5 Stocks to Buy Before Growth Stocks Come Back I April 13, 2026

Key Concepts

• Barbell Portfolio Strategy: A risk-management approach balancing high-quality value stocks (e.g., energy) with high-growth technology and AI stocks.
• Economic Moat: A company's ability to maintain competitive advantages (wide vs. narrow) to protect long-term profits.
• AI Buildout Boom: The structural shift in capital expenditure toward AI infrastructure, including semiconductors and cloud computing.
• Fair Value Estimate: Morningstar’s assessment of a stock's intrinsic value, used to determine if a stock is overvalued or undervalued.
• Compound Annual Growth Rate (CAGR): The mean annual growth rate of an investment over a specified period longer than one year.
• Loan Loss Reserves: Funds set aside by banks to cover potential losses from defaulted loans.

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1. Market Overview and Geopolitical Impact

The market experienced significant volatility due to the Iran conflict. Following a two-week ceasefire announcement, the market rallied, with growth stocks rising over 3%. However, the breakdown of negotiations over the weekend led to renewed uncertainty.

• Sector Performance: Energy fell 5.4% on the ceasefire news but remains up 28.5% year-to-date. Consumer cyclicals, industrials, and basic materials saw gains.
• Strategic Outlook: Dave Sekera notes the market is roughly 10% undervalued but warns that oil prices (still 50% higher than pre-conflict levels) and supply chain disruptions (fertilizer, plastics, chemicals) will drive continued volatility and keep inflation elevated for several quarters.

2. Investment Strategy: The Barbell Approach

Sekera advises maintaining the "barbell" portfolio but suggests tactical adjustments:

• Profit Taking: Investors should harvest gains from energy and value stocks that outperformed during the conflict.
• Reinvestment: Proceeds should be directed toward beaten-down, high-quality growth and AI-related technology stocks.
• Future Rebalancing: Once tech/AI valuations reach "full" (3-star or 2-star territory), investors should rotate back into value stocks to maintain the barbell balance.

3. Earnings Season Expectations

• Guidance Risks: Management teams may provide weak guidance or wider-than-normal ranges to create a "cushion" against the economic impact of high oil prices.
• Banking Sector: Banks are key indicators of economic health. Focus areas include loan growth demand (specifically in March), net interest income, loan loss reserves (potential for higher bankruptcy pricing), and headcount reductions related to AI efficiency.
• Specific Stock Analysis:
  • J&J: Currently a 1-star stock at a 31% premium. Sekera suggests locking in profits due to high valuation relative to pharma peers.
  • ASML: Execution is the primary concern. The market is watching shipment cadence and potential US export restrictions to China.
  • Taiwan Semiconductor (TSMC): A bellwether for AI. Investors should watch for the shift from "AI training" to "inference" demand, which would signal structural growth.
  • Netflix: Focus is on pricing power. Analysts are watching for churn rates following price hikes and the success of ad-supported tiers.

4. Deep Dive: Viva Systems (Question of the Week)

Eric asked about the security of Viva’s "wide economic moat" amid AI competition.

• Thesis: Viva’s R&D solutions (55% of revenue) are heavily regulated and essential, creating high switching costs.
• AI Impact: The market is currently "puking" software stocks due to fears that AI will displace them. Morningstar argues that software companies will instead use AI to add value, shifting from seat-based pricing to consumption-based (token) pricing. Viva remains a 4-star stock at a 50% discount.

5. Stock Picks for the AI/Growth Portfolio

| Stock | Rating | Discount | Key Rationale | | :--- | :--- | :--- | :--- | | Microsoft | 5-Star | 38% | Diversified business; Azure and Co-pilot provide upside if software is disrupted. | | Broadcom | 4-Star | 26% | Massive growth in custom AI accelerators (TPUs); long-term supply deal with Google/Anthropic. | | Salesforce | 4-Star | 40% | Downgraded to narrow moat, but remains top software pick; market is pricing in zero margin expansion. | | Chewy | 4-Star | 30% | High growth potential; operating margin expansion expected to drive earnings. | | On Holding | 4-Star | 29% | Fastest-growing sportswear brand; significant room for geographic and product line expansion. |

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Synthesis

The current market environment is defined by a tug-of-war between geopolitical instability and the structural growth of the AI buildout. Investors are encouraged to avoid panic-selling and instead utilize a disciplined barbell strategy: harvesting gains from overvalued defensive/energy names and deploying that capital into high-quality, undervalued technology and growth stocks that have been unfairly punished by broad sector selloffs. The primary risk remains the "higher-for-longer" inflation environment driven by energy costs, which may lead to conservative corporate guidance in the coming weeks.