Bank Earnings Kickoff, Tech Fueling Rally, Sarat Sethi Guest Host 10/13/26

Apple

Across the shows: 12 speakers in other episodes, 2 bullish and 6 bearish calls, past 30 days

• Sarat Sethi · Douglas C. Lane & AssociatesBullish

  Apple's services recurring revenue and pricing power justify its high multiple by smoothing earnings.

  Apple's key is services. Recurring revenue and its ability to raise prices across phone, home, car and TV give it steady earnings. That keeps the business sustained even at a roughly 36 times multiple, because its earnings are more even than those of other megacaps. The services strength also offsets possible hardware demand weakness from higher memory and hard drive costs.

  “For them, that recurring revenue and their ability to raise prices is giving them, even though they have a 36 multiple or depending on what year you're looking at, I think that's sustaining it because it's going to have more of an even earnings”at 7:52

• Mark Newman · BernsteinBullish

  Apple looks cheap on EV to free cash flow versus the Magnificent Seven; rated outperform/buy despite margin worries.

  He is slightly worried about Apple's P/E multiple, but on EV to free cash flow it looks pretty cheap compared with the Magnificent Seven, most of which lack free cash flow. Apple has shown it keeps growing free cash flow, and its capex is modest, about $13 billion this year. It is well placed as the gateway to AI, and Siri AI has been a big step forward. He does worry that gross margins will disappoint in the December quarter because of much higher memory costs, but the longer-term story holds.

  “if you look on EV to free cash flow and you compare it to the Max seven, it actually looks pretty cheap.”at 9:17

Seagate Technology Holdings

• Mark Newman · BernsteinBullish

  Seagate is his top pick: hard disk drive pricing is rising at an accelerating rate, with five quarters of orders already signed.

  Seagate is his top pick because it has the tailwinds of the hard disk drive market, which has rising prices and strong demand, plus a better cost profile than peers. HDD is earlier in its cycle than memory: pricing is accelerating, not decelerating. Purchase orders are already signed for the next five quarters, so the company knows the pricing ahead, and that will drive earnings growth over the next few quarters. Demand is tight across DRAM, NAND, HDD and even tape.

  “Seagate is our top pick because not only do they have the tailwinds of what's going on in hard disk drive playing out, which is rising prices, strong demand, but also they have better cost profile as well.”at 4:33

Western Digital

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

• Mark Newman · BernsteinBearish

  Western Digital lagging because it is falling behind on next-generation hard disk drive technology, a risk for the next year.

  Western Digital has done worse than Seagate, and the reason is that it is falling behind on technology, specifically next-generation hard disk drive technology. He sees risk over the next year or so as the company tries to catch up, while Seagate's better cost profile and pricing tailwinds leave it in a stronger position.

  “the reason why Western Digital has done a bit worse is because they're falling behind a bit on technology. That's the next generation hard disk drive technology.”at 4:51

Chevron

Across the shows: 3 speakers in other episodes, 2 bullish and 1 bearish calls, past 30 days

• Sarat Sethi · Douglas C. Lane & AssociatesBullish

  Chevron offers rising dividends, buybacks and an inflation hedge, making energy better than bonds for equity-heavy portfolios.

  For a portfolio that is 100% equity, energy is better than bonds. Energy majors like Chevron have rising dividends and buy back shares, which lifts the stock. They are also a strong inflation hedge against events happening in the world. Energy is a good hedge within the portfolio against the other side of the trade, as seen with airlines hurt by high fuel costs.

  “Yes, definitely better than bonds because thing with the Chevron excellence of the world, you have rising dividends as well. They buy back shares, stock goes up, and it's a great inflation hedge to things that are going on in the world.”at 32:23

Delta Air Lines

Across the shows: 7 speakers in other episodes, 7 bullish and 0 bearish calls, past 30 days

• Sarat Sethi · Douglas C. Lane & AssociatesBullish

  Delta is the best-run airline; premium demand holds up despite high oil prices and it stays cash-flow positive.

  Delta is the best-run airline, doing its best with oil prices. Traffic is still there, including premium traffic, and the company is still cash-flow positive and making money. It can pass some costs on. As oil prices come down over time, its profits should rise further, helped by loyal customers coming back. The upper end of the K-shaped consumer is less sensitive to price, so premium carriers hold up better.

  “I think, again, Delta is the best run airline we have out there. They are doing their best with oil prices the way it is.”at 32:50

Southwest Airlines Co.

• Sarat Sethi · Douglas C. Lane & AssociatesBearish

  Southwest and other non-premium carriers will be hurt more because their pricing may not stick.

  The upper K of the consumer is less sensitive to price than the lower K. Airlines focused on premium, like Delta, are fine, but airlines like Southwest that are not into premium will be hurt more, because their pricing might not stick with a more price-sensitive customer base. He says there is a breaking point, but consumers are not there yet.

  “The upward K is not as sensitive to price movements as the lower K. So the airlines that are more focused, maybe the Southwest or some of the others that are not into premium, I think will get hurt more because their pricing might not stick as much.”at 34:45

United Airlines Holdings

• Sarat Sethi · Douglas C. Lane & AssociatesBullish

  United's raised status requirements build loyalty, helping United and Delta at others' expense.

