High Bar for Q3 Earnings? The Investment Committee Debates 10/12/26

NVIDIA

Across the shows: 24 speakers in other episodes, 22 bullish and 6 bearish calls, past 30 days

• Steve Weiss · Short Hills Capital PartnersBearish

  Nvidia's vendor and circular financing resembles a house of cards risk, though not imminent.

  He calls Nvidia the biggest culprit in a potential house of cards, because it funds its own revenue by lending money. It recently put another large sum into a cloud company, and it buys chips for many companies it finances, which raises circular and asset-backed financing concerns. He hedges that he is not predicting something ugly will happen soon.

  “They're funding their own revenue by lending money. ... NVIDIA's put another 250,000,000 in. ... The circular financing concerns and the asset backed financing concerns.”at 14:06

Wells Fargo & Company

Across the shows: 2 speakers in other episodes, 2 bullish and 0 bearish calls, past 30 days

• Steve Weiss · Short Hills Capital PartnersBullish

  Wells Fargo's turnaround under Scharf and the lifted asset cap let it grow; bullish.

  Wells Fargo has to get going this quarter. CEO Charlie Scharf has done a good job turning a big ship around, and now that the asset cap has been lifted, the bank is free to grow. He wants to see how much growth it delivers, and treats its story as a turnaround that is now underway.

  “Wells Fargo, they sorta gotta get going at this... I mean, [Charles Scharf's] done good job. Big ship to turn. He's turned it. Now the cap is lifted. Now they're free to grow.”at 20:57

The Charles Schwab

Across the shows: 1 speaker in other episodes, 0 bullish and 1 bearish calls, past 30 days

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  Schwab trades at 12.5x with double-digit earnings growth ahead despite a negative year; bullish.

  Schwab, which her firm owns, trades at 12.5 times earnings with a negative 2% return, while analysts expect double-digit earnings growth ahead. She sees bank earnings as more reliable than the debt-funded AI part of the market, so the group should be worth more as capital rotates toward it.

  “Bank of America, 10 times earnings with a basically flat return. Schwab, which we own, 12 and a half times with a negative 2% return. And then you look at their earnings growth, and they all have double digit earnings growth estimates ahead.”at 22:36

Citigroup

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Jim Lebenthal · Cerity PartnersBullish

  Citigroup is still cheap on forward earnings, with turnaround and dividend support; he likes it.

  Banks trade at discounts to the S&P 500, but the S&P itself trades richer than its history. Citi is still cheap, with forward earnings and a decent dividend yield. Management is improving expenses and turning the company around. Catalysts include lifting the regulatory consent orders and the planned Banamex spin-off, which he admits keeps getting pushed back.

  “these banks have big discounts... I still like Citi in this group. If we're gonna talk about expensive, it's still cheap.”at 23:55

Adobe

• Jim Lebenthal · Cerity PartnersBullish

  Adobe is attractive at nine times forward earnings; the feared AI threat has not materialized.

  Wells Fargo worries that AI competition will show up in results and cut IT budgets, which is why the stock trades at nine times forward earnings. But ChatGPT is nearly four years old and the threat has been there the whole time. Sales are up about 50% and EPS about 80% over four years, revenue growth is slowing to about 11%, the share count is down 7% in nine months, and the company has no debt.

  “I just have to point out that we're now approaching the fourth year anniversary of ChatGPT. This threat has been out there the whole time. ... It simply hasn't happened in four years, and I find it attractive at this price.”at 27:35

eBay

• Jim Lebenthal · Cerity PartnersBullish

  eBay is a multiyear grower; consumers keep shopping there despite weak retail stocks; he bought it.

  Retail stocks have underperformed, and it's unclear where exactly the consumer is, but consumers are clearly going to eBay, and the results show it. Expansion into collectibles has broadened the product line. He bought the stock earlier this year at just under $100 and sees it as a nice multiyear grower.

  “consumers are going to eBay... This to me seems like a nice multiyear grower. I'm happy with where I purchased it right under $100.”at 29:01

Regeneron Pharmaceuticals

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  Regeneron trades at 12x earnings with a big pipeline and double-digit growth; about 20% upside.

  Her firm owns Regeneron, which trades at 12 times earnings with a 6% free cash flow yield, and has an enormous drug pipeline. Earnings should grow double digits for at least the next three years, which makes the math easy and implies about 20% upside. The Libtayo driven upgrade matters less, since Libtayo is only about a $2 billion drug, but it points to many drivers ahead.

