Investors have been waiting for Nike (NYSE: NKE) stock to hit bottom and start to move up for a long time, but it just keeps going lower.

Since its peak in November 2021, when it traded near $180 per share, Nike stock has plummeted by about 78% to its current price of $38.50 per share. The stock price has not been this low in about 12 years.

This year, the stock price is down about 40% year-to-date, as hopes of a turnaround under new CEO Elliott Hill have been derailed by weak demand and sputtering revenue in a challenging market marked by high inflation, tariffs, and intense competition in the wholesale market that Nike is now trying to reenter.

Image source: Getty Images.

Is Nike stock finally a buy?

A major problem for Nike stock is that, despite a long, steady five-year decline, Nike stock remained overvalued. As recently as June, it was trading at 30 times earnings. For a company that had flat revenue last fiscal year and suffered a 3% decline in earnings, a price/earnings ratio of 30 is just way too high.

But a continued decline in shares through the summer has finally brought down Nike's P/E ratio to a more reasonable 18. It is still too high, given Nike's sluggish earnings outlook. On its fiscal Q4 earnings call in June, Nike management said it expects the difficult environment to remain the same over the next six months, with revenue to be down slightly. But tighter cost controls are anticipated to bring flat earnings and improve cost margins.

So has Nike reached bottom? I honestly don't think so -- not yet. It is getting closer to the buy zone, but the P/E is still too high for its tepid earnings outlook.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.

While there are tons of dividend exchange-traded funds (ETFs) to choose from, there are two broad categories that investors gravitate toward. One type focuses on high-yield dividend stocks, while another major category focuses on stocks that consistently grow their dividends.

Is one preferable to the other? It depends on what you are looking for.

Image source: Getty Images.

Global X SuperDividend US ETF

A high-yield dividend ETF invests in stocks that generate the highest dividend yields. One prime example is the Global X SuperDividend U.S. ETF (NYSEMKT: DIV). This ETF follows the Indxx SuperDividend U.S. Low Volatility Index, which includes the 50 stocks with the highest dividend yields, including real estate investment trusts (REITs). The stocks also must have paid dividends consistently over the last two years. There are also beta screens to ensure lower relative volatility.

The portfolio is equal-weighted, but some of the largest holdings, based on price movements and other factors, are Tsakos Energy Navigation, which has a yield of 4.62%, and CBL & Associates, a REIT with a yield of 4.59%.

Overall, this ETF has an extremely high 12-month distribution yield of 6.55%, paid monthly.

This ETF would be favored by investors, perhaps retirees, who are looking for high dividend income payouts. The trade-off is that long-term returns may be lower, even though the reinvested dividend will boost total return. But still, you are investing in stocks for their high dividends, not their long-term stability and growth.

For example, this ETF has a five-year average annualized return of negative 0.5% and a five-year average total return of 6.4%. Now let's compare that to a dividend growth ETF.

Vanguard Dividend Appreciation ETF

The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) is a good example of a dividend growth ETF, offering a solid contrast to a high-yield dividend ETF like DIV.

The Vanguard Dividend Appreciation ETF tracks the S&P U.S. Dividend Growers Index, which focuses on stocks, excluding REITs, with a record of increasing dividends annually. The focus is on annual growth, not high yields, as the top three holdings -- Broadcom, Microsoft, and Apple -- show. These are not what you'd call high-yield stocks.

Broadcom has a dividend yield of just 0.71%, but it has increased it for 15 consecutive years. Microsoft has a yield of 0.73% but has boosted it for 21 straight years. Apple's yield is just 0.33%, but it has increased for 13 consecutive years.

Thus, the 12-month distribution yield for the Vanguard Dividend Appreciation ETF is just 1.48%, which pales in comparison to the Global X ETF.

But the benefit of the Vanguard Dividend Appreciation ETF and other dividend growth ETFs is that they invest in larger, stable, established, well-capitalized companies that increase their dividends year after year.

That typically results in higher long-term returns than high-yield-oriented ETFs. The VIG ETF, for example, has a five-year average annualized total return of 10.2% compared to 6.4% for the Global X SuperDividend US ETF.

Data by YCharts.

Schwab U.S. Dividend Equity ETF

While both DIV and VIG represent opposite ends of the spectrum, some ETFs occupy the middle ground, such as the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD).

This popular ETF tracks the Dow Jones U.S. Dividend 100 Index and includes the highest-yielding stocks with at least 10 consecutive years of dividend payments. They must also meet certain screens to ensure adequate liquidity and solid fundamentals. In addition, the stocks must have grown dividends for at least five years.

Its top three holdings are Merck, Amgen, and Abbott Labs.

The SCHD ETF is really the best of both worlds, as it has an excellent 12-month distribution yield of 3.13% and a strong record of returns. Specifically, it has a five-year average annualized total return of 10%, nearly on par with VIG.

If I had to pick one, it would be the Schwab ETF because it gives you both stable dividend growth and high yields. But if you are looking for just high yields or the potential for higher total returns, then the other two might be options.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories, Amgen, Apple, Broadcom, Merck, Microsoft, and Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.

There are several different types of banks that handle various functions for their customers and often perform differently, depending on the market.

There are commercial banks that manage assets for consumers and businesses, investment banks that help institutions get access to capital from other investors, and custody banks that simply hold and service assets for large institutional customers. Some of the larger banks do all three, but typically have a specialty.

Probably the least considered, but perhaps best investment of the three in recent years are custody banks. There are only a handful of major custody banks that can handle and are trusted with the trillions of dollars they oversee, so they are protected by a competitive moat, and they have a simple fee-based business model that generates reliable earnings through various market cycles.

The world's largest custody bank is Bank of New York Mellon (NYSE: BNY), which has been the best bank stock over the past five years.

Image source: Getty Images.

BNY Mellon's fee machine is humming

BNY Mellon has a massive $62.6 trillion in assets under custody, which means it holds, services, and safeguards $62.6 trillion in assets from pension funds, mutual funds, hedge funds, investment managers, corporations, governments, municipalities, and other organizations.

While the bank also offers its own separate accounts, mutual funds, and exchange-traded funds (ETFs), and earns interest income from sweeping uninvested cash into high-yield investments, the bulk of its revenue comes from fees.

BNY Mellon generated $5.7 billion in revenue in the second quarter, up 13% year over year. Of that amount, $4 billion, or 70%, comes from fees for holding and servicing the assets. The fees are tied to asset levels, so when the asset levels rise, whether through appreciation or net inflows, BNY Mellon's fees rise. It also generates fees for securities lending and certain issuer services.

The rest of the revenue is from two different buckets, investment management fees from its own funds and interest income from sweep accounts. With sweep accounts, it invests unused, idle client cash into high-yielding investments and earns a portion of the interest.

But it is the asset servicing fee engine that drives BNY Mellon. As one of a handful of major custody banks, it will attract assets in any type of market. In fact, it tends to see more customers during market downturns as there is a flight to safety, and customers want to protect their assets. So, that helps offset the capital depreciation of its assets during downturns.

BNY data by YCharts

But when markets are strong, like they have been for the past four years, assets under custody keep appreciating, which leads to more revenue for BNY Mellon.

It's a good business if you can get it -- it only takes 242 years of trust and experience built up from the roots planted by the founder of Bank of New York, Alexander Hamilton, back in 1784.

BNY Mellon stock is up 39% year to date, and it has been the best-performing bank stock in recent years. It has posted an average annualized return of 56% over the past three years and 28% over the past five years. And it is still reasonably valued, trading at 18 times earnings. It remains one of the best, most reliable bank stocks you can buy.

Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and JPMorgan Chase. The Motley Fool has a disclosure policy.

If you are looking for an exchange-traded fund (ETF) to buy and hold for the long term, the best thing to do is look at history.

While we all know that past performance is no guarantee of future results, ETFs that have a long track record of success are worth taking a look at.

One ETF that jumps out for its market-beating performance over the past decade is the Invesco S&P 500 Momentum ETF (NYSEMKT: SPMO). This ETF has destroyed the Nasdaq-100 and S&P 500 over the past three- and five-year periods, and is essentially equal to the Nasdaq and the fund that tracks it, the Invesco QQQ (NASDAQ: QQQ), over the past 10 years.

Here's why I think it's the ETF to buy now in 2026.

Image source: Getty Images.

SPMO beats the Nasdaq and S&P 500

The Invesco S&P 500 Momentum ETF has averaged an annualized return of 37% over the past three years and about 20% over the past five- and 10-year periods.

QQQ data by YCharts

So, it has clearly been a stellar performer, as the chart above shows. I think SPMO will continue to outperform those benchmarks because of its focus on momentum. With many large-cap stocks mostly overvalued, returns for broad indexes could be choppy over the next several years.

But an ETF like this that focuses on the 100 or so large-caps with the most price momentum over the previous 12 months -- except the most recent month -- rebalanced twice a year, with certain volatility screens, should be able to outperform as the laggards and the most volatile stocks are weeded out.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Apple seemingly changes CEOs about as much as the Pittsburgh Steelers change head coaches, but both are embarking on a new era this month.

John Ternus became CEO of Apple (NASDAQ: AAPL) on Sept. 1, replacing Tim Cook, who ran the company for 15 years. Before that, the late founder Steve Jobs had been at the helm since the 1990s. And Mike McCarthy begins his Steelers coaching tenure this month, becoming only the third coach for the team in the last 30 years.

Image source: Getty Images.

Which will have a better season? I predict Apple. The Ternus era begins with the introduction of Apple's new lineup of iPhones, including what is rumored to be its first foldable smartphone, on Sept. 9. And the Steelers still have Aaron Rodgers as their quarterback -- 'nuff said.

Surprise and shine

At the Sept. 9 event, called Surprise and Shine, Ternus will essentially introduce himself to the world, along with a roster of new products. The lineup is likely to feature new iPhone 18s, including the Pro and Pro Max. But the most anticipated product is the rumored new foldable iPhone, which insider sites like Mac Rumors say will be called the iPhone Ultra.

There are also a slew of other new products expected to be introduced, including Apple Watches, MacBooks, iPads, AirPods, and a new Home Hub.

Apple stock has been rising ahead of the event, jumping about 8% over the past month. That's typical, as these types of new product events are usually "buy the rumor, sell the news" events. But Apple stock has been trending higher for several months now, up about 30% since April 1. Apple stock is now up about 21% year to date.

New foldable iPhone is coming

Apple's June-ended quarter saw strong results, with revenue up 16% year over year to nearly $109 billion and earnings up 27% to $29.4 billion. iPhone sales jumped 22% to $54.2 billion.

Growth is expected to slow slightly in the September-ending quarter, with year-over-year sales growth in the 9% to 11% range. This is due to higher foreign exchange rates, which account for a 2.5 percentage-point sales headwind, and supply constraints. iPhone sales should see mid-teens year-over-year growth, executives said on the latest earnings call. Further, the gross margin is anticipated to be 47% to 48%, down from 50.1% in the June quarter.

But the new foldable phone and iPhone 18 Pro and Pro Max offerings should provide a boost in the December-ending quarter, and beyond, as they are projected to debut in the fall, either in September or October.

Experts anticipate the iPhone 18 launches will be 10% to 20% more expensive than their iPhone 17 counterparts, due in part to higher memory costs. The foldable iPhone will likely retail for more than $2,000.

Analysts at Morgan Stanley estimate that the foldable phone alone could generate $14 billion in revenue for Apple in the December quarter alone. Morgan Stanley rates Apple stock as a buy with a $360 per share price target. That would suggest about 9% upside from the current $330 per share price.

Apple stock has had a strong run over the past few months and is not cheap, trading at 37 times earnings. I'd expect some "sell the news" action, and perhaps a dip, when the weaker September-quarter results come out in October, given its valuation. But after that, Apple stock should be on your radar when the new products hit the streets.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

Hedge fund manager Bill Ackman's firm, Pershing Square, went public on U.S. markets with its Pershing Square USA (NYSE: PSUS) fund, backed by his big-name notoriety and a strong track record of success.

Ackman, one of the world's most famous investors, has run the Pershing Square hedge fund since Jan. 1, 2004, when he formed Pershing Square Capital Management.

The fund launched with $54 million in assets, and now the core strategy has about $24 billion in assets across different funds. Since its inception, the hedge fund has averaged a 15.6% compound annual return, beating the S&P 500's 11%.

On a gross return basis, before fees, the fund has averaged an annual return of 20% since inception, Ackman wrote in an Aug. 12 letter to shareholders.

This is a pivotal time for Pershing Square. It recently went public with its new Pershing Square USA closed-end fund, which tracks its core strategy, and later this year, it is rolling out a new fund, Pershing Square Ventures. Will he be able to keep churning out market-beating returns?

Pershing Square Capital Management Founder Bill Ackman. Image source: Getty Images.

Down 21% since its IPO

Since PSUS hit the market, the road has been a bit bumpy. The IPO priced at $50 per share on April 29 and is currently trading at around $39 per share, down about 21% since then.

In contrast, the S&P 500 has gained 7% since April 29. But Ackman has a longer-term view.

"Our goal in selecting investments is to find businesses that meet our core principles, that have a high likelihood of sustaining significant rates of normalized EPS growth, and that are available at attractive prices. When we find businesses that meet these criteria, we often hold them for years, and sometimes, for more than a decade," Ackman wrote in the Pershing Square USA semi-annual report.

The fund, which employs the same core strategy as Pershing Square's flagship fund, is highly concentrated, with 12 stocks accounting for 86% of the portfolio's assets. The three largest holdings are Microsoft, Uber Technologies, and Meta Platforms. Brookfield Corp. is next, followed by Amazon and Restaurant Brands International.

He expects each holding to grow its earnings per share (EPS) by at least 15% annually for the next three to five years, with half of them growing EPS by 20% annually. Ackman added that all current holdings trade at discounted multiples, significantly below their intrinsic value.

"Our goal for the funds and companies we manage and invest in is to generate gross returns in excess of 20% per annum over the long-term," Ackman wrote in the shareholder letter.

New Pershing Square "ventures"

The company also plans to launch Pershing Square Ventures, a fund that will give public market investors access to pre-IPO, private market, high-growth companies. Further, it will be allowed to hold companies after they become public. Ackman said it will have "substantially" lower fees than most private venture and growth funds.

"We believe our public markets experience translates directly to venture and growth-stage investing," the shareholder letter states. "Our public equity research has given us deep familiarity with many of the investment themes, most recently AI, that drive the businesses of the private companies we evaluate."

More details on the fund will be released in the coming months. It is expected to debut by the end of 2026.

Dave Kovaleski has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Brookfield Corporation, Meta Platforms, and Microsoft. The Motley Fool recommends Restaurant Brands International and Uber Technologies. The Motley Fool has a disclosure policy.

Among asset management firms, Affiliated Managers Group (NYSE: AMG) is not one that immediately jumps to mind for most investors. Yet this manager of managers, which owns stakes in several different boutique investment management firms, has had the type of performance that should get it noticed by more investors.

Image source: Getty Images.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Up 62% over the past year

AMG owns majority stakes in about 40 boutique investment managers, which have total assets under management of about $942 billion. It shares revenue with the firms but is hands-off as far as operations go, so the shops have full independence and autonomy over their own businesses.

Some of the affiliates include Tweedy, Browne Company; Yacktman Asset Management; TimesSquare Capital; Third Avenue Management; Artemis Investments; Pantheon; and Parnassus Investments, to name a few.

So, it has relatively low overhead with a diverse mixture of affiliates that manage equities, alternatives, fixed income and multi-assets, and private market investments. The mix is about 60% private markets and alternatives and about 40% equities and multi-asset.

The combination of affiliates has allowed AMG to perform well in all market cycles, even when stock markets are down. AMG stock is up 26% year to date and has a best-in-class one-year return of 62%, as the chart below shows.

AMG data by YCharts

It has a 40% average annualized return over the past three years and a 16% average annualized return over the past five years. Illustrative of its all-weather capabilities, it crushed the market during the 2022 bear market, dropping just 3%.

$600 million in share repurchases

Over the years, AMG's portfolio has tilted more toward alternatives and private equity investments, which has helped it outperform in choppier markets for stocks.

In the second quarter, it hit a record of $942 billion in assets, with $13 billion in net inflows including a record $29 billion in alternative net inflows.

Revenue soared 30% year over year to $641 million in Q2, while net income climbed 74% to $237 million for all the affiliates. The economic earnings per share (EPS), which the company uses to calculate its share from affiliates, rose 54% to $8.29 per share.

Further, the company generated some $35.5 billion in net client cash flows through the first six months of 2026. That allowed AMG to buy back $189 million in shares in Q2, bringing the year-to-date total in share repurchases to $375 million. For the full year, it expects to execute $600 million in share repurchases.

