Which Stocks Benefit From AI, Banking, and Oil?

TL;DR

Morgan Stanley, Ciena, and Baker Hughes are presented as strong stocks with distinct catalysts in financial activity, AI infrastructure, and energy. Morgan Stanley could benefit from wealth management, trading, IPOs, and M&A, while Ciena offers higher-growth exposure to data-center connectivity. Baker Hughes is already at record highs, with potential upside if crude prices or rig counts improve.

Transcript

PAY DOWN DEBT. NOW SEND IT OVER TO MIKE SANTOLI. >> SEEMA, THANK YOU VERY MUCH AND WELCOME BACK TO POST NINE, EVERYONE. I AM MIKE SANTOLI STEPPING IN FOR SCOTT. GOOD TO SEE YOU ALL HERE. LET'S SEND IT OVER TO JOSH BROWN RIGHT NOW FOR AN UPDATE TO HIS BEST STOCKS IN THE MARKET. HEY JOSH. >> HEY WHAT'S UP MIKE. WE'RE GOING TO DO THREE VERY QUICKLY. A... Read More

Key Insights

• Morgan Stanley is positioned across several financial-market businesses, including wealth management, asset management, trading, investment banking, IPOs, and M&A. Brown argues that these activities could benefit if the market rally continues through year-end, supporting his view that the stock can move higher.
• Morgan Stanley was introduced on November 20 after a nine-point drawdown from a recent record high. The stock was testing its rising 50-day level, which Brown treated as a practical opportunity to buy a strong company during a temporary dip.
• Ciena is an AI infrastructure investment because data-center computing equipment must communicate through telecommunications networks. Brown argues that purchasing more GPUs is insufficient when the surrounding infrastructure cannot connect effectively, making Ciena’s networking role central to his investment thesis.
• Ciena has a clearly defined risk level near 172 to 173, according to Brown. That area marked the recent sell-off when enthusiasm for AI-related stocks weakened, and he recommends remaining long only while the stock stays above that level.
• Ciena is the higher-beta, higher-growth counterpart to Cisco within the same AI infrastructure theme. Its latest quarterly revenue growth was 29.4%, while Cisco was described as more suitable for large-cap, value-oriented investors who require a greater valuation-based margin of safety.
• Baker Hughes is already trading at record highs despite no improvement in crude prices or rig counts. Brown believes the stock could accelerate if declining rig counts eventually bottom or oil prices improve, because those developments would strengthen two important fundamental drivers.
• Energy ownership is described as very low or underweight, partly because investors are concerned about oversupply, particularly in natural gas. The panel argues that AI-related power needs could increase natural gas demand, creating an opportunity for investors with limited energy exposure.
• Risk management is essential when investing in momentum-oriented AI infrastructure stocks. Brown says his approach is to exit when a stock stops being one of the market’s strongest names, and he pairs recommendations with stop losses rather than treating positions as permanent commitments.

Questions & Answers

Q: Why does Josh Brown expect Morgan Stanley to rise?

Josh Brown expects Morgan Stanley to rise because it participates in several businesses that could benefit from a continuing market rally. He specifically cites wealth management, asset management, trading, investment banking, IPOs, and M&A. After the stock recovered from a nine-point drawdown near its rising 50-day level, he said its price reflected those favorable drivers and argued that it could move higher.

Q: When did Morgan Stanley become a buy-the-dip opportunity?

Morgan Stanley was presented on November 20 after experiencing a nine-point drawdown from a recent record high. At that point, the stock was interacting with its rising 50-day level. Brown used the setup as a concrete example of buying a strong stock during a dip, and he later returned to the idea because the trade had worked well.

Q: How does Ciena benefit from the AI infrastructure buildout?

Ciena benefits from the AI infrastructure buildout by providing telecommunications infrastructure that helps data-center systems communicate. Brown’s argument is that buying GPUs alone does not create a useful data center if the underlying infrastructure cannot connect its components. Ciena therefore offers exposure to the networking side of AI investment, and the company reported 29.4% revenue growth in its latest quarter.

Q: What stop level does Josh Brown suggest for Ciena?

Brown identifies approximately 172 to 173 as the stop area for Ciena. That level corresponds to the recent sell-off that occurred when the AI trade became shaky. His recommendation is to remain long while the stock stays above that area. The clearly defined threshold is intended to limit downside if momentum weakens and the stock no longer qualifies among his strongest market names.

Q: How do Ciena and Cisco differ as AI investments?

Ciena and Cisco offer two different ways to invest in the same AI infrastructure theme. Ciena is described as the higher-beta, higher-growth choice, supported by 29.4% revenue growth in its latest quarter. Cisco is positioned as the large-cap, value-oriented alternative. The preferred stock therefore depends on how much momentum an investor wants and how much valuation-based margin of safety is required.

Q: Why does Josh Brown favor Baker Hughes?

Brown favors Baker Hughes because the stock is already at record highs even though crude prices and rig counts have not improved. He believes declining rig counts will eventually bottom, and that a recovery in drilling activity or crude prices could strengthen the company’s fundamental outlook. He also notes that energy stocks are under-owned, which could support demand if investors return to the sector.

Q: How could AI power demand support natural gas investments?

The panel argues that natural gas could fuel a meaningful portion of the power required for AI-related infrastructure. Investors remain underweight energy partly because of concerns about oversupply, particularly in natural gas. If necessary spending on power systems increases alongside AI development, investors with limited energy exposure could have an opportunity to add positions, especially as natural gas had already made a strong move.

Q: Why is risk management important for Ciena investors?

Risk management is important because Ciena has substantial exposure to confidence in AI capital spending. If companies reconsider budgets or cancel data-center plans, stocks connected to that investment cycle could decline. Brown does not intend to hold Ciena regardless of performance. He recommends using stop losses and leaving the position when it stops behaving like one of the market’s strongest stocks.

Summary & Key Takeaways

• Josh Brown highlights Morgan Stanley after its rebound from a nine-point drawdown near its rising 50-day level. He argues that a continuing year-end rally could support the company because it participates in wealth management, asset management, trading, investment banking, IPOs, and M&A, all of which could contribute to further gains.

• Ciena is presented as a higher-momentum way to invest in AI infrastructure because data centers require telecommunications systems that allow their components to communicate. Brown points to 29.4% revenue growth in the latest quarter and identifies roughly 172 to 173, the area of a recent sell-off, as a stop level.

• Baker Hughes is favored because energy ownership is low even though the stock is already at record highs. Brown believes declining rig counts could eventually bottom and that improving crude prices or drilling activity would strengthen the fundamental outlook. Other panelists also connect natural gas demand with AI-related power requirements.