Eddie Ghabour "Cautiously Optimistic" for MU Earnings, Why He's Deploying Cash in Market

SPEAKER_1 (0:00)

But I do want to welcome in our next guest, we've got Eddie Ghabour joining us this morning, owner of Key Advisors Wealth Management. Eddie, happy Friday to you. How are you looking at the markets this week? I mean, I'm looking at the big board. We've got a mixed picture, but a lot more green than we've had on the screen in the last two days.

Last we spoke, though, it was pre-fed. And I know that you had sidelined quite a lot of cash. So I'm curious now that we have the Fed decision, which I know you were in line and expecting a hike. How are you looking at those cash reserves? Are you still sitting on it? Are you deploying that cash now?

Eddie Ghabour (0:31)

We have deployed a lot of that cash post-fed. We got the hawkish message that we were expecting. We got the rate hike.

And now you've got max pessimism in regards to Fed policy moving forward. We're about as hawkish as you can expect from a sentiment perspective. Everyone is now continuing to raise the bar on how many hikes that the market's expecting over the next 12 months. We think that the market is too hawkish. So we're looking at this as an opportunity to buy the dips, which we did aggressively. One thing I'll say is our buys have really been focused on tech and semis. With the 10-year doing what it's done, it's made this market very narrow. There's lots of areas under the hood that are not working. And this is why as an investor, that's not a buy and hold for our clients, we tactically move and concentrate in areas of strength until the market tells us otherwise. So we went from a broadening play from the end of May through the summer to now getting rid of that more of a broadening story and starting to get really narrow into the semis that have underperformed for three months that look like they're getting ready to break out. And it's extremely impressive because in the face of the 10-year spiking as fast as it has, most people probably would think the opposite is happening. But even like a day like today, we are still seeing semis lead.

SPEAKER_1 (1:57)

Let me through that, I mean, you mentioned the underperformance of semis. You moved heavily back into big tech and semis. What specific signals are telling you that they're ready to run?

Eddie Ghabour (2:06)

So last Friday was a pretty impressive day on the market where towards the end of the close you really saw a lot of buyers coming in. And from a technical perspective, you had some names hit, AMD hit new highs.

You've got more and more semis above the 50-day, which before that they had, you know, cratered through the 50-day, some to the 200 So technically, the fundamental story has been there. Earnings have been strong, demand is there, but the technicals weren't supporting it. And July had a huge sell-off, post earnings for some of these companies. And now they are getting solid ground and solid footing. And we think the next move, after you've seen something like this kind of stay flat or underperform for a few months, the next move is usually a pretty violent move. You have to bet on whether you think that's going to be up or down. And we're betting that right now it's up until the market tells us otherwise. And we'll pivot if we have to.

SPEAKER_1 (3:00)

And I know you've got Micron as one of the names that you're buying. And with their earnings sort of kicking off the season for us next Wednesday, I'd love to know how you're looking at them. Because I mean, last earnings, we saw them beat heavily on top and bottom line. I think they even went beyond the whisper numbers and we still saw a negative reaction. Now, different technical set up for Micron coming into this earnings report. So what's giving you optimism here, Eddie, that we're going to get a different market reaction to what are expected to be, again, positive numbers and a top and bottom line beat?

Eddie Ghabour (3:33)

So I think we have an opposite set up as we did last earnings season. And I think when we go into this earnings number next week, I think you have pessimism, much worse positioning, much worse because the July sell-off, I mean names like Micron lost 30 to 50% of their value in a very short period of time. We did start buying in July and we recently added as they broke out even more to those positions. So we think positioning going into this earnings next week is actually more bearish than where we were last time. So we're expecting earnings to stay strong, but more importantly, we are cautiously optimistic that the opposite will happen, that they'll be rewarded for good numbers versus being punished for good numbers like they were last time.