  “We do, and it's nice to see it getting a little bit of positive attention. So that would be almost 20% upside from here, and we think that's doable. The math on Regeneron is pretty easy. It trades at 12 times earnings, has a 6% free cash flow yield.”at 29:24

Energy Transfer LP

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  Midstream pipeline operators are a durable, high-yield way to own fossil fuel demand.

  Gilman Hill owns the midstream pipeline companies because she is confident fossil fuels will keep flowing in the US for at least five, probably fifteen to twenty-five years, whether or not the country wants it. Pipelines are slow and steady, not likely to double, but they pay yields of roughly six to nine percent. She avoids refiners because they carry political and economic sensitivity that could make them collapse if oil falls back toward $68 or the economy slows.

  “I wanna own Enterprise Products, Energy Transfer, Kinder Morgan, just the huge pipeline companies. They're slow and steady.”at 38:41

Kinder Morgan

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  Midstream pipeline operators are a durable, high-yield way to own fossil fuel demand.

  Gilman Hill owns the midstream pipeline companies because she is confident fossil fuels will keep flowing in the US for at least five, probably fifteen to twenty-five years, whether or not the country wants it. Pipelines are slow and steady, not likely to double, but they pay yields of roughly six to nine percent. She avoids refiners because they carry political and economic sensitivity that could make them collapse if oil falls back toward $68 or the economy slows.

  “I wanna own Enterprise Products, Energy Transfer, Kinder Morgan, just the huge pipeline companies. They're slow and steady.”at 38:41

Enterprise Products Partners L.P.

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  Midstream pipeline operators are a durable, high-yield way to own fossil fuel demand.

  Gilman Hill owns the midstream pipeline companies because she is confident fossil fuels will keep flowing in the US for at least five, probably fifteen to twenty-five years, whether or not the country wants it. Pipelines are slow and steady, not likely to double, but they pay yields of roughly six to nine percent. She avoids refiners because they carry political sensitivity and economic sensitivity: an oil price drop back to about $68 or an economic slowdown could make them collapse.

  “I wanna own Enterprise Products, Energy Transfer, Kinder Morgan, just the huge pipeline companies. They're slow and steady.”at 38:41

TotalEnergies

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  TotalEnergies is up 50% on LNG leadership amid strong global energy demand.

  Her international strategy owns Total and Shell, which are both up about 50% this year. She attributes the gains to their status as global LNG leaders, since there is huge global demand for energy of every type. She owns them while taking out as much economic and political risk as possible, avoiding a direct oil trade.

  “In our international strategy, where it's a little different, we own Total and Shell. These are both up 50% on the year, and they're both global leaders in LNG.”at 39:55

Shell

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  Shell is up 50% on LNG leadership amid strong global energy demand.

  Her international strategy owns Total and Shell, which are both up about 50% this year. She attributes the gains to their status as global LNG leaders, since there is huge global demand for energy of every type. She owns them while taking out as much economic and political risk as possible, avoiding a direct oil trade.

  “In our international strategy, where it's a little different, we own Total and Shell. These are both up 50% on the year, and they're both global leaders in LNG.”at 39:55

Cheniere Energy

• Jim Lebenthal · Cerity PartnersBullish

  Cheniere is a pipeline-like LNG exporter that adds to his diversified energy exposure.

  He holds energy stocks across three names for a diversified approach: integrated oil, LNG and drilling. Cheniere is a pipeline-like business focused on liquefied natural gas exports, which benefits from the broad global energy demand he sees across all energy types.

  “I'm playing it through three different names. ExxonMobil, obviously integrated oil Cheniere, which is a pipeline like yours, focused on liquefied natural gas exports”at 40:49

Transocean

• Jim Lebenthal · Cerity PartnersBullish

  Transocean is the highest-beta play on the energy sector and is in his portfolio.

  He holds energy through three names: ExxonMobil, Cheniere and Transocean. He describes the diversified energy plays as offering pipelines, refineries and exploration and production, with Transocean as the most volatile piece. Its high beta makes it the most aggressive way to play the sector, and he sees energy demand from economic activity regardless of whether it comes from AI.

  “Transocean Deepwater Driller. That is the highest beta play to the energy sector.”at 41:02

Netflix

• Steve Weiss · Short Hills Capital PartnersBullish

  Netflix has found its lows, and risk-reward is very attractive ahead of next quarter.

