Transcript:
Caroline Woods:
Joining me now to kick off the week is Mark Gibbens, CIO of Gibbens Capital Management. Mark, great to have you here.
Mark Gibbens:
Thanks for having.
Caroline Woods:
Me. All right. So, coming off the long holiday weekend, S&P 500 only about a percent and a half away from all time highs. What’s the real state of the market right now. Do you look at this is another like higher or do you look at it as, you know, prepare for more volatility?
Mark Gibbens:
I guess I look at it as consolidation before another like higher. So we’re in this period before earnings you know start being recorded. So we have a couple weeks here or so before we you know we start hearing from Delta you know the banks etc.. But the overall earnings picture looks really good. So you know Q1 we were looking at about 30% earnings growth.
Mark Gibbens:
Q2 we’re looking at over 20% earnings growth. So the story that corporate America is telling us you know it looks very, very positive. We still have the eye buildout going on. The consumer now doesn’t have to worry about gas prices at the pump. So we are making a lot of good progress here.
Caroline Woods:
And we do actually have micron earnings this week. Is that the next real test for I.
Mark Gibbens:
Yeah I would say it’s kind of a miniature test. But it is definitely going to be a test. About the memory trade. Obviously micron has done, you know, exceptional this year. And actually, you know, some of the some of the memory players probably still have quite a bit of room left to go. You know, analysts are still trying to catch up their price targets to what’s fundamentally happening on the ground with those companies.
Mark Gibbens:
So it’s a little bit of a test. And then we’re going to get the real test when we start getting Q2 earnings.
Caroline Woods:
Would you buy micron ahead of earnings up 320% year to date.
Mark Gibbens:
We do own a little bit of micron right now. I’m not going to buy it. Pre earnings release. But we do want a little bit of it. We have some exposure there to the memory trade. We have exposure you know, to the broader I build out trade. So connectivity you know GPUs CPUs etc..
Caroline Woods:
What would you buy in the AI space right now?
Mark Gibbens:
Looking at the space in totality, I really like connectivity. So, you know, talking about a name like Creative Technologies. So, you know, they basically provide cables that are coming at a better, you know, cost point, that are energy efficient than many of the traditional optical providers. So I think, you know, they’re a pretty good company.
Mark Gibbens:
I also like AMD right now, I know it’s had a stellar run as well, but I don’t think the CPU piece of the data center buildout is really fully priced in yet. So I think those kind of companies, with their compute power and maybe traditional compute needs are still being undervalued.
Caroline Woods:
Okay. So you talked about maybe potentially some consolidation ahead of the next earnings season. So that means we could potentially see some red arrows. Right. But ultimately you have an 8200 price target on the S&P 500 by your end. Last year on earlier this year you had an 8000 price target. So what makes you even more confident now.
Mark Gibbens:
The delivery of the earnings. It’s all about the earnings. So when you see numbers close to 30% on Q1, you see the 20% for Q2 and you see 20% built out over time over the coming quarters. I mean, it’s just it’s power. Power. Powerful earnings growth. And when you look at, you know valuations, we’re not talking about really stretched valuations.
Mark Gibbens:
So I think we’re currently trading around 21 times the S&P 500. So the earnings really tell the story there.
Caroline Woods:
I saw your notes. You say this is a difficult market to poke holes in. What could ultimately prove your 8200 price target wrong.
Mark Gibbens:
I would say it would have to come from the inflation front. So there are some things coming down the pike. You know, have existed really, at least partially due to the Korean War conflict. So I would say if we’re talking about, you know, rate hikes and multiple rate hikes and Federal Reserve, I don’t think that’s what’s going to happen.
Mark Gibbens:
So I’m more in the camp, we’re probably going to be playing this out flat the entire year. As far as the Federal Reserve is concerned, I don’t think they’re going to raise rates. I don’t think they’re going to probably cut rates. But again, I would say a Federal Reserve reaction to inflation later in the year is probably the biggest hurdle.
Mark Gibbens:
Get over it. But I think that’s going to be a smaller hurdle than most people think.
Caroline Woods:
So you don’t think we’ll see any rate hikes or cuts for the remainder of this year?
