Wall Street Unplugged
Episode: 1000January 31, 2023

2 stocks that should be in everyone’s portfolio

Congratulations to my beloved Eagles on winning the NFC Championship. On Thursday, I’ll do a deep dive into their Super Bowl matchup… along with some predictions for anyone looking to bet on the big game. 

Turning to markets, ExxonMobil (XOM) reported a record $56 billion in profits—which works out to around $7 million per hour. I put these incredible numbers in perspective… and explain why the Permian Basin is key to our nation’s energy independence.

McDonald’s (MCD) also reported incredible earnings. I share one stat that proves the company is in a league of its own… and why today’s pullback is a buying opportunity.

Tomorrow, the Fed will hike interest rates again. I’ve been pounding the table on why the Fed’s actions will soon trigger a big decline in the stock market. To help you make a fortune when that happens, I’m offering Moneyflow Trader for an incredible discount right now.

Inside this episode – Sponsored by Masterworks:

Wall Street Unplugged | 1000

2 stocks that should be in everyone’s portfolio

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on Main Street.

Frank Curzio: How’s it going out there? It’s January 31st. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break the headlines and tell you what’s really moving these markets.

Frank Curzio: You know, I was going to start with this, but congratulations to the Philadelphia Eagles. Going to the Super Bowl again. I kind of thought the game would be more entertaining. I felt bad they knocked out Purdy right away. Although, I did think they had a very, very good shot of winning this game. They just matched up well because they could put pressure on the rookie quarterback, they were going a little deep, which Hurts did miss a long pass to AJ Brown. Should have been a touchdown. And he also overthrew DeVonta Smith, which he did drop that pass. It hit the ground, but was ruled complete, I’ll take it. That’s cool.

Frank Curzio: You throw in the cross-country traveling, which never bodes well for any team in the playoffs, especially if you’re traveling from one end of the country to the other end of the country in a different environment, different temperature than you used to. You look at the stats, it’s usually not a good thing for that team that’s traveling. But our offense still scored 31 points against one of the best defenses in the league, ranked the best defense in the league with Hurts not throwing the ball well.

Frank Curzio: But looking forward to the Super Bowl in two weeks. No, I will not be attending because it’s my daughter’s birthday. It got pushed back a week because they added another week to the schedule of games. So, I’m not going to be going, but I did go to the 2008 Super Bowl, which they won. I also went in-person to the NCAA Championship to watch my favorite team in the world, Kansas Jayhawks, win. So, if the Eagles lose the Super Bowl, I promise you, I’m going to be attending every one they make into the future. So hopefully, it doesn’t happen. We’ll see.

Frank Curzio: But if you’re a long-term listener, I have a whole segment on the Super Bowl. I do it right before the Super Bowl, just about the week before the game, and I break down all the positive, negatives, match-ups, coaching, everything. I’ve been in fantasy football long enough to where I had Barry Sanders on my team, where you had a look at the newspapers to see the box scores where they didn’t have internet back then. I love football. It’s one of my favorite sports in the world, next to basketball. And I’ll break it down, and it’ll sound really cool and go over statistics, everything.

Frank Curzio: However, my record for picking the winner in the Super Bowl’s like 10% over the past 12, 13 years. So, I always make a joke, listen, just sell your house. I’m going to provide the perfect example of why this team should win based on all these stats, but just do the opposite and you’ll win almost every time. Seriously, almost every time.

Frank Curzio: So, it’s this big joke, if you’re new to listening to Wall Street Unplugged, which we continue to get new listeners, and thank you so much because this is, by the way, my 1,000th episode for Wall Street Unplugged. Thank you so much.

Frank Curzio: I didn’t think I would be able to do this 1,000 times, but to be honest with you, it’s more like 3,000. That’s just Wall Street Unplugged. When I used to do The Real Story at TheStreet, I used to do podcasts every single day for a while. But since we’ve been tracking this particular podcast for… I think it’s like seven years, eight years now, 1,000 episodes. I can’t do that without you. Thank you so much. I really appreciate all the listeners out there in 100 countries and been downloaded tens of millions of times, and I appreciate it. Thank you so much. It really means a lot.