  He thinks the stock has found its lows and that everything depends on next quarter's results. The Street couldn't be more negative on it, so expectations are very low. That makes the risk-reward very attractive, with the upside coming if the quarter comes in better than the negative consensus.

  “I think the stock has found its lows, and everything depends on next quarter. Street couldn't be more negative on it. So I think the risk reward is very attractive here.”at 45:56

AbbVie

Across the shows: 1 speaker in other episodes, 1 bullish and 0 bearish calls, past 30 days

• Jim Lebenthal · Cerity PartnersBullish

  AbbVie is a solid, long-held company with strong momentum that should keep performing.

  He has owned AbbVie for many years and calls it a solid company. Even though the stock is at an all-time high, he thinks the momentum is strong enough to justify recommending it, and he expects it to perform for the next several years.

  “AbbVie, you know, I debate whether to recommend a stock right at an all time high, but the momentum here is strong. This is a solid company that I've owned for many years, and I expect will perform for the next several years.”at 46:06

DocuSign

• Jenny Harrington · Gilman Hill Asset ManagementBullish

  DocuSign is cheap at 14x earnings and AI won't eat its lunch.

  The stock is held in Gilman Hill's growth strategy. It trades at 14 times earnings with nearly a 10% free cash flow yield, which is cheap. It was treated for a while as if AI would eat its business, but she doesn't think that will happen.

  “DocuSign, 14 times earnings, nearly 10% free cash flow yield. This one's from our growth strategy, and it was treated for a while like AI was gonna eat its lunch, but I don't think it's going to.”at 46:18

AI infrastructure & data centers

• Jim Lebenthal · Cerity Partners

  Hyperscalers' AI capex plans remain intact and may rise; nobody is pulling back on spending.

  Three months after hyperscalers raised their spending plans, every indication is that those plans are intact and may go higher. Political pushback on data centers exists, but CEOs and leaders he has heard from say no one is pulling back, since they feel the race is still in the early innings and cutting spending would mean losing it. The key question for earnings is whether capex plans are confirmed.

  “Every indication is that those plans are intact. Maybe they even go a little bit higher.”at 4:16

• Jim Lebenthal · Cerity Partners

  AI compute demand remains strong, shown by Anthropic seeking outside compute and Meta opening its own.

  Despite debt worries, he argues demand for compute is still there. Anthropic is turning to SpaceX for compute, and Meta is transitioning some of its business plans to open its compute to others. He says the market is saturated with debt, not demand, and that the demand appears sufficient to support the spending, though the debt sell-offs show the financing strain.

  “Anthropic going to arch enemy SpaceX to get compute demand or Meta transitioning some of its business plans to open it... Open its compute to others to use, it just indicates to me that there still is enough demand”at 10:16

• Steve Weiss · Short Hills Capital Partners

  Data center demand may be inflated by double-ordering, risking excess capacity in data centers.

  In past cycles, semiconductor and memory companies double-ordered to avoid being shut out, and he sees the same behavior in data center demand. Much of the demand reflects companies' own predictions of what will happen in ten or fifteen years. Cold storage and data center warehouses may end up with excess capacity, though cycles usually peak before capex does.

  “They all double ordered. ... We don't know how much that demand is their own prediction of what's gonna happen in ten or fifteen years. And so these warehouses may find themselves with the excess capacity, data centers, warehouses.”at 12:16

US stock market outlook

• Steve Weiss · Short Hills Capital Partners

  Market near highs is misleading; most stocks lag and only tech is performing.

  He objects to calling the market near new highs because the performance is cherry-picked. Most stocks are not trading above their 50-day average, and more than half are below their 200-day average. Using the word market gives a false sense of security when most of it has underperformed except for tech.

  “because most stocks are not trading above their fifty day average. More than half's trading below their two hundred day average.”at 5:58

• Jenny Harrington · Gilman Hill Asset Management

  S&P gains are concentrated in a narrow top quarter; the rest of the market tells a different story.

  The S&P 500 was up 2.3% in the third quarter, which she calls misleading. Strategists say large caps look fine, but they are referring to a very small group, the top 25% of the index. Step outside that narrow group and the performance is very different.

  “you're up 2.3%, and holy moly was that misleading. ... as soon as you step out from that very narrow kind of top 25% of the S and P 500, as soon as you step out, a very different story is being told.”at 9:09

• Julia Boorstin · CNBC

  Earnings season may let lagging stocks catch up while megacaps take a break.