Mark Gibbens:
I think that’s the most likely outcome. Is no, no, no hikes, no cuts. You know, kind of play it simple. You know, we just got in there. He’s starting to implement his agenda. He wants to look at, you know, more forward looking metrics than the Federal Reserve has traditionally, you know, looked at. So I think that’s I think that’s pretty good.
Caroline Woods:
But we’ll also be getting the results of the bank stress tests this week. Do you think that financials could continue to be this catchup trade. It obviously had been an underperforming sector year to date although it’s been doing well this month.
Mark Gibbens:
I do think so. So, you know, we hold positions and, you know, banks like Goldman Sachs, JP Morgan, PNC. What we really like, probably the most is Goldman Sachs. So we’re talking about, you know, a company that’s only trading at 18 times forward earnings. And look at the runway they have for it’s coming into the capital markets.
Mark Gibbens:
We just got the space IPO went you know went off without a hitch. We’re looking you know down the pike. We’re looking at you know OpenAI. We’re looking at traffic and a lot of other names in the air. They’re going to be coming to the public markets. So we like the fact that, you know, Goldman is going to be playing in that space.
Mark Gibbens:
And then on top of that, you have companies like, you know, Nvidia, Google that are trying to go to those capital markets and raise additional capital through equity or be it through debt.
Caroline Woods:
You mentioned SpaceX going off without a hitch hitch, aside from the fact that it is quite a bit lower than where it was just a few days ago, so is space X at 170 A of an opportunity here?
Mark Gibbens:
I think it could be longer term. So, you know, it is it’s going to be probably trading a little bit volatile, because it’s a brand new company. People are still trying to price it. I mean, if you look at metrics like, you know, price, price to sales, I think we’re looking at 125 or something like that.
Mark Gibbens:
So on traditional metrics, it’s really hard to value, you know, if you have a longer term time frame, it may be a good time to get it.
Caroline Woods:
Meanwhile, energy has had a tough month. That oil is below $80 a barrel, but it’s still the second best performing sector year to date behind technology. Do you look at that as an opportunity, or what price does oil have to be for it to be a buying opportunity for you?
Mark Gibbens:
You know, we don’t have very much exposure in the energy space. It’s not some, some place that we’re looking to, you know, put our capital to use. But if I were, I probably looking at places that are trying to rebuild facilities in the Middle East, something like that. But, you know, we’re mostly concentrated on right now or, you know, tech, you know, communication services, financials, industrials, those kind of areas of the market.
Caroline Woods:
Do you expect this to continue to be a tech driven market, or do you expect investors to ultimately be rewarded for, you know, kind of broadening their exposure?
Mark Gibbens:
I think it’s still going to be, tech driven market. But I am also going to caveat that with, that I do think, you know, it’s going to broaden out, but tech’s going to leave, so you kind of get the best of both worlds. So there’s other places to go. But it’s going to be led by tech.
Caroline Woods:
So for investors with extra cash right now what do you tell them.
Mark Gibbens:
I would say, you know, the build out of the data centers is not going to be stopping any time soon. That’s obviously a place to make sure you have exposure to. So that’s that’s really key right there. As far as other areas, you can go to, you know, banks, finance, as we discussed earlier, you know, industrials, lots of good, spots in the communication services space.
Mark Gibbens:
So, but I would say that the core part of your portfolio, should be, you know, have some, touching to the AI trade.
Caroline Woods:
Okay. And if we do get some consolidation over the next couple of weeks, like you might be expecting, what’s top of your shopping list? Give me a few names that you’d be buying aggressively on a pullback.
Mark Gibbens:
And are you buying aggressively on a pullback? You know, I think Nvidia itself is really just, you know, it’s not being paid attention to in the markets. It’s trading at a relatively low, valuation. Obviously we know the build out story. Obviously we know the GPU story. And that continues to roll on. So I don’t think investors are fully valuing that company.
Mark Gibbens:
But that’s you know, some of the other players, I think the CPU’s, you know, it’s it’s a different part of the data center. It’s more traditional. But I think they’re just starting to come online. So, you know, there are names out there like, AMD there are names out there, like Intel, even an ARM Holdings.
