U.S. stocks are hitting all-time highs, but can the rally continue? According to Adam Johnson, portfolio manager of the Bullseye American Ingenuity Fund, the answer is a resounding yes. In this high-energy interview, Adam makes the bullish case for American innovation, explains why AI is the most transformative force of our time, and names the companies poised to dominate the next decade.
From autonomous trucking and warehouse robotics to Tesla’s humanoid factory workers, Adam reveals the real-world AI applications already disrupting industries—and how investors can position for it. He also shares how he manages risk, takes profits, and navigates volatility in a market full of mixed signals.
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Adam Johnson 0:00
AI, artificial intelligence is the single most powerful theme that you and I and our viewers will have seen over the past 20 years and will see over the past 20 years. It’s bigger than.com it’s bigger than the cloud, it’s bigger than all those things, and it’s bigger because it touches every aspect of every business, and even as we’re beginning to realize all of us in our personal lives.
Maggie Lake 0:32
Hello everyone. Welcome to wealthion. I’m Maggie Lake, and joining me today is Adam Johnson, Portfolio Manager at Bullseye American ingenuity fund. Hey, Adam, it’s great to see you again.
Adam Johnson 0:41
Oh, likewise, Maggie, we certainly got a lot to talk about today. We do,
Maggie Lake 0:45
and we have a very interesting time to talk because we’re sitting sitting at record highs for US stocks. And I just think it’s worth reminding everyone, when we spoke last in mid March, you really dismissed talk of a recession and made the bull case for the US economy and companies, and that was not consensus at the time. And of course, we saw that big swoon after liberation day, you know, correction US stocks, but they have since come back and are now sitting at these highs. The US economy has been resilient. So, you know, it’s been interesting to see that play out, I think very much along the lines of your thinking, but I’m curious now, how you think about things, given that we are sitting at these record highs, how are you feeling about the US economy?
Adam Johnson 1:30
Well, new highs tend to get new highs right when markets are breaking out, they tend to keep breaking out for the simple fact that the reason they’re breaking out is something that not is just about today, but it’s about tomorrow and the next day and the month after, the month after. I mean, think about what we’ve heard in the past several days. Not only were there trade deals 15% tariff deals for many of the Asian countries now, that’s happening in the EU and 15, one, five, 15% is a lot less than we were first told back in April when stocks were in freefall. Maybe it’s the fact that, you know, easier for a cruel man to be kind than a kind man to be cruel, right? So in other words, President Trump said it’s going to be up here, and then we find out it’s only down here. And you say, Oh, that’s not so bad. You know, it’s like the kid who comes home and tells, you know, his parents, you know, my report card’s not going to be very good this year. I mean, it could be really bad. And so they’re thinking, why are there going to be some F’s? And he comes home with all C’s, and they go, hey, well done son, right? I mean, it’s not as bad as we thought. So I think that’s very important. Number two, I’m always amazed that people underestimate the resilience, creativity and power of not just the US economy, but the people who make it happen. You Me and all of our listeners, viewers, etc. I mean, this is just it’s the reason why, you know there were 1000s of people trying to get across the border every day. This is where the world wants to be, whether you’re a migrant coming across the border, or whether you are a European auto parts manufacturer or various other company that wants to get into this country and will withstand 15% tariffs. It’s the biggest economy in the world. It’s arguably the most creative. I mean, think about what we’re doing with AI and how that’s revolutionizing business, and not just this generation of businesses, but businesses as you look forward. So as I look forward, Maggie, I see so much to like, and I see new highs over certainly the summer and into the fall. It won’t be a straight line. You know, markets never are, but there’s a lot more to like than to
Maggie Lake 3:40
fear. So it’s so interesting you say that because the narrative that had taken hold was very much that, listen, this is the time for the rest of the world to now really shine. Valuations are so much lower. They’ve got tailwinds that we don’t have. You know? It was that everyone’s overexposed to the US, and even just rebalancing towards something more normal and historical is going to kind of create this big rotation out of the US, and it’s the rest of the world that looks attractive.
