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Barbell Strategy To Strengthen Your Portfolio (Episode 24)

Barbell Strategy To Strengthen Your Portfolio (Episode 24)

Details Transcript Guests

In this week’s episode of the MarketBeat Podcast, Kate chats with David Wagner, Equity Analyst & Portfolio Manager at Aptus Capital Advisors.

Stocks Mentioned in This Episode

Company	MarketRank™	Current Price	Dividend Yield	P/E Ratio
HAL Halliburton	4.784 of 5 stars	$19.91 -2.8%	3.42%	7.04
TS Tenaris	3.8961 of 5 stars	$32.90 -1.2%	6.81%	9.11
PXD Pioneer Natural Resources	0.7578 of 5 stars	$269.62	1.85%	13.32
KBH KB Home	4.9599 of 5 stars	$51.40 -3.4%	1.95%	6.07
DHI D.R. Horton	4.9803 of 5 stars	$119.68 -2.4%	1.34%	8.46

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Kate Stalter
Host

00:04

Welcome to The MarketBeat Podcast. I'm your host, Kate Stalter. And in this show, we cut through the noise and give you real market insights from professional investors, traders, asset managers, and analysts, our guests put the market developments in context and give you actionable information to make you a more successful trader or investor let's get started.

Kate Stalter
Host

00:33

So I'm sure you're feeling this too. As this current market downturn just continues more worry seep into the investing psyche. Maybe you're like me. You're hearing more about various hedging strategies to protect capital while also increasing your probability for gains. Now, one strategy that professional investors use is called the barbell, which is typically applied to fixed income. It allows a portfolio to strike a balance between higher risk on one side and greater stability and lower risk on the other. So for example, a portfolio could be weighted on one side with high yield bonds, which are a higher risk asset. These offer the potential for bigger return while balancing that on the other side, with lower risk, lower return investments like government bonds. Now, when it comes to equities, that kind of strategy is less common, but it can still be very effective. And today's guest gives us an example of a sector that's currently high growth, but with plenty of room to run and another that's been beaten down, but where he also sees upside potential and tailwinds ahead, and that's the type of strategy.

Kate Stalter
Host

01:50

That's exactly what the current market volatility and broad global uncertainty calls for. And here's the great news. It's not complicated. That's the beauty of pairing two different equity sectors as part of a wider strategy for growing your portfolio while adding an element of protection at the same time as I'm recording this, the market is turning lower again. As the institutional investors are digesting the potential impact of the fed meeting on May 4th and that 50 bibs increase in the fed funds rate. Now this means we all need to be looking at something beyond the traditional 60 40, if you're a long term investor or just the tried and true growth stock picking that works in many market cycles. If you like to trade, this is not the environment for either of those full stop. Okay? So in today's interview, you will hear a lot about two sectors, energy and home building and what the macro environment is for both and how today's guest expects those to perform going forward.

Kate Stalter
Host

02:56

Given developments in the past few years, both having to do with the pandemic fallout and also ESG investing among other factors in the case of energy. So there's a lot going on behind the scenes that affects investment potential and today's guest lays out those cases for you in a really fun, energetic, entertaining way. Lots of gems here. You don't wanna miss this. Here's my interview with David Wagner of Aptis ETFs. All right. So David, as we're talking, we're seeing the same thing. Everybody who watches the market is seeing right now, just extreme volatility. We're seeing a lot going on in the world with inflation, with supply chain disruptions, commodity prices going up. I mean, we're just seeing a lot of things that are affecting the investment environment right now. Give us your take on that.

David Wagner
Guest

03:51

We have never seen a market. In my opinion, obviously I have a short career I've only been in the industry 10 years, but an market environment that we've never seen before. And I think it's a market environment that has put a lot of people's brains into pretzels because going back in history, I'm a big believer reading in history that I don't think we've ever had an environment where we've had so many macro uncertainties overhanging in the market right now. I mean, just this week we saw the NASDAQ, uh, close at fresh year to date lows and the S and P 500 close essentially at their year to date lows. And, you know, I think the selling that we've seen here over the cross past several, um, in trading days has been very, very intense. So how I wanna really start to look at this is, you know, what's been really going on, what's been causing this downtrodden market here lately, so why have they stopped? And so why have they started falling part of me? And we know that the S and P 500, just basically since last Wednesday, just five trading days or so, the market's down about 7%. And if there was a single reason, why is the market down? It's rising worries about a global recession, the artwork keeps getting thrown around everywhere, any market pundit that you listen to, whether it's CNBC or Bloomberg, they really started talking about that. When you had that two day inversion of the 10 year, two year spread, uh, curve right there.