"[W]e are uniquely positioned to capitalize on attractive growth opportunities, drive durable earnings growth, and create meaningful long-term value for our shareholders," AMG President and CEO Jay Horgen said in the company's July 30 earnings release.

In Q3, AMG anticipates adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be between $315 million and $325 million, which would be up at the midpoint from $316 million in Q2. The economic EPS is targeted for between $8.43 and $8.71, which would be up approximately 40% at the midpoint year over year.

The incremental reduction of the share count on the market through buybacks should help lift the stock price, along with its expected earnings growth. Combine that with its dirt cheap valuation, trading at just 10 times forward earnings, and AMG is a solid buy right now.

JPMorgan Chase is an advertising partner of Motley Fool Money. Charles Schwab is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BlackRock, Goldman Sachs Group, JPMorgan Chase, and T. Rowe Price Group. The Motley Fool recommends Affiliated Managers Group and Charles Schwab and recommends the following options: short September 2026 $95 calls on Charles Schwab. The Motley Fool has a disclosure policy.

Nubank, the digital bank owned by Nu Holdings (NYSE: NU), is one of the fastest-growing banks in the world. It posted record results in the most recent quarter, and yet the stock price is floundering, down about 13% year to date.

Are investors missing the boat on this Brazilian banking powerhouse?

Image source: Getty Images.

Expanding into the U.S.

São Paulo-based Nubank launched 13 years ago as something new in its Brazilian market: a fully online digital bank. With no branches and little overhead, the idea was to reduce expenses, serve customers where they are, and operate more efficiently.

Nubank has achieved that, and then some. It has expanded into Mexico and Colombia and now has 139 million customers, adding 4 million in the second quarter alone. Most of them, about 118 million, are in Brazil, while Mexico has 16 million and Colombia has 5 million customers.

Nubank will soon be expanding into the United States. In January, it got conditional approval from the Office of the Comptroller of the Currency (OCC) to launch Nubank NA, a national digital bank in the United States.

The customer growth numbers are accompanied by its increasingly engaged and active user base. In the second quarter, the average revenue per active customer (ARPAC) was $17, up from $16 in the previous quarter. Further, the monthly activity rate, which counts people actively using the app, jumped to 83.5% overall, up from 83% in Q1. In Brazil, it hit 86% for the first time.

$1 billion in net income

The bank's efficiency has been outstanding. Its efficiency ratio, which measures how much the bank spends for every dollar of revenue, is 19.5%. That is extremely low, as most banks with branches are happy to have an efficiency ratio in the 50%-60% range. However, the efficiency ratio is up from 17.3% in Q1. The higher Q2 ratio is due to real estate and marketing expenses shifted from Q1, as well as costs for international expansion.

When you consider the efficiency, engagement, and customer growth, you get blowout earnings results. Nu generated $5.9 billion in revenue in Q2, up 39% year over year. Net interest income hit $3.7 billion, up 9% from the previous quarter, while net interest margin increased 180 basis points to 22.9%. Nu set a record for profitability with $1.1 billion in net income in Q2, up 17% from Q1 and 49% year over year. Also, the return on equity (ROE) rose to 33%, from 29% the previous quarter.

One of the concerns earlier this year was Nu's credit quality, as non-performing loans (NPL) had increased to 5%, up 89 basis points from Q4. But year over year, it was only up from 4.8%. In Q2, the NPL rate improved to 4.8% but was still up from 4.4% a year ago. The 90-plus-day NPL rate was 6.9% in Q2, up from 6.6% in the same quarter a year ago.

Nu's stock is up about 7% since the second-quarter earnings report came out on Aug. 13, signaling improving investor sentiment. It is trading at 20 times earnings and has a low PEG ratio of about 0.9, which means it is cheap relative to its long-term growth expectations.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nu Holdings. The Motley Fool has a disclosure policy.

While stocks keep churning higher and touching all-time highs, investors are becoming increasingly nervous about the bottom falling out.

A weekly poll of investors by the American Association of Individual Investors (AAII) showed the highest bearish sentiment among investors in more than two months. AAII's investor sentiment poll for the week of Aug. 26 found that 44.4% of investors have a bearish outlook, compared with 32.9% who are bullish and 22.6% who are neutral. The bearish view is the highest since June 10, when it was 47.7%.

The negative outlook is likely due to a confluence of factors, including inflation, declining consumer sentiment, and an historically high stock market valuation after an almost four-year bull market.

This is a time when investors are nervous, but it is also a time when investors should be on high alert, according to the Oracle of Omaha, investing legend Warren Buffett.

Warren Buffett. Image source: The Motley Fool.

Be prepared when it rains gold

If the market corrects or spins out into a bear market, categorized as a 20% drop in price from recent highs, Buffett views it as a buying opportunity. As Buffett wrote in Berkshire Hathaway's 2016 annual shareholder letter:

Charlie [Munger, Berkshire's late vice-chairman ] and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves. Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons. And that we will do.

What Buffett is saying is that investors should not fear economic slowdowns and market downturns; rather, they should be on high alert for deals. Bear markets and market downturns are when you'll find great long-term stocks at a discount.

It is an updated version of probably his most famous quote: "Our goal is more modest: we simply attempt to be fearful when others are greedy and to be greedy only when others are fearful," which he penned in the 1986 shareholder letter.

The most "wonderful" time

Buffett, who handed over the reins to Greg Abel at the start of the year, did very little buying in his last few years at the helm during the current bull market.

The last time Buffett rushed outside carrying the washtub was in 2022. During the 2022 bear market, Buffett loaded up on Apple, still his largest holding, Chevron, and Occidental Petroleum, which remain major Berkshire holdings today, plus Ally Financial, to name a few. It all harkens back to that age-old investing adage: Buy low and sell high.

Obviously, we are not in a bear market right now, and those dark skies Buffett warned about may not come for a month, a year, or five years. We just don't know. But the most important thing for investors is to get those washtubs ready for when they do come.

The key, however, is not to just buy a stock because it is cheap. Instead, buy it because it's good, at a lower price because, as Buffett said in the 1989 shareholder letter: "It is far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Ally is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Chevron. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

The Federal Reserve Bank of St. Louis tracks credit card loan delinquencies on a quarterly basis, and the results provide insight into the state of the economy and the condition of the consumer.

Astute investors may also use the data as a way to gauge the prospects for bank stocks.

Overall, the second-quarter results were mixed. Overall delinquencies and delinquencies for large banks were still elevated, but trending lower. However, delinquencies for smaller community banks are going up.

Image source: Getty Images.

The rate of overall delinquencies, which are credit card bills more than 30 days past due, was 2.85% in the second quarter. That was down from 2.91% in Q1, 3.04% in Q2 2025, and 3.22% the same quarter two years ago.

That shows a steady downward trend, but it remains elevated. Between 2012 and 2023, delinquencies were below 2.85%, dropping to as low as 1.53% in Q3 2021.

It is a similar trajectory for the 100 largest banks. In Q2, the delinquency rate for the largest banks was 2.58%, which was down from 2.91% in Q1 and 3.04% in Q2 2025. The recent peak is 3.10% in Q3 2024. But again, from 2012 to mid-2023, the rate was consistently below the current percentage.

Smaller banks see delinquencies rise

Smaller banks, like community banks, have much higher delinquency rates than large banks. But unlike at large banks, where rates went down, rates are rising for smaller banks outside the top 100.

In Q2, the delinquency rate for small banks rose to 6.49%, up from 6.44% in Q1. While it is still lower than the 7.04% rate in Q2 2025 and below the peak of 7.86% in Q4 2023, there was a notable divergence compared to big banks.

This speaks to what's going on in the economy. Large banks have had the ability to tighten up their lending standards and not make as many risky loans. They can afford to do this because they offer an array of financial services and are making lots of revenue from investment banking, corporate banking, institutional trading, and other areas.

Smaller banks don't have those additional income streams, so they generally have to take on more credit risk, making more loans to customers with lower credit scores and less disposable income. As a result, the delinquencies are more common. The fact that the delinquency rate for smaller banks ticked up means that their customers are facing more hardships in this economy.

How this impacts bank stocks

For bank stocks, higher credit card delinquencies can have a direct impact on the bottom line.

For starters, the fact that the loan is not being repaid means the bank is losing out on interest income. And if the loan ultimately has to be charged off, it is an acknowledgment that the loan won't be repaid.

Also, when banks see their delinquencies spike, they are required by federal regulation to boost their provisions for credit losses, which is money set aside to cover bad loans. Those provisions come out of the expense line, and when they are high, it is a drag on earnings. So when you see delinquencies go up, you can figure that the bank will have to have higher provisions for credit losses.

Large banks have a better ability to absorb these hits with M&A and institutional trading generating significant revenue. Plus, they can generally offer lower deposit rates because customers are more likely to stay with them due to the other services they offer. That leads to higher net interest income. Smaller banks don't always have that same luxury.

Bank stocks have generally performed well this year. The KBW Nasdaq Bank index, which tracks the 24 largest banks, is up 14% year to date. The KBW Nasdaq Regional Banking index is performing even better, up about 16% YTD.

But with an interest rate hike on the table and a fragile economy, investors should keep a close eye on credit card delinquencies as they offer insight into the state of the consumer, the economy, and banks.

The Motley Fool has a disclosure policy.

iShares Core S&P Small-Cap ETF (NYSEMKT:IJR) and State Street SPDR Portfolio S&P 600 Small Cap ETF (NYSEMKT:SPSM) offer nearly identical exposure to U.S. small-cap stocks, differing primarily in expense ratio, liquidity, and assets under management.

Small-capitalization stocks often provide growth potential that large-cap peers lack, though they typically come with higher volatility. Investors frequently use these vehicles to capture the "size premium," or the historical tendency for smaller companies to outperform larger ones over very long time horizons. Both funds track the S&P SmallCap 600 Index, but their histories and fee structures differ.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

State Street SPDR Portfolio S&P 600 Small Cap ETF is the more affordable option with a 0.03% expense ratio compared to 0.06% for the iShares fund. Additionally, the State Street fund currently offers a slightly higher dividend payout, providing a 1.4% yield versus 1.1% for its competitor.

Performance & risk comparison

What's inside

iShares Core S&P Small-Cap ETF provides exposure to 671 holdings, and its largest positions include Corcept Therapeutics (NASDAQ:CORT) at 0.60%, Viasat (NASDAQ:VSAT) at 0.60%, and Glaukos (NYSE:GKOS) at 0.59%. The portfolio's sector allocation is balanced across financial services at 18%, industrials at 16%, and technology at 15%. This fund was launched in 2000. iShares Core S&P Small-Cap ETF has paid $1.64 per share over the trailing 12 months, which on its recent ~$146.37 share price works out to a 1.1% yield.

State Street SPDR Portfolio S&P 600 Small Cap ETF holds 606 stocks and is also concentrated in financial services at 18%, industrials at 16%, and technology at 14%. Top holdings include Corcept Therapeutics at 0.64%, Glaukos at 0.60%, and Viasat at 0.56%. This fund was launched in 2013. State Street SPDR Portfolio S&P 600 Small Cap ETF has paid $0.79 per share over the trailing 12 months, which on its recent ~$56.93 share price works out to a 1.4% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

Small-cap stocks have been a pretty good place to invest over the past year after getting pummeled by large caps over the past several years.

Both of these small-cap ETFs have posted excellent returns over the past year -- almost identical returns, in fact, because they track the same index. They have roughly similar year-to-date returns of 21%, and they have each returned about 24% over the past 12 months. In both cases, they are beating large-cap ETFs.

If you were looking to own one of these, it would have to be the State Street ETF, SPSM. The main reason is its lower expense ratio of 0.03%, compared with 0.06% for the iShares fund. Because of its lower expense ratio, it has a slightly higher distribution yield of 1.4% compared to 1.1% for the iShares ETF, and a slightly higher average annualized total return over time.

It really is a case of splitting hairs with these two ETFs, but the lower expense ratio gives the State Street fund a small edge.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Corcept Therapeutics and iShares Core S&P Small-Cap ETF. The Motley Fool has a disclosure policy.

Vanguard Health Care ETF (NYSEMKT:VHT) offers broad-market healthcare exposure at a minimal cost, whereas Simplify Health Care ETF (NYSEMKT:PINK) provides an active strategy focused on innovation while donating its profits to charity.

Healthcare investors must often choose between the stability of a cap-weighted index and the potential of active management. While the Vanguard fund tracks a wide benchmark of domestic healthcare stocks, the Simplify fund seeks capital appreciation through a concentrated, expert-led portfolio targeting biotechnology and medical technology breakthroughs.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Vanguard Health Care ETF is the more affordable choice with an expense ratio of 0.09%, which is substantially lower than the 0.51% charged by Simplify Health Care ETF. The Vanguard fund also offers a higher payout, yielding 1.5% compared to 0.6% for the Simplify fund.

Performance & risk comparison

What's inside

Vanguard Health Care ETF holds 411 positions, with its largest positions including Eli Lilly & Co (NYSE:LLY) at 13.40%, Johnson & Johnson (NYSE:JNJ) at 8.84%, and AbbVie Inc (NYSE:ABBV) at 6.45%. It is primarily concentrated in healthcare at 99%. Launched in 2004, the fund has paid $4.72 per share over the trailing 12 months, which on its recent ~$323.7 share price works out to a 1.5% yield.

Simplify Health Care ETF maintains 58 holdings and concentrates 87% of the portfolio in healthcare, followed by 7% in industrials. Top holdings include Eli Lilly & Co at 10.43%, Humana Inc (NYSE:HUM) at 6.91%, and Purecycle Technologies Inc (NASDAQ:PCT) at 6.25%. Launched in 2021, the fund has paid $0.25 per share over the trailing 12 months, which on its recent ~$39.8 share price works out to a 0.6% yield. It features a currency hedge and donates all net profits to breast cancer research.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

The healthcare sector has been one of the better performers over the past year. Stocks in the sector have had an average return of about 10% year-to-date and 25% over the past 12 months.

These are two good options to tap into the sector, yet they are very different. The Vanguard fund has a lower expense ratio, is far more diversified, has a higher distribution yield, and has been a better performer this year, up 12% year-to-date compared to the Simplify ETF, which is up about 8%.

The Simplify ETF is far more concentrated, but it has better longer-term returns. It beats the Vanguard ETF in one-, three-, and five-year average annualized returns.

Also, it is a pro bono fund, which means all of its net profits get donated to the Susan G. Komen Foundation for breast cancer research. That's a nice added benefit, even if the fund didn't perform so well. The Simplify ETF would be my investment choice among the two.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Eli Lilly. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

The best time to start investing is always right now, because one of the most fool-proof ways to build wealth is time in the market. In fact, it probably matters more than anything.

The longer your investment time horizon is, the more time you have for compounding to accelerate the growth of your portfolio. For example, if you started out with $5,000 and invested it in three exchange-traded funds (ETFs) that had an average annual return of 10% for 10 years, and contributed $100 per month to it, you would have about $33,000.

But say you did that for 20 years. You would have $105,000. And if you did it for 30 years, that $5,000 would grow to $230,000.

Image source: Getty Images.

Now let's say you did better than 10%. You beat the average and had an average annual return of 13%. After 10 years, you would have $40,000; after 20 years, you would have $160,000; and after 30 years, you would have a staggering $568,000. That's the power of compounding and time in the market.

The next question is, which three ETFs could get you an average return of 13% during the next 20 or 30 years?

How about these three?

1. Vanguard Information Technology ETF

With a time frame of 20 years or more, a new investor should consider a sizable allocation to a growth fund. They may be more volatile and subject to short-term swings, but over time, the growth outweighs the dips, and they historically produce superior long-term returns.

My top choice for growth would be the Vanguard Information Technology ETF (NYSEMKT: VGT).

During the past 20 years, it has produced an average annualized return of 17.4% as of Aug. 28. That beats all of the other major broad technology ETFs. (No. 2 is the iShares US Technology ETF at 17.2%.)

This ETF is cheaper than the rest, with a 0.09% expense ratio, and more diversified, with 319 holdings as it taps into the broad universe of tech stocks, not just large caps. The top three holdings are Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT).

2. Schwab U.S. Dividend Equity ETF

The next choice would be a dividend fund, because a good dividend fund often serves as a portfolio foundation, made up mostly of value stocks -- with the benefit of more dividend income and a higher total return. My choice would be the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD).

This ETF doesn't have a 20-year track record yet, as it launched in 2011. But it does have a 15-year track record and during that time, it has had an average annualized return of 10.1%. With dividends reinvested, the total return shoots up to 13.6%.

