Retail Investors Chase Shiny Objects While Ignoring the S&P 500

**SPEAKER_1** (0:01)
This is Invest Talk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

**Justin Klein** (0:15)
Good afternoon, fellow investors, and welcome back to another edition of Invest Talk. It's our Wednesday, July 15th, 2026 edition.
And I'm excited for this hour to speak with you. Whatever is on your mind, we are here for it. The show is about making you a better investor. And we mainly do that by bringing you data, bringing you perspective so that you can make better decisions with your money. But most of all, it's about you, what is on your mind. And that's why we collect your questions in various ways. Our favorite is always a live call or leaving a question on our voice bank, 24-7. Either way, that is a great way. Those are great ways to get us your questions, your concerns, so that we can not only help you, but help others in the InvestTalk community.
Because I guarantee you that whatever is on your mind, question you might have is something another InvestTalk listener has as well. So you're helping many of you out there by picking up the phone and giving us a call. So I'm ready for whatever is on your mind. 88899chart is how to get through and ask your question on today's show. Now, just a bit, we'll talk about today's market performance and then run down show topics for the hour. But first, let's tackle this first caller question now.

**SPEAKER_3** (1:49)
Hello, I wanted to get your opinion on Sprouts Farmers Market.

**SPEAKER_4** (1:53)
That's a good symbol with SFM. Thank you.

**Justin Klein** (1:56)
All right. Looking at Sprouts, SFM is the symbol. It's the name that we used to own for clients. Still like the name.
So I'm pulling up my computer is running a little, a little, a little behind today. It's a, maybe it's the heat.
I'm not sure, but it's definitely dragging a little bit, but Sprouts is the name, like I said, we used to own for clients. We sold it as it started to lose its momentum well above $100 per share. And it continues to kind of lose some momentum. It's now down to $73 and change at the close today, but it's still a very, very good business. Good balance sheet, only about $2 billion in debt on a $7 billion market cap. Free cash flow of $360 million, which is down from its all-time high, around $500 million. But you're still getting a free cash flow yields of about 5% or so. It's pretty good. Return equity, 36%. I like that. It's what's it doing with its cash flow. It's buying back shares. It continues to do that. So I think it's good capital allocation earnings this year. It's supposed to be at 5% and then 6% next year.
And the reason it's struggled recently, I think, is more to do with that slowing of growth. In 2023, earnings are up 19%. 2024 earnings are up 32%. 2025 last year earnings are up 42%. But since then, once again, expectations for growth has slowed dramatically, which means multiple contraction. The question is, is this cheap enough? Because for Looking EBITDA, enterprise value EBITDA is only at about 10, which is near the low end of its range. My issue, though, is the technicals remain to poor. It just recently hit a high around 91, and just over the past six, seven, eight trading days or so, it's down to, like I said, 92 and change. So quite the pullback.
I would probably take a shot on it around 65 I think it's cheap at those levels.
I think it's good risk versus reward at those levels. The question is, where is the ultimate bottom here? I think long term, this is a good area. Anything in the 60s, I would say, is a good, you're talking about 10 times forward-looking earnings. For everyone else out there, Sprouts, they're big here in California. They have a lot of stores, grocery stores here. It's all about organic foods, natural foods, vitamins, supplements. It's a great store to shop at. I shop there regularly. So I love the business, I love the store, I like the long-term value here, but I understand the technicals still leave a lot to be desired. I would want to see this in the mid-60s to really load up, but I think you're getting there. There was a lot of ground to cover over the next 45 minutes or so, time permitting, we'll get to all of it. We had a great show yesterday. We looked into this story, how to protect your portfolio from inflation's second wave. We also answered a listener question on Costco. So if you happen to miss it, go check it out. The best way to get every show is to follow InvestTalk wherever you get your podcasts. And once again, we have a great show for the next 45 minutes or so. Our main focus point is how retail investors are chasing the shiny objects. While ignoring the S&P, new data shows retail traders are piling in to speculative assets and momentum plays, sector momentum plays. This is a behavioral pattern that is historically late cycle risk taking. So we'll explore the psychology behind this trend and why chasing shiny objects always ends badly for individual investors. We'll also talk about other topics including Brussels and European banks. They're actually loosening their regulations and frankly, this is a good thing for the broader economy, at least in the short term. It's inflationary. We'll talk about that, what they might mean for the broader economy. Then small caps are doing very well.