Kate Stalter
Host

05:06

You know, sometimes I worry that when they start talking like this, that it becomes a self-fulfilling prophecy, just cuz everybody's saying it. I mean, is there anything to that?

David Wagner
Guest

05:16

No, I, I fully think so too, because you know, we only saw that ten two spread invert for like two days whatsoever. That was the fastest spread Inver ever since the first, uh, rate hiked by the fed. It took 16 days to do that. It's playing into the narrative it sells. But what, the thing that a lot of people don't understand is that when you get this type of inversion, the equity market from that inversion for the next 12 months tends to have positive returns tune of an average return of 15%. So it's just really the media just telling, Hey, you should be scared. And that's why you've seen a lot of the volatility in the market. Here

Kate Stalter
Host

05:48

It is. And that's how they make their money by yeah. Scaring people and getting them to come back. That's absolutely true. So tell us though, within that backdrop, there have been sectors and industries that at least till very recently were performing well, the energy sector is one that I was looking at now it did start to decline recently and this fresh bout of volatility, but really has been the top S and P sector for quite some time now.

David Wagner
Guest

06:21

Absolutely. And just a short period of time, because it was probably one of the most hated sectors over the last decade. Okay. How we do our investment strategy here at Apptus is I love baring things. And so two of the favorite areas of the market right now are energy. So you're looking at EMPS oil field servicers, and I like to barbell that actually with home builders. And so if you bifurcate my two kind of bullish calls here is energy. Well, that's an area of the market that has continued to do very well. On the other hand, I don't think you could have, uh, worse sentiment against home builders right now. So that's really how we like to look at our investments.

Kate Stalter
Host

06:57

Talk a little bit about the barbell strategy, just for those who might not be familiar with what you mean by that.

David Wagner
Guest

07:03

Yeah. So the barbell strategy's kind of taking on two completely polar opposite style of investing strategy. So in this case, we're choosing an area of the market that the market has one rewarded and there's very positive sentiment to it. And pairing that with a very much unloved area of the market home builders that has not performed well whatsoever.

Kate Stalter
Host

07:23

And let's go back and talk about energy first and what's going on there. Cause I have questions about both of those sectors, David. So yeah. Talk to me about in the energy industry in particular, what you like there and what you're seeing in terms of how this might play out.

David Wagner
Guest

07:38

Yeah. So there's a commonality between these two actually, and it's under investment in both spaces and I might get a little bit technical on the oil side, just cuz we are so overweight here. And it's very interesting too, in my opinion. And hopefully everyone else listened here to understand how underinvested the United States is from an energy standpoint. So if you just look at it from this oral standpoint, I think the most bullish data for energy point providing it, this structural support to prices is the chronic lack of global CapEx investment over the last three to four years. And if you look at domestic public EMP companies, EMP is exploration and production companies. It's the oil companies going into the ground to take out the oil. If you go back to EMP days of the high flying EMP days from like maybe 2011 to 2014, um, they were reinvesting about 110% to 130% of their cash flow back into the ground to take out more oil.

David Wagner
Guest

08:30

So if you fast forward to today, well let's just say 2019 to today that number has substantially decreased in 2019, it was 95% of their free cash flow, 2020. It was 80, 20, 21. It was 40% of their free cash flow. And they're reinvesting this amount from lower percentages of smaller cash flows than they were back in 2011 to 2014 because we know that energy prices are substantially lower than where they were down during that time period from 2019 to really 2020, obviously not the case for 2021. Now that we're seeing oil, you know, over $100. But to put that in absolute terms, you know, the annual CapEx by the S and P 500 energy constituents was probably about 200 billion back in 2011 today, it's only close to about 50 billion right now, one quarter of the size. So there's been substantial under investment right now in the energy side, in our opinion.