Frank Curzio: I still can’t believe you guys actually listen to this thing. I just come here and try to, I don’t know, I just try to give you facts, figures, things that you’re not hearing any place else. We are independent, so we don’t get paid by anybody. We don’t have an agenda, a political agenda, or we don’t have to say things because we work for a specific company. I work for myself, and we just tell it how it is. And surprisingly, that’s been really, really good since the day I took it over from Jim Cramer and Aaron Task back in TheStreet.com days, 2007, ’08, ’09, around there, sometime in there. Holy cow, it was a long time ago.

Frank Curzio: But I just went on there and I just started. I really didn’t want to do it. I just started saying, “Listen, you don’t have to pay attention to this. This is bullshit. Listen to this, listen to this.” They wanted me to basically get on there. They had all the research analysts say, “Hey, we need someone to take over for Aaron Task and Cramer,” and I just decided I didn’t want to do it and they kind of forced me, and I did it, and I just told the truth, and they said, “You got a ton of people, a ton of positive feedback.” And I said, “Really? People actually like this?” This is me.”

Frank Curzio: So, if I could be me and do this podcast and you’re not acting, you’re not pretending, and I didn’t know it would take off the way it does. And we’ve been doing a podcast almost longer than anyone that you know, other than Andrew. I think he’s been doing it just a couple weeks longer than me, Andrew Horowitz with his podcast. But everyone has a podcast today. Everybody does. And they have a podcast. They come to me and ask, “How do you do it? How did you generate so much money over the years through this podcast and monetize and everything?”

Frank Curzio: And I tell them the whole formula, and 99% of the time they don’t do it because they don’t… They think it’s easy. They think they’re just going to go on there and talk about it. They don’t understand the research that goes behind it. They don’t understand how you need to prepare for every single interview, knowing everything about these people before you interview them. I take that very, very seriously, and I hate when people interview me or they ask me, “Oh, what products do you have?” when you can find all that shit for free. Just take five minutes to learn.

Frank Curzio: If you’re going to ask me to go in your platform, just take five minutes to learn about me. I always find that disrespectful. Even people when I call, I want to know how many subscriptions they have. I never really want to talk to people just going in blind and bullshitting them. They deserve more, especially my clients, especially people that I’m interviewing that are coming onto this platform. But it takes a lot of work, a lot of research. You see me throw out numbers. Some guy highlighted a mistake when I was talking about Comcast the other day and Paramount’s not part of… It’s Peacock, so I made that mistake. You’re going to see me because I talk about lots of numbers, lots of figures all the time, even with Daniel on Wednesdays.

Frank Curzio: But I love this. I love doing this. I love helping people. I truly do. And I just want to say thank you. Really, seriously. 1,000 episodes. Here’s to the next 1,000.

Frank Curzio: But getting back to the Super Bowl, and I know you guys know, long-term listeners, that I do this every year. I’m going to be breaking down this game on Thursday. It should be pretty cool. I mean, it should be a great game. Mahomes is the best quarterback in the world. I know he’s injured. Let’s see how he plays. He still could throw from the pocket, but the Eagles match up very well to them. They have a good defense. Their offense is very, very good.

Frank Curzio: You saw, I don’t know how the Chiefs won that game, but they pulled it through. I didn’t think they were going to win it. You could blame whatever and hits and calls and stuff like that, but look, since he had the ball several times to win that game and they just didn’t do it. They just didn’t get it done. And I was very surprised at that because usually Burrow does get it done, especially against the Chiefs.

Frank Curzio: But the Chief’s defense was really, really good. They got to the quarterback because you saw those three people who were injured on the offensive line for Cincinnati. Much different when it’s not snowing out because they got to the quarterback. But we have great lines on both sides of the ball. It should be a really, really good game. I like the matchup for us. But still, you’re going against Mahomes, you’re going against Kelce and the Kelce brothers. That’s awesome. They’re playing against each other.

Frank Curzio: But I’ll break down this game in detail and give you the winner and just do the opposite. The winner with the spread, of course. So, I think the Eagles right now, if they’re up about two and a half, some it’s three, it opened up at one. But we’ll see where that goes over the next week, week and a half. That’s going to be dependent on how healthy Mahomes is because he definitely wasn’t healthy. He definitely was limping around a lot, and I don’t think it was… Yeah, I don’t think his ankle’s going to be 100% when they do play. So, it should be interesting.