It invests in the Dow Jones U.S. Dividend 100 Index, which has various screens to find the most sustainable, high-yielding dividend stocks. Eligible stocks must have at least 10
straight years of dividend payments, a market cap of $500 million or more, and meet various liquidity and performance requirements. From there, the index is comprised of the highest-yielding dividend stocks with no single stock representing more than 5% of the portfolio. The current top three holdings are Merck (NYSE: MRK), Amgen (NASDAQ: AMGN), and Abbott Labs (NYSE: ABT).

This ETF should perform well when the Vanguard Information Technology ETF and perhaps other growth funds don't, giving you a nice balance to smooth out returns in volatile markets.

3. Vanguard S&P 500 ETF

The third ETF to include in an initial portfolio is the Vanguard S&P 500 ETF (NYSEMKT: VOO). This is the largest ETF in the world and for good reason, as an S&P 500 ETF should be a staple in a portfolio, and the fund's low 0.03% expense ratio makes it a popular choice.

This ETF, established in 2010, doesn't have a 20-year track record, but the S&P 500 certainly does. The S&P 500 has had an average annualized total return of 11.4% during the past 20 years.

You know what's in this one, and you could certainly swap this ETF out for a State Street or iShares S&P 500 ETF. There is some overlap with Vanguard Information Technology fund, but this fund is far broader, going beyond technology sector stocks to include the 500 largest stocks trading in the U.S. across all industry sectors.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abbott Laboratories, Amgen, Apple, Merck, Microsoft, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

Where will the markets be in 20 years? It is hard to make even educated guesses, given how rapidly the artificial intelligence (AI) computing revolution is changing how so many organizations do business and how so many people live their lives. What makes it even harder is that AI is just in the early stages of its impact.

If I were going to make a few bets on an investment 20 years out, I'd probably invest in an S&P 500 ETF for broad exposure to large caps. I'd also probably stay invested in the MarketDesk Focused US Momentum ETF (NASDAQ: FMTM), an actively managed quant fund that seeks out stocks with the most momentum, even during downturns.

I'd also have a few more diversifiers, maybe a dividend-income fund, an international ETF, and perhaps a value fund. But for pure alpha, I would strongly consider the VanEck Semiconductor ETF (NASDAQ: SMH).

This ETF has blown away the S&P 500, the Nasdaq Composite, and all of the other major tech and growth-oriented ETFs on the market across the past 15 years, and it is well-positioned to maintain its dominance.

Image source: Getty Images.

The picks and shovels of the AI gold rush

Semiconductors have been the technology that has benefited most from the AI revolution. Semiconductor chips are the picks and shovels of the AI boom, meaning they are a necessary component to enable AI computing. Without them, hyperscalers building AI infrastructure can't adequately process the data and information required for AI computing.

And because of the incredibly high demand for this technology, supply is tight, which drives up demand, margins, and prices -- all benefiting chip stocks. Furthermore, there are many different types of chipmakers needed for various AI-related tasks. There are CPU and GPU makers like Intel and Nvidia, memory and storage chip stocks like Micron Technology and Sandisk, chip foundries and equipment makers like Taiwan Semiconductor Manufacturing and ASML, and networking chip manufacturers like Broadcom, to name a few.

And as AI computing expands beyond big tech to smaller companies and throughout all of the sectors of the economy, demand will only increase. New AI innovations will require new chip solutions, likely expanding the need for semiconductor chips even more.

The names may change over the next 20 years, but semiconductor stocks should remain the picks and shovels for the AI gold rush.

VanEck has blown away the competition

The VanEck Semiconductor ETF has capitalized on this high demand with its portfolio of only semiconductor stocks.

The top three holdings are Nvidia, Taiwan Semiconductor, and Broadcom. It only holds 26 stocks, so it is highly concentrated and should only represent a relatively small percentage of your overall portfolio due to the short-term volatility it will experience.

Data by YCharts.

But over the longer term, like a 10- or 20-year period, this ETF's highs should outweigh its lows.

Over the past 10 years, it has posted an average annualized return of about 32%, which beats all major ETF competitors, as the above chart shows. This year alone, it has returned about 58% year to date as of Aug. 27.

With AI expected to continue to transform economies over the next decade or more, the highly concentrated VanEck Semiconductor ETF should continue to generate high long-term returns that outperform the competition.

Dave Kovaleski has positions in Ea Series Trust - MarketDesk Focused U.s. Momentum ETF and Micron Technology. The Motley Fool has positions in and recommends ASML, Broadcom, Intel, Micron Technology, Nvidia, Taiwan Semiconductor Manufacturing, and Vanguard Morningstar Growth ETF. The Motley Fool has a disclosure policy.

Interest rates are the primary tool that the Federal Reserve uses to calm or jump-start the economy. When it cuts its benchmark rates, markets usually rise, as lower costs to borrow spur companies to invest, transact, and acquire. That, in turn, leads to economic growth and, typically, rising stock prices. That's the good news.

When the Fed raises rates, though, markets tend to react negatively, because when the costs of borrowing go up, it increases expenses, drags on earnings, and can deter companies from making investments. That's the bad news.

But it's never that simple.

Image source: Getty Images.

A rate hike is expected in 2026

The benchmark federal funds rate had been close to 0% for six years after the Great Recession, from 2010 to the end of 2015, as the economy recovered. But in the rate-hiking cycle that followed, it never went over the 2.25% to 2.50% range, peaking in July 2019. Four raises in 2018 were a major reason that the S&P 500 was down 4% in 2018, but it surged 31% in 2019 when the Fed began lowering rates.

The COVID pandemic hit in March 2020, and the Fed flattened interest rates back to 0% again to support the economy through that turbulent period. This helped spur another rally as the S&P 500 returned 18% in 2020 and 29% in 2021. Inflation started rising due to a combination of low rates, supply chain issues, and economic stimulus, among other factors, so the Fed went on an aggressive rate-hiking spree starting in April 2022 through September 2023 that brought rates from 0% to the 5.25% to 5.50% range, where they peaked and remained until August 2024. In 2022, the S&P dropped 19% and the Nasdaq fell 33%.

The simple fact that the rate-hiking phase of that cycle appeared to be over fueled a rally in 2023 -- the S&P soared 25%.

The Fed's rate-cutting cycle began in September 2024 and continued until December 2025. Markets continued to rise in 2024 and 2025, as rates fell to the 3.50% to 3.75% range. Consequently, the S&P 500 was up 25% in 2024 and 18% in 2025.

But since then, rates have plateaued, remaining at the 3.50% to 3.75% range. Markets had been expecting further cuts in 2026, possibly two 25-basis point reductions, but tariffs, rising inflation, geopolitical conflicts, and a slowing economy have changed that view. As a result, markets have been more volatile, although they are still up 12% year-to-date.

Now expectations have flipped, and a rate hike is expected this year, according to CME's FedWatch. This poll of interest rate traders finds that 51% expect a rate hike in October, while 70% expect rates to be higher by December.

A hike is already baked in

It is by no means a foregone conclusion that rates will go up this year, and even if they do, this is a new cycle. The two most recent rate-hiking cycles started from the bottom -- at or near zero. This one would be starting from the middle, and it seems unlikely that those increases would be the start of an extended cycle of hikes, given the Fed's own summary of projections.

The Federal Open Market Committee anticipates one hike in 2026, but then forecasts rate cuts in 2027 and 2028 with a longer-run target of 3% to 3.25%. Again, this is how they see it now. Their views could change.

So, I think it's hard to draw any solid conclusions on how the market may react to a single rate hike later this year. It is already expected and may already be baked into investors' thinking, which would mean it would have little impact on the market when it arrives -- assuming that it does.

Now, if there are multiple rate hikes, that might be a different story. But the Fed isn't anticipating that, and neither are most investors. I think a single rate hike this fall could be a non-event. And longer term, if rates trend lower, that would likely have a positive effect on the market.

It is always important to keep a long-term mindset as an investor, because even if markets jolt lower after successive rate hikes, things have a way of resetting as companies adjust to the new reality, and stocks generally move higher over the longer term.

The Motley Fool has a disclosure policy.

It's wild to think how rapidly the S&P 500 (SNPINDEX: ^GSPC) has progressed in recent years. Since July 2022, the S&P 500 has nearly doubled, reaching 7,681 as of Aug. 26.

From its launch in 1923, it took 45 years to reach 100 on June 4, 1968. Then it took almost 30 years to close above 1,000 on Feb. 2, 1998. It took another 16 years for the S&P 500 to reach 2,000, which it did on Oct. 31, 2014.

After that, the 2010s bull market pushed the S&P 500 to its next milestone in just five years, closing above 3,000 on Oct. 21, 2019. Then, the S&P 500 rode the post-COVID-19 pandemic rally to hit 4,000 on April 21, 2021 -- taking just 18 months to gain 1,000 points. Its road to 5,000 was slowed a bit by the 2022 bear market, so it didn't close above 5,000 until Feb. 9, 2024.

Image source: Getty Images.

In less than a year, the S&P 500 scaled the 6,000 peak on Nov. 11, 2024. And then it closed above 7,000 for the first time on April 15, 2026. As of Aug. 26, the S&P 500 is bearing down on 8,000, sitting at 7,681.

The S&P 500 at 43,000

The higher the benchmark moves, the more points it takes to achieve a certain percentage increase, so the pace at which it hits these milestones lately can be a bit deceptive. For example, a 100% increase on a benchmark at 100 brings it to 200. A 100% increase from 3,800 brings it to 7,600.

What's more important is the return that it has generated over the years. In the almost 70 years since the modern-day S&P 500 launched as a 500-company index on March 4, 1957, it has had an average annualized return of 8.7%. With the dividends reinvested, the total average annualized return is 11%.

^SPX data by YCharts

While past performance is no guarantee of future results, an 11% per year return is a number that most of us would take in a heartbeat.

Now, many experts and strategists expect a slower decade for the S&P 500, mainly due to its current high valuation, among other factors. Vanguard anticipates a 5% average annual return for the S&P 500 over the next decade, while Goldman Sachs and J.P. Morgan forecast 10-year average returns of 6.5% to 6.7%.

That might be on par with the 1970s, a period marred by war and inflation, which had an average annual return of about 6%. But the index bounced back in the 1980s with a 17.5% average annual return. Also, the 2000s were basically flat, but the 2010s saw an average annual return of almost 14%.

So history tells us that even if the next 10 years are rocky, the 10 years after that could be significantly better.

Let's say the S&P 500 averaged about 9% return over the next 20 years, which would be in line with its average over the past 20 years. Where would the S&P 500 be in 20 years? Based on historical trends, it would be at just over 43,000.

JPMorgan Chase is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and JPMorgan Chase. The Motley Fool has a disclosure policy.

In Warren Buffett's last few years at the helm of Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB), the company didn't do much buying and hoarded cash. The conglomerate was a net seller of stocks in the last few years leading up to the handoff to new CEO Greg Abel in January. By the first quarter of 2026, the firm had amassed a record $397 billion in cash in the portfolio.

That changed in the second quarter of 2026, as Berkshire Hathaway became a net buyer of stocks for the first time in 14 straight quarters as a net seller. The company bought roughly $23.5 billion in stocks last quarter and sold just $3.7 billion. As a result, the massive pile of cash dropped to approximately $365 billion.

Image source: Getty Images.

One of the biggest moves Abel made was buying 17.5 million shares of Delta Air Lines (NYSE: DAL) stock, increasing the position by 44%. Berkshire now holds 57.3 million shares of Delta, valued at $5.4 billion, up from $2.6 billion after Q1. Delta is now the 13th-largest position in the Berkshire Hathaway portfolio, representing about 1.8% of the portfolio. Further, Berkshire now holds 8.7% of Delta stock, up from 6.1% in the first quarter.

Back on board with Delta

Berkshire Hathaway has owned Delta in the past; in fact, the conglomerate held the stock from 2016 through 2020 and built up a sizable stake. But when the pandemic hit, Buffett exited his position in Delta entirely, selling off the remaining 61 million shares in Q2 2020.

It wasn't just Delta, however. Buffett sold off all of his airline shares when the pandemic hit, dumping his holdings in American Airlines, United Airlines Holdings, and Southwest Airlines. Most surprising was not that he sold, but when he sold -- at the bottom, meaning he got fearful and locked in losses rather than ride it out.

Also, it took six years for Berkshire to get back on board with commercial airline stocks, even though the two major carriers, Delta and United, have performed well. In Q1, Berkshire bought 39.8 million shares of Delta, adding another 17.5 million in Q2. Delta is the only airline stock that Berkshire Hathaway currently owns.

Delta has had a resurgence since then, with an average annual return of 15% over the past five years. It has averaged a 25% return over the past three years and is up 33% over the past 12 months and 19% year to date.

The good thing is that Berkshire and Abel do not appear to be too late to buy in, as Delta stock is still relatively cheap, trading at 13 times earnings and 12 times forward earnings. Wall Street is almost all in on Delta, with 89% of analysts rating it a buy. Delta stock has a median price target of $105 per share, implying a 28% gain over the next 12 months.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Delta Air Lines and Southwest Airlines. The Motley Fool has a disclosure policy.

The "Magnificent Seven" stocks have been the driving force behind the market's current bull market. Right near the beginning of the bull market in April of 2023, Roundhill Financial launched an exchange-traded fund (ETF) that sought to capitalize on the strength of these seven magnificent megacaps -- Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG), Meta (NASDAQ: META), Amazon (NASDAQ: AMZN), and Tesla (NASDAQ: TSLA).

The Roundhill Magnificent Seven ETF (NYSEMKT: MAGS) became the first ETF to invest solely in these seven stocks. And it's had a great run the past three years, returning 55% on an annualized basis in 2023, 62% in 2024, and 21% in 2025. It has a three-year annualized return of 31% as of Aug. 25.

But this year has been a different story. The ETF has barely been above water, up about 2% year to date, while the Nasdaq Composite and S&P 500 are each up 12%.

So why is the MAGS ETF underperforming? And is this a buying opportunity for investors?

Image source: Getty Images.

Why MAGS is a good buy

The underperformance of the MAGS ETF speaks to one of the major risks of investing in a concentrated portfolio, particularly one concentrated on similar megacap growth stocks. The lack of diversification means that when markets go down, this ETF will go down with them.

But with those same risks come rewards. When markets are up, MAGS will likely outperform the indexes, as it did in 2023, 2024, and 2025 -- and by massive margins in 2023 and 2024.

This year, in particular, the Magnificent Seven have been a mixed bag, as the chart below shows.

Data by YCharts.

Tesla and Meta have had double-digit negative returns, bringing down the performance of the ETF. Apple, Amazon, and Nvidia are all beating the benchmarks, but not by much. Alphabet and Microsoft have positive but single-digit returns year to date.

Even though the ETF has underperformed, it's still trading at almost $68 per share, near a 52-week high of $71 per share. Its average P/E ratio is 29, which is on par with the S&P 500's and lower than the Nasdaq-100's, which is 34.

But here's why investors are still buying the Roundhill Magnificent Seven ETF. Despite its still elevated price/earnings (P/E) ratio, five of the Magnificent Seven stocks -- Amazon, Microsoft, Nvidia, Alphabet, and Meta -- are relative bargains and strong buys, trading at below-average valuations. The MAGS P/E ratio is thrown out of whack by Tesla, which is trading at a ridiculously high P/E of 323.

Considering that a strong majority of Magnificent Seven stocks are good buys at reasonable valuations, this ETF is in a good position.

I would not allocate the majority of my portfolio to this ETF because of its extremely concentrated focus and its high potential for volatility. But setting aside a smaller allocation for this type of alpha might not be a bad idea, especially with many of the Magnificent Seven stocks looking attractive.

Dave Kovaleski has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

State Street Financial Select Sector SPDR ETF (NYSEMKT:XLF) and iShares U.S. Financials ETF (NYSEMKT:IYF) both provide exposure to the financial sector, but they differ significantly in cost, liquidity, and portfolio breadth.

While both funds focus on U.S. financial companies, the State Street fund targets a narrower subset of large-cap firms from the S&P 500, whereas the iShares fund offers a more expansive view of the domestic financial industry by including a wider range of market capitalizations.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

State Street Financial Select Sector SPDR ETF is the more affordable choice, featuring a 0.08% expense ratio compared to 0.38% for iShares U.S. Financials ETF. Both funds currently offer an identical dividend yield of 1.4%.