Kate Stalter
Host

09:23

So why did that happen?

David Wagner
Guest

09:24

well, there's probably two reasons for that one being ESG. That's probably the smallest part of that too, that really tried to curtail the expiration of hydrocarbons. Just cause obviously from an ESG standpoint, it wasn't the best thing to do. Obviously we've seen a huge push, you know, the rise of Tesla, the rise of Rivian and all these other electric vehicles really take precedence here. But I think the big reason for that is, is, Hey, well, a lot of these companies couldn't make money from 20 15, 20 16, 20 17, their break evens from taking oil outta the ground and get it basically produced was about 45 to 50 to 60, in some cases, depending on where in the United States, they were to $70 a barrel. And when oil per barrels trading substantially below that for quite some time, why would a company go in and just start burning money? Cuz that's exactly what they're doing during that time period. So they really started to curtail and take away from production because Hey, they wanted to make some type of profit and they couldn't do it in that type of environment.

Kate Stalter
Host

10:21

Okay. Makes a lot of sense then. Yeah. And I'm looking at, as you were speaking, I pulled up the chart for the X XLE ETF just to kind of use as a proxy for the industry here. And I am looking exactly at what you're talking about, that 2011 to 2014 timeframe, nice rally in there. And then kind of the XLE kind of peaked in June, 2014 and has, has not reached that level since then.

David Wagner
Guest

10:47

And I think one of the biggest things that really cause obviously in this industry, you're always looking for the next dollar of investment. All, you don't wanna be the last one holding the bag. And obviously there was a substantial, you know, clout over the entire energy industry just cuz they were burning so much capital they're burning so much money, it's difficult to be profitable. There's been a mindset, a mentality change from the management standpoint within MPS that has really started to get not just energy head funds, but the generalist investor to really start looking at EMP companies as a viable consideration for investment, obviously, you know, helps when, you know, oil straighten above hundred dollars and they can now produce at a more efficient rate of maybe $30 in the Perme basis, which was six $50, you know, five, six years ago. So they're more efficient for taking this oil outta the ground.

David Wagner
Guest

11:33

But I think the game changer here, Kate is the fact that they have changed their mindset from a capital allocation policy. Like I just mentioned before, most companies were, you know, putting 125% of their free cash flow back into the ground for growth. Well, a lot of these management teams came out and said, Hey, you know, we're gonna stop doing that. We want to reward our shareholders that have been with us. So they have actually started to do substantial amounts of shared buybacks, a substantial amount of dividends of core dividend and a burial dividend. And a lot of these companies like PXD Devin Diamondback, the main non-integrated EMP companies say, Hey, we're gonna pay out 50 to 75% of our previous quarters, free cash flow in dividends or share buybacks. And obviously that is a huge change in mentality from a shareholder year old perspective than what you saw from, you know, Scott Sheffield, CEO of PXD, you know, just say five years ago. So there's huge interest out there right now.

Kate Stalter
Host

12:26

Yeah. And again, I'm looking at the XLE and I'm seeing, you know, there has been a tremendous rally since November, 2020. So are you kind of saying that rather than revenue growth that may be driving price appreciation in some of these that share buybacks are playing a bigger role,

David Wagner
Guest

12:43

They're starting to play a bigger role. I think if you did some type of attribution report of, you know, where that role is being played is probably, you know, 50%, top line, 30% margin expansion and about 20%, you know, the shareholder yield aspect of dividends and buybacks. Okay. I mean the big point was that it started to get investors attention that they're changing their mentality to be, you know, uh, more fruitful on the bottom line.

Kate Stalter
Host

13:07

Mm-hmm okay. So tell us about some specific stocks. You mentioned a few there a minute ago in passing. Did you wanna delve into any of those or some other ones that you wanted to talk about?

David Wagner
Guest

13:17

So right now I think this is still a huge macro trade whatsoever. Obviously you can get into the idiosyncratics of, of each single company and what they're doing from a fundamental standpoint and I'm at my heart, a bottoms up investor. So this is kind of difficult for me to do, but that's how the market is trading these names right now it's from a basket perspective. So we should probably focus a little bit more on the macro, on what's going on there too. So, you know, I mentioned, as you said, you know, PXD Fang Devin from an EMP standpoint and I still love EMP companies too, from what they're doing from a capital allocation standpoint and from valuation standpoint. But you know, I'm starting to really focus on oil field servicers and they're kind of the next transition, the next leg from EMPS that tend to get some type of tailwinds over a full energy market cycle.