Frank Curzio: Anyway, let’s get to earnings real quick. And I want to start with a pretty small company of reported earnings. Their name is Exxon, which I love the management team on Exxon because unlike Chevron, who reported what? Last week, they reported $35 billion in profits. In profits. We’re not talking about revenue. Profits. But Chevron announced, even I think a couple days before, the week before, they announced a $75 billion buyback, which is 20% of its company’s market cap, and raised its dividend, which the politicians, they went crazy. They didn’t know what to do. “Oh my god, this is crazy!”

Frank Curzio: Ironically, even though they’re responsible for these insane profits, but they criticized the oil giant, all of them, how it’s making profits by destroying planet earth, and they want to tax the hell of these companies even more than they’re already being taxed, much, much more, and all this. But it’s just so funny how these policies, which have led to this, the ESG policies and things like that.

Frank Curzio: But unlike what Chevron did, which kind of threw it in the politician’s face, Exxon didn’t announce a huge buyback even though the oil giant generated, I can’t believe I’m going to say this number, $56 billion in profit for 2022. $56 billion in profit. Let’s put that in perspective. Only 20% of the companies in S&P 500, a 138, have a higher market cap than $55 billion. A market cap. The market cap of $55 billion. These guys produce profits of $56 billion for the year.

Frank Curzio: If you look at the market cap of the entire US solar industry, in terms of pure plays, it doesn’t include the companies that have solar operations like utility companies or EV companies like Tesla that have it buried within their organization, but just to show you how big this is, so if you take the solar industry, US and the market caps comes to around $60 billion. These guys generate $55 billion in profits. Do you see how big Exxon is?

Frank Curzio: I mean, even better. If they have $56 billion in profit, it equals $6.3 million an hour. That’s how much money that they generated. And this not only set a record for Exxon in terms of profits, but a historic high for the Western oil industry forever and ever and ever, which is incredible. That’s the number that they posted.

Frank Curzio: ExxonMobil from the call, they did say the White House needs to get its facts straight because they’re attacking them because the company generated more profits than anyone because they invested more than anyone. They invested a ton of money, which is good, which is jobs. That’s what you want. They also have price determined by supply and demand. The more work governments do to limit supply, the worse a situation will be. Factual. And that’s what our politicians are doing.

Frank Curzio: Management also said Permian production hit a record. And you say, “Okay, well, that’s normal.” Let me tell you something about the history with Exxon. Exxon really missed. You can’t say they missed now because they have record production there, but the whole shale revolution, they were very late to the party. They didn’t see it coming. They didn’t want to invest in this. Early on, very early on, 2010, ’11, ’12, when I started covering this industry, I traveled to the Permian, I traveled to the Bakken and I traveled to the Eagle Ford. These are the three major areas in the US with Permian. We drove through Eagle Ford, 20, 22 different counties. Cactus and I, we also went to the Permian, which he lives in Midland.

Frank Curzio: So, Exxon being late to the party or slow to the party allowed companies like EOG, Pioneer to become industry leaders in shale, even Continental, which is a Bakken player.

Frank Curzio: But even based on these numbers, and you’re looking at the Permian, Exxon still trades at eight-times forward earnings, which is incredible. And surprisingly, analysts are expecting earnings to come down from $14 in 2022 to $11 next year and $10 the following year, which I find insane. I understand the conditions, I get it. But given how much stock Exxon can buy back from the massive cashflow they’re going to be generating, the profit’s going to be generating, again, they could do that later on, which they would do. Also given the landscape where internationally, we’re seeing a massive ramp up in drilling. Massive, massive, massive. Because many years, they turn to alternative energy and now we see the dire situation. Europe putting itself in a position where they’re so reliant on Russia for its energy needs.

Frank Curzio: And also, when you look at ESG, ESG’s not going away anytime soon with these policies, which forces a mandate to use alternative energy regardless if it’s economical. And we’re not saying, “Hey, take a certain amount of profits and invest in this.” We’re like no, mandating that this is the way it has to be. Which is why Europe and all these countries within Europe who decided, “Hey, you know what? We’re really going to just limit the amount of fossil fuels,” you see what happened to them because now they’re turning to coal.

Frank Curzio: Again, which is ironic. They’re turning to coal. Look at all the news stories. They’re turning to coal because yeah, they got lucky. It’s been a mild winter so far, and I’m very, very happy for that. But they got lucky. And let’s see because it might get colder going forward, not so much in the US. That’s why you’ve seen oil prices come down this week. Even where we are, it’s like 75, 78 degrees, almost 80 degrees in North Florida. It’s usually seasonal here. It’s probably around, I would say, 55, 60 here normally. All right? So much, much warmer here and I think a lot of places in the US.