Performance & risk comparison

What's inside

State Street Financial Select Sector SPDR ETF concentrates its portfolio on 76 holdings, focusing on Financial Services at 98% and Technology at 2%. Its largest positions include JPMorgan Chase (NYSE:JPM) at 11.72%, Berkshire Hathaway Inc Cl B (NYSE:BRKB) at 11.34%, and Visa Inc Class A Shares (NYSE:V) at 7.56%. It was launched in 1998. State Street Financial Select Sector SPDR ETF has paid $0.81 per share over the trailing 12 months, which on its recent ~$56.95 share price works out to a 1.4% yield.

In contrast, iShares U.S. Financials ETF provides broader exposure with 141 holdings, leaning 99% into Financial Services and 1% into Real Estate. Its top holdings include JPMorgan Chase at 11.21%, Berkshire Hathaway Inc Class B at 11.06%, and Bank Of America (NYSE:BAC) at 4.39%. It was launched in 2000. iShares U.S. Financials ETF has paid $1.92 per share over the trailing 12 months, which on its recent ~$134.82 share price works out to a 1.4% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

These are two strong financial sector ETFs, but one stands out as the better buy.

I would give the edge to the iShares U.S. Financials ETF, which tracks large and mid-cap stocks within the Russell 1000. The ETF also has certain caps in place to keep it even more diversified.

The State State ETF is a more concentrated portfolio that tracks an index comprising a representative group of large-cap financial sector stocks within the S&P 500. In that sense, it is less diversified than the iShares U.S. Financials ETF.

Both ETFs have similar distribution yields of 1.4%, but the iShares ETF has better returns over the 1-, 3-, and 5-year periods. The two ETFs have posted similar average annualized returns over the past 10 years.

However, the State Street ETF is far cheaper, with a low expense ratio of 0.08%-0.38%, compared with the iShares ETF's 0.38%. Still, the broader diversification and returns of the iShares ETF make it a better buy.

Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, JPMorgan Chase, and Visa. The Motley Fool has a disclosure policy.

Billionaire hedge fund manager Ken Griffin, founder and CEO of Citadel, made a big move last quarter into one of the best dividend stocks on the market: AbbVie (NYSE: ABBV).

Griffin added 2.7 million shares of the pharmaceutical company, boosting his hedge fund's stake in AbbVie by some 547%. Citadel now owns 3.2 million shares of AbbVie worth a total of about $798 million. That stake makes up about 0.46% of its total portfolio.

AbbVie is a tremendous income investment. The company has increased its annual payouts for 54 straight years -- if one includes its time as a part of Abbott Labs, from which it was spun off in 2012. That track record earns it a place in the exclusive group of Dividend Kings -- companies that have raised their payouts for at least 50 straight years.

In mid-August, AbbVie paid out a third-quarter dividend of $1.73 per share. At the current share price, it yields 2.6%.

This trade reflects a defensive posture from Griffin, as a big move into a stable, defensive, dividend-paying stock like AbbVie perhaps indicates growing uncertainty about the market, which is trading at historically high valuation levels.

Ken Griffin, founder of Citadel. Image source: Getty Images.

It's somewhat in step with a recent move that Griffin made to sell off 80% of the assets he bought from AI-focused hedge fund Situational Awareness. Those assets had been purchased at a discount by Griffin because the heavily tech and AI-oriented fund had suffered significant losses. The assets were integrated into Citadel's Wellington Fund.

According to CNBC, Griffin told investors that he made some 100 block trades of stocks worth more than $4 billion in total value to de-risk the portfolio and lock in profits.

Wall Street is bullish on AbbVie

In the days since Citadel's second-quarter 13F was filed on Aug. 14, AbbVie stock has risen from about $249 per share to its current price of roughly $264 per share, a 6% gain. The stock is now up about 16% year-to-date.

Wall Street remains bullish on AbbVie stock, with an overwhelming 75% of analysts covering the stock rating it as a buy. It has a median price target of $282.50 per share, which would suggest about 7% upside from here over the next 12 months.

While the stock has a gaudy price/earnings ratio of 74, its forward P/E is just 18 and its longer term five-year price/earnings-to-growth ratio is just 0.47. When a stock has a PEG ratio below 1, that means it is a good value relative to its anticipated earnings growth.

The company's current high P/E ratio is a bit skewed because its earnings over the past 12 months have been impacted by acquisition costs. So, the forward P/E and PEG ratios are more accurate depictions of its earnings with respect to its share price.

AbbVie owns a roster of blockbuster drugs, including Rinvoq, Skyrizi, Vraylar, Botox, Qulipta, and Ubrelvy. It has also recently made several acquisitions to bolster its pipeline of drugs in areas like immunology, cancer and oncology, obesity, and neuroscience.

The company still has an abundance of cash, with cash flows from operations rising 7% year over year to $7.3 billion. That steady flow of cash will help it keep funding its dividend.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool has a disclosure policy.

If you are looking for long-term buy-and-hold stocks right now, you have to be selective. There are many stocks out there, particularly large caps, that are overvalued and may not deliver the long-term performance they once did.

But the good buys are still out there; you just have to look a little harder and go a little deeper in your research.

Two of the absolute best buys out there right now are Amazon (NASDAQ: AMZN) and Realty Income (NYSE: O) -- and for very different reasons.

Image source: Getty Images.

1. Realty Income

Realty Income is a real estate investment trust (REIT) that is literally built to provide dividend income. It actually calls itself the Monthly Dividend Company.

It has been providing high-yield dividends since it started trading as a public company in 1994. This marks the 32nd straight year that it has raised its annual dividend. Nothing in life is certain, but you can be fairly certain that it will keep raising its dividend for another 10 years in a row, and probably well beyond that.

As a REIT, Realty Income is required by law to distribute 90% of its taxable income to shareholders through its dividend, which it pays out monthly. It is currently enduring one of the worst real estate markets in more than a decade and is still raising its dividend. Realty Income also managed to raise its dividend through the housing market crash that rocked the economy during the Great Recession.

Realty Income owns roughly 15,500 properties leased to some 1,800 customers in 92 different industries throughout the U.S., the U.K., and Europe. There are many reasons why Realty Income has been such a reliable dividend payer, but it mainly stems from its diverse group of holdings and its highly selective process, as it focuses on single-tenant, freestanding commercial properties with high-quality clients and long-term leases typically of at least 10 years. The leases also require the tenant to pay rent, taxes, insurance, and maintenance, which keeps expenses lower.

Realty Income pays $0.27 per month at an extremely high yield of 5.19%, which is about five times the S&P 500 average. Also, after a rough stretch, the real estate market should be slowly improving, which bodes well for Realty Income in the years ahead. That consistent, high dividend yield will provide investors with the income and total return they need, particularly if markets stumble or stagger.

2. Amazon

Investors all know Amazon as one of the "Magnificent Seven" stocks, but it is particularly magnificent right now for one major reason -- its valuation.

Amazon stock is as cheap as it's been in more than a decade, even longer perhaps, trading at just 20 times earnings.

And concerns about its high capex have begun to subside a bit, as the company has a surging backlog of $496 billion and saw its highest sales growth in Amazon Web Services in more than four years last quarter.

This is a perfect opportunity to buy one of the best companies in the world at a 10-year low valuation. That should set it up for significant long-term growth, given its massive backlog and sales momentum.

Dave Kovaleski has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Realty Income. The Motley Fool has a disclosure policy.

Amazon (NASDAQ: AMZN) stock has trailed the S&P 500 for most of 2026 and is now in line with the large-cap benchmark, up 12% year-to-date.

There are several reasons Amazon's stock has lagged for most of this year, but there is one major reason investors should buy it now in August.

Image source: Getty Images.

Amazon stock is trading at one of its lowest valuations in a long time. Its current P/E ratio is 21, and other than a dip to 19 in June of this year, it hasn't been this low in at least 10 years, but likely much farther back than that.

AMZN PE Ratio data by YCharts

That right there is enough to signal a strong buy on Amazon stock. Any time one of the largest, most successful companies in the world, one of the Magnificent Seven stocks, is trading at a decade-low valuation, the buy sign should be flashing.

In Amazon's case, it is the leader in both of its major markets: e-commerce and cloud computing. It's just a no-brainer buy right now.

A massive $496 billion backlog

The dirt cheap valuation is the number one reason to buy, but also, Amazon is heading back in the right direction after a bumpy start to the year.

One of the chief concerns about Amazon was its massive increase in spending on artificial intelligence. At the start of the year, Amazon proposed a whopping $200 billion in capital expenditures to maintain the huge demand for AI infrastructure. That's some 51% more capex spending than in 2025.

Investors balked, as Amazon had been steadily losing market share to Microsoft (NASDAQ: MSFT) and Google, owned by Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), so they questioned whether more spending was the answer, particularly given its cash-flow depletion.

But Amazon officials argued that the infrastructure was necessary to regain lost market share and meet demand from its growing backlog of $496 billion in contracts. In fact, CEO Andy Jassy said on the Q2 call that Amazon now projects $220 billion in capex in 2026.

"Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027, too," Jassy said on the call.

Analysts are bullish on Amazon

The investments may already be paying off as Amazon reported blowout second-quarter earnings. Amazon Web Services, its cloud computing business, had its fastest growth in more than four years with revenue rising 37%. Overall revenue increased 20%.

Further, its operating income soared 43% to $27.5 billion while net income increased 243% to $62.6 billion, boosted by its investments in Anthropic.

Amazon anticipates sales to rise 9% to 12% year over year in the third quarter and operating income to be between $22.5 billion and $26.5 billion, up 29% at the midpoint.

That's not quite the growth rate Amazon saw in Q2, but at that low multiple, Amazon stock is just too attractive to pass up with its massive earnings power and growing backlog. Wall Street is almost unanimously in agreement, with 97% of analysts rating it a buy and a median price target of $327 per share. That suggests 27% upside for Amazon stock.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.

When markets correct or crash, one of the first thing investors should do is start to look for good stocks to pick up at discounts.

In the current market, large-cap valuations are extremely high: The Shiller CAPE (cyclically adjusted price-to-earnings) ratio sits at 42.15, the highest that market valuation metric has been since the peak of the dot-com bubble in 1999.

Should the market tank, there would be some great buying opportunities among some of these now-overpriced large caps -- some of them, but not all.

Thatʻs why, if the market does tank, I would be looking to load up on the VictoryShares US Value Momentum ETF (NASDAQ: ULVM).

Image source: Getty Images.

Value and momentum

The VictoryShares US Value Momentum ETF employs a unique strategy that looks for large-cap stocks that are not only good values, but have forward price momentum.

The ETF tracks the Nasdaq Victory US Value Momentum index, which includes stocks within the Nasdaq US Large Cap 500 index with higher exposure to value and momentum factors. Each stock's value score is calculated based on factors like price/earnings and other valuation ratios, while its momentum score is based on the stockʻs price trends over the last six months and 12 months, except the last month, adjusted for volatility.

Then, each stock is ranked by its combined value and momentum scores, and the top 25% are included in the portfolio. Stocks with lower volatilities are given higher weights in the ETFʻs portfolio.

The index is rebalanced and reconstituted quarterly, and the ETF's portfolio follows suit. The ETF currently holds 124 stocks with Johnson & Johnson, Berkshire Hathaway, and Realty Income the three largest holdings.

Companies in the financial industry make up 29% of the portfolio, followed by healthcare and industrials at 11% each.

Beating the Nasdaq and the S&P 500

The strategy has worked well as the VictoryShares US Value Momentum ETF has outperformed the S&P 500 over the past 12 months with a total return of 29%.

Its three- and five-year average annualized returns are about 13%, which is roughly the same as the S&P 500. It does not yet have a 10-year track record, having only debuted in 2017.

SPY data by YCharts.

So during an almost-four-year-long bull market when gains were dominated by magnificent megacaps and large tech stocks, its performance has kept pace with the S&P 500.

But where you should really start to see some separation between this ETF and the large-cap benchmarks is during a downturn, when value is key and momentum is paramount. Take 2022, for example, when the S&P 500 dropped by 19%. This ETF was only down 8% that year, a significant outperformance.

Yet, over the past three-plus years, when markets soared, the VictoryShares US Value Momentum ETF kept pace with the S&P 500. This is a good ETF in any market, but its strengths will really demonstrate themselves if there is a significant downturn.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Realty Income. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

Things have been going pretty well on the stock market as the bull market approaches four years this October. That's why a lot of people are rightly nervous.

All good things come to an end, especially when a valuation gauge like the Shiller P/E ratio is at its highest level since the dot-com boom, which soon thereafter went bust.

That's not to say a bear market is right around the corner or that a market collapse is imminent. All markets are different, and there are some key differences between this one and the nearly two-year bear market that followed the dot-com boom.

However, it is likely that markets will be volatile and, like Marvel villain Thanos, bear markets are inevitable. There have been 10 of them in the last 60 years.

What's also undeniable is that bear markets don't last forever. In fact, historically, they are much shorter than bull markets. History also shows that over the long term, riding out the inevitable market dips leads to solid gains.

Image source: Getty Images.

Bear markets are shorter than bull markets

According to an analysis by Winthrop Wealth, 93% of rolling 10-year periods from 1928 through today have had positive returns. Only 7% have had negative returns, with all of those negative rolling periods coming in either the 1930s or the 2000s.

One of those periods was the "lost decade" of the 2000s, which featured the dot-com bust and the Great Recession. That decade, from Dec. 31, 1999 to Dec. 31, 2009, resulted in a total return of -9.1%, or -0.9% on an annualized basis.

^SPX data by YCharts.

The lost decade was followed by an 11-year bull market, the second longest in history. That bull market saw the market rise 400%, or roughly 16% per year, according to an analysis by First Trust. The current almost-four-year bull market has featured a total return of approximately 110% and an average annualized return of 22%.

Furthermore, the First Trust analysis found that the average bull market has lasted 4.4 years and had an average total cumulative return of about 152.8%. The average bear market has lasted only 11 months and had a total cumulative return of -31.7%.

So the bulls clearly win out.

An 11% average return over the past 100 years

If you go back to 1926, when comprehensive data tracking of the modern stock market began, obviously, with the precursor to the S&P 500, you get a holistic view of the value of long-term investing.

^SPX data by YCharts.

Over that 100-year stretch, the S&P 500 and its precursor have an average annualized total return, with the dividend reinvested, of 10.96% -- call it 11%. That shows the value of staying invested in the market and waiting out the inevitable dips and the occasional bear market.

Even if the next rolling decade were to be a rare "lost decade" for the S&P 500, there are investments outside of large-cap U.S. stocks that would produce positive returns. For example, during the 2000s, mid-cap and small-cap stocks were each up 6%.

History also shows that rare long-term declines are followed by much higher gains over the subsequent multi-year period.

The Motley Fool has a disclosure policy.

When you find a great dividend stock, there are really not many reasons to ever sell it. Thatʻs because great dividend stocks play an essential role in a portfolio.

A quality dividend stock pays you reliable, consistent income every quarter, no matter if the market is high or low. If the market is low, thatʻs when strong dividend stocks shine because that income can be reinvested in the stock to boost total return when you most need it.

Plus, reliable dividend stocks are typically good defensive stocks. They are stocks of stable, well-capitalized companies that often provide essential products or services in demand across any market or economy. For those major reasons, they deserve to be a foundational piece in a portfolio.

Here are two consistent, reliable high-yield dividend stocks to buy and never sell.

Image source: Getty Images.

1. Johnson & Johnson

Johnson & Johnson (NYSE: JNJ) is a household name in that many of its former products, from Band-Aids to baby powder, were in every household. But the company spun that consumer business off in 2023, and now it just focuses on pharmaceutical drugs and treatments and medical technology equipment. In that sense, it is rare to be a major player in both areas, as companies typically occupy one side or the other.

But this is part of why Johnson & Johnson is such a solid dividend stock. It has two strong revenue streams that provide stable revenue and strong cash flows, allowing it to consistently fund its dividend.

In the most recent quarter, the pharmaceutical business grew revenue by 7.8% year over year to $16.4 billion, while the medtech business increased revenue by 4.5% to $8.9 billion. Importantly, it had $8.7 billion in free cash flow in Q2 and expects to have $21 billion by the end of fiscal 2026. That robust cash generation will help it continue to fund its dividend.

And funding the dividend is something Johnson & Johnson has a long history of doing. It is a Dividend King, having increased its dividend annually for 64 straight years. Not many stocks have longer streaks than that.

It currently pays out a $1.34 per share quarterly dividend at an above-average yield of 1.96%. Along with its reliable dividend, it has been a solid performer with a five-year average annualized return of 12% and a 10-year average annualized return of 11.5%, with the dividend reinvested.