Adam Johnson 4:14
I’ve heard that argument more times than I could count, and it’s funny to me. I mean, okay, granted, I am the founder and portfolio manager of the American ingenuity fund. So I am vested in this economy by definition, and I purposely, when I set this up a number of years ago, decided that I wanted to focus exclusively on the US, because there are structural differences that make the US far more attractive, from transparency to a robust accounting system to a legal system that keeps people honest to fortunately, now under the current administration, a government that is business friendly, and now they’re particularly business. Friendly. There are fewer regulatory burdens here than there are in Europe. There’s also consistency to policy here in the US, despite the fact that we have a four year election cycle, you know, you think about what’s happening in China, they keep moving the goalposts. I mean, look what, look what President Xi did to Jack Ma and Alibaba and all the shareholders. They, they just kept changing all the the capital rules and the requirements, and it’s, I think, made investing in China very difficult, if not impossible. I don’t do it anyway. I exclusively invest in the US, but I just, you know, I look at the rest. I mean, do you really want to invest in Brazil and Argentina with all the crazy inflation down there and constant regime change, no, I do not Europe that is still just just so beholden to all of the people in Brussels who just can’t seem to reach any kind of decision, the fact that monetary policy, the euro, one currency is divorced from political policy. You know, what is it? 21 nations each with its own elected government. So there’s just so many internal issues there. And China, you know, dominates Asia. Yeah, okay. You could make an argument about Japan. You could make an argument about India, if you wanted to go to the fridge. I mean, Vietnam has been a story that people embrace as a high growth opportunity, and China substitute. Okay, fine, but you really need to have some expertise. I’ve traveled in Vietnam. It’s an exciting place, but you really need boots on the ground if you’re going to go to Vietnam or Indonesia or Malaysia, or any of these other sort of far flung opportunities. So I just keep coming back to the US, where we have the highest per capita income, we have consistent growth, and you know, all those structural assets that I talked about. So for me, the US is is just the place
Mario Rodríguez 6:55
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Unknown Speaker 7:19
right now, and you don’t see
Maggie Lake 7:22
that changing at all, because there are some that are worried about moving goal posts and executive orders, maybe more power being consolidated under the Presidential branch. And maybe that’s not a positive. Maybe that is going to give pause to international investors. You know, some of the negotiating style and the way the trade deals have been hammered out maybe carries reputational harm. You don’t, you don’t worry about any of that. You don’t see that as as really changing anything.
Adam Johnson 7:54
No. And I think the critics of President Trump argue that he is a megalomaniac, and I, by contrast, would argue, well, he’s actually doing it to make America better, right? If you say, Make America Great Again, that’s a political statement, but I think to make it better is a fair statement that everyone can get behind. You know, we could debate the big, beautiful bill, but it was arguably, depending upon how you measure it, one of the largest the administration, would say, the largest tax cut ever. What is that going to do the deficit? Well, it depends whether or not there’s stimulative growth that ends up generating more tax revenues, a la Ronald Reagan, which I think will be the case. I would say that $10 trillion of foreign direct investment from other countries and companies outside the US 10 trillion coming into the US 10 trillion since Election Day, no other president has ever done that. So it’s not as though President Trump, even if you hate him, is doing all this for his own ego. There may be part of that, but you know, he is doing it because he wants this to be the greatest, strongest country. I mean, I think even if this is not really a Wall Street issue, but I think it speaks to confidence, even the US bomber strike, where we flew bombers, what 36 hours from Missouri to Iran for a precision strike, did what needed to be done, got out, and no American lives lost, and the assets that were taken out in Iran were assets that the entire Mid East fears, nuclear bomb capability. So that, to me, was a reassertion of American strength. And I think the world likes that, whether you agree with this or not, depending upon what your politics are. The fact is, the world does look to the United States for leadership, and while some have criticized the lack of, or perhaps erosion of American exceptionalism, I would say, just look at the track record of the past six months, and America, the brand, is back. And I. Countries around the world respect that, and certainly investors around the world like that, and that is why US stocks are going to new highs, plus we also have earnings growth and economic growth and full employment. So again, I come back to what I said earlier. There is a lot to like, and in fact, there’s a lot more to like than to fear.