Frank Curzio: But looking at the bigger picture, and you need to understand this, well, the politicians and the leftists, which you read all the time since they control the media, and they go crazy about the profits being produced by these energy companies, being energy independent, having the biggest energy companies in the world, having unlimited shale potential, especially in the Permian where you can drill deeper in areas like the lower Spraberry, Wolfcamp, A, B, C, D. Guys, look it up. I mean, understand more about the Permian.

Frank Curzio: Again, this is a place I visited personally, but if you look at the Bakken, and the shale area in the Bakken, it averages, and this is the pay thing. So, it’s a pay. It’s 10 to 120 feet of thickness. So, that’s where you could drill into and frack for oil, 10 to 120 feet in the Bakken.

Frank Curzio: In Eagle Ford, it’s about 150 to 300 feet. So, you could drill down, and then drill horizontally, and then frack in there. And that’s where you find the oils. It’s 150 to 300-feet thick. Just to put it in perspective. I’m trying to put this in terms that you guys could understand. The Permian, and this is West Texas because the Eagle Ford’s located in Southeast Texas, the Bakken is located in North Dakota. Again, traveling there, it was amazing. It was pretty cool up there. There’s nothing up there. People are making a fortune up there during the oil boom before it kind of busted over the past couple of years.

Frank Curzio: When we went there early on, I think in 2012, ’13, and seeing people from Walmart making like $25 an hour. This is before inflation now and stuff, when everyone else was making $12 an hour and $8 an hour, whatever it was. But it’s incredible how much they were paying them.

Frank Curzio: But in the Permian, getting back to that, they offer formations that are 1,300 to 1,800 feet, which is 12 times the Bakken in thickness. So, the drilling area is massive, where they could drill 15 to 18,000 feet at near 100% accuracy to find oil. Why is it 100% accuracy? Because a lot of the area has drilled already and they know exactly where the oil is.

Frank Curzio: So, when you look at a Permian and seeing how great they’re doing in the Permian, Exxon, they were late to the party, but think of all the other players within the Permian, you’re wondering why oil profits… I mean, just look. I’ll cover this more with Daniel tomorrow. But when you’re looking at, I just brought up the earnings that are going to be reported today, and they show you from last year to this year, and you’ll see a lot of them down and some of them up a little bit, the companies. And then you get to the oil companies, and it’s like a 300% increase from last year, 200% increase from last year. These are the biggest companies.

Frank Curzio: It’s amazing to see year over year how much, and again, that’s from oil prices going higher, these guys investing, these guys cutting costs for four or five years and just the environment’s absolutely perfect for them.

Frank Curzio: But getting back to the point here, when you become a massive producer of oil, it makes you an incredibly powerful nation. You have Europe, Germany, Finland, Poland, Romania, Slovakia, Lithuania, all import more than 30% of their oil and petroleum products from Russia. And we know what happened with them, right? It’s a very dangerous situation. So even China is a very small producer, producing 5 million barrels a day, yet, they consume 15 million.

Frank Curzio: In the US, we’re the largest producer right now, back and forth with Saudi Arabia. We produce 19 million barrels a day and consume about 19 million barrels a day. It makes us incredibly powerful.

Frank Curzio: So the climate change crazies, again, they’re going to do everything they can to have our companies produce less fossil fuels. Being the largest oil producer in the world makes us the most powerful nation, most powerful military, allows us to dictate terms on deals with every country, and the massive profits that these companies generating, they’re investing heavily into alternatives. I mean, ExxonMobil said the company’s going to reach net zero in Permian Basin by 2030. That’s what they’re doing. It doesn’t have to be a total shutoff. We understand that. It doesn’t have to be a total shutoff, but we need to remember that.

Frank Curzio: That makes us incredibly, incredibly powerful. The more oil we produce, it’s something everyone needs. It powers the world. It powers electricity, which electricity powers all the technologies. So, it’s not the technology companies, it’s the oil companies. And they’re back, and they’re going to be back for a while because of the policies that are in place.