2. AbbVie

AbbVie (NYSE: ABBV) is one of the largest pharmaceutical companies in the world. Its lineup of drugs and treatments includes some of the most popular names in healthcare. Skyrizi, Rinvoq, Humira, Vraylar, Botox, and Ubrelvy are just a few of the pharmaceuticals it produces.

These blockbuster drugs have allowed AbbVie to develop a strong pipeline of new drugs and to make strategic acquisitions, such as the recent acquisition of Apogee Therapeutics, which develops drugs to treat inflammatory and immunological diseases. AbbVie currently has 90 compounds, devices, or treatments in the pipeline, with 60 in mid- to late-stage development.

In its most recent quarter, AbbVie generated about $17 billion in revenue, up 10% year over year. Its operating earnings spiked 31% year over year to $6.4 billion, and its cash flow from operations increased 7% year over year to $7.3 billion.

AbbVie stock pays a dividend of $1.73 per share at a yield of 2.6%, higher than Johnson & Johnson's. It's also a Dividend King (stocks that have raised their dividend annually for 50-plus consecutive years) with 54 straight years of dividend increases.

In addition, AbbVie stock has posted stellar returns, with a five-year average annualized return of 22.1% and a 10-year average annualized return of 19.6%. It has been the better stock for dividends and returns than Johnson & Johnson, but both would be great additions to a long-term diversified portfolio.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie. The Motley Fool recommends Johnson & Johnson and Kenvue. The Motley Fool has a disclosure policy.

Warren Buffett is a big fan of compounding interest. "My wealth has come from a combination of living in America, some lucky genes, and compound interest," Buffett said back in 2010.

And you don't have to be an oracle to take advantage of it -- you just need patience, discipline, and time.

Image source: The Motley Fool.

Your money making money

Compound interest, or compounding, is quite simply your money making money. More technically, it is the interest you earn on top of your principal and interest over time.

To keep it simple, let's look at how compounding works in a bank savings account. Say you set aside $10,000 in a savings account that pays out a 3% interest rate.

That $10,000, after one year, would grow to $10,300 -- so you made $300 in interest. After year two, that 3% gain is on $10,300, including the $300 in interest you made the previous year. So now that $10,300 grows to $10,609. That $300 in interest you made last year made $9 on its own.

That might not sound like much, but when you let compounding do its thing over many, many years, that interest you earn on top of the interest just keeps piling up. After 20 years, that $10,000 becomes $18,061.11.

So thatʻs the concept. Now apply that to investing, where you are making returns instead of interest.

The magic of compounding

The S&P 500 has averaged about a 10% annual return over time, so let's take that as an example. You invest $10,000 in an S&P 500 exchange-traded fund (ETF) like the Vanguard S&P 500 ETF (NYSEMKT: VOO), and that ETF averages a 10% annual return.

After 10 years, that amount would grow to $25,937.42 -- a roughly $16,000 gain on the initial investment. But now look at how compounding kicks into high gear as it works. After 20 years, with a 10% annual return, you would have $67,275 -- a gain of almost $40,000 in just the previous 10 years.

When you calculate 30 years of compounding, that initial $10,000 would grow to $174,494.02, with more than $100,000 of that added in the previous 10 years.

That's what Buffett was talking about.

Now, if you contributed $100 per month to that initial investment, that would compound, too.

Specifically, after 10 years, the $10,000 initial investment, with $100 added every month, with a 10% return, would turn into $45,923.81. After 20 years it would be $139,100.92, and after 30 years $380,778.35. Just $36,000 of that is contributions -- the rest is compounding returns.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

Before exchange-traded funds (ETFs) took over the investing world, mutual funds were the investment of choice for most retail investors and none was bigger than the Magellan Fund from Fidelity.

Magellan, managed by investing legend Peter Lynch, was the largest mutual fund in the world, peaking at about $102 billion in assets under management in 2000 during the dotcom boom. For perspective, its currently got roughly $27 billion in assets, so its down considerably from its peak as ETFs have boomed. There's also an ETF now, the Fidelity Magellan ETF (NYSEMKT: FMAG).

The fund made its name during the tenure of Lynch, who ran the fund from 1977 until 1990. During that time it went from about $20 million in assets to over $14 billion by 1990. Lynch's legendary status is supported by his performance. Under his management, the fund averaged an annual return of 29.2%, which is among the best in the business. And he beat the S&P 500 in 11 of his 13 years there.

Image source: Getty Images.

Lynch was also known for his folksy wisdom about investing that was easy for the average investor to understand if not execute on. His most famous quip is to "invest in what you know," which, I admit, I tried when I first started investing to disastrous results. I really didn't know what I thought I knew about the stock, I just liked the product. Lynch was saying to know the stock, know the company, know the industry. That's a lot of knowing for someone new to investing.

What I should have done was listen to another bit of Lynch's wisdom and turned over a few more rocks before making an investment.

Leave no stone unturned

"The person that turns over the most rocks wins the game. And that's always been my philosophy," Lynch once said. This piece of Lynchian advice is a bit more applicable and easy to grasp for the average retail investor. He's basically saying: Do your research, look at more stocks to find the ones that have the most upside or best fit your portfolio. Don't follow the crowds.

If everyone is buying AI stocks, don't just reflexively pile into the most popular stocks with the highest returns. Those with the highest returns may also be the most overvalued and prone to a steeper decline if the market corrects. Or they may be overpriced based on hype and not actual real earnings and strong fundamentals.

The way to find the best AI stocks, or value stocks, or growth stocks, or income stocks, or whatever, is to go deep in your research of its valuation ratios, earnings history, earnings potential, debt, revenue growth, and other fundamentals, for that will tell the fuller story. The more stocks you explore, or the more rocks you turn over, the better chance you will have of finding the ones that are keepers in a long-term portfolio.

Like Magellan and Lynch, be an explorer.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The stock for Dick's Sporting Goods (NYSE: DKS), a leading sporting goods retailer, is primed for a big move after it releases its fiscal second-quarter earnings on Aug. 25. The reason has to do with performance trajectory.

Dick's looks like an even better buy, in part, because of a stock sell-off it experienced on Aug. 20 on news that its Britain-based rival JD Sports reported a comparable-store sales decline in the summer quarter and lowered the retailer's outlook. The thing is, JD Sports also had a weak first quarter, with comp sales dropping, so I donʻt expect Dickʻs to suffer the same results, given its momentum.

In the first quarter, Dickʻs posted blowout results with net sales spiking 67% year-over-year to $5.16 billion. Overall comp sales were up 6%. Including Foot Locker, which Dick's bought last September, comp sales were up 4.1%.

So, Dickʻs Sporting Goods is on a different trajectory than JD Sports.

Image source: Getty Images.

Dick's is seeing surging revenue growth

There are few reasons why Dickʻs Sporting Goods stock should take off after Q2 earnings are released on Aug. 25.

First, the stock is cheap. After tanking roughly 5% on Aug. 20, the stock is down 9% year-to-date and is trading at 18 times earnings and 13 times forward earnings. But its earnings have been impacted in recent quarters by costs associated with the Foot Locker acquisition.

Its sales, however, have been strong and its price/sales ratio is very low at just 0.87.

Second, Dickʻs has a robust sales growth outlook. For this fiscal year, it anticipates $22.1 billion to $22.4 billion in net sales, which would be about a 29% increase over the previous year. Adjusted earnings are targeted to be between $13.50 and $14.50 per share, which would be up 6% at the midpoint.

Further, itʻs operating margin shows continued improvement, rising from 3% in Q4 of last fiscal year to 8.7% in Q1.

Analysts at Wells Fargo recently upgraded Dick's price target to $240 per share, from $220. That would suggest 32% upside for the stock. The median price target among analysts is $267 per share, which would indicate a 47% return.

For Q2, analysts target revenue of $5.6 billion, up 55% year over year, and earnings of $3.80 per share, down year over year, mainly due to higher costs related to Foot Locker. Wells Fargo analysts project that earnings will be even lower than that at $3.72 per share, but it is still bullish on Dick's stock.

Growth catalysts

Wells Fargo analysts said they will be looking more at the outlook for the rest of the year than the Q2 earnings. They see Foot Locker ultimately being a catalyst, with the segment's margins rising over the near-term to 7% to 8%, up from the current 1% to 2%.

In addition, Wells Fargo sees Dick's as being one of the primary beneficiaries of a Nike turnaround as Nike looks to reenergize wholesale channels through retailers like Dick's and Foot Locker.

I think that Dick's stock could jump a bit after Aug. 25 earnings, but the larger gains will be seen over the longer term. The stock is cheap, and it has the potential for a strong growth catalyst in Foot Locker.

Wells Fargo is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.

The S&P 500 is up a solid 13% year-to-date, but this large-cap exchange-traded fund (ETF) blows it away with a 30% year-to-date total return. For the Invesco S&P 500 Momentum ETF (NYSEMKT: SPMO), it is all about momentum.

The Invesco Momentum S&P 500 ETF has outperformed the S&P 500 and other S&P 500 ETFs in every period since it launched on Oct. 9, 2015. Yet it is not even among the top 125 ETFs by assets under management, with about $22 billion in AUM.

The SPMO ETF has flown under the radar among large-cap investors, but it deserves a prominent place in a long-term portfolio. It alone, with persistence and discipline, could account for a significant portion of retirement savings.

Image source: Getty Images.

The outperformance is striking

This is not your typical S&P 500 ETF. The Invesco S&P 500 Momentum ETF tracks the Invesco S&P 500 Momentum Index, which includes about 100 large-cap stocks with high momentum scores. The momentum score is based on recent upward price movements relative to other stocks in the index.

The score is calculated by looking at the percentage change in each stock's price over the past 12 months, excluding the most recent month. Then, that score is adjusted based on a stock's volatility, or up-and-down movement, over that period. Each stock is weighted by multiplying its market cap and momentum score. The fund is rebalanced twice a year, in March and September.

Currently, the top three holdings are Micron Technology, Nvidia, and Broadcom.

SPMO's performance relative to the Vanguard S&P 500 ETF (NYSEMKT: VOO) is striking:

Data by YCharts.

SPMO is up 30% year-to-date, compared to 13% for Vanguard's ETF. It has a one-year return of 32% versus 20% for VOO, and a three-year annualized return of 39% compared to 21% for the Vanguard S&P 500 ETF.

Looking back five years, the Invesco S&P 500 Momentum ETF has had an annualized return of 20%, beating the VOO's 12% average annualized return. Further, the Invesco ETF has had a 10-year average annualized return of 19% compared with the Vanguard ETF's 13%.

A 20% average return over the past 10 years

Aside from the long-term outperformance, the Invesco S&P 500 Momentum ETF tends to do well in down markets, too. That's because it focuses on momentum stocks.

When the S&P 500 was down 19% in 2022, for example, this ETF was only down 12%. And when markets are strong, like 2024, when the S&P 500 was up 23%, SPMO jumped 45%.

SPMO does have a higher expense ratio of 0.13%, but it's not nearly high enough to offset its strong outperformance.

If you just go off its past 10 years, SPMO averaged a 19% annual return and a 20% annual return with dividends reinvested.

If you invested $10,000 in this ETF today and contributed $100 per month, with a 20% annual return over the next 20 years, your investment would grow to roughly $627,000. That could go a long way toward funding a large part of your retirement.

Dave Kovaleski has positions in Micron Technology. The Motley Fool has positions in and recommends Broadcom, Micron Technology, Nvidia, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.

Schwab International Equity ETF (NYSEMKT:SCHF) and State Street SPDR Portfolio Developed World ex-US ETF (NYSEMKT:SPDW) provide nearly identical low-cost exposure to non-U.S. developed markets, differing primarily in index provider and portfolio depth.

These exchange-traded funds serve as core international building blocks for investors seeking geographic diversification. By excluding U.S. stocks, they allow for precise control over domestic versus international allocations. While their portfolios overlap significantly, their underlying benchmarks and total number of securities provide slight variations in market coverage that may appeal to different types of investors.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Both international funds are among the most affordable options on the market, each carrying a low 0.03% expense ratio. The dividend yield difference is minimal, though the Schwab fund has historically offered a slightly higher payout. These low costs ensure that a high percentage of the underlying international dividends and capital appreciation reach the investor.

Performance & risk comparison

What's inside

The Schwab fund tracks the FTSE Developed ex US Index, focusing on large- and mid-cap companies. Its sector exposure includes Financial Services 26%, Industrials 18%, and Technology 15%. Its largest positions include Samsung Electronics (KOSE:A005930) at 2.86%, ASML Holding (NASDAQ:ASML) at 2.35%, and SK Hynix (NASDAQ:SKHY) at 2.04%. The fund holds 1,490 securities. It was launched in 2009. Schwab International Equity ETF has paid $0.84 per share over the trailing 12 months, which on its recent ~$28.5 share price works out to a 3% yield.

The State Street fund tracks the S&P Developed Ex-U.S. BMI Index, providing broader reach with 2,436 holdings across similar markets. Its largest positions include Samsung Electronics at 2.48%, ASML Holding at 2.04%, and SK Hynix at 1.68%. Its sector weights are nearly identical, led by Financial Services 25%, Industrials 18%, and Technology 15%. It was launched in 2007. State Street SPDR Portfolio Developed World ex-US ETF has paid $1.52 per share over the trailing 12 months, which on its recent ~$52.1 share price works out to a 2.9% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

International ETFs are becoming increasingly popular as U.S. investors look to diversify beyond U.S. large cap stocks.

International stocks have outperformed U.S. stocks in recent years and are expected to continue to beat U.S. large caps in the years ahead. An analysis by Vanguard released in July says that over the next 10 years, international equities will likely post higher returns than U.S. stocks.

A key difference between the two is that the State Street fund is more diversified, investing in the broad universe of international stocks, including small caps. The Schwab ETF sticks primarily to large and mid-cap international stocks, omitting small caps.

Returns have been fairly similar, both over the past 12 months and across longer term time periods. Going forward, if Iʻm investing in one international ETF, Iʻm favoring the more diversified State Street fund. International small-caps have historically beaten international large caps over the long-term and are currently trading at extremely discounted levels.

So, over time, having that access to international small caps should help the performance of the State Street ETF.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.

With the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite hitting all-time highs last week and the Dow Jones Industrial Average doing so the previous week, stock valuations have entered the danger zone.

At only one other time in history has the Shiller P/E ratio been this high. This inflation-adjusted gauge, which looks at valuations over 10 years, stands today at 42.6. The only other time it was higher was in November 1999, when it hit 44.2. What followed was a nearly two-year bear market.

The 12-month-trailing S&P 500 P/E ratio is also at its highest point since 2000 at 30, while the Nasdaq-100 is slightly above average at 29.7, but nowhere near the 78.2 it hit in 2002.

The Shiller P/E has been a pretty reliable gauge over the years, as the market has suffered either a correction or bear market after it spiked in 1929, 1965, 1999, and 2021. While it is impossible to predict the future, knowledge of history can prepare us for any eventuality.

If a bear market or correction does follow this spike in the Shiller P/E ratio, here's the first thing I'm doing.

Image source: Getty Images.

Bear markets are a time to buy

One of the most famous quotes by former Berkshire Hathaway CEO Warren Buffett is to be fearful when others are greedy and be greedy when others are fearful.

That speaks quite directly to the market we're in right now. With stock valuations so high, it is important to be more selective than you normally might. While there are still some great stocks at reasonable valuations out there, like Amazon and Alphabet, there are many more to be wary of, too.

It may not, in fact, be the best time to pour more money into a broad S&P 500 exchange-traded fund (ETF), as you are buying near the top of the market. But it does make sense to favor actively managed ETFs or to seek out individual stocks that are reasonably valued and have earnings catalysts, such as Micron Technology (NASDAQ: MU).

But when the bear market hits, or the market corrects, that is the time to be greedy. This is the time when great companies that had become overvalued, perhaps due to how well they performed during the long bull market, return to a more normalized valuation range.

If you go back to the last bear market in 2022, Microsoft, for example, saw its P/E ratio fall to 24 and its share price dip to $221 per share by that summer. Microsoft's stock has since increased by more than 130% to over $500 per share. Same with Apple (NASDAQ: AAPL). Its P/E ratio dipped to 23 in 2022 and was trading at around $137 per share in mid-2022. Today, Apple is trading at $305 per share, increasing by more than 120%.

So, the first thing I'm doing when the bear market takes hold is looking for great companies to buy at a discount.

Dave Kovaleski has positions in Micron Technology. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Micron Technology, and Microsoft. The Motley Fool has a disclosure policy.

The Vanguard Morningstar Mega Cap Growth ETF (NYSEMKT:MGK) offers low-cost exposure to the largest U.S. growth stocks, while the State Street SPDR S&P 600 Small Cap Growth ETF (NYSEMKT:SLYG) targets smaller companies with high expansion potential.

