, five types of stocks to invest in 2025.
All of this includes his comments about what just happened with the tech stocks and the deep stick stink, whatever the hell it's called. I've lost track of the amount of news we have to cover on this channel, but at this point, it's just part of the game, folks. The finance world is a roller coaster; get on it.
Tom Lee's coming out, but as always in my videos, I don't hold you hostage. So, first of all, you're going to get the Tom Lee clip right away and then my analysis.
After that, I always respect your time, so don't click nothing, don't smash nothing, don't buy nothing. Let's listen to Tom Lee, and then I'm going to break apart everything he said. I'm going to tell you what my strategy is going forward.
Let's watch the clip first.
"This is the nature of technology. I'd be personally surprised if Nvidia became Betamax in the past week. I mean, that really would be the kind of change that would be required to really justify selling Nvidia here. Given, I think, the need for AI because of global labor shortage and Nvidia chip dominance is still strong, unless a new model emerges that doesn't require GPUs entirely.
I'd say that markets just generally do buy a ready aim. If Nvidia was at 100 PE, I'd probably say that there's too much good news priced in. But, you know, the PE is around 30 times. I'm not sure that that's very demanding for investors. If you look a couple years out, it's in the 20s.
I don't think Nvidia is priced for perfection; is the market itself? I don't think so. I mean, the 10-year now is backing off to 45, so you're still paying over 20 times for a 10-year bond. The median PE in the S&P is around 18 times.
I've been researching companies since the early '90s, so over 34 years. I never found a PE for a high-quality company to be at 22 times, let's say for MAG 7, to be a demanding multiple. Again, I think if you're talking about price for perfection, it really has to be stocks where you have to back into the NPV of 100% earnings growth forever.
Well, today market breadth is actually pretty good. Financials, healthcare, staples, they're green. Dow's up almost 200. That's right, even in NASDAQ we have stocks that are up. Yeah, Apple, Uber, Meta.
And I think year-to-date, we have three weeks, and year-to-date, Bitcoin's outperforming small caps, outperforming financials. So, I think the market does look pretty healthy.
I would say it's also very encouraging that if we can close on the S&P above 5881 by the end of this week, it really solidifies that 2025 is going to be probably a double-digit gain year.
I think financials, to me, represent a pretty good fundamental case of change this year because we have a new administration, a Fed that is dovish, yields that aren't painful for banks, and at a time when it could lead to upside for capital markets activity, and multiples are low.
So, I think financials remain our number one S&P sector idea. I mean, because I ask you, 'cause your narrative is so levered, so to speak, to big cap tech. Your top five ideas in the market are Nvidia, Amazon, Meta, Google, and JP Morgan.
Yeah, now you're not rethinking any of that? No, at the moment, no. And even though this one day is painful, I do think markets tend to overreact. And again, unless we're on the cusp of a recession, this pullback in Nvidia is going to prove to be a buying opportunity as well.
Any Fed risk this week at all? Can they? What do you have any worries about what they could say? They're not going to do anything, we don't think, but you know, they always say a lot.
Yeah, there's a lot of uncertainty going into January FOMC because last month it really caused markets to rethink the probability of a hike for 2025. Now, the probability of a hike for 2025 now stands at 27%. I think that's an extraordinarily high probability. I think there's a chance the Fed sounds more dovish than the market expects.
Tom, we'll talk to you soon. It's good to see you as always, especially here at Post-N. It's Tom Lee."
So, as you just heard, Tom Lee is talking about the fact that the market tends to be a little bit overreactive in the short term. It's not a huge secret. I often use this story about the market in the short term being more like a toddler after a sugar rush has expired, and the long-term stock market is more like a seasoned accountant in his 50s.
You see that with a stock like Palantir. You see that with lots of stocks. Short-term volatility really means nothing.
Now, the reason for what happened, I think he gives a valid reason. He basically says, "Look folks, the markets don't love risk. The markets don't love uncertainty."
Because a new LLM was introduced and really insane claims were made about that large language model, AI essentially, the fact that it will not need Nvidia chips and that it is essentially just as good as anything else in the market.
These are outlandish claims that nobody has verified, but because the claims were made, extra risk was introduced to the stock market, and that's why everybody sold off. The market, being the overreactive market that it is in 2025, really took it all the way to the next level.