Frank Curzio: And I mentioned earlier, internationally, international drilling is picking up incredibly, which is why that kind of held back. If you’re looking at oil companies early on last year, a little bit year before when oil companies started taking off, we really didn’t see the same moves in the stock prices when it comes to the Halliburtons. The energy service companies, the Schlumbergers, we didn’t really see that. So, the Baker Hughes.

Frank Curzio: But now, if you listen to those calls, they’re going to start returning money back to investors. They’re starting to make a fortune, and they’re seeing massive, massive demand, which is going to continue because Europe’s not going to put themselves in that place anymore. But we’re talking about many, many, many years of demand.

Frank Curzio: So if you’re looking within oil, if you think you missed it or whatever, I mean, the oil service companies have not gone up as much. They’re kind of trading, I believe, at 52-week highs. I mean, oil has pulled back over the past week or so. We have a name in our portfolio, probably going to add to it. We’re doing very well with it. We took a hard position. But that’s where you’re going to find a lot of value within the oil industry and also on this pullback in natural gas. Holy cow. I mean, natural gas has pulled back incredibly.

Frank Curzio: Daniel and I are going to talk a lot about that tomorrow. We do have a lot of companies reporting earnings, especially the largest technology companies. But we want to talk a little bit more about oil, which is cool.

Frank Curzio: But Exxon is a buy. I mean, it’s pulling back after these amazing earnings probably because investors are expecting a large buyback announcement. They didn’t get it. But that’s going to come. Dividends over 3%. It’s going to be raised every year. Massive, massive amounts of free cash flow. They’re going to be investing everywhere. Just a staple should be part of your portfolio. I mean, kudos to Daniel who has been riding the XOM train from the low 50s where he recommended it to our Dollar Stock Club portfolio, mid-2021. Great, great call by him and he lets me know about it every single day, which is cool. Actually, Daniel’s like me. He’ll talk more about his losers than his winners.

Frank Curzio: But seriously, great call and just a name that should be a staple in your portfolio because if you’re looking at just going forward, I mean, the tailwinds are going to continue. They’re going to continue for these companies. You’re going to see massive international drilling, which Exxon has a lot of exposure to. Also, US and the Permian, they’re just operating, firing on all cylinders. And those investments and that money dividends are going to be raised, continue to be raised, and they will buy back stock in the future. So, just a name that makes a lot, a lot of sense over the next few years, especially if you are a buy and hold type of person.

Frank Curzio: Now, before I get to the next staple that I believe should be in everyone’s long and hold portfolio or buy and hold portfolio, I want to talk about an amazing company called Masterworks who created a model, which is tokenization, which you should be familiar with since we did that with our company, Curzio Research, where you could buy shares in our company. We sold off a small piece. That’s what it is. Tokenization is selling off a piece of an asset to investors.

Frank Curzio: And why is this revolutionary? For Masterworks, what their model focuses on is blue chip art. So, blue chip art used to be available to the ultra-rich only like Basquiat, Andy Warhol, Banksy, Picasso, all those names that you studied that you’ll never ever own and own a piece unless you’re worth an absolute fortune. But now, through tokenization, Masterworks provides a platform for anyone to buy a piece of some of the finest art in the world and hold it like a stock, which is important because it offers you an alternative asset class because art has been one of the best forming assets outpacing S&P 500 real estate and gold over the past 26 years, believe it or not.

Frank Curzio: Again, this is a market that isn’t open to everyone. Well, now it is. So, learn more about this platform, actually see the fine art pieces that you can invest in right now. You can go to www.masterworks.com. That’s www.masterworks.com.

Frank Curzio: So, I just talked about Exxon being a staple in everyone’s buy and hold portfolio. Another name is McDonald’s. This is a name I’ve been back and forth with probably over the past five, six years. I think I told you shorter at the right time. Not shorter, but just avoid it. It was super expensive. Earnings weren’t growing. Now post-COVID, I mean, this is a company, they blew out the numbers today. Easily beating earning for shares, easily beating sales estimates, same stores sales surge, 12.6%. It’s a number that you’re not going to see by again, same stores sales is a key metric for restaurants, it’s a key metric. It just measures stores opened, comparable stores opened to the period last year, a year ago, for over a year. So, they’re not new stores, they’re open for a year. And sales for those are 12.6%. It’s a very important gauge that people look at also in restaurants and retailers, retail operations and stores.