Investors choosing between these two funds are essentially weighing the stability and dominance of America's largest corporations against the high-octane potential of small-cap companies. While both ETFs strictly target growth-oriented firms, the scale of their underlying holdings creates vastly different risk profiles and performance drivers for a portfolio.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The Vanguard fund is more affordable with an expense ratio of 0.05%, which is one-third the cost of the SPDR fund. State Street SPDR S&P 600 Small Cap Growth ETF provides a slightly higher payout for income-seeking investors.

Performance & risk comparison

What's inside

The Vanguard Morningstar Mega Cap Growth ETF provides concentrated exposure to the giants of the U.S. market, holding only 69 companies. Its portfolio is heavily weighted toward the technology sector at 59%, followed by communication services at 16% and consumer cyclical at 11%. Its largest positions include Nvidia (NASDAQ:NVDA) at 13.24%, Apple (NASDAQ:AAPL) at 12.14%, and Microsoft (NASDAQ:MSFT) at 7.49%. The fund was launched in 2007. Vanguard Morningstar Mega Cap Growth ETF has paid $0.29 per share over the trailing 12 months, which on its recent ~$91.14 share price works out to a 0.3% yield.

Contrastingly, the State Street SPDR S&P 600 Small Cap Growth ETF offers much broader diversification with 351 holdings. It targets smaller firms with strong expansion in sales and earnings, leading to a sector mix of industrials at 19%, technology at 17%, and healthcare at 15%. Its largest positions include Viasat (NASDAQ:VSAT) at 1.31%, Corcept Therapeutics (NASDAQ:CORT) at 1.18%, and Brinker International (NYSE:EAT) at 1.17%. The fund was launched in 2000. State Street SPDR S&P 600 Small Cap Growth ETF has paid $0.76 per share over the trailing 12 months, which on its recent ~$118.35 share price works out to a 0.6% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

It is hard to beat Vanguard and its low fees. The Vanguard Morningstar Mega Cap Growth ETF has an expense ratio of just 0.05% compared to the State Street SPDR S&P 600 Small Cap Growth ETF, which has fee of 0.15%.

But which one of these two ETFs you choose to invest in depends on your portfolio. Mega cap growth stocks have outperformed small cap growth stocks by a fairly significant margin over the past three-, five- and 10-year periods. That's no surprise as the mega caps, including the Magnificent Seven stocks and many AI leaders, have dominated the markets over the past decade.

But small cap stocks have outperformed in more recent times. This year, small caps have been one of the hottest investments on the market and that has carried over from a strong 2025 for small caps.

I would probably favor the small cap growth ETF because all of these mega cap stocks are in an S&P 500 ETF, which most investors already have. It's less likely that investors have adequately diversified into small cap growth stocks. Further, small caps remain more reasonably valued than overvalued mega cap stocks, even after surging this year. They should have more room to run as they are cheaper and should benefit from lower rates and investors rotating out of large caps.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Corcept Therapeutics, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

iShares S&P Small-Cap 600 Growth ETF (NASDAQ:IJT) and State Street SPDR S&P 600 Small Cap Growth ETF (NYSEMKT:SLYG) offer nearly identical exposure to small-cap growth, differing primarily in their expense ratios and asset scale.

Small-cap growth stocks are often sought for their potential to deliver significant capital appreciation, though they typically carry higher volatility than their large-cap peers. Both funds target U.S. companies with smaller market capitalizations and strong growth characteristics, such as rising sales and earnings momentum. While they share similar DNA and tracking targets, subtle differences in costs, asset scale, and liquidity may influence which vehicle a small-cap investor chooses for their portfolio.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The State Street fund is slightly more affordable with a 0.15% expense ratio. While the iShares fund has a marginally higher yield, the gap is relatively narrow for growth-oriented investors focused on capital appreciation.

Performance & risk comparison

What's inside

The iShares S&P Small-Cap 600 Growth ETF focuses on U.S. small-caps with robust growth prospects, currently holding 377 stocks in its portfolio. Its sector allocation is led by Industrials at 19%, Technology at 17%, and Healthcare at 15%, providing a diversified look at the smaller end of the market. Its largest positions include Viasat Inc (NASDAQ:VSAT) at 1.31%, Corcept Therapeutics (NASDAQ:CORT) at 1.18%, and Brinker International Inc (NYSE:EAT) at 1.17%. The fund was launched in 2000. iShares S&P Small-Cap 600 Growth ETF has paid $1.21 per share over the trailing 12 months, which on its recent ~$177.38 share price works out to a 0.7% yield.

The State Street SPDR S&P 600 Small Cap Growth ETF mirrors the S&P SmallCap 600 Growth Index, selecting 351 positions based on expansion in sales and earnings momentum. Like its counterpart, it leans heavily into Industrials at 19%, Technology at 17%, and Healthcare at 15%. Top holdings include Viasat Inc at 1.31%, Corcept Therapeutics Inc at 1.18%, and Brinker International Inc at 1.17%. The fund was launched in 2000. State Street SPDR S&P 600 Small Cap Growth ETF has paid $0.76 per share over the trailing 12 months, which on its recent ~$118.35 share price works out to a 0.6% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

When comparing these two ETFs, there is not a whole lot of difference. Both of them track the exact same index, the S&P 600 Small Cap Growth Index, so their returns are pretty much the same, as is their holdings and diversification.

Small cap growth stocks have performed well this year as investors have rotated out of large caps into more reasonably valued asset classes with growth potential. Both of these ETFs have posted stellar 26% returns year-to-date and 45% returns over the past year, beating large-caps by a wide margin.

If I had to give a slight edge to one of these small cap growth ETFs, it would be the State Street fund for one major reason. The State Street ETF has a slightly lower expense ratio at 0.15% compared to 0.18% for the iShares ETF. That allows it to pay out a slightly higher total return than the iShares ETF. But the difference is minor. Both are solid options if you are looking to diversify with small cap growth stocks.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The Vanguard FTSE Developed Markets ETF (NYSEMKT:VEA) provides exposure to mature economies outside the U.S. at a fraction of the cost of the iShares MSCI Emerging Markets ETF (NYSEMKT:EEM).

The Vanguard FTSE Developed Markets ETF and the iShares MSCI Emerging Markets ETF serve as primary instruments for investors looking to balance their portfolios with international equities. While the iShares fund focuses on higher-growth, higher-volatility developing nations like China and Taiwan, the Vanguard fund targets mature economies such as Japan, the United Kingdom, and Canada to offer potentially more stable performance. This comparison explores how their differing geographic concentrations and expense structures might influence your investment strategy.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Expenses are a significant point of divergence. The Vanguard fund is exceptionally cost-efficient, with a 0.03% expense ratio that is a small fraction of the 0.72% fee required by the iShares fund. Over time, this 0.69% difference in annual costs can noticeably impact total returns. Furthermore, for those focused on income, the Vanguard fund currently offers a superior payout through its 2.5% trailing-12-month dividend yield.

Performance & risk comparison

What's inside

Vanguard FTSE Developed Markets ETF tracks an index composed of large-, mid-, and small-cap companies across Canada, Europe, and the Pacific region. With 3,873 holdings, the portfolio is deeply diversified across sectors, led by Financial Services (23%), Technology (18%), and Industrials (18%). Its largest positions include Samsung Electronics Co Ltd (KOSE:A005930) at 3.14%, SK Hynix (NASDAQ:SKHY) at 2.99%, and ASML Holding NV (NASDAQ:ASML) at 2.34%. The fund was launched in 2007. Vanguard FTSE Developed Markets ETF has paid $1.81 per share over the trailing 12 months, which on its recent ~$72.50 share price works out to a 2.5% yield.

The iShares MSCI Emerging Markets ETF seeks to replicate the performance of an index that includes large and medium-sized company stocks in emerging markets. It manages 1,196 holdings and is heavily weighted toward Technology at 40%, followed by Financial Services at 20% and Consumer Cyclical at 8%. Top holdings include Taiwan Semiconductor Manufacturing (NYSE:TSM) at 15.14%, Samsung Electronics Ltd at 6.39%, and Sk Hynix at 4.65%. The fund was launched in 2003. iShares MSCI Emerging Markets ETF has paid $1.11 per share over the trailing 12 months, which on its recent ~$65.17 share price works out to a 1.7% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy

An investor would be well-served having both of these ETFs in their portfolio, as international developed markets and emerging markets are two important asset classes. Both international developed markets and emerging markets have outperformed their U.S. counterparts not only this year, but over the past two years. And with U.S. markets currently wildly overvalued, having a diversified portfolio of both international developed markets and emerging markets is critical. Both are much cheaper than U.S. large-cap stocks and many experts believe they could outperform U.S. large-caps over the next few years.

Comparing VEA and EEM head-to-head, both have their benefits. The iShares ETF has had better returns year-to-date as well as over the past one- and three-year periods. The Vanguard ETF has better longer term returns over the past five- and 10-year periods.

But what I think gives the slight edge to VEA is its minuscule 0.03% expense ratio, which is far less than EEM's 0.72% ratio. Also, the Vanguard ETF pays out a higher distribution yield, providing additional income or total return. In addition, with its low expense ratio and diversified holdings, the Vanguard ETF is one of the best-in-class developed markets ETFs.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Taiwan Semiconductor Manufacturing, and Vanguard FTSE Developed Markets ETF. The Motley Fool has a disclosure policy.

It has been a long year for chicken wing chain restaurant Wingstop (NASDAQ: WING). Its stock price is down 62% over the past year, and it is trading not just at a 52-week low but at a four-year low of around $122 per share.

But is the sell-off finally over? It may be, as Wingstopʻs stock price soared 8% on Aug. 14 -- one of its best days this year.

The catalyst? Aug. 14 was the date of record for its third-quarter dividend, payable on Sept. 5. That led to a surge of interest and may signal that Wingstop is starting to rebound.

Investors were buying in to qualify for the $ 0.33-per-share dividend payout, up from $0.30 last quarter. But beyond that, investors were looking to buy at a reduced valuation as Wingstop's P/E ratio is down to 27, from almost 43 in June.

Image source: Getty Images.

Why Wingstop stock crashed

Wingstop stock has been a solid performer over the years, with an average annualized return of about 16% over the past 10 years, beating the S&P 500.

However, the past few years have been difficult for Wingstop after a huge post-COVID-19 surge. The expansion that followed the surge was derailed by high inflation, higher costs, lower foot traffic, and massive debt for the fast food stock.

At the same time, Wingstop was way too expensive with a P/E ratio of over 100 in 2023 and 2024. Even as recently as June 2025, it was trading at 57 times earnings. It was all a recipe for a crash.

Wingstop is still seeing declining same-store sales. In Q2, they dropped 7.5%, after falling 8.7% in Q1. Wingstop has now had five straight quarters of same-store sales declines.

Is Wingstop a buy now?

But there are some bright spots. Revenue increased 5% due mostly to continued expansion, as Wingstop opened 102 new stores in the quarter. Since the company operates on a franchise model, it charges franchise fees on every store, so its aggressive plan to eventually open 10,000 stores globally continues. It currently has 3,255 stores.

But the company is being more strategic about it, looking to expand more internationally, with 2026 on pace to be a record year for international openings. The company now has 527 international stores, up 29% over the past year. There are 2,728 U.S. locations, up 13%.

Wingstop also saw net income increase 17% to $31.3 million, or $1.15 per share, in Q2. This is due to a decrease in the cost of sales as a percentage of sales to 73.3%, from 75.2% in Q2 of 2025. This was driven by a decrease in food, beverage, and packaging costs. Also, selling, general, and administrative expenses dropped to $30.2 million from $32.9 million a year ago.

So, can investors assume the worst is over? No. Wingstop has had false starts before, so a wait-and-see approach may be best.

But the business has had promising results with its Club Wingstop loyalty program and its quicker and more efficient smart kitchens. When you see same-store sales start to increase again and that valuation tick a bit lower, it will be time to buy Wingstop.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool recommends Wingstop. The Motley Fool has a disclosure policy.

The two leading retailers in the U.S., Amazon (NASDAQ: AMZN) and Walmart (NASDAQ: WMT), are on very different paths right now.

Amazon is hovering near a 52-week high, up about 14% year-to-date to $262 per share. Walmart stock is trading near its lowest point this year at around $115 per share, up about 3% year to date.

Along with their different trajectories, they also carry different valuations. Amazon, which is significantly outperforming Walmart, is much cheaper with a price-to-earnings (P/E) ratio of 21, which is as low as it's been in a decade, or more.

Image source: Getty Images.

Walmart, typically known as a defensive stock, is anything but right now. It's trading at roughly 40 times earnings, which is above its historical average.

Why are we seeing this unusual divergence?

Why Amazon is cheap

The market is starting to come around on Amazon, as evidenced by its approximately 13% jump since it released second-quarter earnings on July 30. That basically accounted for most of the year-to-date gains.

Net sales rose 20%, operating income soared 43%, and Amazon Web Services (AWS) climbed 37%, its fastest growth in more than four years. It seemed to justify Amazonʻs massive AI spending spree, as the company anticipates spending a whopping $200 billion in capital expenditures (capex) in 2026, up from $131.8 billion in 2025.

Amazon management said the capex is necessary to meet the high demand it is seeing in AWS, with some $244 billion in backlog at the start of 2026, up 40% year over year.

"Customers really want AWS for core and AI workloads. And we are monetizing capacity as fast as we can install it," CEO Andy Jassy said in February on the fourth-quarter 2025 earnings call.

The spending has really depleted Amazon's free cash flow. In Q2, it reported a cash outflow of $7.6 billion for the trailing 12 months. It was fueled by $66.1 billion in capital expenditures in AI. In comparison, Amazon had $18.2 billion in free cash flow in Q2 2025.

So the high spending and huge debt soured investors on Amazon for most of the year, bringing down the valuation. But the strong Q2 results, combined with its dirt cheap valuation, sparked the recent rally, even though the valuation is still low.

Why Walmart is not

Walmart has outperformed Amazon over the past five years, with an average annualized total return of about 20% to just 10% for Amazon.

WMT data by YCharts.

This also plays into the valuation divergence. Walmart's valuation has gradually increased during a strong five-year run. Now the market sees it as overvalued, with insufficient earnings power to justify the high multiple.

In the first quarter, it grew revenue by just 7% and operating income by just 5% year over year. It did not raise its guidance for the fiscal year, keeping sales growth at 4% to 5% and operating income growth at 7% to 10%.

It's just not enough growth to justify that multiple, particularly in a slow-growing economy with high inflation amid concerns that consumers won't be able to continue to carry the economy.

Walmart is not a great buy until the multiple comes down, but Amazon is a great buy right now.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.

There have been roughly 27 bear markets since the stock market crash of 1929, but most of them occurred before 1970. Since 1970, there have been 10.

So, in the past 60 years, there has been a bear market, on average, every six years. Our last bear market, defined as the market dropping at least 20% from its recent high, was in 2022, when the market fell about 25% from January 2022 through mid-October.

If you simply play the averages, it would suggest that we are due for another bear market in the next two years. Of course, the market doesn't work that way. We went 13 years without a bear market from 1987 until 2000, and 11 years without one from 2009 until 2020.

Image source: Getty Images.

Then again, we had four bear markets in the 2000s alone, two of which were among the worst on record. The 2000 bear market ran for about 540 days, and the market dropped 37%. The 2002 bear market lasted more than 275 days and saw the market fall 33%, and the 2007/2008 bear market spanned more than 400 days and resulted in a 51% market drop, according to an analysis by The Hartford Funds.

While we won't know if the next bear market will start tomorrow, by the end of 2026, two years from now, or 10 years from now, there are warning signs that investors should heed.

Warning signs are flashing

We've been enjoying a nearly four-year bull market since the last bite of the bear in 2022. Just recently, on Aug. 7, the S&P 500 hit another all-time high, closing at 7,757. It's been hovering around that number since.

What's also hovering near an all-time high is the Shiller price-to-earnings (P/E) ratio, also known as the cyclically adjusted P/E, or CAPE, ratio. This gauge looks at market valuations over a 10-year period, adjusted for inflation, so it provides a broader look than the standard P/E ratio, which goes back 12 months.

The Shiller P/E ratio is currently at 42. To put that in perspective, the only time it was ever higher was in November 1999, when it peaked at 44. What followed a few months later was a bear market that lasted some 546 days.

No two markets are the same, and this market is certainly different than the one that led to the 2000 bear market, but even so, these are caution flags that should remind investors to be prepared. Here are a few things you can do to prepare.