  United raised its status requirements for next year. Customers want their status and the premiumization that comes with it, so they stay loyal to the same airline. That helps United and Delta and hurts other airlines. He notes that United shares are down 7% year to date despite this, so the loyalty effect is not yet in the stock.

  “That's where this is really going. It will also mean that you'll keep on trying to fly the same airline and you'll be loyal because you want to hit it the same. That helps United and that helps Delta.”at 35:29

Natera

• David Miller · Catalyst FundsBullish

  Natera's cancer blood-test platform can drive exponential margins and justifies its valuation.

  Natera's Signatera platform, recently FDA-approved, uses a blood test to show whether cancer remains after surgery and which treatment to use, replacing imprecise imaging. The test is recurring for the patient's lifetime. Revenue has grown about 37% annualized, margins could reach 70%, and its diagnostics and oncology business is growing over 50%. Miller argues this justifies the valuation despite a 127% one-year gain. He prefers it to large pharma such as Eli Lilly because a company of Natera's size can keep compounding at high margins for several years, while a trillion-dollar company has a limit on how big it can get.

  “Well, when you look at the revenue growth, it's been about 37% annualized. ... It looks like margins going forward could get to 70%.”at 38:27

Johnson & Johnson

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

• Sarat Sethi · Douglas C. Lane & AssociatesBullish

  J&J's post-earnings selloff overstates the problem; the stock looks cheap again and remains a great company.

  The stock fell on weakness in its med-tech unit, which Stryker and Boston Scientific had also flagged, and an overhang from the planned sale of its orthopedics division. Sethi argues the selloff is overdone. Guidance was raised above the start-of-year target, the pharma division is doing well, and the stock is still up 18% for the year. He says the valuation has reset to about 20 times earnings, down from the 15-16 range where he first got interested, and the company has a AAA balance sheet. He attributes the med-tech slowdown to consumers and hospitals in Asia, Europe and China pulling back on non-essential procedures amid Middle East tensions and high oil prices, which he sees as a manageable issue rather than a fundamental break.

  “I think it got baked in. It's 20 times earnings. It used to be trading at 15, 16. That's when we got interested. I think it's still a great company. It's a AAA balance sheet”at 41:00

General Motors Company

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

• Sarat Sethi · Douglas C. Lane & AssociatesUncertain

  GM is a cyclical auto company; oil-driven car sales slowdown and union pressure are real risks despite buybacks.

  Sethi says he was wrong to sell GM earlier, since he had expected the consumer to weaken, but consumers are still buying cars. He credits GM with good cash flow, buybacks and effective management through tariffs. He stresses that autos are hard businesses with no recurring revenue, that unions will eventually push for a bigger share of profits, and that a sustained oil price rise, for example a $25 increase, would drive car sales lower. He calls the stock a holding that moves within a band rather than a clear long-term winner, and describes its competitive position as strong but contested.

  “Brian, if oil goes up $25 from now, you know car sales are gonna start coming down.”at 43:46

Banks

• Gerard Cassidy · RBC Capital Markets

  Bank Q3 numbers were in line to slightly better, but earnings revisions and buybacks will be less strong than Q2.

  Estimate revisions will not be as powerful as in Q2, when the group posted blowout numbers. Q3 results were in line to slightly better, with strong core commercial banking, but investment banking and trading were not as strong. Share buybacks, a strong component of the sector, are likely to be dialed back because lending is strong and needs capital, as JPMorgan's Jamie Dimon noted.

  “the estimate revisions are not going to be as powerful or as positive as we saw in the second quarter when the numbers for the group were just blowout numbers.”at 15:16

• Gerard Cassidy · RBC Capital Markets

  Rising long-term rates could erode bank capital via AOCI unrealized bond losses, though capital remains very strong.

  Long-end rates have moved up sharply recently. Higher rates create unrealized bond losses that flow through accumulated other comprehensive income, which raises concern about bank capital levels and may have caused some investors to step aside. Rising short-term rates initially help net interest margins, although that benefit fades if hikes continue. Capital is nonetheless very strong, and 2023's regional bank failures make investors cautious.

  “there's a concern that as interest rates go higher, that that might be impacting the capital levels for the banks because of the AOCI, accumulated other comprehensive income, which is essentially unrealized bond losses.”at 15:49

• Gerard Cassidy · RBC Capital Markets

  Bank credit quality is very healthy; JPMorgan and Citi card losses came in well below expectations.

  Second-quarter credit was strong. JPMorgan's card credit losses came in well below expectations, and Citi's did too. Both commercial and consumer credit are very healthy with strong trends. Rising rates could make credit more stressful over time and could postpone debt capital markets issuance, but that has not shown up yet, and investors are not selling bank stocks over credit.

  “Credit today, both on the commercial and consumer side, very healthy. Credit trends strong.”at 18:43

US stock market outlook

• Paul Tudor Jones · Tudor Investment Corporation

  2027 will be very challenging for stocks; the market feels like 1999, with AI adopters and non-adopters diverging.