Maggie Lake 10:19
Yeah, you mentioned the tariffs, and we have been getting there’s a lot, I think, growing concern as we approach another deadline, but we’ve seen trade deals starting to get inked, and it was, it’s interesting the way you talked about it, because it is an expectation game, isn’t it. Do you think even though they’re a lot lower than the threat, they’re still higher than they’ve ever been before? Do you think that American companies, and I guess consumers can can digest and handle what looks like. 15% is going to be a baseline. If these keep falling in line on that, that seems to be what the administration is getting, at least, or the goal that’s higher than it has been in the past. You think that companies can handle that? It won’t hurt earnings? Yeah, I think
Adam Johnson 11:01
we can live with it. I think 10 to 15% is a level everyone can live with because, you know, it can be borne by sort of everybody, a little bit at a time. In other words, producers might eat a third of that 5% consumers might eat a third of that 5% right? And some of it just gets lost in supply chains. And remember, net imports into this country are only about three to 4% of GDP. Gross imports are call it 14% maybe 15. So you know, that’s only a fraction of the economy. It’s not like every single product in the US got more expensive. A fraction of products are going to get a fraction more expensive. And here’s the other thing Maggie that’s important to realize for many, many years. The past several decades, when US goods have gone overseas, they have, on average, faced about a 12 and a half percent tariff. Right? Europe would tariff us stuff at about 12 and a half percent, whereas we, the US, would only tariff on average imports at about two and a half percent. Well, no one had a problem with that right here, here, we Americans were facing four and a half to five times higher tariffs when our stuff goes goes overseas, and no one complained. Well, so guess what? Now we’re just doing the same. We’re bringing ours up to where they were, and everything’s going up a little bit. And so it’s a realignment, but the fact that we could live with having to pay those tariffs are seeing our products disadvantaged for so many decades. At 12 and a half percent tells me that they can deal with the same thing at 15% it’s a rebalancing. So there’s already a precedent for this level being acceptable once you get over the initial hump.
Maggie Lake 12:49
Yeah, yeah. And a lot of people have been calling had, had been saying that there was a rebalancing that was needed. You know, after this long period of globalization, we’ve got the Fed. We have a busy week. We have the Fed coming up. Fed meeting coming up as well. We have another one in September. Are are you worried at all about the bond market? What are your what’s your forecast for rates? And we’re going to get to some individual, some of your individual picks, in just a minute. But let’s round. Let’s round out on the macro front first. Yeah, it’s always
Adam Johnson 13:19
funny to hear a stock guy talk about bonds, yeah, as
Maggie Lake 13:21
long as they don’t. Well, this is it was roiling stocks earlier this year, though, right? And so, you know, well, no more. Bonds
Adam Johnson 13:28
are boiling stocks, no more. And one of the things that I as a stock investor have noticed about the bond market is how sanguine or comfortable the bond market is with the state of the economy. In other words, corporate bond spreads, just where viewers understand, bonds typically trade at a spread to treasuries, which are considered, you know, the risk free rate. So corporate bonds right now are trading at about 75 basis points, three quarters of a point, 75 basis points over the risk free rate. So if you say, just to make the math easy, that the 10 year is at four and a half percent, well, corporate bonds on average are trading 75 bips more than that or five and a quarter percent, right? There’s the difference. That’s the spread, and that’s historically a low. I mean, I think the all time low going back decades is like 72 bips. So when bond spreads are narrow, that is telling us that the bond market is very comfortable with risk. It’s comfortable with corporate balance sheets. It’s Corporal comfortable with the level of rates. It’s not worried about leverage in the system, be it at the government level or at the corporate level, that’s a very strong signal seeing corporate bond spreads this narrow. Now you could say, well, guess what? Adam, that means it’s probably as good as it gets. Okay, fine, it might be, but they can actually stay tight like that for a very long. Time. So
Maggie Lake 15:02
what do you think we’re going to see lower rates? Do you expect to see? Okay,
Adam Johnson 15:06
so, yeah, I just addressed the bond spread component, which is how the market perceives risk. Now, if you want to talk about absolute rate levels, just, you know, okay, what is it? Five and a half or four and a half? I do think that rates are going lower, but not by a whole lot. I and look the whole market. If you just look at fed fund futures, expect a 25 basis point cut sometime in the fall, maybe September, maybe October, and then another one probably in December or January. So remember inflation CPI, which was below 2% for a long time before covid shot as high as 9.1 so from two to 9.1 currently it’s about 2.7 Well, the Fed, to fight inflation, took rates from about zero, and you could argue that zero was way too low. They should never have been there. I agree with that statement. They probably should have been two two and a half, but they took rates up to five and a half percent. The Fed Funds rates, which is the rate at which banks can borrow from one another, and that’s the rate that the Fed sets that we all talk about. Well, five and a half has come down to four and a half. So even though inflation went as high as nine and has come down to 2.7 the Fed has only cut their rate by one percentage point, right from five and a half to four and a half. So I think the Fed is late to the ball game. I think Jerome Powell is trying to protect his legacy because he’s out in eight months, and God forbid he cuts rates now and in four months, inflation flares, and he’s got to raise him. And as he’s going out the door, he’ll say, Oh yeah, there’s the guy who got it wrong, right. So I think he’s protecting his legacy, but I do think he’s late to the party, and we certainly know that President Trump thinks he’s late to the party. He wants lower rates, because that helps everybody, from people who are financing cars to people who are buying homes, to businesses that are financing themselves, and to people like me who look at forward earnings and then discount them back to the present in order to get to a stock price, a target price. And so when rates go down, the discount rate goes down, which means I can afford to pay more today for those future earnings. So there are a number of reasons why. Not to mention, oh, the big one, government borrowing. There’s this thing called debts and deficits, and so right, if we make it cheaper for everyone else to borrow, it’s cheaper for the government to borrow too, which means financing that deficit becomes less onerous. So there are a lot of reasons to want rates to go down, provided that inflation stays in the twos where it is right
Maggie Lake 17:45
now. Yeah. So this is a, this is a really good backdrop. If you’re a stock investor in this picture you paint, you know. And so how are you finding where do you see the best opportunity against this very benign or positive backdrop. What do you like here?