Bear-proofing your portfolio

One of the first things to do to prepare for a bear market or correction is to identify stocks in your portfolio that have abnormally high P/E ratios. For some growth stocks, a normal P/E might be 30, but an abnormal or above-average P/E might be 50 or 60. It all depends on the specific stock.

Those well-overpriced stocks are probably going to be the hardest hit when the bear attacks, so you may want to think about paring some of those positions back.

Next, make sure your portfolio is diversified, and not top-heavy in too many growth stocks or large-caps. These are the stocks that have been leading the bull market, so they may have gained greater weight in your portfolio over the years.

Diversify the stock portion of your portfolio with holdings that tend to do well coming out of bull markets, like value stocks, international stocks, small-caps, and high-yield dividend stocks. Make sure the stocks are reasonably valued and have strong, consistent earnings to support their price. Speculative stocks, or those that are overhyped without real positive earnings, could be more susceptible to a steeper drop if there is a market downturn.

For what it's worth, Vanguard's current model portfolio recommends 36% U.S. stocks and 24% international stocks. It also calls for 40% in bonds, with 28% in U.S. bonds and 12% in international bonds.

Exchange-traded funds (ETFs) are a good option in a bear market too, as they come already diversified. You may want to lean toward actively managed ETFs, as a portfolio manager can make changes to the portfolio as needed to navigate the ups and downs.

Finally, look for bargains. Bear markets are the best times to find bargains on great stocks after their prices and valuations plummet to more sustainable levels.

The Motley Fool has a disclosure policy.

The Vanguard Information Technology ETF (NYSEMKT: VGT) invests in the sector that has driven the market for the past 25 years and may continue to do so over the next 25 years. Its returns over time have stacked up better than most technology ETFs, including the Invesco QQQ (NASDAQ: QQQ).

Over the last 10 years, the VGT has had an average annualized return of about 25% per year, beating the QQQʻs 20.8% average annualized return.

If you go back 20 years, the Vanguard Information Technology ETF has posted a 21% average annualized return, compared to 19.5% for the QQQ. And due to its low 0.09% expense ratio, compared to the QQQʻs 0.18% fee, investors kept more of that return.

Image source: Getty Images.

How about $503,000 after 20 years?

So, if you had invested $5,000 in the VGT back on Aug. 13, 2006, and contributed $100 per month to the fund, youʻd have a pretty good-sized chunk of change right now.

In fact, those investments would have grown to roughly $503,000 over 20 years. That alone could provide enough retirement income for many people, when paired with their Social Security payouts.

It speaks to the power of compound interest, patience, and consistently setting aside money to invest in yourself and your long-term future.

That's not to say that the next 25 years will yield a 21% annualized return for VGT -- it may be less, or it may be more. But even if it was just an annualized 15% return, the investments would have grown to about $213,000 after 20 years.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Oracle (NYSE: ORCL) was one of the most shorted stocks by hedge funds in the first half of 2026, according to the Data Insights Crowding Report.

This meant that a lot of investors were betting that the shares will fall. Only two companies were more heavily shorted, Data Insights found: Charter Communications (NASDAQ: CHTR) and Super Micro Computer (NASDAQ: SMCI).

It has been a wild 12 months for Oracle stock. It spiked to an all-time high last summer on strong earnings and a growing backlog. As of June, the end of its fiscal year, it had amassed a huge order backlog, with a whopping $638 billion in remaining performance obligations.

Image source: Getty Images.

The backlog was highlighted by a $300 billion deal with OpenAI for cloud computing.

But it also has infrastructure deals with Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), AMD (NASDAQ: AMD), and Meta (NASDAQ: META), to name just some of the major partnerships.

Oracle stock soared to an all-time closing high of $324 on Sept. 10, 2025. It's now trading at about $153 per share, after losing more than half its value. What happened?

Shorting Oracle

A confluence of factors are responsible.

The major factor is the huge capital spending plans to build out data centers and artificial intelligence (AI) infrastructure to fulfill these contracts. Oracle reported $21 billion in capital expenditures (capex) last year and a whopping $55 billion in fiscal 2026. This left Oracle with negative cash flow of $23.7 billion in fiscal 2026.

And in fiscal 2027, the company plans to raise another $40 billion through debt and equity financing to fund its capex.

Its debt is through the roof at $167 billion and a sky-high 388% debt-to-equity ratio.

Investors also are concerned about OpenAI's finances and whether it can fulfill all its contracts, including those with Oracle. It certainly plays into the growing investor narrative that AI stocks are spending too much on infrastructure in relation to the potential return.

Is Oracle stock a buy now?

So, with a series of setbacks, not to mention a high valuation, it is clear to see why investors have been betting on Oracle's stock to drop.

However, after such a steep drop, the share valuation has returned to a reasonable level. Oracle stock has a price-to-earnings (P/E) ratio of 25, a forward P/E of 18, and a low five-year price/earnings-to-growth ratio, or PEG ratio, of 0.85. A PEG of less than 1 indicates that the stock is undervalued relative to its anticipated earnings expectations.

Oracle is poised for a rebound, according to Wall Street analysts. Some 82% of analysts rate the stock as a buy, and the median price target is $241 per share. That would suggest a 57% return during the next 12 months.

But there are a lot of balls in the air for Oracle. There is a lot of money being spent on AI as it continues to rack up debt, which can weigh on earnings because at some point it must be paid down. If you're a long-term investor, there are probably better AI stocks out there that you don't have to worry so much about.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.

Lemonade (NYSE: LMND) is a pioneer in using artificial intelligence to process insurance claims. When it first debuted on the market in July 2020, there was a lot of excitement in those post-COVID days when tech stocks surged.

But then reality set in, and investors realized it would be a while before this fintech start-up would turn a profit.

Six years later, those days are upon us. In its second-quarter letter to shareholders, management said Lemonade anticipates positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) in the fourth quarter of 2026. This would be the first-ever quarter of positive adjusted EBITDA for Lemonade. The firm projects about $8 million in adjusted EBITDA in Q4.

Image source: Getty Images.

In the second quarter, Lemonade posted a net adjusted EBITDA loss of $19 million, about 54% better than the $41 million net loss in the same quarter a year ago. In the third quarter, Lemonade reported a $20 million to $23 million net loss before breaking through with $8 million in positive adjusted EBITDA in Q4.

For the full fiscal year, Lemonade projects a net loss of $47 million to $51 million. But in 2027, CEO Daniel Schreiber said the company expects positive adjusted EBITDA for the full year.

All systems go

The earnings improvement is fueled by rapid revenue growth and improved underwriting results. In Q2, revenue soared 79% to $294 million, buoyed by a 32.4% spike in in-force premiums (IFPs) to $1.4 billion. It marks the 11th consecutive quarter that IFPs has increased.

This is significant because IFPs represent basically the amount of money paid to Lemonade in active insurance policies. This rose because the number of customers increased by 23% to 3.3 million, and the amount of premiums each customer paid rose by 8% to $433 per customer. Rising IFPs typically translate to higher revenue.

Lemonade also reported its best-ever loss adjustment expense ratio of 5%. This measures the amount of money it spends to handle, investigate, and process each claim. The 5% ratio is almost half of the 9% industry average. The efficiency stems from Lemonade's AI model, which has lower overhead when processing claims.

These results stem from strong underwriting, driven by AI models and algorithms that have proven effective at assessing risk.

$10 billion in IFPs by 2034

In its outlook, Lemonade expects revenue to grow another 10% in Q3 to $323 million to $326 million. For the full year, the company anticipates about $1.2 billion in revenue, up 63% from $738 million in 2025.

IFPs are targeted to rise another 7% in Q3 and projected to hit about $1.635 billion in fiscal 2026, at the midpoint of the range. That would represent about 32% IFP growth in 2026.

Longer term, Lemonade is targeting $10 billion in IFPs by 2034. That would represent a compound annual growth rate of about 25%, which seems reasonable given its current trajectory. And its path to profitability looks clear, given its growth and efficiency, but investors will certainly be watching the next two quarters to see if it can hit that mark.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.

Upstart (NASDAQ: UPST) has had its share of ups and downs since the fintech went public in late 2020. The company, which uses artificial intelligence (AI) to process loan requests, is currently in a downward trend, with the stock price sliding about 31% year to date.

But there are some promising trends, illuminated in its recent second-quarter earnings, that bear watching. Let's look at them.

Image source: Getty Images.

The advantages of the AI lending platform

Upstart delivered strong results in Q2, beating estimates with revenue up 42% year over year to $365 million and net income jumping 195% to $16.5 million.

The positive net income marked a return to profitability for Upstart after a $7 million net loss in the first quarter. But Upstart has been fairly consistently profitable over the past year, with positive net income in four of the past five quarters.

Also, Upstart originated $4.2 billion in loans in Q2, up 50% year over year. It converted 19.7% of loan inquiries, down from 21.7% in the same quarter a year ago. And 91% of the loans it processed were fully automated, done in seconds by AI.

This provides a huge advantage for Upstart that other banks can't match. The key statistic is the contribution margin. This a metric that examines how much profit Upstart makes on every $1 it lends, after subtracting all costs to process that loan.

In Q2, Upstart generated a record $193 million in contribution profit, up 38% year over year. The contribution margin was 55%, down from 58% in the same quarter a year ago. The fact that 91% of the loans are processed quickly with no human intervention drives up that contribution margin and will continue to do so.

That high contribution profit can then be used to invest back in the technology and other resources or pay down debt. Overall, it just improves the financials for the growing company.

New bank charter to improve unit economics

The other trend Upstart is seeing is that its revenue gains are outpacing its operating expenses, resulting in a higher operating margin. In Q2, its operating profit increased 224% to $14.6 million and its operating margin jumped from 2% to 4%.

These trends are all pointing Upstart toward increased earnings. For the full year, Upstart anticipates $1.4 billion in revenue, up from $1 billion in 2025 and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $294 million, up from $230 million last year.

Last month, Upstart received approval for a national bank charter and expects to launch its bank in early 2027. This will allow Upstart to collect deposits, which will, in turn, lower its cost of lending. Currently, Upstart pays fees to third-party banks to originate loans, but once it launches its own bank, it will eliminate some of those fees, further improving its contribution margin and unit economics.

Upstart stock is still not cheap, with a forward P/E of 47. However, Wall Street is fairly bullish on its growth with a median price target of $39.50, suggesting 30% upside. Upstart may not be a strong buy right now, but it is moving in the right direction and could start to take off once it gets its bank charter.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Upstart. The Motley Fool has a disclosure policy.

Heading into its second-quarter earnings release on Aug. 19, Lowe's (NYSE: LOW) is trading at a discount.

Its current P/E ratio of 18.5 is below its historical average of 20.5, and its forward P/E of 17.4 is the lowest it's been since the end of 2023, when it was 15.7.

This relatively low valuation alone makes the home improvement retail store stock worth considering heading into its earnings release.

Image source: Getty Images.

Another reason to buy is its ridiculously good dividend. Lowe's increased its dividend in July to $1.25 per share at a solid yield of 2.28%. This marks 55 straight years of dividend increases for the Dividend King.

What to watch in Q2 earnings

The low valuation for Lowe's could spark a surge in the share price if Lowe's reports good second-quarter earnings.

It has some solid momentum with five straight earnings beats. In Q2, analysts anticipate revenue of $26.2 billion, which would be up 13% billion from Q1. Adjusted earnings are estimated to be $4.24 per share in Q2, which would be down from $4.33 per share in Q2 2025, mainly due to costs associated with recent acquisitions.

Also, comparable-store sales are targeted to be between flat and a 2% increase. That is a key metric investors should watch. If the number is at the high end of that range or exceeds it, the stock price could jump. In addition, Lowe's has been steadily increasing its online sales. Last quarter, that segment saw a 15% gain. Investors will want to see if that continues trending higher.

Further, while Lowe's doesn't post its growth rates for its Pro business, which caters to contractors, there is typically commentary around it. Listen to what management says about Pro growth, as it's a higher-margin business than the DIY retail business. Pro growth may also signal that it is eating into the market share of rival Home Depot.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy.

Leading derivatives trading marketplace CME Group (NASDAQ: CME) has had some of its most active months ever this summer. In June, it reported an average daily volume (ADV) of 30.6 million. That capped off its second-best second quarter ever, with an ADV of 29.8 million contracts.

That momentum has continued, as CME recorded its highest July average daily volume (ADV) on record, at 27 million contracts, up 23% from July 2025.

There is one constant in both June and July that likely pushed volume higher: Both months featured Federal Open Market Committee (FOMC) meetings. And at both the June and July FOMC meetings, there was considerable uncertainty from the Federal Reserve about the future path of interest rates.

Image source: Getty Images.

In June, the Fed voted 12-0 to hold rates steady. Still, the quarterly summary of projections indicated that the committee majority anticipates one rate hike by the end of 2026, bringing rates back up to 3.8%. Currently, they are in the 3.50%-3.75% range.

Then, at the July meeting, the Fed again voted not to change rates, but the vote was 9-3, with three members favoring a rate hike. It speaks to the growing unease about rates.

A record first half for CME

Why is this good for CME? The company generates most of its revenue through transaction and clearing fees, so when ADV is higher, there are more transactions and thus, more fee income.

In the first half of 2026, CME saw record trading in Q1 and the second-highest Q2 totals ever. That led to record first-half 2026 revenue, adjusted operating income, adjusted net income, and adjusted earnings per share. This can be attributed to the overall volatility and uncertainty that we've seen in the markets in the first half of the year.

In the first quarter, rising inflation, weak economic data, the war in Iran, and rising oil prices caused markets to tank. Investors reallocated their portfolios, moving to the safety of interest-rate products and other stable investments. The second quarter featured a huge bounce-back rally as investors piled back into stocks, driving a lot of trading volume.

However, inflation has remained high, and macroeconomic concerns persist. As a result, sentiment on rates has flipped from an almost certain cut at the start of the year to the likelihood of a hike now.

Volatility and Fed indecision are good for CME

The Fed's changing view on rates has created additional volatility, not just among interest rate products but also stocks. In July, the ADV for interest rate products was 12.6 million, up 17% year over year. June also saw a 17% increase in ADV for interest rate products.

But the increases have been much larger for equities. The ADV for stocks rose 48% to 8.2 million contracts in July. That follows a record 10.1 million ADV in June, up 54% year over year.

This shows growing Fed indecision about rates, as well as perhaps high market valuations and weak economic indicators, are prompting investors to rebalance their holdings to match evolving market conditions.

It also shows that CME stock, up 10% over the past month, thrives on volatility and may be a good option right now to profit from the uncertainty.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.

Intel (NASDAQ: INTC) stock fell by about 4% on Monday after the chipmaker announced plans to sell $15 billion worth of shares to fund capital expenditures and boost its working capital.

"Customers continue to signal a strong and sustainable demand environment, driven by unprecedented investment in AI compute. Progress in emerging areas including physical AI, purpose-built silicon, advanced packaging and external wafers represent significant growth opportunities for Intel," its press release announcing the the move stated.

That continued the steep decline Intel stock has been on since the company released its second-quarter results on July 23. As of Aug. 10, it was trading at less than $98 per share, down 31% from its recent peak on June 22.

Image source: Getty Images.

Ramping up capex

The slide that began in late June continued despite a strong Q2 report that beat Wall Street estimates. Revenue rose 25% to $16.1 billion, while adjusted earnings climbed to $0.42 per share from a net loss of $0.10 per share in the prior-year period. Gross margin increased by 12.1 percentage points to 40.8%.

However, management offered a mixed third-quarter outlook. Projections for revenue and gross margin ticked higher to levels exceeding analysts' estimates. However, adjusted earnings were projected to drop to $0.38 per share, which may have contributed to the stock's subsequent sell-off.

It speaks to the market's concerns about Intel's spending. On the Q2 earnings call, CFO Dave Zinsner said the company was raising its plan for 2026 capital expenditures to more than $20 billion. Previously, it forecast capex in the $17 billion to $18 billion range.

The semiconductor company also forecast that its 2027 capital expenditures would be significantly above 2026 levels, based on rising customer demand.

Intel stock is still up 388% over the past year

The Aug. 10 sell-off came in direct response to the news that the company was selling $15 billion worth of new shares. That dilutes the value of its previously existing shares. It also plays into the narrative that Intel could be overspending on AI infrastructure.

One major reason why Intel is raising money with this equity sale is because it can afford to. The stock has been on an incredible run this year, up 164% year to date and 388% over the past 12 months. And perhaps in light of the earnings outlook, the dilution of shares, and higher capex spending, some investors have decided to cash out and take profits after that performance.