Mark Gibbens:
So I think CPUs is really going to be a place to go. And I think connectivity. So coming back to, you know, players like Marvell, credo technology. So we’re talking about the cables and optical, and those solutions that are within the data center.
Caroline Woods:
And just to confirm, these are names that you would buy now you kind of dollar cost averaging or you’d wait for a pullback.
Mark Gibbens:
I would probably dollar cost averaging. So and most if not all those positions are either already laid out. But I’d probably dollar cost averaging something like that kind of tip toe. As we go through this consolidation.
Caroline Woods:
Okay. All right. I think this is a great time to transition to our rapid fire round of this or that you’ve played before. Quick questions. Quick answers. Are you ready?
Mark Gibbens:
I’m ready.
Caroline Woods:
S&P 8200 by year end on track where a stretch.
Mark Gibbens:
Certainly on track. So we may get that short term consolidation but certainly on track.
Caroline Woods:
Second half playbook tech leadership or market broadening.
Mark Gibbens:
I hate to play both sides of the fence, but I’m going to hear. So, have you have some exposure outside of the tech trade. But tech is going to lead. So a little bit of both.
Caroline Woods:
Add risk here and lock in profits.
Mark Gibbens:
If one of the two at risk.
Caroline Woods:
Deploy cash now or wait for a pullback.
Mark Gibbens:
I would be, deploying a little bit of cash right now.
Caroline Woods:
Biggest second half risk inflation or midterm elections.
Mark Gibbens:
Inflation.
Caroline Woods:
Large caps or small caps for the rest of 2026.
Mark Gibbens:
That’s a good question. I prefer I prefer large but that we do hold some small cap exposure.
Caroline Woods:
Gold or Bitcoin.
Mark Gibbens:
A big one.
Caroline Woods:
Rate cut by year end. Yes or no?
Mark Gibbens:
I don’t think so. It’s possible. I don’t think so. I think it’s more likely for.
Caroline Woods:
AMD or Nvidia.
Mark Gibbens:
Right now AMD but they’re both great companies and we have exposure to both. But right now AMD.
Caroline Woods:
AMD or micron.
Mark Gibbens:
AMD.
Caroline Woods:
Qualcomm or Broadcom. Broadcom Microsoft or Oracle. Oracle Amazon or Shopify. Amazon JPMorgan or PNC. JPMorgan Bank stress tests not event or catalysts for financials.
Mark Gibbens:
Not event.
Caroline Woods:
Fedex or Carnival ahead of earnings tomorrow.
Mark Gibbens:
That’s a tough one I go Fedex yeah.
Caroline Woods:
Tech winner that surge too but still looks cheap.
Mark Gibbens:
Create a.
Caroline Woods:
One tech name that’s fully priced.
Mark Gibbens:
Fully priced. I guess maybe you could maybe say space, at least for the interim. Like I said, it’s going to backer. It’s going to bounce around. It’s going to be volatile. It just IPO. But I said that space.
Caroline Woods:
If you could only buy one stock today and hold it for five years, what is it.
Mark Gibbens:
One stock today and hold it for five years. Nvidia.
Caroline Woods:
One word to describe how your feeling about the market for the rest of 2026.
Mark Gibbens:
I’m pretty bullish. Maybe not like everybody else out there, but it’s hard to deny what’s going on in the corporate sector with earnings. You know, we’re looking at an economy that’s going around 3%. So it’s it’s hard not to look at it as, you know, and a good situation fundamental.
Caroline Woods:
What makes you boost your 8200 price target.
Mark Gibbens:
I would guess higher even higher earnings growth, which is going to be, a tough, but I mean, it’s just because it’s already so high. But maybe if it. Yeah, if it even accelerates further.
Caroline Woods:
All right. We’ll have to check back in with you. That’s Mark Gibbens, CIO of Gibbens Capital Management. Thanks so much, Mark. Really appreciate.
Mark Gibbens:
It. Thanks for having me.
Caroline Woods:
If you enjoyed this story, check out our full interview with Simeon Hyman where he explains how to diversify in today’s market.