Adam Johnson 18:04
AI, artificial intelligence is the single most powerful theme that you and I and our viewers will have seen over the past 20 years and will see over the past 20 years. It’s bigger than.com it’s bigger than the cloud, it’s bigger than all those things remember y, 2k, that we used to talk about, and it’s bigger because it touches every aspect of every business. And even as we’re beginning to realize all of us in our personal lives, 6% of internet searches now go to an AI site like chatgpt, as opposed to Google, which is why Google is starting to integrate AI into its search. It doesn’t want to lose that global franchise. Ai touches everything. Think about target. We think of it as a retailer. Well, actually, yes, it is a retailer, but target is probably one of the best use cases I can think of for artificial intelligence. If they put a mannequin wearing a red outfit on a certain area of the floor on a Tuesday, they track sales of that item, and then if they move it to a different floor on Wednesday, they compare Tuesday and Wednesday. Or what if it’s a yellow item, or what if they only put that item out on sale days next to the elevator, etc, etc. They track all of that stuff, and they tweak their sales based upon it Costco. You know, if you go to Costco, you got the Costco app on your phone. The GPS is so good, it tracks you around the store, and because it has GPS mapped all of the contents within the store. It can tell when you stop and pause, even using cameras to pull something off the shelf and look at it. And then what does it do? If you don’t buy it before you leave, like eight or 10 minutes later, it does a spot sale. Take that item you just looked at is now on sale for the next five minutes if you want to go. Go back and get it, wow. So we can talk about what’s happening at Google or meta or Nvidia chips or on and on and on, but just, you know, right there in our face every day, shopping and living our lives, artificial intelligence is playing a role, and that’s why I say it’s so big, and because it’s so big, there’s so many ways to invest in AI,
Maggie Lake 20:26
yeah, one of the things you’re looking at, I saw, which is very interesting, is AI powered platforms. Because I think everyone’s wondering the initial the initial surge was really around mag seven and those that were building these large language models, and, you know, sort of doing that early investment, but it looks like you’re kind of thinking about deploying it. So you talked about retail. I saw you’re also looking at AI when it comes to trucking, right? And you’re like a name in that space Aurora. Tell me a little bit about how you’re thinking about that.