Frank Curzio: Operating margins were just over 15% for the quarter, which management was pissed off at. They said they’re not happy. Blaming elevated commodities, wages, while higher energy costs. Again, these are headwinds that hurt the number, but 15% operating margins.

Frank Curzio: And it’s amazing when considering GM just reported, they reported great, great numbers. I just think there’s a big separation between GM and Ford. We did get rid of that company a little bit earlier. I wish we would’ve held it since it’s up like 7% today. But if you’re looking at Ford and GM, GM just reported, I think Ford reports very soon, they have operating margins of 5 to 6%.

Frank Curzio: Now, you might say, “Frank, all right. You’re talking about two different industries. You’re talking about autos and you’re talking about McDonald’s.” These are blue chip stocks that you have to look at. They’re different industries, but you need to remember some because those operating margins for Ford and GM at 5 or 6%, they’re likely going to get worse. Why? Because they’re being forced to lower prices to compete with Tesla, and even said that.

Frank Curzio: So, you may be thinking, “Well Frank, it’s not apples to apples necessarily,” but higher profits for every company leads to stronger balance sheets. That allows you to invest more money into your business to grow it, advertise, whatever, hire more people, build more stores, build more cars. It allows you to buy back stock, increase your dividend, which the oil companies do. But which Ford and GM, although those numbers were great, again, for GM this morning, they’re going to have trouble doing it through 2023 and likely well into 2024 because of the competition and because they’re lowing prices while already having very, very low operating margins.

Frank Curzio: So, in the service you can be like, “Wow, those numbers are really good.” But when you look year-over-year, not so much sometimes, and we’re looking at numbers that beat analysts’ expectations. It doesn’t mean that the companies grew year-over-year. They just beat the number that they’re putting on TV, which has been drastically lowered into the call, which is something that’s going to come back and bite everyone on the ass pretty soon for most companies.

But when I look at McDonald’s, what do they have? They have incredible pricing power.

Frank Curzio: Now, I gained about 10, 12 pounds, and been eating fast food a lot. I plan to go on a diet. But the reason why is because now that we close on our house, we’re going back and forth a lot. We’re still driving the kids back and forth. We still have a little bit more work to do before we officially move, which is going to be three weeks. And just it’s crazy. It’s the most stressful time in my life right now. Just back and forth to the house, taking the kids back and forth. My wife’s doing the school. And also again, almost four or five times a week, it’s about 50 minutes away. We’re going back and forth to the house, dropping stuff off and just doing things and meeting the vendors. I still have to complete a couple projects.

Frank Curzio: So, we’ve been eating a lot of fast food, unfortunately. And I don’t know if that’s you, and hopefully it’s not because that’s going to stop pretty soon because now again, in about two to three weeks, I’m officially moving into my new house in Jacksonville. I paid over $14 for a subway sandwich with a medium Coke and chips. I’m paying $15 for a meal and a drink at Chipotle. If you’re looking at some of the prices that are being charged, and just in Starbucks and how much, and even Zaxby’s and all these places, I mean, you get salads there and stuff like that. It used to be $7. They’re $12 now.

Frank Curzio: I mean, it comes down to the amount of money, especially for a family, of what you’re paying is insane. Food prices are out of control right now. And I’m not just talking about eggs and all that shit, whatever. I’m just talking about, just across the board. I mean, holy cow, they have not come down. I mean, you’re not saying like, “Wow, thank God…” There’s no family out there right now saying, “Wow, inflation has eased. I see it. I’m not paying as much.” No, you’re paying even… Everybody’s bills are still going a little bit higher, just at a slower pace. But they’ve already moved up, what, 20, 30% over the past two years and you’re still paying these massively high prices that are not going down.

Frank Curzio: So, even though you might say, “Well, inflation might get down to 3%, 4%, 2% target,” whatever, the Fed target, you’re still paying a ton of more money for almost every single bill, every bill. I mean, you can’t tell me your cable bill’s going down. Don’t tell me your streaming bills are going down because they’re all trying to raise prices. Electricity bills aren’t going down. Are you crazy? If you go in the supermarket, go there, you have to buy off-label brands is the only way your price is going down. They’re not going down. They’re not going down. Gasoline prices are up. Heating oil. You’re just looking across the board going, “Holy shit.”

