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Investalk is made possible by KPP Financial, a registered investment advisor firm, serving clients throughout the United States. Here is KPP Financial Chief Executive Officer, Financial Advisor, Justin Klein.
Good afternoon fellow investors and welcome back to Invest Talk. This is our Friday, January 3rd, 31st, 2025 edition of Invest Talk. And as we work through the dynamics of this new incoming administration, we are here to help guide you.
through the maze that is challenging more than I think it's ever been to understand the political dynamics. This is one of those things where everyone talks about the numbers in markets and companies, but it's not just about that. That's what we call quantitative analysis, but this is qualitative.
To understand how this administration is going to operate, you know, they say a lot and a lot of that is a part of the negotiation process and, you know, what will be actually implemented. We will see even now we still don't know. And that's what came across the wire.
just as we close this month, which was, you know, tariffs on 25% on Canada, Mexico that might exclude oil. We'll look at that as well as 10% on China. So this is a very interesting market and we'll break this down here as we go through this hour. But I'm Justin Klein and our objective here is always to help you become a better investor, bring you actionable material so that you can
Take it to your own personal situation and make better decisions week after week, month after month, and year after year. Now, we do this mainly by answering your finance and investment questions. So we encourage your calls at eight and eight, nine, nine chart. Now, in just a bit, we'll talk about today's market performance and rundown on the show topics. But as usual, we'll tackle this first caller question now and it's a live call, Nick from Seattle looking at RPRX. Yeah. Hey, Justin.
Hey, RPRX, do you want to invite? I own a small position. I added it a few weeks ago. It was starting to look attractive from like a four PE basis, looking a little cheap. You know, it seems like a good company. Right now, it's a small position. They announced earnings in the next couple of weeks. And the technicals are kind of improving here based on some good news recently.
But I don't understand this business, and I was curious if you all have a take on what they do and your look on the stock. Well, this is the name that's been in a strong downtrend, but it looks like it just reversed. They typically like those names that are starting a new uptrend after a long period of
bear sentiment that really has overtaken the name since 2021 would peak that around $52 per share. And its recent low was down around $25 per share. Now we're at 31 in change. Now what this does is the largest buyer of bio pharmaceutical royalties. Okay. And so it has a portfolio of royalties that allows it payments
for, you know, as a percentage of sales. So it has more than 35 commercial products on the market, including products that Avi, Johnson & Johnson sell, let's see, a bunch of biogen, IDEC, Vertex, and there's 10 in development stage. And so what it looks like this company does is it helps to, it picks certain
biotech companies and products that are going through trials and they help finance those to get to market. And so they're making a bet that these will get to market and then they own a royalty on them and they just collect a stream of income. And typically that's a good business who kind of reminds me of the
Gold and silver streaming companies. There's a couple big ones out there. Those are a couple that we own for our clients. We own for a long time and they tend to be very good businesses because it's low cost of capital, low capex or sorry, high capex because they're investing in this, but low ongoing working capital. There we go. That's what I meant in the business. It's just okay. If you bet on the right ones, then you can get that nice stream of capital. Now, the
Question here is, you know, patent cliffs makes it complex, right? Because at some point these drugs come off patent and the price comes down dramatically and the royalties are worth a lot less. And then you have pressure, especially in the United States. Does RFK get confirmed? Is there some pressure there on drug prices that are vastly different here than many parts of the world? So is there some pressure there? And I think that's the biggest to worry here.
I have to dig into why this recently popped over the past few weeks. Do you have any insight on that? Yeah, they had an announcement around a share buyback program and like a billion dollar acquisition that I guess the market like.
Yeah, I mean, I think it's still risky. Yeah, I mean, because of that potential pressure downward on drug prices. Now, analysts are upgrading earnings for this year and next year. That's a positive. But I would have to dig into the details here about all the royalties, what type of patent clips there are, and then you just have that overarching risk that there could be pressure to lower these drug prices or stop.
allowing these companies to raise drug prices, especially if they're still drastically different than they're selling in the rest of the world. So the technicals are fine. I don't really see any issue on that front. It is cheap. You're talking about a $31 stock, making $4 per share this year. But it does have a good amount of debt, about $7 billion in net debt and its balance sheet on a $14 billion market cap.