David Wagner
Guest

14:04

And there's really two primary reasons that one can be long oil oil filled servicers because like I said, it's a natural progression from MPS, but first global crude and product inventories are below average. Currently it's about 413 million barrels. This falls below the lower band of the running five year average. So yeah, we need more activity. We need more drilling. We need more production in order to supply that deficit that we have. So that's reason one number two is secondly that these oil and gas companies produce oil ad in a two stage process it's called drilling one and completion drilling the Wells just as it sounds completion is the process of casing and fracking. The well, and these processes are done separately separately in order to save money. You know, operators have very much depleted the inventory of the already drilled Wells, which is known as the drilled uncompleted Wells or Duc.

David Wagner
Guest

15:00

So that just sets a stage for, you know, the second aspect of this process right here, the completion part here to enter stage right to complete that process because we need more drilled, rigs are going to be needed to increase this production. And to really also rebuild the drilled uncompleted well count that we've really started to deplete here over the past year or so because the first part, the drilling aspect is about 30% of the overall cost of getting the world outta the ground. The completion part is the 70%. So a lot of these EMP companies have really started to tap out the full amount of drilled Wells that they can have to start the completion process to now fulfill this on out. So, you know, they're going to have to start to replenish that. And I think if there's two names in this space, so that's the macro side, let's focus on the individual name side, cuz that's the more fun side we understand that the macro is there.

David Wagner
Guest

15:52

And I think the two names that I would probably look at in the oil field services space is going to be Halliburton and baker Hughes very, very similar and actually to NAS too, they're on the casing side, but where these two differ, you know, Halliburton and baker Hughes is that Halliburton is a pure play on drilling and completion. Whereas baker Hughes, they have their hand in all sorts of stuff. So the drilling and completion like Halliburton, but they also do subsea equipment turbo machinery. And they're actually actively trying to shift their revenue mix over the long run from upstream to more industrial chemical applications. And that's why it makes it a little bit of a differentiated oil field servicing story. And really since oil field servicers, the acronym's OFS. So I'm gonna start using that from here on out. Since the OFS has really caught a bit, Halliburton has actually materially outperformed baker Hughes simply because it is a pure play in the easiest cause and effect story to really understand kind of the Warren buffet side. Hey, this is the simple story, not the two complex story for me to understand, but yes, overall, these, both these names have quite run a bit, but you know, given the trends for more rigs and completions and productions, these names should probably continue to catch a bid moving forward in the future.

Kate Stalter
Host

17:00

Well, I'm looking at both of the charts cuz that's what I do when we talk here, I just pull up the charts while we're speaking. And you're right. Halliburton is it's slipped below it's 50 day moving average this week. But other than that has just been on a tremendous run for several months. And it looks like baker used maybe in a new consolidation here actually, cuz it's fallen enough. So could be kind of interesting

David Wagner
Guest

17:26

The terminology I've been using for this too, cuz obviously a lot of these names have outperformed. They may have been over bought in the new term. So that's why we started to see them pull back. But they are over under own. Pardon me over the longer periods of time. If you go back to the 1960s and seventies and early eighties, the average weight of energy in the S and P 500 is about 12% this year, year Tod date, the S and P weight in, in energy. Yeah, it has doubled from like two to 4%, but it's still minimal in the green scheme of things that, Hey, you can continue to see a lot of these names continue to play, especially in an inflationary environment. So yeah, very bullish in all these names.

Kate Stalter
Host

18:00

Yeah. And it's interesting because you mentioned ESG and I know that politically there's been over the years, some pushback against increased drilling, but the reality is oil and gas is not going away. It's still something that's gonna be needed. And it sounds like from what you're saying, there is a supply and demand issue right now.