Adam Johnson 20:59
So when I first looked at autonomous driving a couple of years ago, I kind of poo pooed it, but I did think to myself, well, there’s probably a place for autonomous driving in controlled environments like warehouses, right? You know, forklifts and so that took me to a company like symbotic S, Y, M, which we bought for our Bullseye American ingenuity subscribers, as well as active account clients. We were buying that, you know, around 10 bucks. It’s now over 50, and that’s only a couple of years. And this company, again, symbotic ticker S, Y, m, is automating all 47 of Walmart’s distribution facilities, making them almost completely robotic. I mean, that’s amazing. Gxo, by the way, gxo logistics, which was spun out of XPO logistics Brad Jacobs company. He was also the founder of United rentals and waste management. Everything the guy does just goes poo, and you want to own it. And so gxo, like symbotic, those are really the two number one automation stocks, warehousing automation stocks and companies in this country, that’s very exciting. And so I was part of autonomy early on, but I didn’t really give it much credit for being out on the roads driving. And then I realized, hang on, Waymo, owned by Google, is already providing 250,000 Robo taxi rides per week across five cities in the southwestern US 250,000 per week. So it’s happening. And then I began to realize, wait a minute, as I researched it, and this is only recently, this company, Aurora, a U R, Aurora innovation, is starting to move 18 wheelers across Texas, Oklahoma and now into Arizona, and they’re doing several dozen loads per week. They still have a driver there, just as a precaution, but the driver is not needed, and these trucks are doing long haul trips like 1500 miles non stop. So they even have larger fuel tanks. They don’t need to stop. They go through the night. Really amazing that’s already happening. And what’s interesting about Aurora is that they don’t build trucks. They just build the guidance systems for the trucks. So they’ve partnered, for example, with PACCAR, which actually does build trucks. They make kentworth trucks, for example, in Peterbilt, two of the most beautiful trucks out there. I used to make those models as a kid. They partnered with Volvo. They’ve created these wonderful partnerships where they’re not actually, you know, putting nuts and bolts together. They’re just doing the brains behind it. And if you look at the trucking market, it’s a 1 trillion it’s amazing. It’s a $1 trillion per year market GDP is 33 trillion. So Trucking is about, you know, 3% of GDP. Well, they plan to have a goal of commanding 5% of that market by 2030 which you know, when you think about it’s only four and a half half years from now, and you start running the numbers on you know what that means? That’s a $50 billion revenue company. Well, at that point, it’s bigger than Tesla. So if you can envision Tesla at $300 where it’s trading now, well, you can probably envision Aurora out in 2030 at a comparable valuation. And Need I remind you, Aurora is a $6 stock today, so that’s one that could go a long way. That’s very exciting. And again, there’s that theme artificial intelligence. And
Maggie Lake 24:52
I just want to underscore we are. This is not financial advice. You should go talk to your advisor. We are. Adam is kind enough to share, I think. I’m interested in is the thinking behind this, because we’re sort of, as you say, at the early stage of AI and so how do you think about as this plays out? How should we be thinking about as investors, you know, the next waves, as they roll out? So we, of course, put Adam’s information in the description. If you’d like to contact him, if you want to an advisor and look at your portfolio. You can get a free review at wealthion.com/free, but this is, I think, what we’re all trying to do, Adam, is digest this, like, what’s next, trying to look around that corner you mentioned. Tesla, wow. This is a stock that people love to love, and this is a stock that people love to hate. There’s a lot going on here. How are you thinking about the stock and some of the fundamentals? Clearly, you’re very keen on AI, and that’s threaded through Tesla, but there’s also this weird political risk that’s been layered on, which may be resolving itself slightly, but it’s but it’s been a big one, and it’s hurt the stock. How are you thinking about those two. Those two, no one
Adam Johnson 26:02
likes to see mom and dad fight, right? You know? I mean, the President and Mr. Musk were best buds, and then suddenly it went terribly awry. They seem to have kissed and made up and done so publicly in multiple ways, across multiple platforms. So I think we’re kind of over that. I hope that Mr. Musk is over his aspiration of creating a third party. I think he is. I think he recognizes it’s time to, you know, get back to the the company, work floor, roll his roll his sleeves up, and do what CEOs do, which is manage and create value. And I recently bought Tesla for the first time, I no longer think of it as an EV company. I think of it as an AI and robotics company, and that’s why I bought shares. So I don’t know if people realize but Tesla has created a humanoid robot, and by humanoid, I mean, you know, remember c3 po on Star Wars, right? You know that walked around are too detailed. Well, Elon Musk has created his own version of c3 Po, and it’s called Optimus, and just Google it, and it’s amazing. It walks around like a human. It’s got fingers that are articulated. It can play the piano, and by year end, Mr. Bus will have 10,000 Optimus humanoid robots working across his various factories, doing jobs that people used to do. And what’s fascinating about this is that they are trained. Their brains have been trained on all the lessons learned from the autonomous cars that have been running now for several years. So not only is the hardware being produced by Tesla, the software and all of the intellectual property associated with that is produced by Tesla. And so it’s, it’s an incredible opportunity. And Mr. Musk himself has said that again, it’s, you know, I’m a stock picker and I’m a stock analyst, so I run numbers, and here are the numbers on Tesla. He wants to and believes he can be at a 1 million robot run rate by 2028 which again, is two and a half three years. That’s not that far from now. And he said, at a million robots a year, which he will sell to other factories and manufacturers. It’ll cost him $20,000 per robot, and he plans to sell them for 50,000 which makes means he makes $30,000 per robot. Well, $30,000 on a million robots is $30 billion of profit. That is double what Tesla made in its most profitable year. In its most profitable year, it made 15 billion in profit off selling EVs. And I’m now saying that in three to four years, it’ll make double that, 30 billion in profit, not revenue, by selling robots. So I think Tesla is quickly going to become and I think the market’s starting to realize this a robotics and AI company, not an EV company. They’ll still make EVs. They’ll still make batteries, fine, but it’s effectively going to be a company where if you really want to value it, you have to do the sum of the parts. What is the battery business worth? What is the EV business worth, and what is the much bigger robotics business worth, that’s the way I think about Tesla. And I get to a much higher valuation, I think Tesla can double from here, based upon my view about the optimist robot going out to say 2028
Maggie Lake 29:33
That’s fascinating. Do you worry about corporate governance? Because, you know, as we saw from the little foray into politics. So much about this seems to be centered on Elon himself, on an individual, and a bet on his his ability. And, you know, people point out that the board is kind of non existent. They kind of only answer to him. There’s there’s not some of those checks that you’d see on other publicly traded companies. Companies, is that an issue for you at all?