Frank Curzio: Now, if you look at McDonald’s, you could get a breakfast there, buy one sandwich, get another one for a dollar for like $5. I mean, put that in perspective. A local bagel store charged me $27 for four bagels. Two of them had egg and cheese. Two of them had cream cheese for my kids. $27. Are you effing kidding me? This is local, it’s not like, “Wow, this is the best bagel!” It’s not New York bagels or anything. It’s just the best in an area in Florida, which makes it still a shitty place, but just better than every place in Florida because most bagels and stuff like that and pizza is going to be bad in Florida. It’s not New York, it’s not Chicago, whatever.

Frank Curzio: But prices are insane right now. People are trading down. At McDonald’s, those prices are so cheap. They can raise prices conservatively, which they’ve done, and still be much cheaper than so many of the other fast food places because of their supply agreements and their supply chain and stuff like that.

Frank Curzio: Now, the stock fell even though they reported amazing earnings because management warned like they’re supposed to do, which is smart, said, “Listen, 2023 earnings could see some pressure due to higher commodity costs.” Amazing. Due to higher commodity costs… I thought inflation was coming down. They’re warning of higher commodity costs for 2023. Something that’s interesting, which a lot of companies talked about.

Frank Curzio: They also said they’re still dealing with supply chain issues and weaker consumer demand could happen because they see more than anyone that a recession could be coming, but that’s going to be good for this company since it’s going to result more people going to McDonald’s to eat and plus, they have pricing power.

Frank Curzio: So, I think… I don’t think. I know that management’s being conservative with their future guidance, but that hurt the stock a little bit. I’d be buying here and they’re aggressively opening stores, 2,000 around the globe. Stock’s trading about 21 times next year earnings. And you might say, “Wow, that’s kind of expensive.” I mean, there’s NASDAQ companies trading at 27 times total earnings and not growing their earnings, maybe by 2, 3%, some of them, some of them maybe. Some of them are seeing earnings decline year-over-year. But McDonald’s is projected to grow their earnings by at least 10% annually over the next few years. That’s what they projected. It’s probably going to be much, much higher than that.

Frank Curzio: So, you have a company where, again, you don’t want to look at a P/E and be like, “Wow, that’s an expensive company,” because it’s not expensive if the company’s able to grow earnings and they’re going to grow those earnings probably about three times faster than every company in the S&P 500. And it’s a company that has pricing power in a world where a lot of companies are starting to lose pricing power. We’re seeing it. We’re seeing autos lose pricing power. We’re seeing streaming companies lose pricing power. You used to be able to raise prices and raise prices. We’re seeing some restaurants, we’re seeing retailers. That’s why inventory levels are going higher and higher because they can’t sell them for higher prices. They got to lower those prices.

Frank Curzio: So, we’re seeing a lot of companies, not all of them, we’re seeing it across definitely semiconductors, but they’re losing pricing power. McDonald’s isn’t losing pricing power, going to grow earnings much faster than the market, plus stock pays around a 2.5% dividend. It’s really a good name here. It’s a good name staple that I think should be in everyone’s portfolio just like Exxon. Again, nice dividend paying stocks, just like a buy and hold name. That’s very, very attractive, especially on this pullback.

Frank Curzio: And don’t take a full position because the market’s going to be all over the place. But there are names in this market that are getting it done, that are doing it right. Even though I predicted the market’s going to come down a lot, at least a lot of stocks are going to come down a lot because their earnings are not just going to be able to hold up. There’s companies right now that are meeting estimates, lowering future estimates and going higher, which kind of amazes me, or companies that are beating their estimates, but yet, earnings are down 10% year-over-year because they’ve been revised 10, 12% lower heading into this quarter.

Frank Curzio: So, there’s a massive discrepancy of what the earnings are supposed to be or what the analysts are projecting, which is around 220-ish, compared to where earnings are likely going to be, which is probably below 200, 190. And that’s not being factored in. And you know what’s not being factored in is when the Fed meets, which they’re meeting today and tomorrow, they’re going to announce tomorrow. Daniel and I will cover it a little bit. We might get on before they actually make the official announcements, which will be a 25%, 25 basis point hike. We all know that. It’s 100% chance.