David Wagner
Guest

18:19

Absolutely there is. And I think this is kind of counterintuitive and the ESG movement has probably been one of the most bullish things. The bullish themes for energy companies over the recent few years, it's really set the story moving forward that the lack of underinvestment in this space just cuz institutions have been throwing their money at energy companies. So they haven't had the capital out their hands, easy capital out their hands to really, uh, uh, put into reinvestment. So the whole ESG story has definitely helped this industry, uh, to prolong, I guess, their overall, uh, cycle.

Kate Stalter
Host

18:50

Yeah. And when I was a financial advisor, I used to explain to clients who would come in and say, I don't want oil and gas. I'm like, well, wait a minute. We're not gonna do that. And if you are interested in ESG, this is how these companies are held accountable to make progress. And once people understood that they had a different viewpoint of it, but I think that's something maybe that individual investors aren't really aware of is how the actual institutional owners do kind of hold their feet to the fire. Well,

David Wagner
Guest

19:18

I think ESG investors do tend to get it wrong. They see stuff as black and white and obviously the black is gonna be the Texas gold, uh, oil here in that case. that it's wrong. It's horrible. It's like gambling stocks or any other sin type of stocks, the sin stocks, but what you actually see the market start to reward. They don't just reward the black and white anymore. What they're following from an ESG perspective is, Hey, what is the cadence? Are you becoming more ESG? We just don't wanna push, you know, EMPS and oil off to the side that we'll never own them. They're the redheaded stepchild of ESG investing. We want to help them prolong and become more ESG friendly. So Hey, how can we do better? How can these oil companies do better from a flaring perspective? And you're actually starting to see a lot of these companies and PXD was at the forefront of this, come out with annual sustainability reports saying, Hey, how are we getting better? Cause we understand what we are doing to the ecosystem from a pollution standpoint. It's probably not the best thing, but we're trying to get better. We're never going to be perfect, but we're getting better. And that's what the actually the market from an ESG standpoint is starting to reward those that get better from the ESG standpoint,

Kate Stalter
Host

20:24

Which makes sense because that's how you can measure progress. Like that makes perfect sense. Not sure what stocks to buy and which to sell. Well, no worries. Market beat. Has you covered get the latest buy and sell ratings from wall Street's top performing most accurate and most respected research analyst. That's just one part of what you will receive as a MarketBeat all access subscriber. You'll also get MarketBeat's new trending stock lists, which monitor social media chatter in real time to help you identify the next game stop or AMC before you hear about it on the news, MarketBeat all access also features real time news market events and performance data for your stocks with the MarketBeat portfolio monitoring tool. And you can take a completely risk free trial for just $1. If you head over to the link we will put in the show notes, you'll get best in class stock research tools, performance ratings for wall street analysts, real time newsfeed, executive support team access, all of this add free for just $1 for the first month. Sign up today. The link is in the show notes. So let's do this. David let's switch over. Talk about the other side of the barbell, which is housing. And this is interesting to me because I've done some interviews here on the podcast recently and what I've been told by other analysts who also follow the housing industry is that we have a shortage in that area as well. But apparently there's some kind of similarity with under production. Isn't there,

David Wagner
Guest

22:07

There's a huge commonality, but I'm gonna ask you a question first. Were they bullish or bearish on home builders when they spoke about it?

Kate Stalter
Host

22:14

Uh, kind of neutral. I believe at least in the short term

David Wagner
Guest

22:17

Neutral in the short term. Yeah. You know, you're starting to see people dip their toes into this space. You're starting to see some outperformance in the last two weeks, but no one has really dove head first in because I don't think anyone wants to catch a falling knife. And that's what was occurring since the beginning of this year, that home builders were basically a falling knife. They were stuck in, you know, the doom loop of higher rate fears really since the end of last year, investors sentiment, you know, investors really felt as if home builders had 99 problems, but I can tell you demand right now is definitely not one of them. Yeah. But you know, I think where I differ from a lot of people here is that I disagree with the prevailing narrative that this year 2022 represents peak earnings implying a theorized collapse of margins and or buying demand due to the combination of cost inflation wage inflation on that side too.

