00:00 Speaker A
David, I mean even your small cap heart is now looking at this dip and saying, okay, you can’t really avoid an opportunity like this. So what type of diversification should people still be balancing their portfolio with even if there is this outsized opportunity?
00:25 David Wagner
Now, great, great, another great question there. And that’s also me saying I like the magnificent seven on their pullback when small caps, my bailiwick, my love of my life, it’s also pulled back, you know, almost 17%. So what I would do right now, Brad, is probably two things. I love the barbell approach. I love barbelling the mega caps that have this characteristic of operating leverage, but I also like owning some higher quality small cap stocks that are very much depressed in valuation. I think you can diversify your portfolio by owning small cap value because if you think of that antiquated Tic Tac toe board that Morningstar uses like the S&P 500 is in your top right right now, large growth. And there’s no better way to hedge your portfolio by going on the opposite spectrum of that Tic Tac toe board of owning small value. So I think if you can own some quality small value, I think it’s a great pair with owning your mega cap tech stocks. And the second reason, and the second thing I think that you can do to kind of hedge your portfolio if you uh expect to see, I guess a little bit more volatility on the downside, especially as we, you know, uh go up against that April second tariff deadline. I think you can own some long puts uh within a few different active ETFs out there that are not handcuffed to uh the calendar, they’re not calendar constrained, that are very much active underneath the hood of the active ETF itself that owns these long puts.
02:47 Speaker A
Okay, we’re going to get to some of your picks and then we’ll pivot perhaps to discussing the Fed and of course the decision coming later today. But first, some of the other areas of opportunity that you’re looking across right now. One of them happens to be a mag seven name in Amazon, but you have two non-mag sevens in there in United Healthcare and then you’ve also got Copart. Why those?
03:19 David Wagner
Yeah, Brad. I think we’ll start with um the Amazon. And I think the most simplest way of saying this is in two facets. Um Amazon’s cheaper than Walmart right now. I I own both stocks in my concentrated portfolio, uh but when was the last time we saw Amazon trade at a valuation relative to Walmart that was cheaper? And then you couple that with the aspect that Amazon is one of the, you know, best companies that highlights the operating leverage within the magnificent seven, especially on the retail side and on their their cloud side. So I think the valuation is very palatable right now to own Amazon. Um if you look at the other side of the spectrum, I also like owning healthcare right now. Healthcare historically speaking has been one of the worst performing sectors during presidential election years, and that’s exactly what we saw in 2024. But now that we’re in 2025, we recognize that healthcare tends to be one of the best performers coming out of this presidential election cycle. And one of the biggest beneficiaries, I think there would be UNH. It trades at a pretty hefty discount to the S&P 500 by about 20%, putting it at almost one of the largest valuation spreads versus the S&P 500 ever. And I think a lot of the headline risk is overblown, the fundamentals remain. So I like UNH. But the third stock that I like here, Brad, is a little bit differentiating, it’s kind of an unknown name. And obviously with all the jargon and headline risk around tariffs, I tend to skew a little bit lower down to the market cap spectrum where you can get some more domestic exposure. And Copart is one of the coolest stocks that doesn’t have any tariff risk, that has a long runway for growth. It operates in an oligopolistic type of uh um market where it’s only peer being uh IAA. But as bad as this is to say this and as altruistic as I want to say this, Brad, like Copart’s the best way to play texting and driving because they’re basically an auction for salvage cars and they kind of have their hands in the pockets of a lot of these different insurance companies where they can get these salvage cars. And I think the best statistic to say here is if you go back 10 years ago, of all the cars that were in accidents, about maybe 12% of them were considered, you know, totaled. Fast forward to today with all the bells and the whistles and the electronics, it’s closer to almost 23% of cars that get in accidents are considered total. And the biggest beneficiary of that is going to be Copart, and they trade at a reasonable valuation.
07:41 Speaker A
All right, well,