He also says the same thing that Dan Ives said yesterday, that this is an overreaction. In fact, this is a huge buying opportunity, and I couldn't agree more.
Now, we'll talk about my opinion in a second. I just want to cover what Tom Lee said here first. He talks about the fact that Nvidia didn't become Betamax overnight because of this deep stink thing or whatever it's called.
Look, I tend to agree. Nvidia didn't become obsolete yesterday; nothing has changed. God knows what's going on with a dip stink, how many AI processors it requires, how many Nvidia chips it had. Nobody really knows anything about it except a PR statement.
The fact of the matter is Nvidia is still a staple of the AI revolution. Nothing has changed. The market overreacts, first things later. Not for the first time, don't be a part of the herd; that's what Tom Lee is saying.
Now, he also says, "Look folks, Nvidia at 35 forward PE is not priced in for perfection." If it had 100 PE, we would be talking about the fact Nvidia is priced for perfection. Everybody expects Nvidia to do 100% revenue growth every year for the next five years, but it's not the case.
Look at the forward PE of Nvidia; it's a 35. It's hardly priced for perfection at that price level, especially with the fact that the rest of the market is also not in the state of frothiness. Not to the level that people think it is, with the median PE on the S&P 500 of 18.
The market isn't crazy frothy; it's not crazy expensive, and definitely not Nvidia. Nothing is crazy priced right now. So yes, we had that little drop, but you know, the markets look healthy overall. That's what Tom is saying, and he's not even concerned in the slightest.
He also said in this video that he foresees a double-digit year in 2025, which I think is a little bit higher than the initial estimate he had, but I think it has to do with the strong opening we had in January before, you know, the Fed hit the fan, so to speak, yesterday.
Now, he also says that the setup right now is beautiful. We have a dovish Fed. Essentially, the Federal Reserve is in the beginning stages of an accommodating monetary policy, which is just, you know, political mumbo jumbo for essentially saying that there's going to be more money in the market.
It's going to be cheaper money, and everybody's going to have access to cheaper capital for longer amounts of time, which means businesses are going to flourish. That means people will have more available income, and basically, the cycle is the positive cycle in the stock market.
Now, I don't disagree with this, but he also adds another point, which is we just replaced a previous administration with this one, which is way more business-friendly. It's way more mergers and acquisitions-friendly, and it's way less regulatory constraint.
Essentially, it's not going to impose the same constraints and limitations on the business, on the economy, like we had in the previous administration. Lina Khan and the FTC—sorry, I had something in my throat.
So essentially, he's not going to be in the same state of, "Oh, we have to be brutal with this market." And that, along with the friendliness of the Federal Reserve, the monetary policy, and the accommodating, so to speak, theme in the White House, let’s call it this way, the market looks in a really good setup.
Now, he did name the five top stocks to invest in, the five top stocks right now, his top five ideas, and those are, by no particular order: Nvidia, Amazon, Meta, Google, and JP Morgan.
He also named the five industries, the five categories to invest in right now, and those are Bitcoin, small caps, financials, industrials, and tech.
Now, you can take your pick; you can analyze. But I want to focus here a little bit on Nvidia because, in my mind, Nvidia went through this idiocracy moment yesterday.
Now, we are right now on the fear and greed index in fear, which is a good thing. Whenever we hit fear, I told you on January 13th, fear and max fear, this is the perfect time to buy. So, we're in fear; that means it's time to go shopping, just as a general observation.
Now, Nvidia is currently also in a very special position. Based on our system in our academy, we buy stocks on a regular basis. It's called dollar-cost averaging. We spend the same amount every month to buy the same stock.
But when a stock we like remains strong as far as the thesis, we still like the stock just as much, maybe even more, but the price drops 20% below the highest point the stock was for the past 52 weeks, basically for the past year.
In that scenario, we're going to double down as long as the stock remains 20% below the 52-week high, which is exactly what happened yesterday with Nvidia. Nvidia yesterday dropped by 18%. That is insane, insane, complete idiocracy.
I'll talk about that in a second, but that moment triggered Nvidia below $120, which is the double-down territory for people who love Nvidia in my academy because that's 20% below the 52-week high.
As long as Nvidia stays in that region, it's a double-down opportunity, and that's what my academy is doing. We talked about this yesterday during our academy lesson, and I'll actually also share with you some things we said in that academy lesson.