  The market is split, with semiconductors falling after South Korea's market dropped and software and Meta rising. The equal-weight S&P 500 is still 4 to 5% below its highs while the S&P 500 is near a record, which points to a deep divide. She thinks many expect earnings season to bring relief for the underperforming majority of stocks, and possibly a pause for the mega-caps. She calls this an open question because the divergence has been building for a while. Suppressed volatility is encouraging people to keep exposure, and perhaps to overextend.

  “...in the way a lot of people, I think, are assuming that earning season will allow some relief for the majority of stocks that have vastly underperformed to catch up, and maybe the mega caps can take a break.”at 41:47

Earnings & corporate profits

• Jenny Harrington · Gilman Hill Asset Management

  Q3 results likely land as expected; the real risk is guidance and the pace of earnings growth.

  She doesn't think expectations for the numbers reporting over the next four to six weeks are elevated; they should come in as expected and are largely priced in. The expectations risk sits in guidance, forecasts and whether the pace of earnings growth is enough, given that earnings are expected to rise about 15% in 2027. She is unsure whether guidance will be as robust as expected, and says the market's reaction to each report (as with Nvidia's share price after strong numbers) may matter more than the data.

  “So my guess is that the expectations for the earnings numbers that we're going to hear in the next four to six weeks, I don't think it's elevated. I think things are going to come in very much exactly as expected, and that's kinda baked in.”at 2:04

• Jim Lebenthal · Cerity Partners

  Nvidia's excess cash flow means buybacks are small and a huge acquisition is unlikely.

  Nvidia generates about $300 billion of free cash flow, but its dividend is small and its buyback is a pittance compared with that cash. Returning all of it would make the market question its investment opportunities, so it has to invest in its ecosystem. He doubts it will make a $100 billion acquisition of a public company, since that would disrupt its business.

  “what is NVIDIA supposed to do with $300,000,000,000 of free cash flow? ... They did a buyback, but it's just a pittance compared to the free cash flow.”at 15:31

US Treasuries & yields

• Jim Lebenthal · Cerity Partners

  Stabilizing the 10-year yield near 5.25% would let financials and industrials perform, not just tech.

  He still expects good earnings growth outside tech, including energy, materials, financials and industrials, though below tech's pace. Those sectors have lagged mainly because of interest rates. The 10-year yield has stabilized around 5.25% over the last week or so, and where it goes depends on this week's CPI and PPI. Further stabilization in rates, paired with good bank earnings starting the next day, would let non-tech sectors start to perform.

  “And the easy answer, and I think the right answer, is because of interest rates.”at 4:47

• Nate Geraci · NovaDius Wealth Management

  Record bond ETF inflows despite losses show investors still buying yield through ETFs.

  Fixed income ETFs took in over $75 billion in the past month and a record $525 billion so far this year, even though many major bond categories have negative returns this year, especially those with duration. Investors are buying across the curve: some park at the front end for 4%-plus yields with little risk, others go further out for higher yields. With stocks at record highs and rates at multi-decade highs, bonds have been a drag on the 40% of a 60/40 portfolio.

  “we've had over $75,000,000,000 in inflows into fixed income ETFs just over the past month. And we've now seen a record $525,000,000,000 in inflows this year, despite a large number of major bond categories posting negative returns.”at 33:53

US rates & the Fed

• Steve Weiss · Short Hills Capital Partners

  Fed will pause through the election, then tighten again in December.

  Rates are restrictive and show no sign of easing. The Fed will hold on pause regardless of this week's data because it won't tighten so close to the election. After the election, he expects another tightening in December, so the market should look at reality rather than what comes from the White House.

  “while the Fed will be on pause regardless of what the numbers are this week, because they're not gonna tighten that close to the election... So you'll have another tightening in December.”at 7:07

• Steve Liesman · CNBC

  Hammock's urgency on rate hikes may set up a dissent at the October meeting.

  Cleveland Fed President Beth Hammock says restrictive policy is appropriate, that the Fed must act quickly with smaller moves, and that an inflationary mindset is taking hold. She sees financial conditions as neutral rather than restrictive, and says inflation pressures are broad-based. Other officials say the Fed can take its time to reach an October pause. Given how strongly she is pushing for quick action, Liesman reads her remarks as possibly setting up a dissent at the October meeting.

