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Best Stocks: A company that's indispensable to its customers with a stock in a pristine uptrend

Best Stocks: A company that's indispensable to its customers with a stock in a pristine uptrend

CNBC17-07-2025
(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — A business that makes itself indispensable to its customers ends up being a business with a defensible moat, predictable cash flow, SG & A expenses in check and a happy employee culture. I like to think I am running such a business in wealth management — by incorporating tax and insurance in-house for wealth management clients, we've made ourselves indispensable. The more our clients come to rely on us for, the higher the engagement, the less risk of turnover. Customer turnover is expensive. Companies that build indispensable services experience less disruptive churn and shareholders benefit as a result. Some of the biggest winners in the history of the stock market have had this characteristic. Think Salesforce, Apple, Costco, and Starbucks. For many, interacting with these companies is part of their regular routine, and it would take a lot for a competitor to pry them away. As an investor, I am always looking for stories like the one we're about to tell. Sean has written up a piece describing the strategy Fastenal (FAST) uses to make itself indispensable to its customers and the tactics that they employ to execute the strategy. We'll take a look at the stock's technicals as well but, first, it's story time. Best Stock Spotlight: Fastenal Co (FAST) On the list since: 4/12/2025 Sean — Fastenal is not just an industrial company selling screws and bolts, they have successfully vertically integrated their business to allow for more predictable, higher margin relationships with customers. Their stock price is reflecting the momentum the business is seeing. The long-term trend in this stock looks incredible: Fastenal acts more like a logistics and inventory partner than a typical industrial supplier. FAST sets up industrial-level vending machines, bins, and on-site locations that Fastenal stocks and monitors. FAST has one of the densest networks in terms of stores and distribution centers. This allows them to achieve economies of scale in purchasing, logistics, and inventory management. One of their largest focuses has been the "Fastenal Managed Inventory" — a digitized tech platform that fulfills, tracks, processes and delivers products to customers. Fastenal is creating dashboards monitoring inventory and supplying that inventory to customers. Via Quartr, 44.1% of total sales came through FMI technology in Q2 2025, up from 41.8% in Q2 2024 and 39.8% in Q2 2023. There are 132,174 integrated devices installed in total, which is up 10.8% year-over-year. Diving into their earnings from Monday of this week, the company beat on top and bottom lines, sending the stock about 4% higher post-earnings. Sales were up 8.6% year-over-year, operating margin improved to 21.0% from 20.2% last year, and earnings per share was up 12.7% year-over-year. This company is taking tariffs head-on. FAST dedicated an entire slide in their presentation to the current trade situation (via Fastenal): The CFO noted they have been proactively engaging with customers this year as it relates to tariff costs. From the CFO: "Fastenal has historically been able to win market share during periods of disruption on the strength of our nimble sales, our frugal and adaptive culture and the weight of the technologies and the global supply chain resources we can apply to finding solutions to customer challenges. This is our expectation in the current environment." FAST has implemented 3 pricing changes and plans on a phased approach to increase prices 140-170 basis points, depending on trade policy in 2025. The stock is within 5% of new all time highs. It sits about 8% above its 50 day moving average and about 15% above its 200 day moving average, well within a defined uptrend. Risk management Josh — This one's easy. The stock is slightly overbought thanks to the post-earnings reaction from the start of this week. I might give it a day or two to work off some of that overbought condition, even if I am not necessarily expecting much of a pullback. In a situation like this, position sizing is the key thing to focus on. If you're worried you missed it, you can enter the trade in stages. Worst-case scenario, it keeps rolling higher and you don't have enough. It happens. Above, I'm showing you a three-year chart with a 50-WEEK moving average (orange line, currently at $38 and change). I want you to pay attention to how pristine this uptrend has been. Since 2023, the dip-buyers have consistently come in as the stock flirted with its trendline and they bought it right back up. I would take advantage of any weakness here and then follow the trade with a mental stop loss (or physical if you're easily distracted) at that 50-week, checking on it every Friday to see if something's changed. If not, I'd stay long. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.
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Best Stocks: A unique financial stock riding the options boom with a chart sent from heaven
Best Stocks: A unique financial stock riding the options boom with a chart sent from heaven