That's not a small amount. So there are some risks here. I think it's a decent risk versus reward, but I don't love it mainly because of that overarching worry that drug prices are going to be pushed lower in this new administration. So, you know, choose carefully here. Thanks for the call.
There was a lot of ground to cover over the next 45 minutes or so and our main focus point is about high income Americans and they're showing a bit of signs of stress and we'll talk about what data we're seeing coming down the pipe and how much that could impact the overall economy.
We also have other topics on the docket, a lot to cover, really. One is in regards to lending from a lot of these smaller regional banks. Lending growth is pretty meager, and that is worrisome, and there's a few reasons for that. So we'll talk about what that is, even though they've recovered from the banking crisis back in 2023,
We're nearly two years post that. They're coming into other issues, and we'll talk about why some of those banks may be struggling. Also, what could go up based on these new Trump tariffs that look to be implemented over at the weekend? We'll talk about that. And then natural gas. Natural gas. We've been in a natural gas glut for
over a decade, for the most part, since the shale revolution started. But that's starting to change. And we'll talk about what numbers we're seeing on that front as well. We also have voice bank questions. One is in regards to M core EME and the other is Oracle. We also have some questions that came in came in via the comment section over on our YouTube channel as well. But most importantly, we'll be your
live call. So don't hesitate to pick up that phone and give us a call at eight to eight ninety nine chart. But right now we're heading into a short break and on the other side we'll touch briefly on today's market activity and then play more of your questions. So here in the best stock we are ready for your finance and investment questions at eight to eight ninety nine chart.
Invest Talk is made better when listeners add their voices.
of the information that came out today on the whole AI play with deep-seeking all that. How much of that information can you really trust? And Justin Klein and Luke Guerrero are always ready to provide unbiased dancers. I am very much a person that does not trust Chinese data. Net income is growing and margins are staying pretty steady. Let's go take a live call all from Palm Desert. Let's go to George from San Mateo who has a question about index funds.
Tell your friends, live a little, live a little. Call and vest talk. Weekdays from 4 to 5 p.m. Pacific time. Is that a good strategy or should I be looking at other things? 888-99. Chart.
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Those go take a quick look at the market today. It was a decidedly red day and we closed near the lows after the news of the Trump tariffs actually being implemented came out later in the day. And you had a continued follow through really with Nvidia. Nvidia was really the story of the week. If I pull up where we
go looking for in videos down three and a two thirds percent on the day but if I zoom out to the week it was down over nineteen percent on the week meta was down nearly seven percent of the week Tesla down about two percent and
I say that Microsoft Office of meta up 8% Google up 3% of the week Apple up 5% on the week in earnings and the mark it was kind of flat on the day of but overall the market was kind of fine with slowing growth in iPhone sales but
You know, their outlook was pretty upbeat. And so I think that's what kept the market or kept the apple kind of hanging in there. But that was the market today. In the red, broadly, mid and small caps certainly did the worst. You had names like Decker Outdoors, struggled, same with Colgate, Palm Olive, Walgreens, Boots Alliance. Those are some of the laggards on poor earnings.
Some sectors that did fairly well today, you had exchanges, asset managers, grocers, and media charter communications, for example, definitely were stronger overall. You have the curve steepening. You had long rates go up a little bit. But overall, for the week, rates were lower. The dollar was up by half a percent on that news around.
tariffs and then gold finished down about 0.4%, but still right off of its fresh all-time highs, which were hit yesterday. So gold being down the day, but still very, very positive in its broader trend. Crude oil, that was down about 0.3% with
Not a whole lot of clarity still on the tariffs, which we'll get into a little bit. But that was a really what colored the close of this month. Overall, it was an up month. So typically has January goes. So does the rest of the year.