Adam Johnson 30:02
If something were to happen to Mr. Musk, the stock would be down a lot, very quickly, and it would be bad. This is a company that is very dependent upon the vision and bullheadedness and constant creativity of its founder and CEO in many ways, much like apple. You know, if you go back to the Steve Jobs era, that company was all about Apple. Now, fortunately, there was a deeper bench at Apple than there is at Tesla. Now, Steve Wozniak, for example. You know, there were some greats who were all part of it. And then along came Johnny Ives, who enabled all the consumer products to not only function well, but look beautiful and feel beautiful in our hands, etc. So there was a lot of creativity that came out of apple that went beyond Steve Jobs. But there was a time there, if you remember, the board forced him out, and then the stock, practically, you know, went belly up, and they brought him back to save it. And so there are, you know, Howard Schultz with Starbucks, right? I mean, same sort of thing happens in and out, yeah, a couple of times, yeah. And they always bring them back, you know? And when times get tough. So these iconic executives really do matter to the brand. You could argue that Elon Musk is the Tesla brand, though, I think we’re getting to some sort of tipping point at some point the future, once he’s once he’s making those robots at that scale that almost becomes its own thing, and they’ll be able to keep going. But right now, if something were to happen to Elon Musk, it would be, it would be a rough ride. And
Maggie Lake 31:42
I just consider, you know, you always have to look at the the potential benefits and risks and make an analysis. So that’s a good risk to keep in mind, if anybody’s thinking about putting that on their, on their, you know, portfolio pad, what you’re you’re also looking at health technologies, right? GE, health technologies, I think that’s a new pick for you. Is also based on AI, or is that more about aging populations and some of the trends we’re seeing in healthcare?
Adam Johnson 32:10
Well, tactically meaning, sort of, if you want to be opportunistic and buy it now, it got crushed by tariffs, and in part, it crushed itself. Tariffs came out, and management cut guidance by 20% because they said, we have a feeling that we’re going to take some heat on tariffs, and that is because 54% of their sales again. GE, healthcare, you know, they make the MRIs, the ultrasound machines, CAT scans, all that, all the big tubes. You know, when you go to the doctor’s office and you get exams, those probably are GE made products, because the company gets more than half its revenues outside the US. It’s been very worried about reciprocal tariffs from other countries, so that’s why it cut guidance by 20% the stock got crushed, fell about 30% it’s regained about half of that loss initially, so tactically or opportunistically, I think it’s a good time, because we’re now finding out that all the tariff stuff is not as bad as we thought. We can live with 15% as you and I said a moment ago. So that’s part of it, but also, if you just start running the growth numbers on this company, it’s very exciting what they’re doing, and nobody else does it at the scale at which they do it. So if you just look at where the valuation is now, you know, trading it, call it 15 times. It’s typically traded since being spun off from the old legacy GE several years ago. It’s typically traded at 19 times. So typically trades at 19. Now it’s at 15. That’s the tariff discount. Okay? Tactically, great. I can get four turns in theory, if they get through the tariff thing. But also, if you just look at the forward growth and take earnings out to 2027, and put that 19 a half multiple on it, you get to a target of 112 stocks trading, you know, 75 ish. So you know, are we gonna get rich on GE Healthcare? No, but, you know, I’m very happy with the valuation. That gets me to 112 and you know, if we go out, you know, another couple years, we can, we can probably notch that up to 125 without a whole lot of trouble, especially if things go right and they get they, you know, get a market multiple, because the market trades even richer than than GE Healthcare. So, you know, now we’re just playing with numbers. But my point is, I think there’s upside. It’s not nearly as volatile name, especially once we get through tariffs. And, you know, every now and then, it’s nice to add a name to the portfolio that’s, you know, just sort of manageable, that tends to have less volatility. That’s a great American innovator selling stuff abroad. That’s a good story. So, yeah, I’m comfortable with with GE Healthcare. We won’t get rich on it, but that’s okay. There are other stocks in the portfolio for that
Maggie Lake 34:56
exactly. Not everything needs to be a home run, right? Sometimes you. You want to make sure you’re diversified and have some of those slow but very nice gainers in the pack as well. What about chips? So we have mag seven coming out. We have a big week of earnings. We’re going to get a read on a lot of that, AI capex and spend, and see how everyone whether they’re able to monetize it, and as much as much as everyone likes to rotate out of them. They’re still core. They still lead. How are you feeling about the chip story? Is that played out now for AI, or do you think there’s still room to run?