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(This is The Best Stocks in the Market , brought to you by Josh Brown and Sean Russo of Ritholtz Wealth Management.) Josh — In 1973, The Chicago Board of Trade launched a subsidiary that would allow traders to place bets on a new standardized contract based on stock prices. These contracts, similar to but separate from the CBOT's bread-and-butter commodity futures products, were called options. They carved out a single trading pit on the floor for these stock option contracts and standardized how they worked. At first, there were options on just sixteen publicly traded companies, like IBM. In due time, more were added. Stocks were extraordinarily volatile in the mid-1970s with back-to-back bear markets and lots of opportunities for both speculation and protecting portfolios. The business was a hit. When the early 1980's bull market got underway, this "Chicago Board Options Exchange" or CBOE (usually pronounced as C-Bow) grew into a hive of trader activity. In 1983, the first contract on a stock market index came along when the CBOE unveiled its S & P 100 options offering. If you've ever seen the ticker "OEX" cross the bottom of your CNBC screen, that's the one. Cboe Global Markets (CBOE) is now one of the best financial services businesses in the world and this week it made the Best Stocks in the Market list. Ever since the next generation of retail traders came along during the pandemic, it's been a bull run for options trading. In its July 3, 2025 report, Cboe said that June 2025 trading volume hit a new all-time record. They reported the highest ever quarterly average daily volume for S & P 500 options at 3.7 million contracts, and zero‑day-to‑expiry (0DTE) options at 2.1 million contracts. Zero days to expiration trading — which we refer to as 0DTE — continues to boom. Did you know that over 60% of S & P 500 option trades are 0DTE? It's wild given how new this type of contract is. Retail traders are estimated to be responsible for over half of this activity. Sean's going to give you the set-up on Cboe stock, which has been moving in a tightly wound, neat little uptrend all summer long. I'll be back at the end with a risk management comment. Best Stock Spotlight: Cboe Global Markets Inc (CBOE) On the list since: 7/22/2025 Sean — Cboe Global Markets (CBOE) made it onto the list this week. When I pulled up the chart, I knew I had to show Josh right away. The stock's lack of volatility is remarkable as you can see in the logarithmic chart since inception. The lack of volatility has given the stock a beta of 0.43 compared to the overall market's beta of 1.0, which means CBOE has about half the volatility of the S & P 500. For obvious reasons, this makes for an attractive risk-reward and many portfolio managers love building allocations with stocks like these. Despite its lack of volatility, CBOE has been anything but quiet. 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Cboe's non-transaction revenue business includes Data and Access Solutions (DnA), providing data, infrastructure, and global market access to its customers. The exchange's infrastructure and proprietary market data are getting leveraged into recurring revenue streams through subscription-based services. Unlike transaction-based revenues that fluctuate with market volatility, their DnA business provides steady, predictable income that complements the trading business. Said otherwise, the firm is leveraging higher-quality revenue. You can expect the market to award this improvement in "earnings quality" with a higher multiple. From 2020 through their last reported quarter, CBOE has grown revenues 5%, operating income 13%, and diluted EPS 14% on an annualized basis. CBOE is due to report next week on Friday, August 1st. Analysts expect Revenue of $575M up 12% year-over-year and EPS of $2.43, up 13% year-over-year. (Data via Quartr) Risk Management: Josh: If this were heaven, and not earth, this is what every stock chart would look like and we would just buy them all. You can see below how perfectly the buyers came in to save this name from a 200-day trend break during the market volatility in April. Investors in this name know that volatility is actually a good thing if you're the largest options exchange and clearing operation in the world. Earnings next week could produce a blip, which I would most likely ignore so long as the company does the number and guides up. For shorter-term traders, I'd use 220 as a pivot point. It retested that level in mid-June and bounced off it clean. If it gets below, there might be better set-ups elsewhere. Investors should obey the rising 200-day and check back every Friday close. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. INVESTING INVOLVES RISK. EXAMPLES OF ANALYSIS CONTAINED IN THIS ARTICLE ARE ONLY EXAMPLES. THE VIEWS AND OPINIONS EXPRESSED ARE THOSE OF THE CONTRIBUTORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY OR POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC. JOSH BROWN IS THE CEO OF RITHOLTZ WEALTH MANAGEMENT AND MAY MAINTAIN A SECURITY POSITION IN THE SECURITIES DISCUSSED. ASSUMPTIONS MADE WITHIN THE ANALYSIS ARE NOT REFLECTIVE OF THE POSITION OF RITHOLTZ WEALTH MANAGEMENT, LLC" TO THE END OF OR OUR DISCLOSURE. Click here for the full disclaimer.

At The Money: Getting Paid in Company Stock
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