David Wagner
Guest

23:05

And rising mortgage rates, we saw the mortgage rates 30 year mortgage rate rise above 5%, basically since for the first time since 2018. But I think the outlook for further earnings growth remains as strong as ever underscored by, uh, you know, a record supply demand gap that we continue to mention here. And more importantly, a drastically improved us consumer from other balance sheet perspective. Us consumers have never been better off than they are right now. Their balance sheet are unencumbered. They paid off debt surprisingly on their credit cards during COVID the us household from a number standpoint over the last 10 years are about 130% better off than where they were 10 years ago. If you actually look at it versus pre COVID, it's like 35%. So there's a lot of tailwinds in this industry

Kate Stalter
Host

23:47

Right now. But all you hear about is housing prices continuing to get bid up. I mean, one day I'll read an article that says, oh, maybe it's peaked. And then yesterday I read an article that said housing prices up 20% in the us and March or something. I hear what you're saying is that you have this confluence right now of strong demand, but also rising interest rates. And maybe it's more difficult for families to get into homes. And then you've also got this other thing about corporations like BlackRock buying up homes to rent them out. So what the heck's going on here in this industry.

David Wagner
Guest

24:22

So I I'm gonna start with the latter part there too. And I actually heard an interesting fact on the call with the cell side analyst. Um, last week that Blackstone has bought, say 300,000 homes over the last 10 years right now the addressable market for rental homes is close to 19 million. So the institutional private equity side is just still such a small sliver in this space right now. So I don't see them as a huge problem for the industry moving forward.

Kate Stalter
Host

24:45

Cuz so it's been exaggerated.

David Wagner
Guest

24:47

I think so, you know, they can throw crazy money and it Blackstone this week just, you know, bought American campus, ACC, ticker, ACC, a REIT, and they also bought a PS B parks. It's basically just a industrial park route too. So they have a lot of capital on their side. Don't get me wrong there too, but you're right. It's been overblown for sure at the key right now though, cuz obviously higher rates could potentially price out the lower end of buyers in the home market. So obviously they're gonna have to continue to rent much longer, but what we're seeing from management commentary, because obviously I really wanna look at that for future guidance. Hey, can they keep up with this demand what's going on from, you know, the supply side, what's more important what's going on from the cost side? You know, we spoke with the CEO of KBH, KB Holmes, not just last after the earnings call.

David Wagner
Guest

25:33

And he basically said, Hey demand, hasn't stopped whatsoever at all across the spectrum, across the United States, from what we're seeing in our universe of homes yesterday, the Dr. Horton announced their earnings ticker DHI and they tend to be a little bit on the lower end of the home echelon right now over the last 10 years, I think about 19% of their homes actually were canceled. At some point during the process, KBH was closer to two. So Dr. Horton does the lower end. They started to see sales come down slightly, you know, just cuz they, I think some people were priced out of that environment right now, but what's more important is that their price, what the cost that they were able to push on to whoever's buying the home. Well, it's continuing to expand. So margins are continuing to grow. So that's making up for the lower than expected revenue, uh, from an earnings perspective.

Kate Stalter
Host

26:22

Okay. So for retail investors who are listening to this and maybe wanna get ahead of things when there's a rebound are home builders kind of something that maybe, and I'm putting you on the spot a little bit here. Yeah. Are home builders, something that maybe are more of a watch list sector right now just to keep an eye on while it's still correcting or is there a case to be made for, Hey, maybe we're near the bottom here. What's your take?

David Wagner
Guest

26:48

I love that. You're putting me on the spot here too. and you know, investors never wanna catch a following knife in my strategy. I try not to do that. You know, you don't wanna be the Jim Croy of spitting into the wind. You want the wind that you're back. So you do wanna buy with some positive momentum and you know, anywhere you look from any analyst, they talk about, oh, PE valuations for home builders are three and a half times. They're pricing as if they're going out of business. But what I've learned over full home building cycle is PE actually tend to not matter. You know, you do not look at PEs from evaluation perspective right now for home builders, look at book value. And if you look over the last decade book values, once they hit below one times, that's really, when you wanna start dipping your toes into the water to start accumulating shares.

David Wagner
Guest

27:30

Dr. Horton over the last 10 years has had an average price to book value of two times. Alright, they're currently at one and a half times. I could maybe hold off on them for a little bit, but KBA KB homes, they tend to have a book value of 1.3 to 1.5 times over the last 10 years. Right now they're trading at an 80% discount to book value. So I would be more susceptible of, of buying KBH homes right now over Dr. Horton, but kind of like oil. It's a macro play as a whole. They're gonna trade together. I just would rather trade one and buy one that has, is trading at below book value with record demand, record margins, and just instilling a buyback program of 10% of their shares. Outstanding.