  “I mean, this could be setting up a potential dissent by Hammock and maybe others in, the October meeting where, she says the Fed needs to act quickly”at 44:17

Banks

• Steve Weiss · Short Hills Capital Partners

  Bank Q3 results should be good, but guidance will decide the move; M&A is hurt by rates.

  Banks should have had a good quarter and will be optimistic about their IPO pipeline, but with some guardedness. Goldman and Morgan Stanley depend on M&A, which is taking hits because of where rates are. He argues it is not a slam dunk quarter, and guidance will drive how banks trade.

  “While the banks should have had a good quarter, and they will be very optimistic about their pipeline of IPOs... So I don't think it's a slam dunk quarter as everybody's, you know, intimating.”at 7:30

• Jenny Harrington · Gilman Hill Asset Management

  Banks' reliable earnings and low multiples could pull capital from debt-funded AI into banks.

  Banks like JPMorgan at 13 times and Bank of America at 10 times, with double-digit earnings growth ahead, have reliable earnings. She contrasts that with parts of the market that depend on huge debt issuance to keep AI going. That gap could lead to a rebalancing, as in the first and second quarters, where capital is reallocated to banks at fair valuations with decent growth.

  “I think that those are highly reliable or at least more reliable potentially, Leslie, than other parts of the market where you're really relying on huge, you know, huge debt issuance to continue to drive AI.”at 22:57

Credit markets

• Jenny Harrington · Gilman Hill Asset Management

  Compute demand is insatiable, but investor appetite for AI debt is showing first cracks.

  She separates demand for compute from demand for the debt that funds it. Compute demand is insatiable, but investor demand for AI-related debt is where she sees the first cracks. She says the market may need to see returns before it keeps lending at this pace, and notes that credit funds and institutional bondholders are beginning to back off.

  “there's insatiable demand for the compute... the investor demand for the debt... that's where you're starting to see, I think, the first cracks.”at 13:03

• Jim Lebenthal · Cerity Partners

  Debt market shows saturation, not credit risk: IG spreads are tight while CCC spreads have widened.

  Investment-grade spreads are tight while CCC spreads have widened sharply. That gap points to a supply-and-demand saturation effect in the debt market, not to doubts about whether borrowers can repay. He notes some recent debt issues traded poorly after launch, and says the debt market is where to look first for crisis risk.

  “I think this is a question of demand versus supply... Look at credit spreads. Investment grade credit spreads are tight. ... there is a saturation effect going on right now in the debt market. That's different than a credit worthiness.”at 14:29

Oil & fuels

• Bill Baruch · Blue Line Capital

  Energy rally is driven by diesel crack spreads benefiting refiners, not AI.

  Heating oil and diesel crack spreads have surged this year. The move started from diesel supply disruption tied to Russia and Ukraine, since Russia and China are major diesel exporters and heating oil futures track diesel prices, and got another boost when the US attacked Iran in early March. US refiners are running at high utilization, so there is no crude or diesel supply problem domestically. Marathon Petroleum, Valero and Phillips 66 are all up over 100% this year. He rejects the idea that AI is underpinning the energy rally; the gains come from crack spreads that refiners are capturing.

  “So a lot of people may say this is the AI trade underpinning energy. It's not. This is the crack spreads, and these are the refiners that are really capitalizing on this move.”at 38:02

• Jim Lebenthal · Cerity Partners

  Crude oil won't collapse; strategic reserve refills and broad energy demand support prices.

  He is a long-time believer in energy stocks and asks what happens to crack spreads if the Iran war stops and crude falls toward $68. He doesn't think crude will collapse, because strategic petroleum reserves around the world need to be refilled. He also argues economic activity demands energy of all types, whether fossil, renewable or otherwise, regardless of AI.

  “First off, I don't think crude oil is going to collapse. We've got strategic petroleum reserves around the world that need to be refilled.”at 40:30

IPOs, M&A & deal activity

• Jim Lebenthal · Cerity Partners

  The IPO market is far less robust than expected; he hopes Anthropic lists next month.

  The IPO market is one of the negatives the market is watching, since it is nowhere near as robust as expected. He hopes Anthropic will come to market next month, but he expects no reporting on that in bank earnings. The weak IPO pipeline is a concern for bank capital markets results.

  “the IPO market is nowhere near as robust as we expected it to be. Now, hopefully, Anthropic will come next month, but we're not gonna have any reports on that in the earnings tomorrow.”at 20:31