That's generally the thought process. I like to think it's, you know, as we get deeper into the year, if it's positive, that trend tends to stay there. There are some structural reasons for that, but still a lot up in the year in the first kind of half of this year. I do think February likely probably a red month is the tariff situation.
probably likely brings more volatility into markets and probably bring some buying opportunities in certain spaces. But the broad message I got, not just for the month, but mainly this week, was that DeepSeek news was significant for the AI space as a whole. You see that with NVIDIA down, nearly 20% on the week. We'll see what kind of follow through week gets next week. Microsoft also down heavily this week as well. So some
Some notable names in the AI space were we're taking it on the chin for the week and didn't recover as we kind of closed closed out the week and you know once again we'll watch to see what kind of follow through we get next week but very interesting close and we'll know a lot more about the tariffs as we get into Monday.
Now, if you're telling your friends that are audio podcasts available in video form, which you can find over on YouTube channel and we have questions submitted over there. So let's check out one of those. Now, Shawnee Boy 111 says, first off, guys, love the podcast. Really appreciate the videos. It's great. It's not only here, but to see the why behind your thoughts, keep up the great work.
I did want to get your thoughts insights on UGI currently in a small position. I'm considering selling some of the position to lock in profits and go to house money, do the technicals. I can see the possible double top of the technicals in question. The fundamentals going forward, any insights from your end would be greatly appreciated. Well, thank you for the kind words. And let's take a look at UGI is the symbol.
And this is UGI, it's a holding company with interest in propane and butane distribution, natural gas and electric distribution services as well. And the trend here is certainly, this is a name, kind of like that one we talked about earlier was a long down trend.
This one peaked out at $48 back in 2021, hit a recent low around $20. Now we're all the way up to $30. So nice rally. We're in an uptrend. And I generally like this business. The biggest issue if I remember correctly, let me pull up the data here.
is it's yet's yet does have a good amount of debt on its balance sheet of free cash flows of the nearly four hundred million dollars and is a is as recovered from going negative in twenty twenty three I think that was the issue why I was in downtrend you know when a company has a lot of debt and a cash flow goes negative the market starts to worry
Now, the dividend yield of nearly 5% is pushing up against its payout ratio and cash demand ratio. I would certainly worry that that is not going to be sustained. So I think this is a good place to trim on UGI. They're heading to a break. Give me a call now at 8 to 8, 99 chart.
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Your questions are free, the answers are unbiased. Justin Klein is here now, ready to take your calls live.
It is 99 chart 889 to 427 days. I get through and ask your question on today's show. Now, our main focus point is about how high income earners are starting to struggle. We've talked about this for a while that we were kind of in this K-shaped economy. If you're owners of assets, especially if you had a home and locked in the 3% mortgage, you were in pretty good shape for the most part. Your housing costs didn't really go up. Maybe.
your insurance did. But besides that, the majority, the bulk of your cost of housing was static. But if you were a renter, you were feeling higher rent costs, higher utilities, etc. And maybe you were getting raises, but they were kind of barely keeping up. But once again, if you owned a home, that mortgage was
flat and you are also probably getting a raise. And so those higher income earners were typically ones that were homeowners. And so the renters lower income people were struggling more than average. Now you're starting to see this creep into the higher earners. These are people making over $150,000 per year. Now the delinquency rate for higher earners
is up 130% over the last two years from January, 2023 to December of last year. Now, this is the type of stat though, and I'm saying this stat because I see this all the time. Oh, it's up this huge number. Well, what is that first number? Is that first number very low? Is it average? Is it high? Well, the reality is it's very low.
because consumer balance sheets work are very strong generally. And so while yes, delinquencies are up, it's from a very low base. So it's not something to panic about. But what you can see is that home insurance costs, auto insurance, just inflation in general are starting to drive delinquency rates up across the board.
Now credit card balances were up 2.9% year over year as of the end of last year. But that's kind of in line with inflation. So that's not really a worry. And overall credit utilization is actually down one full percentage point in December. And that was the second lowest mark in 2024.