Adam Johnson 35:30
No, that’s the whole point. We’re at the very beginning of this whole thing. We’ve only begun to see the use cases emerge. I mentioned, you know, target and Costco, and now we’ve got Aurora trucking in its infancy. They’re running, you know, right now, they’re running several dozen trucks a week. What about when it’s several 100? And then what about a couple 1000? And then they go beyond just Texas and Arizona and Utah, and you know, they’re running them cross country, so all of those trucks will need chips right and and those chips will require foundries that have chip equipment right? So there, there’s just a huge multiplier effect. You know, we talk about data centers as we do more and more with AI. The need to build these data centers where you can rent AI capacity in the cloud. Wow, what a concept. And, you know, there are companies that do that apply digital builds data centers and rents out space. That’s pretty exciting. You need to create electricity to power those data centers. Well, enter another GE spin off Ge vernova, ticker GeV. That’s very exciting, because they take what used to be just a jet engine, and instead of mounting on auto wing mounted on steel brackets, and instead of running jet fuel through it, ran nat gas through it to spin a turbine that creates electricity. Well, now you just put one of those. You install one of those generators at your plant, attach it to a nat gas pipeline, and suddenly you’re creating electricity. You’re a utility on site. That’s pretty powerful. So again, there’s so many different ways to to express the view that AI is a powerful theme we want to invest in?
Maggie Lake 37:20
Yeah, yeah. I think last time we talked, I think you mentioned Ge vernova, they had a big rally on the back of it, as people start to see this coming through, how do you you actively manage your fund? Are you still comfortable with that? And you know, when you see those kinds of gains in the story catching on, do you need to take some profits, or do you keep those winners in and let them ride. How do you think about sort of managing that?
Adam Johnson 37:43
So I manage the portfolio one stock at a time. I don’t make grandiose comments about the market. I just look at each stock. And before I ever buy a stock, part of my analysis is to put a target on that stock, as as my boss said many years ago, my boss and mentor, wonderful man who is now retired, but he used to say, you’re only rational once, and it’s before you buy the stock. Because once you buy the stock, you fall in love with it, right? And you’ll own it through thick and thin. So set the target in advance, and when it gets to your target, sell something, sell a quarter, sell a third, whatever, sell half. But sell something, it did what you expected it to do, and now rerun your numbers, because it probably took some time to get there. Has something changed? Is there more growth looking forward? And if you can get to a higher target looking forward, then fine, sell a portion, raise your target on the balance, and continue to own it, and that way you continue to participate, and you’ve also freed up capital to go find the next stock that could potentially make money for you. Or, you know, if you say, you know, the growth story has been great, but it’s kind of done, then sell the whole thing. Fine, but that’s how I deal with managing risk to the upside on the downside. It’s also important, I said alert. And if the stock goes typically down 35 40% I’m a little squirmy, and, you know, I have to just sort of rerun the numbers and examine whether something has changed, if nothing has changed at the company, that’s just a market downdraft, like what we saw in March and April. Fines, market downdraft. I mean, they’re uncomfortable, but nothing changed at the company, so I just leave it alone and and I am as a result, I’m probably more volatile than some money managers out there, but I tend to outperform on the upside, and I can live with that. And I always tell my clients that that will be the profile of our returns. So they shouldn’t be nervous. And they should never, just as I never put all my money in one stock, they should never put all their money with one manager. You spread it around. Because, you know, you want a growth manager, you want a dividend manager, you want a bond fund manager. And you know. Want some cash and you want to own some real estate, you know that’s called diversification, and that’s important for every investor. And how you diversify depends upon your age and your income or lack thereof, if you’re retired. And then you know just your risk profile, how you think about risk, and you know that people are very, very different in how they approach risk. Some people, it freaks them out. Other people, bring it on. You know, we’re all different.