Intel stock is now trading at an expensive 88 times earnings and 80 times forward earnings. But investors can see that its infrastructure build-out is expected to deliver long-term growth because its five-year price/earnings-to-growth (PEG) ratio drops to 0.5 -- a figure that puts it in value territory.

The company recently inked a foundry deal with Fortinet, and there are reports that it has signed a deal to manufacture more than 3 million Tensor Processing Units for Alphabet in 2028.

Intel is also making chips for the U.S. government, which took an ownership stake in the company a year ago in exchange for CHIPS Act funds that had previously been offered to it as grants.

Where will Intel be in 3 years?

Intel stock has risen 185% over the past three years, an annualized rate of 41%. But most of that rise has come over the past year.

Could it match that over the next three years? Wall Street analysts are predicting an average of 21% growth with a median price target of $118 per share. It will be tough for it to match the 41% annual return over the next three years because of its high valuation right now and the competitive nature of the chip foundry business, where Taiwan Semiconductor is the dominant player and boasts huge competitive advantages.

The chip design business is equally competitive, with Nvidia dominating in graphics processing units and Advanced Micro Devices winning market share in central processing units.

Iʻd be hesitant to buy into Intel stock now. It's just too expensive, and the company's capex is too high unless more contract wins are announced. I would not be surprised to see the stock moving lower in the nearer term, so there will probably be lower entry points ahead.

If you did invest $1,000 in it now and Intel matched its longer-term, 10-year average annualized total returns of about 14% over the next three years, that position would grow to about $1,481. If it delivered a 20% annualized return, that holding would jump in value to $1,728.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Fortinet, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

The iShares U.S. Consumer Staples ETF (NYSEMKT:IYK) offers broader sector exposure and a lower cost profile compared to the more specialized Invesco Food & Beverage ETF (NYSEMKT:PBJ).

Investors seeking stability often turn to consumer defensives to anchor a portfolio. While the Invesco Food & Beverage ETF targets a specific subset of industry producers using a dynamic index, the iShares U.S. Consumer Staples ETF provides a more traditional, diversified approach to the broader U.S. market.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The iShares U.S. Consumer Staples ETF is more affordable with a 0.38% expense ratio, while Invesco Food & Beverage ETF charges 0.61%. Additionally, the iShares fund provides a higher payout for income-seeking investors.

Performance & risk comparison

What's inside

The iShares U.S. Consumer Staples ETF provides broad exposure with 53 holdings, primarily in Consumer Defensive (82%), Healthcare (14%), and Basic Materials (2%). Its largest positions include Procter & Gamble (NYSE:PG) at 12.97%, Coca-cola (NYSE:KO) at 12.95%, and Philip Morris International Inc (NYSE:PM) at 11.35%. Launched in 2000, iShares U.S. Consumer Staples ETF has paid $1.90 per share over the trailing 12 months, which on its recent ~$74.19 share price works out to a 2.6% yield.

In contrast, Invesco Food & Beverage ETF follows a narrower index of 31 companies involved in the production and distribution of food and agricultural products. Its sector tilts include Consumer Defensive (78%), Consumer Cyclical (8%), and Industrials (5%). Top holdings include Coca-Cola Co. at 5.48%, Starbucks Corp (NASDAQ:SBUX) at 5.27%, and Monster Beverage Corp (NASDAQ:MNST) at 5.23%. Launched in 2005, Invesco Food & Beverage ETF has paid $0.61 per share over the trailing 12 months, which on its recent ~$47.03 share price works out to a 1.3% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy?

There is not much of a comparison here. The iShares U.S. Consumer Staples ETF wins on just about every count. It has better performance over every time period, including year-to-date, one-year, three-year, five-year, and 10-year. Year-to-date, IYK is up about 10%.

The iShares ETF also pays out a higher dividend yield and has a lower expense ratio. These are two reasons it has managed to outperform over the years. But it is also more diversified, covering a wider swath of the consumer staples sector while the Invesco Food and Beverage ETF focuses just on one part of the consumer staples sector, food and beverage stocks.

The iShares U.S. Consumer Staples ETF includes most of the stocks in the Invesco ETF, if not all of them, as 55% of the portfolio is in food stocks. But it also pulls stocks from other industries like household and personal products, healthcare equipment and services, retail and distribution, and materials.

A good consumer staples ETF should be a must in any portfolio for the balance it provides and the dividend income that can help boost returns during downturns. IYK is a certainly a solid choice to fill that void.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Monster Beverage and Starbucks. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.

The iShares Russell 2000 Growth ETF (NYSEMKT:IWO) targets small-cap companies while the Vanguard Morningstar Mega Cap Growth ETF (NYSEMKT:MGK) focuses on the largest U.S. growers, presenting a choice between niche agility and blue-chip stability.

Investors seeking growth often grapple with the trade-off between the stability of market titans and the explosive potential of smaller firms. While the Vanguard fund provides concentrated exposure to the tech giants driving modern markets, the iShares fund offers a broader, healthcare-heavy basket of smaller innovators. This analysis compares their costs, risk profiles, and unique portfolio structures.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

Cost is a primary differentiator here, as the Vanguard Morningstar Mega Cap Growth ETF maintains a minimal 0.05% expense ratio, making it much more affordable than the 0.24% charged by the iShares Russell 2000 Growth ETF. While the iShares fund offers a slightly higher 0.4% yield compared to the Vanguard fund's 0.3%, both payouts remain secondary to price appreciation for these growth-focused strategies.

Performance & risk comparison

What's inside

The iShares Russell 2000 Growth ETF targets smaller, high-growth companies, with its largest sector allocations in healthcare at 29%, technology at 21%, and industrials at 15%. Its portfolio is broadly diversified among 1,106 positions; its largest positions include Moog (NYSE:MOGA) at 0.70%, Glaukos (NYSE:GKOS) at 0.63%, and Brightspring Health Services (NASDAQ:BTSG) at 0.62%. It was launched in 2000. The iShares Russell 2000 Growth ETF has paid $1.64 per share over the trailing 12 months, which on its recent ~$388.02 share price works out to a 0.4% yield.

By contrast, the Vanguard Morningstar Mega Cap Growth ETF focuses on the absolute largest growers, concentrating 59% of assets in technology, 16% in communication services, and 11% in consumer cyclical sectors. It is much more top-heavy with only 69 holdings; its largest positions include NVIDIA (NASDAQ:NVDA) at 13.24%, Apple (NASDAQ:AAPL) at 12.14%, and Microsoft (NASDAQ:MSFT) at 7.49%. It was launched in 2007. The Vanguard Morningstar Mega Cap Growth ETF has paid $0.29 per share over the trailing 12 months, which on its recent ~$90.63 share price works out to a 0.3% yield.

For more guidance on ETF investing, check out the full guide at this link.

Which looks like the better buy?

You really can’t find two more different ETFs than these. They probably both belong in your portfolio, since they cover the gamut of U.S. stocks between the two of them.

The Vanguard ETF invests in the largest end of the spectrum, the megacap monsters that have dominated the markets for the past 10 years or more. The long-term returns for this ETF dwarf the returns of the iShares ETF, with an average annualized return of nearly 19% over the past 10 years compared to 11% for the small-cap fund.

But year-to-date, and over the past year, small-caps have dominated. The iShares ETF is up 19% YTD and 33% over the past 12 months. In contrast, MGK is up 9% YTD and 17% over the past year. This outperformance occurs as investors rotate out of overvalued large-cap stocks into less expensive smaller caps. But also, AI innovations are starting to expand beyond tech and large-caps, benefitting smaller companies.

If I had only to invest in one, I might invest in IWO because historically, small-caps have led the way following a sustained large-cap driven bull market. Plus, you will get access to these megacap stocks in an S&P 500 ETF, which many investors already own.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Moog, and Nvidia. The Motley Fool has a disclosure policy.

If you have $1,000 to invest in growth stocks, you could buy a few shares of Nvidia, one share of Micron Technology, or a fractional share of Sandisk. Or you could invest in an exchange-traded fund (ETF) that tracks growth stocks within an index, like the S&P 500.

A better idea right now, given the number of inflated stock valuations, economic uncertainty, and market volatility, is the MarketDesk Focused U.S. Momentum ETF (NASDAQ: FMTM). The MarketDesk Focused U.S. Momentum ETF is a growth ETF, but it focuses on stocks of stable companies with growth momentum and upward price movement.

The ETF is so inexpensive that you could buy roughly 25 shares with a $1,000 investment. I invest in this ETF, which speaks to my conviction in it. Hereʻs why I think itʻs a no-brainer growth ETF to buy right now.

Image source: Getty Images.

Growth ETF with momentum

The MarketDesk Focused U.S. Momentum ETF deploys a quantitative strategy that uses price data from the last six months and advanced mathematics to identify stocks with the highest relative momentum.

The ETF considers the universe of stocks with market caps exceeding $1 billion and then removes those that don't meet certain liquidity filters. Then those stocks go through quality screens that assess profitability, operating efficiency, and balance sheet quality. Then those stocks are ranked for their upward price movement over the previous six months.

These screens create a basket of 30 to 50 stocks with stable, consistent momentum. The stocks are equal-weighted to ensure greater diversification. Also, the portfolio is rebalanced monthly, so the ETF will consistently hold stocks with strong forward momentum under any market conditions.

Some of the current holdings include Astera Labs, Snowflake, CrowdStrike, and Marvell Technology.

Crushing the Nasdaq and other growth ETFs

The ETF has delivered this year, which is a pretty good test case for growth stocks given how volatile markets have been. The MarketDesk Focused U.S. Momentum ETF is up 21% year-to-date and 45% over the past year, which easily beats the Nasdaq, up 14% year-to-date and 25% over 12 months, and the S&P 500, up 13% year-to-date and 22% over the past year.

But it also beats the various large- and mid-cap growth ETFs that track the major indexes. For example, the iShares S&P 500 Growth ETF (NYSEMKT: IVW), which invests in growth stocks within the S&P 500, is up 14% year-to-date, and the iShares Russell Mid-Cap Growth ETF (NYSEMKT: IWP) is only up 4% year-to-date.

Further, the ETF trades at around $39 per share, meaning you could buy 25 shares for $1,000. I think the MarketDesk Focused U.S. Momentum ETF is one of the best growth ETFs out there. Based on its market-beating performance, it's a no-brainer buy in this volatile and uncertain market for growth stocks and ETFs.

Dave Kovaleski has positions in Ea Series Trust - MarketDesk Focused U.s. Momentum ETF and Micron Technology. The Motley Fool has positions in and recommends CrowdStrike, Marvell Technology, Micron Technology, Nvidia, and Snowflake. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.

Two of the best semiconductor stocks on the market don't design and develop their own chips, they serve the entire industry, including most of the companies those that do design their own chips.

That's why Taiwan Semiconductor Manufacturing Company (NYSE: TSM), or TSMC, and ASML Holding (NASDAQ: ASML) might be the two best long-term semiconductor stocks.

But is one better than the other? Letʻs take a look.

Image source: Getty Images.

Both dominate their markets

TSMC is the leading chip foundry, which means it makes chips in bulk for other companies that design or deploy them, including behemoths like Apple, its largest customer, Nvidia, AMD, and Broadcom, to name some of the largest.

TSMC really has no peer as it owns 73% of the foundry market, a percentage that has been steadily rising. And in the more lucrative advanced or artificial intelligence (AI) chip space, it controls 90% of the market. Because of its scale and its advanced chip-making technologies, it has huge competitive production and pricing advantages that are hard to beat.

It's really the same story with ASML. ASML makes the lithography machines that are needed to make chips, so its biggest customers are the foundries like TSMC, its largest customer. Other large customers include foundries and chipmakers like Samsung, Intel, SK Hynix, and Micron.

Like TSMC, ASML dominates the market with a 90% market share in lithography and 100% market share for extreme ultraviolet equipment for advanced memory chips.

It controls the market with a massive technological advantage. Some analysts have suggested that it would take rivals some $100 billion in investment and 10 years of development to catch up to ASML, and that's assuming ASML stands still.

One stock has a slight advantage

You really cannot go wrong with either of these stocks. They might both be the best two semiconductor stocks to own, period. Because they are the singular choice of the entire universe of chipmakers, these pick-and-shovel providers to the AI boom should continue to thrive no matter who the players are.

The key will be holding on to their dominant market shares, but because of their technological advantages, the moats should stay intact for a long time.

One potential advantage I would give to TSMC is that they represent the gamut of chipmakers and designers, so they are not overly reliant on a small group of customers. ASML, on the other hand, is very much reliant on a few major players, TSMC chief among them. If that relationship fell apart, ASML would take a major hit -- bigger than if TSM lost its largest customer.

The other slight advantage I would give to TSMC is that it is considerably cheaper, trading at 36 times earnings and 25 times forward earnings. Further, its five-year price/earnings-to-growth ratio, or PEG ratio, is 1.01, which suggests it is a long-term value. A PEG ratio below 1 is considered a value based on its future earnings projections.

ASML is a tad more expensive, trading at 56 times earnings, 35 times forward earnings, with a PEG ratio of 1.98.

So, both stocks probably belong in your portfolio, but if I had to pick one right now, it would be TSMC.

Dave Kovaleski has positions in Micron Technology. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Broadcom, Intel, Micron Technology, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Pershing Square Capital Management, run by founder Bill Ackman, is very selective about the stocks it decides to invest in.

Compared to most hedge funds, Ackman and Pershing Square hold very few stocks -- only about a dozen, according to the latest first-quarter 13F filing.

One that he has held for almost 12 years now is Restaurant Brands International (NYSE: QSR), which owns several quick-service and fast-food restaurant chains, including Burger King, Tim Hortons, Popeyes, and Firehouse Subs.

It may seem out of place within a portfolio that includes Amazon, Microsoft, Alphabet, and Meta Platforms, but it features certain qualities that appeal to Ackman.

Bill Ackman, Pershing Square Capital Management. Image source: Getty Images.

"QSR's franchised business model is a high-quality, capital-light, growing annuity that generates high-margin brand royalty fees from its four leading brands: Tim Hortons, Burger King, Popeyes, and Firehouse Subs," Ackman wrote in the annual letter to shareholders.

$58 million in dividend income

By calling it a capital-light growing annuity, Ackman means it provides steady, reliable returns with very little overhead. Most of its income comes from royalty and franchise fees, as it doesn't own most of the restaurants and their physical assets. Ackman is likely also referring to its excellent dividend, which pays out millions to him annually.

Restaurant Brands stock pays out a healthy $0.65 per share dividend, which it has raised annually for 10 straight years. The dividend is paid out at a yield of 3.49%, which is 3 times higher than the S&P 500 average dividend yield.

Ackman owned 22.6 million shares of QSR at the end of the first quarter, making it Pershing's fifth-largest holding, accounting for about 14% of the overall portfolio.

Those 22.6 million shares, paying out a quarterly dividend of $0.65, would generate about $17.7 million in income per quarter and roughly $58.8 million in dividend income per year. So, you can see why Ackman likes the stock, particularly now in a market where returns have been choppy and volatile.

Burger King in turnaround mode

Restaurant Brands released its second-quarter earnings on Aug. 6, and they were generally strong. The company topped revenue and earnings estimates, yet QSR's stock price was drifting about 2% lower.

Restaurant Brands saw systemwide sales grow 6.4% and comparable sales rise 3.8% in the quarter. Revenue increased 5% to $2.5 billion while adjusted earnings surged 14% to $1.07 per share.

The Burger King turnaround is real, as the burger chain saw an 8.6% increase in comparable store sales and a 13% jump in operating income.

That was offset by a 5.2% drop in comp sales and a 5.4% dip in operating income for Popeyes. Also, Tim Hortons, the company's most profitable property, only saw a 0.1% increase in comp sales and a 3.2% rise in operating income.

The mixed results among the chains may have given some investors pause. In addition, while the company reaffirmed its guidance for the full year, it did not raise it. That may have been a red flag considering Burger King's rapid turnaround.

Why Restaurant Brands is a buy in August

I think the 2% dip makes it a good time to buy Restaurant Brands stock, mainly because of the great dividend. But the Burger King turnaround seems to be taking hold, and the company is continuing to see a surge in international markets.

Its international revenue grew 9.8% in the quarter, topping all other segments, and its international operating income rose 13.2%, matching Burger King's jump. International was the second-most profitable segment, with $194 million in adjusted operating income, behind only Tim Hortons' $287 million.

The stock is also a decent value, based on its forward earnings expectations, with a forward price-to-earnings (P/E) ratio of 13.

Wall Street analysts expect the stock to rise 15% over the next 12 months with a median price target of $85 per share. That's a pretty solid return, in addition to a great dividend.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.