So yes, delinquencies are up, but in general, there's a lot of untapped credit that higher income earners can utilize.
Now, there are some potential issues on the horizon. Number one is if you haven't caught up with your student loans, that's going to be now reported as billing point and could hit your credit score by as much as 80 points and could make that credit utilization or credit availability, excuse me, go down for people, whether you're making $200,000 a year or $50,000 a year.
Now, then you go and look at what is called the Bain Consumer Health Index. And this looks at only high income earners. And they showed a 10.8% drop in intent to spend, intent to spend. So yeah, they can go spend, but you're starting to see many of them see some uncertainty around what's happening with the tax rates, with
the tariffs and just generally with the stock market, which is it, our gains going to slow down. I think that's apparently some of their worries. Overall, though, this is not something that you want to get too open arms about. Yes, it's important. And the high income earners are roughly two thirds of consumer spending. So their propensity to spend is vital to the overall economy and overall growth.
However, there's still a lot of capacity to spend. And the main source of that capacity is the equity in their homes. There's nothing that says that in the near term, housing prices are going to drop dramatically. And therefore, so many people are paying down their mortgage at 3%. They might be getting a raise.
They've probably been paying into their mortgage a little bit more as well, paying down that faster. Delinquencies on mortgages are still very, very low, and they can go and tap credit when they need to. And so what delinquencies are rising, yes, it's from a very, very low level. So don't get too up in our arms when you see these headlines about delinquencies.
Whether that's on housing, whether that's on credit cards or whatever it is, there are pockets of weakness, but frankly, there are always pockets of weakness. But generally, while the consumer looks to be slowing a bit, it's not anything that's going to precipitate a recession.
Now, as we've mentioned, that the newest KAP premium newsletter will be distributed tomorrow. And this week, we're going to touch on a few main topics in the KAP Insight section. We discussed this question. What do we mean when we talk about liquidity in the market?
And in the stock idea section, we mentioned a healthcare company and a financial services company. And the portfolio management section, we touch on direct indexing. And if you're interested in learning more, just visit us at investdoc.com and subscribe. The newsletter will come to your inbox every Saturday.
Now the next best talk, we'll look into the story. How a new, how would a new BRICS currency affect the U.S. dollar? That story Monday, but for now I'm Justin Klein, I'm ready to take your calls at 8-8.99.
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Invest Talk. Tell your friends they can listen live, download the free podcast, or watch Invest Talk on our YouTube channel.
Guys, Mark San Diego will love your show. Ask him about Oracle ORCL. They seem to be at the bottom of the magnificent seven. People are just not interested in them right now, but they seem to be cut some stuff happen. So I was wondering what your viewpoint is and if you were to buy what price level you'd be looking at. Thanks. I'll listen for it on the show.
All right, looking at Oracle. And this has been a bit of a volatile name as of late. It peaks back in early December around $200 per share. And it's been in a choppy downtrend ever since. And now we're hanging in right around 170 or so 170 a change today. I don't like the technicals and the
You're looking at a good business. I have no problem with the business. Let me start with that. I like the business. Would I be buying it now after this recent volatility? Probably not, and uncertainty around AI.
They provide databases, enterprise resource, planning, et cetera. And once again, a very good business. If you look at it, it's a return in equity, 128%, return in best capital, 12%, that's probably more realistic. And they have a solid balance sheet compared to their markup of nearly $500 billion.
Now, free cash flow is about 9 billion. So you're talking about a free cash flow yield, only about 2%. I don't love that. And if you're looking at enterprise value to EBIT, it's about 33 times. And that is near, it's all time high. So not a name that I'd be jumping on right now, certainly a name that is a good business, not pooping the business. It's just, I don't like the recent trends, the overhang with AI, as well as that.
that recent, the recent earnings revisions downward as well for this year and next year, those are trending lower. So I'm going to pass on Oracle, but certainly remains on the watch list.