Maggie Lake 40:29
Yeah, it’s really, really good advice. And I like the idea we I think we know about diversification in assets, but I like the idea of people thinking about diversification in terms of managers, right? And so, you know, you can choose to lean a little bit more risky if it’s a narrative that you understand and believe in. But that doesn’t mean that you don’t have other holdings. So this, I think, answers my question. You don’t in the fund. Your are all growth and ingenuity innovation. You don’t look at something like gold as sort of any kind of barbell, or have any of those sort of store value assets. Is
Adam Johnson 41:04
that correct? No interest in gold. It just sits there. There’s nothing innovative about gold. Likewise, I tend not to invest in oil companies. Occasionally I do, being a former oil trader, and the most innovative oil companies are interesting, like Cheniere. You know that exports liquefied natural gas, Halliburton, because of their technology that enables very efficient drilling. EOG as a as an exploration company, because its technology is so good, as is its real estate, and they have the best balance sheet in the business. So whenever oil gets really cheap, like down in the 50s. I’ll, you know, I’ll look at those three names. But the problem with with oil companies, or miners, in the case of gold, you know, which you just mentioned, they are price takers. They have to take the price that is given to them. So oil is trading at 80 well, then it gets hit. That’s down at 65 that’s what you’re going to get for your oil, $65 right? That’s not a position of power or strength or negotiation. You You take what the market will give you, as opposed to Nvidia, which is a price maker, they create something that everyone wants, and they say, and here’s the price, and take it or leave it, because if you don’t want it, someone else is going to and by the way, the price is going up next month anyway, right? That’s a price maker. And I want to own price makers, because they grow faster.
Maggie Lake 42:34
I want to own price makers too. I think we all do. Um, is Nvidia something that you’re invested in, or are you looking for opportunities with names that may not be as well known. I think I saw a semiconductor on your list, NXP. Is it Nvidia? Too crowded that trade? Or do you have to? Is that something you
Adam Johnson 42:52
own? No, we bought Nvidia as a teenager. You know, it was like 1314, bucks, and now it’s what, 180 or something. And actually, my target, I’ve had a number of targets, and I’ve sold it along the way. Current targets 180 so we sell a little at 180 next target will be 240 and I know that because I think they’re going to do $6 in earnings next year, versus five this year. And you put a 40 multiple on six bucks, six times 40 is 240 There you go. There’s my next target. So we’ll peel a little off, you know, 180 and and just let the rest ride, hopefully to 240 at which point we’ll pull up another little bit off. And, you know, by peeling a little off from Nvidia, I keep the position sized in proportion. I mean, if I had never sold anything, it probably be like 25 or 30% of the portfolio, right? Because it’s gone up 12 or 15 times in two and a half years. So it’d be too much. And so you want to diversify. So, you know, Nvidia has birthed investments in all sorts of other companies. I mean, I just added the Aurora, a U R, the autonomous trucking company a few weeks ago, so that’s very exciting. And, you know, there are other names on the list. So when I sell the Nvidia, I can just redeploy the capital and keep the thing going. You know, you want a portfolio to be like a river. You want you want movement. You want fresh water coming in that keeps the water oxygenated, which is good for the fish and, you know, it just keeps everything healthy. The last thing you ever want is your portfolio to be a pond, stagnant pond, that just sits there. That’s that’s not good.
Maggie Lake 44:26
Adam. Has been a fantastic conversation. Thank you so much, and I love you sharing not only some of the things you’re interested in, but also the framework, because I think it’s really helpful for people to remember that. Because you’re right, we fall in love with the story, fall in love with the name, but you have to have a little discipline if you even even in the innovation and ingenuity space. So so appreciate your time today.
Adam Johnson 44:45
Oh, thank you, Maggie, pleasure to to speak with you, and it’s also nice. Thank you for giving me so much leash to actually share, share some of the details. I enjoy the detail,
Maggie Lake 44:55
yeah, and it’s great stuff. Thank you so much, and thanks to all of you, we’ll see you again next time. If you have any questions about how to navigate the current environment, wealthion can help connect you with a vetted advisor to get a free portfolio review, just click the link in the description below or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time again. That’s wealthion.com/free thanks so much for joining us. We’ll see you again next time