Frank Curzio: But what I don’t think is priced in is what the Fed’s going to say because you’re looking at numbers that are from a month ago, month and a half ago, and you’re seeing inflation moderate with some of these numbers. The past 30 days, I went over a lot of different factors with you. There’s definitely factors that you’re seeing inflation moderate, but you need to see many, many more. And the Fed’s not seeing it. You’re not seeing it in the copper. I mean, you’re not seeing it in gasoline prices, you’re not seeing in definitely food prices. Most food prices, especially at the supermarket. Electricity. When you’re looking at your bills, you’re not seeing it. You’re looking at used car prices starting to go up. They’re up two months in a row, used car prices. The Zillow rent index went up last month. Okay?

Frank Curzio: That’s very important and significant because the Fed made it clear, clear, very, very clear, “We will not stop the timing prices early. We made that mistake in the ’80s. We will never make that again.” And when you see these things that impact consumers the most, food, energy, and things like that, when you’re seeing those prices start to tick higher, you see wages come down a tiny bit, but it’s not given the Fed the all clear to stop raising by March. There’s no way they’re going to stop raising by March based on what happened last month.

Frank Curzio: I mean, they could, but you’re going to probably see inflation, a lot more inflation. So, they’re probably going to stay pedal to the metal, and I think that commentary is going to be like, “Hey, we’re not close.” Because right now, and thanks to Daniel showing me this data in the Wall Street Journal, it’s 82% of the traders, derivative traders, believe that the Fed by December is going to start lowering. They’re going to do the first rate cut in December. I think that’s absolutely insane to think that. Absolutely insane. They have to wait to see if this is working and it’s going to take at least six months. They’re not going to stop in March, raising. They’re probably going to go into May now. And that’s what they’re going to say, which I don’t think is really factored in.

Frank Curzio: So, I’m not expecting dovish at all from the Fed. And I think right now, the markets are pricing in, especially with the NASDAQ surge. What is it? 8% it’s up. The short positions in the Russell are up 30% in the past month. I mean, it’s crazy. Just this massive short covering. Algorithms triggering a lot of this stuff and just blowing people out.

Frank Curzio: At the end of the day, the numbers are the numbers and earnings are coming down. They’re coming down a lot. There’s some companies that are doing okay, most are not. They’re lowing estimates, and yet, their stock prices continue to go higher, which makes them very, very, very expensive, especially with the NASDAQ trading at 27 times forward earnings. I haven’t seen that. We haven’t seen that. That’s the highest level it’s traded at pre-COVID.

Frank Curzio: And you’re looking at pre-COVID for many, many, many years going back, I think, to 2008 at least, but 2000 when we traded 40 times earnings. But we peaked at like 25, 26 in January 2020 before COVID. Now we’re trading above those levels, guys. Be very, very careful. It’s a dangerous market. Continue to protect yourself. Moneyflow Trader is a great way to do that. If you guys, again, we have special offers for that. We lower the price considerably. www.mftoffers.com., if you’re interested.

Frank Curzio: But be very, very careful in this market. You want to be long with some good names, you should be long in portfolios like we are, but you need to protect yourself a little bit, your portfolio. It’s not a hedge. It’s how to make money and make a fortune by buying puts because a lot of these things are over-valued. It is going to be interesting tomorrow what the Fed’s going to say because I can’t see the Fed being dovish at all. And that might result in a pullback in stocks, at least, to end this week. Let’s see if I’m right. I might not be right, but we’ll see.

Frank Curzio: So guys, a lot to take in. Great podcast today. It’s it for me. Again, signing off on my 1,000th episode, 1,000 of those babies. Holy cow. Said it earlier, but the only way to get that number is getting listeners. And for me, I can’t believe you guys still listen to this. Again, I’m truly honored. I respect that. Love you, guys. Just can’t believe you’re still listening this long.

Frank Curzio: And I’ll continue to bring you as much information to make you better investors and make you money outside of anything else that you’re hearing every place else. Because that’s my job, right? To educate the mom and pop investors, average investors because Wall Street has been taking advantage of you guys for way, way too long. I know because I used to work on Wall Street. I’ve been doing this for 30 years and trying to bring you the best research and affordable research to mom and pop investors to make sure that your family is safe, secure, especially financially secure.

Frank Curzio: Questions, comments, I’m here for you, frank@curzioresearch.com, and I’ll see you guys tomorrow. Take care.

Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guests. You should not base your investment decision solely on this broadcast. Remember, it’s your money and your responsibility.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 12 million times.
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