Now on Fridays, we generally take a minute to run down some key benchmark numbers. So let's do that right now. The two-year treasury yield was at 4.2% down from 4.27% at the close last week. The 10-year yield was at 4.52 down as well, even more from the 4.62% last week. So you're talking about 10 basis point drop in the 10-year overall.
Gold prices up to $2,809 an ounce right off its all-time high. Last week, we could close at $27.74. So once again, as I said at the top of the show, gold remains in a nice uptrend. Silver as well, up to $31.46 per ounce. Last week, it was at $30.68, also showing some good strength there.
Oil was at $72.82 down about $1.74 from last week. I do think oil generally will trend higher probably more into the high 70s throughout the year, but a bit of a dip so far this week.
The average gas, average gallon of gas costs $3.11, two cents less than it was last week. And still way down from where it was a couple of years ago at $3.57. Here in California.
average gas, average gallon of gas is $4.45 per gallon, a one cent increase over last week. So the rest of the country is seeing a bit of a drop. We're seeing an increase. Now for comparison, in Indiana, the gas last week averaged $2.96 per gallon. So those are rundown of the major
the major data points as we close out the final week of this month. Let's touch a bit on banking. And we had the banking crisis back in 2023. That was a Silicon Valley banking crisis. And we're now two years on from that, but banks are still struggling. And now it's not about solvency. It's the other side, which is growth.
And it's not really the mega banks. The big banks have investment banking arms that continue to do well with mergers and acquisitions, raising capital, whether that's debt or equity, whatever that is, they're doing well. But those midsize banks, regional banks, they are the ones that are struggling the most. Even though the KBW NASDAQ banking index
with both large and regional banks are doing well up about 10% so far this year outperforming the 3% gain on the S&P as a whole. But if you look at the financial results, you see something different. One of the large regional banks, P&C, had earnings recently and there's no loan growth there for the first quarter of 2025.
And so what they are citing is a hazy outlook on tariffs, taxes, and the federal budget. And even though they're gaining clients, they're getting more people to use them, their customers, the businesses that use P&C, are not tapping the available credit lines. And so the question here is this some sort of underlying economic weakness or the financial system evolving.
And I'm going to say it's probably more the latter. Now, across all commercial banks, loans grew about 2.7% from the end of 2023 to the end of last year. Pretty decent, a little faster than the previous year, which is at 2.3%. But it's still the lowest loan growth since the financial crisis. And really what they're struggling with are CNI loans and
commercial real estate loans. So C&I loans are commercial and industrial lending. In 2024, banks C&I lending loan growth was just 1%, up 1%, sorry, up 1% from 2023. And loan growth at the end of the fourth quarter from year early was under 2% on average across 34 large global, national and regional US banks. And a lot of those banks saw loan growth declines
Wells Fargo, PNC, Citizens Financial, Key Corp, Regions Financial, and Comerica all seeing negative loan growth overall. One of the big headwinds here is actually, like I said, commercial real estate. Now what's happening is the value of that commercial real estate is dropping. And so a lot of the owners of these buildings have to cough up more equity.
put money back into the loan. And the overall loan falls because the collateral is worth less. And so a lot of these mid-sized banks, this is where a lot of their lending goes. They don't have other types of lending connected to consumers, for example. A lot of that is done by Jacob Morgan, Citigroup, Capital One, Synchrony Financial. Those are the ones that are big in credit card lending.
Commercial real estate loan book grew only 1.3% in 2024. And then there's the other side, which is where companies are going to get capital to borrow. And they have more choices, mainly in private credit. And this is, I see this, I know business owners that are doing this. They're not going to the bank. They're going into the private credit market because
There's a lot of money there. The Marils and Morgan's of the world have pitched these private credit funds to a lot of wealthy individuals and they bought them promising big yields. And so there's a lot of money there and those funds are able and willing to take more risk. Why does they not have to market the market? They can kind of say what these loans are worth.