We said, "Look folks, if you look at Nvidia right now," and we use the idiocracy analogy many, many times over the course of the call yesterday, "yes, it is idiotic, it is moronic."
But I just want to educate the audience that doesn't really understand why Nvidia dropping yesterday was such a, you know, silly thing to have happened, and it's going to correct itself back.
Look at the world of AI, and it's, you know, in the terms that we're going to understand better. Let's look at it as oil.
So, if data is crude oil that needs to be extracted and processed and whatnot, so if data is crude oil, then the chips Nvidia manufactures and the data centers that they're built upon, these centers are the refineries where we refine that oil and create, you know, gasoline.
So, we take the data, which is the crude, we put it through the refinery, which is the semiconductors, the chips of Nvidia, the data centers, and gasoline comes out.
Now, gasoline in this example is the large language models, the AI, the LLM. Now, these large language models have started off as extremely expensive, and now, based on what Dip Stink is saying, or Dips, whatever they're called, based on what they're saying, it's going to be a lot cheaper.
Now, if I take their claim at face value and I don't put any sort of due diligence on the claims they've made, which I think people should, and I think it's an important question of, "Let's see some proof that you only spent 5.5 million," and "Let's see some proof that you haven't used Nvidia."
But assuming that what they're saying is 100% true, if the gasoline just became cheaper, are you going to short refineries? Have you lost your mind? Have you gone bananas?
I'm not even talking about the fact that Nvidia is at 35 forward PE, at 200 rule of 40, at 62% operating margin, at four times more cash than debt. I'm not even talking about the fundamentals of Nvidia, which are the best in the market—not even there yet.
Are you shorting the refineries if gasoline just became cheaper? Think about the long-term effects of what just happened here.
I want to kind of point out the obvious here. Back in 1865, which is where Warren Buffett was probably in his late 50s, back in 1865, we saw James Watt come out with a new steam engine that literally required 75% less coal to operate.
That was a revolution. All of a sudden, engines worked on one quarter of the amount of coal they needed before that. That's a revolutionary change.
Now, what happened to the price of coal, folks? That's the Jvin Paradox. When the technology becomes more efficient, the resources in question become more expensive because the demand goes up.
Everybody wanted that engine that worked on 25% of the coal, so demand went up. Demand for coal overall went up because it became popular.
If LLMs, gasoline, becomes a hell of a lot cheaper and everybody wants an LLM, everybody wants AI, and now they can afford it at scale, what will happen to the guys who processed this from crude oil to gasoline? Their demand is going to go through the roof.
By the way, not to mention the fact that this analogy, the people who actually build the engines and the only ones who have the maps and the GPS locators are Palantir. Palantir is the engine and the GPS service, and their monopoly.
But nevertheless, Palantir dropped yesterday 4.5% or 5%, whatever that was, was just as moronic as Nvidia dropping. But for Palantir, that's a whole different video. I don't want to, you know, beat the Palantir drum again; I've done it hundreds of times. I think my position is obvious.
But with Nvidia, the refineries in this example are going to go through the roof. So for me, when I was seeing Nvidia dropping 18% yesterday on these news, I was like, "People don't understand what they're doing. They don't understand the long-term effects of what just happened."
Now, of course, assuming that is true, because if it isn't true, Nvidia is still a great company. If it is true, Nvidia is even a better company, and yet it dropped 18%. Just absolutely paradoxical.
Now, I also want to share something with you in our lecture yesterday, academy lecture on patreon.com. We talked about the nine stocks which will benefit from this AI revolution. Deep Seek started something new; maybe they're legit, maybe they're not legit. I don't know.
But we have a commoditization of LLMs, and that commoditization essentially is going to lead to a whole new world in which AI becomes much more prevalent.
So, we spoke about nine stocks that are going to benefit hugely from this new trend over the course of the next 5 to 10 years, and that list is going to be available on our Discord server for our academy members.
If you would like to join the academy, this is probably your last chance because we just crossed 10,000 members, and we're locking it up on February 1st for an indefinite amount of time. It's just too many people right now, so we're going to close it in about, you know, 48 hours, something like that.
So, that's the last chance to join Patreon. If you join, go check out that list of nine stocks. It's in our latest lecture on Discord, and I would love to see you there.
Thank you so much. I'll see you next one. Peace.