Andrew Arons Sees MU Growth Opportunity, IBM Value Play in "Early" AI Days

SPEAKER_1 (0:00)

Do you want to welcome in Andrew Arons, though, founder and partner of Synergy Advisory Management Group. Andrew, great to have you on. We've got a nice positive move to the upside to close out the week so far.

And you say you remain bullish on the market through year end. You believe that the rally confirms that enterprise AI demand is real, but I have to ask the follow-up to that in the wake of the Financial Times report that we got yesterday about OpenAI that led to some pretty significant market reaction in terms of a potential discrepancy in their revenue reporting. How are you looking at that as it plays into your bull market thesis through year end?

Andrew Arons (0:39)

Yeah, I mean, really, there's a lot of discrepancy about revenue and what's going to happen going forward. But I mean, it still looks like we're very, very early here in AI, as everyone knows, and it looks like the market should do very, very well. A lot of money is still coming in, and a lot of these companies' earnings are spectacular. And I think that we're going to continue to see that as the market progresses here.

SPEAKER_1 (1:09)

And what's your strategy then, if that's our setup? Are you buying these intermittent dips? Are you watching the rotation closely and buying into some of the rotation? How are you approaching the market, Andrew?

Andrew Arons (1:22)

Well, right now we're seeing a lot of money obviously going into tech right now and we're seeing some of the stocks in the S&P that are really not doing that great. But there are some stocks that look very, very cheap to me. And I pointed out today that a couple that look like kind of bargains here to me are IBM and Home Depot.

SPEAKER_1 (1:45)

So IBM and Home Depot, what do you like about them? I mean, obviously not in the same space. And we have seen even sentiment coming out today. We're seeing the consumer under considerable amount, at least they're saying they feel they're under considerable amount of pressure. And home renovation is usually one of the first to go. So how are you looking at Home Depot?

Andrew Arons (2:04)

Well, I think that Home Depot, a lot of this soft housing market with the higher rates is already baked into the stock price. Stock has sold off pretty much 20 percent this year. And the valuation looks like there's tremendous upside here.

We're seeing a lot of earnings revisions and there's still a lot of building going on. I mean, I don't know. Everywhere I go, I've been traveling a lot here and seeing building everywhere. And it looks like they're still dominant with professional contractors. And they're paying a 3.15 dividend right here in the market just to hold it. And when you get Home Depot cheap, it's usually a good time to buy it here. And right where it's trading right now on the charts, it's like a really good area. And we saw a little bit of a move yesterday.

And I continue to think we're going to see this stock move up as we move into the final stretch of the year here.

SPEAKER_1 (3:10)

And is this a long-term hold for you, Andrew, or are you just cautiously watching? Because I mean, you highlighted their pro business and that has really given them a competitive advantage. It's been offsetting some of the losses they've seen more from the do-it-yourself consumer. But how long are you willing to wait on Home Depot to see if we actually get any sort of sustainable turnaround here that's meaningful for their earnings?

Andrew Arons (3:33)

Yeah, I mean, I don't think this is, I do think Home Depot is a long-term hold here, but I do think getting into this stock right now, I think people are going to be rewarded pretty nicely over the next six to nine months.

SPEAKER_1 (3:48)

All right. So then let's look at IBM, obviously a part of the AI trade here, but it's well below its 52-week high. So is this a value opportunity for you?

Andrew Arons (3:59)

Yeah. I mean, I've been watching IBM and recommending it here.

It's been very volatile because of what's going on in quantum, but they have a strong AI book at 12.5 billion. They're trading 30 percent off their 52-week high. We have earnings coming up in a few weeks. They're shifting their focus more to lucrative business areas, and they're helping traditional businesses adapt safely to the AI enterprise software. I think right now their earnings last quarter, I think people didn't like necessarily what they heard, but I think they may surprise, in my opinion, and we could see the stock move up quite handsomely.