And so that's where a lot of capital is coming from. And as more and more companies borrow in that way, these regional banks are going to struggle with loan growth. In the middle of last year, the share of corporate debt that was in the form of non-mortgage bank loans. So not loans on sort of property or anything like that. Your traditional lending to corporations was only 9% was coming from
banks, large banks, commercial banks. In the 90s, it was 20%. That's where 20% of that borrowing came from. So it's down over 50% from where it was in the 90s. That just shows you the growth of other types of forms of capital. And so when you're looking at regional banks, understand that there's not a lot of ways out of this, because they don't
Where do they go from here? How do they spark lending growth? They're not big in credit cards. The, the areas that they are big in are, are struggling for the most part. They're having to compete with other avenues for capital. And so it's hard to see a path forward for these mid-sized banks. Let's keep things moving forward and play another question from the Best Doc Voice Bank. You know the number, it's 8 to 8, 99 chart.
Hey, Justin and Luke, Jeremy from New Jersey here, longtime listener. I just want to say real quick, you guys actually inspired me to become a financial advisor, which is awesome. And I love it. So just wanted to get your insights on a ticker EME M core group. It got beaten up on Monday with the deep seek sell off. And it looks like an interesting company, $20 billion market cap trading at 18 times next year's earnings.
really low price-to-sales ratio with really good revenue growth. You know, margins are moving the right direction. Share account is going down. They're doing buybacks. It looks really good here. You know, I kind of want to pile money into it. So I want the fingers off. All right. Look at M core group. What do they do is they provide mechanical and electrical construction services for commercial, industrial, and utilities. And they've done very well as the build out of these AI centers have
ramped up and earnings have ramped up accordingly. $6.40 they earned in 2020 and then this year, sorry, whole year 2024 once they released new for earnings will be nearly $21 per share. This year's must be $22.78 per share. But as with this deep, deep, deep, deep, seek topic,
This is kind of roiling anything that was getting those AI tailwinds. And Emcore is certainly one of those. And the fact that NVIDIA hasn't really gotten off the mat, they go and take a look at that chart.
Nvidia's closed today and it's lowest closed since Monday. So it bounced on Tuesday. It was a bit lower on Wednesday, slightly higher on Thursday, and then the slightly lower today. And once again, this is the second lowest close of the week. And you look at Emcore and it's a bit stronger, but similar pattern. This is what we call a bear flag.
So it reminds me a lot, the whole AI space right now reminds me a lot of post COVID and where money was just flowing into anything that was work from home related. And I just look at zoom was kind of the poster child, right? Everybody had a zoom account. Everyone was signing up for zoom because we were all working remotely. And what did zoom do? It went from 50 bucks all the way to nearly 600.
And just the span of what was this? A year? Yeah, about a year. And then what did it do? It fell all the way to 50 bucks. Full round trip. And it was the market just buying in or the average person buying into the narrative.
I'm not looking at, you know, what, what is the reality is that, you know, these things kind of ebb and flow and there's long term trends, but they typically aren't as strong as the growth is at the gate. That growth slows because companies start to realize maybe they over.
produced, they invested too much in capacity, they slowed down, some of the capacity was built out correctly and worthwhile than others, not so much. And I think you're going to start to enter that period. And from a technical perspective, this just broke negatively, just like Nvidia broke negatively. Now, it's one week,
It could be a flash in the pan and we have a big reversal next week and then things continue on their merry way in the same ways they were before. My gut says that's not the case. My gut says that this deep seek news was a shot across the bow of all those companies that were spending tens and billions of dollars and combined, you know, hundreds of billions of dollars to build that capacity and compute power. And
It probably wasn't that necessary. There are other ways to do this more efficiently and more effectively. And so companies like Emcore, you know, does it trend back to probably isn't trying back to $6 per share. But even if it goes back to 15, $10 per share, which still drastically higher than it earned just a few years ago, that means a much sharper drop in the price than you've seen recently.
So I, while I understand the story, and if you're looking just on what's happening, what's happened over the past couple of years, yeah, it looks modestly cheap. But I think there's a lot of risk that this deep-seek question is game-changing for the industry as a whole. And that's the call you have to make here. Go to invest thing is, right?