Kate Stalter
Host

28:07

So you're talking value stocks at this point.

David Wagner
Guest

28:10

Is there a category below value cuz that's where these people may be right now.

Kate Stalter
Host

28:15

Okay. Okay. Yeah. I just remember back from, uh, my financial advisory days, the price to book was something that was looked at quite a bit in terms of a value name,

David Wagner
Guest

28:27

No doubt. The Graham methodology approach. Even the early years of buffet who would always look to price to book as a ratio and in my mind, price to book is an antiquated, uh, metric to look at a standalone basis. And that's why when I was talking about KB homes, trading and below book value, I coupled that with, Hey, they've never seen such strong demand. The macro environment from a supply demand perspective has such an imbalance, right? Their margins are at historically high levels. So you have to couple price to book since it is an antiquated methodology in my mind with a catalyst for the stock to grow earnings.

Kate Stalter
Host

28:59

Okay. Hey, good, uh, insight right there for the listeners. Hey David, I'm looking at the time really cognizant of what we've talked about today. I know we had some other topics we were gonna get into, but I'll have to have you back to do that. Cuz we could talk for another two hours I think. Absolutely. But we'll do a part two at some point, let the listeners know how they can learn more about Aptis, what you're doing, how can they get in touch? Find out more about the funds.

David Wagner
Guest

29:26

Yeah. Great question. There. We have a website, Aptis, etfs.com at Aptus. We run five proprietary ETFs with four, the five focusing on draw down protection. We try to have we use, we believe that the antiquated 60, 40 portfolio, 60% stocks, 40% bonds is not the best way to look through the windshield moving forward. We think that it's a method of looking through the rear view mirror that you have to start looking at portfolios much differently from a volatility standpoint, cuz we are in a market that has seen a substantial amount of volatility, but we're also in a market where traditional fixed income. Probably isn't the answer moving forward in that a lot of investors who have earmarked, you know, a 40 year bull market in fixed income may not continue moving forward. So what our ETFs do is they provide an opportunity to efficiently get inject volatility into your portfolio where you can start owning more stocks than bonds in your overall asset allocation. But most importantly with the same amount of risk. So all, most of our strategies that we run from an ETF standpoint include some type of measure of uh, being long volatility.

Kate Stalter
Host

30:28

Yeah, I like that because I agree with your take on bonds right now as well. And if there are alternatives, whole other conversation. So remind us again, what is the URL that people can check out?

David Wagner
Guest

30:42

Yeah, it's Aptus etfs.com. We're just going to Google and type in Aptus capital advisors. We may be the only ETF active ETF shop based out of Alabama. So it shouldn't be too difficult to find us.

Kate Stalter
Host

30:54

And that's another conversation. Yes. All right. Hey David, thank you so much. Really enjoyed having you on the show today and we will have to do this again.

David Wagner
Guest

31:02

Thanks for having me.

Kate Stalter
Host

31:06

Thanks again for listening to The MarketBeat Podcast, do not forget to subscribe on Apple Podcasts, Spotify, Stitcher, Google, anywhere else, you get your Podcasts and you'll also find us on marketbeat.com. If you enjoy the content here, please give us a five star review. So others can also find all the great interviews and market insights that we bring to you each week. Also, did you know that MarketBeat has a YouTube channel? We sure do. The Podcasts are there as well as tips for getting the most out of MarketBeat and becoming as always a better investor or trader.

David Wagner, Guest

Equity Analyst & Portfolio Manager , Aptus Capital Advisors

Kate Stalter

Kate Stalter, Host

MarketBeat Contributor, MarketBeat

Kate Stalter is a Series 65-licensed asset manager, with more than two decades of experience in various areas of financial services. As an investment advisor and financial planner, Kate personally manages client portfolios, with a focus on successful retirement, including asset allocation, income generation and tax strategies. Kate also serves as a capital-markets contributor at Forbes.com, and is an expert columnist for the investment advisory channel at U.S. News & World Report.

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