  He says it still feels like 1999. The market is a two-speed, perfectly bifurcated market: companies adopting AI and those that are not are going in opposite directions. That divergence is why he expects 2027 to be really, really challenging for the stock market.

  “It still feels like 1999, a two speed market. You've got it completely perfectly bifurcated in the sense that you have obviously everything that's adopting AI and everything that's not, and they're going in opposite directions. And 2027 is gonna be really, really challenging for the stock market.”at 21:28

• Saira Malik · Nuveen

  Q3 earnings growth is expected at 27% by consensus, led by technology stocks.

  She follows earnings growth more than sentiment. Q3 earnings growth, kicking off this week, is expected at 27% according to consensus, and that will be led by technology stocks. The market is a have and have-not story, with technology the haves. Earnings are the anchor against the narrative that the market will fall.

  “But what I like to follow is earnings growth. And if you look at Q3 earnings growth, which is kicking off this week, we expect 27% earnings growth according to consensus. That's going to be led by technology stocks.”at 22:30

• Sarat Sethi · Douglas C. Lane & Associates

  Value and cash-flow stocks could do well as in the first post-2000 decade, since rates are now at 5%.

  Investors can barbell: keep growth exposure, and hold cash-flow-heavy parts of the market that partake if growth stalls. The first decade after the 2000 crash was great for the Russell and value stocks. That has not happened in 15 years because rates are now at 5%, not zero, which favors cash-flow businesses.

  “The first decade was great for the Russell stocks. The value stocks did really well. We haven't seen that in fifteen years because we also have interest rates going at 5% finally, not zero and two.”at 24:09

AI infrastructure & data centers

• Mark Newman · Bernstein

  AI's core is data, so demand flows through memory, storage and tape, all of which are sold out.

  The core of the AI revolution is data, and that data sits in memory and storage across the whole hierarchy, from DRAM to NAND to hard disk drive and even tape. DRAM, NAND and hard disk drives are all sold out, so customers are being pushed to older tape storage because they lack enough hard drives and NAND. The market for storage is extremely tight.

  “the core of AI is data. What's driving AI revolution right now is data. That data all sits in memory and storage all the way throughout the hierarchy from DRAM to NAND to hard disk drive”at 6:30

• Saira Malik · Nuveen

  The jury is still out on whether AI infrastructure spending will turn into monetization in a reasonable time.

  The key question is whether all the spending on AI infrastructure eventually turns into monetization. She admits the jury is still out on that. Whether monetization happens in a time frame that matters for the stock market is a separate question, which is why she keeps technology exposure but diversifies.

  “The key question, of course, though, is is all of this spending on AI infrastructure going to eventually turn into monetization? Admittedly, I think the jury is still out on that.”at 22:47

AI chips & semiconductors

• Mark Newman · Bernstein

  Memory stocks have sold off on fears of slowing price increases, making them increasingly attractive with upside.

  Memory stocks ran up a lot last year and have since sold off because investors fear that memory price increases are decelerating. He sees that selloff as making the group increasingly attractive, with quite a lot of upside from here. Memory and hard disk drives are the fundamental drivers of AI data storage, so the pullback looks like an entry point.

  “they've sold off quite a bit, and I think this is getting increasingly much more attractive here.”at 3:51

International equities

• Saira Malik · Nuveen

  Global equities diversify away from US tech concentration because the rest of the world is much less tech-exposed.

  Investors should keep their US technology exposure but also participate in the rest of the world. Global equities are much less tech-exposed than the US, so they diversify away from concentration in AI-driven US tech. This is her preferred way to diversify rather than betting against the market.

  “So global equities are a great way to do that. You hold on to your tech exposure in The US but you can also participate in the rest of the world, which is much less tech exposed.”at 22:55

Credit markets

• Saira Malik · Nuveen

  Municipal bonds lagged significantly last year and are having a catch-up trade this year.

  Municipal bonds are a lagging asset class that fell significantly behind last year. They are having a nice catch-up trade this year, which makes them a diversification option alongside global equities, alternatives and private markets.

  “You can look at lagging asset classes and of all things fixed income like municipal bonds which lagged pretty significantly last year and having a nice catch up trade somewhat this year.”at 26:20

Oil & fuels

• Paul Tudor Jones · Tudor Investment Corporation

  He is long oil and bullish, expecting crude to rally another $20 to $25.

  He is long oil and bullish on it, and says it can rally another 20 or 25 dollars from current levels. He gives no detailed mechanism, but he is positioned for it, and Middle East headlines are driving oil volatility.

  “Long oil, bullish on oil. I think it can rally another 20 or $25.”at 30:17

Commodities (broad)

• Sarat Sethi · Douglas C. Lane & Associates

  Energy is a portfolio hedge: commodities rise when the dollar weakens, and they are a good inflation hedge.

  He holds market-weight energy because it is a commodity and it works as a hedge in the portfolio. Energy correlates with the US dollar, so when the dollar weakens, commodity prices rise. He notes that oil can roll over if the global economy slows, so the holding is a hedge, not a bet on fundamentals.

  “I have market [weight] energy because it's a commodity. It also correlates with the price of the US dollar, so dollar gets weaker, commodity prices go up”at 31:03