My view is weight. My view is keeping on your watch list. And at some point, just like Zoom, we picked up Zoom for clients just a handful of months ago. Because it was cheap again. It was worthwhile. It was worth it. And Emcore and a lot of these AI names will be worth it during that next cycle. But my gut here and the data is starting to say we're near the peak in a lot of these names, not the start of anything.
Now we're heading into our final break. I encourage you to give me a call. I'm here for whatever is on your mind, money related at 888.99.
The weekend is here or almost here, but you've got finance and investment questions, so step up and call in. Invest talk, 88899, chart. Let's go talk to, actually, let's go take a question from our YouTube channel. Jay Soso says, what are your thoughts on GHM for long-term equity? What would be a great entry point if it's a good long-term position?
Looking at GHM, this is a small name, $500 million market cap. The first thing you have to say with a small use of the borderline micro cap name is to say anything long term hold. It's hard to say because typically these names have a spotty history of profitability and tends to be up and down. Here's what you see here. In 2022, they actually lost money.
After making sixty five cents back in twenty nineteen pre pandemic and then in twenty twenty four sixty three cents earnings and this year's supposed to be eighty nine cents earnings and then a dollar eighteen next year so. Certainly some nice trends here no dividend and they have no long term debt so i love the balance you know what do they do what do they do is.
the broader question. This is Graham Corporation, the design and manufacturing mission critical fluid power heat transfer and vacuum technology for the defense, space, energy, and process industry. So they're an industrial name. I like the space as a whole. I like what they do. It's a service itself sells parts for its equipment as well. So they have a service business. That's very good. And
They're in the petrochemical business. So generally, I like this. I like what they're doing here. I like the trend in the stock. Once again, I like that balance sheet. Return equity 7%. Not amazing, but certainly on the rise. And that's my first question is, what's happening here? This has been a company with a spotty history.
What has changed over the past, call it 18 months? That has changed the trajectory of sales, of earnings, and overall profitability. Are they just able to opt their margins? Is there something they make an acquisition that kind of transformed their business? What was it? If I have confidence in that change that is sustainable, I definitely think it's a long-term hold because
Once again, I like this area, I like the balance sheet, and I like the profitability. Now, lastly, let's talk about natural gas. And US stockpiles have dropped to 4.14% lower than normal for the first time this year. So typically, there's this big curve in natural gas in stockpiles.
Okay. And it has to do with the time of year. You know, right now it's cold. People are using a lot of natural gas for heat in their homes. And the colder it is, the more natural gas they tend to use. And we know for since the shale revolution that there's been a glut of natural gas out there, tons of it. And that has pushed prices lower. But recently prices are on the rise. You've got a bit of setback, real short term, but generally prices are up.
And what you're seeing right now in the numbers is that rally in natural gas is justifiable. And a lot of this has to do with increasing demand for electricity across the board, talking about AI generation, just cloud computing, but also think of electrifying our fleet of vehicles with some people buying electric cars.
Now, that electric car growth is slower than everyone expected, but it's still there. And so just general increase in demand for electricity is helping stop up a lot of that excess inventory of natural gas that's been there for a long time. So you're starting to see a shift in balance of natural gas. You also have exports of natural gas to Europe. And I see Trump has talked about doing that, right?
getting more business for America, exporting more of that, and that will increase the price of natural gas here, overall. Now, that's good for natural gas companies, obviously. But the big question is weather. And the Arctic right now is unusually cold, and usually that feeds into a longer winter. And I think that's underappreciated in the way the market is looking at natural gas futures.
And so I expect natural gas to generally remain strong throughout this year, and the numbers continue to back that up. Now, I'm Justin Kline, this completes another Invest Talk program. We thank you for listening. We encourage you to tell your friends and family about our free podcast downloads, which you can find anytime at iTunes, Spotify, Google Play, and be sure to rate and review on iTunes as well.
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