Oct 5, 2026 · 54 min
Morningstar flags October risks and favors defensive value
3 Stocks to Sell and 3 Stocks to Buy for October
The episode weighs stretched valuations, rising yields, and economic uncertainty against a concentrated set of stocks Morningstar considers attractive.
- 1October’s market outlook favors selectivity as rising yields and historically sharp selloffs raise risks across expensive assets.
- 2Morningstar names SpaceX, Robinhood, and Garmin as sell ideas while retaining exposure to leading artificial-intelligence companies.
- 3S&P Global, Intercontinental Exchange, and Alliant Energy stand out for competitive advantages, defensive traits, or discounts to fair value.
Don't miss
Dave Sequeira contrasts three expensive sell ideas with three buy recommendations built around competitive advantages, defensive characteristics, and valuation.
The brief
Susan Dziubinski and Dave Sequeira review September’s market performance, then frame October around rising yields, concentrated undervaluation, and the risk of severe market selloffs.
The hosts argue for continued exposure to leading artificial-intelligence companies but caution against broader AI speculation, cyclical businesses, long-duration growth, and floating-rate debt exposure.
Earnings discussions span Constellation Brands, Delta, Micron, McCormick, Nike, Carnival, and Clorox, with valuation and business durability shaping each conclusion.
The three sell ideas—SpaceX, Robinhood, and Garmin—represent richly valued or overextended businesses whose prices appear difficult to justify against their risks.
The standout turn comes with three buys: S&P Global, Intercontinental Exchange, and Alliant Energy, each offering a different mix of moat, defensiveness, valuation, or income.
The broader takeaway is a market divided between expensive narratives and selective opportunities, with position sizing and diversification still central to handling uncertainty.
What was said on this episode
27 statements · 14 positive · 10 negative · 3 neutral
The 10-year Treasury yield could rise to 5.5% and then 6%.
“If it doesn't and it continues to keep widening, I think the next stop just is naturally going to be 5.5%. And after 5.5%, then I think the market starts gearing on a 6-handle.”
Listen at 4:29
The U.S. equity market trades about 10% below Morningstar composite fair value.
“the U.S. equity market is undervalued. It trades at about a 10% discount to a composite of our fair values.”
Listen at 5:16
Investors should favor leading AI companies rather than broad AI exposure.
“I think you still want to have exposure to AI, but specifically that exposure needs to be focused on those companies that are the leaders in AI”
Listen at 7:31
Investors should avoid companies with high floating-rate debt exposure.
“steer clear of anyone that has very high amounts of floating rate debt, i.e. the private credit market”
Listen at 10:07
Nvidia, Broadcom, Microsoft, Alphabet, and Amazon are AI leaders with value.
“whether it's in the hardware space in nvidia or abroadcom or those that are best utilizing it microsoft alphabet amazon”
Listen at 10:39
Constellation Brands is attractively valued at a 35% discount with a 3.7% yield.
“it is a four-star rated stock at a 35% discount, good healthy dividend yield at 3.7%.”
Listen at 11:47
Investors can wait until after earnings before deciding on Constellation Brands.
“I think you can wait until after earnings and decide what you want to do on this one.”
Listen at 13:41
Delta Air Lines earnings may stagnate or decline over the next five years.
“we think that's probably too high for an industry and a company that from here on out is probably stagnant at best. If not necessarily, we're looking for declining earnings over the next five years.”
Listen at 16:57
Memory supply is expected to double by 2028.
“we think memory supply doubles by 2028.”
Listen at 19:55
Micron is expected to enter a steep downturn starting in 2029.
“We're looking for a pretty steep downturn starting in 2029.”
Listen at 20:08
The McCormick-Unilever combination will be more food-focused than McCormick alone.
“the combined company will be actually more of a food company than it was just the prior spices business.”
Listen at 23:13
Nike shows no turnaround and its operating performance is worsening.
“not only is there no sign of a turnaround. it's still in the stage where things are actually getting worse”
Listen at 25:44
Carnival has booked half of its 2027 capacity at record prices.
“they've already booked 50% of their 2027 capacity at just... record pricing levels.”
Listen at 27:58
Carnival remains 30% below Morningstar fair value after its rally.
“even after that pop, it's still at a 30 percent discount to fair value”
Listen at 28:46
Clorox trades near half of Morningstar fair value and remains highly rated.
“It is a five-star rated stock. It trades almost half of our fair value, so a very large discount.”
Listen at 30:34
Clorox remains a buy.
“It is.”
Listen at 34:32
SpaceX is expected to remain free-cash-flow negative through at least 2029.
“we think they're going to be free cash flow negative through at least 2029, if maybe not even through 2030.”
Listen at 38:36
A major event affecting Elon Musk would significantly hurt SpaceX stock.
“God forbid anything were to happen to Elon Musk, I think that would be a huge hit to the stock.”
Listen at 39:27
Robinhood trades at roughly twice Morningstar fair value.
“one star stock trades at double our fair value.”
Listen at 40:03
Garmin trades at 29 times earnings despite modest forecast growth.
“the stock is trading at 29 times earnings.”
Listen at 44:24
Garmin could experience significant multiple contraction if growth disappoints.
“This would be one I think would be very subject to a significant multiple contraction if that growth doesn't meet those investor expectations over the next few years.”
Listen at 44:26
S&P Global trades at a 27% discount to fair value.
“S&P is a four-star rated stock, 27% discount”
Listen at 44:43
S&P Global could receive a near-term earnings boost from hyperscaler debt issuance.
“I think you could see a pretty good earnings boost from that here in the near term.”
Listen at 46:45
Intercontinental Exchange trades at a 17% discount to fair value.
“So it trades at a 17% discount to fair value.”
Listen at 47:52
Intercontinental Exchange is likely less economically sensitive than average companies.
“I also suspect that this company would be a lot less economically sensitive than the average company.”
Listen at 48:48
Alliant Energy trades at a 17% discount and yields 3.4%.
“So Alliant stock is a four-star rated stock at a 17% discount to fair value, 3.4% dividend yield.”
Listen at 49:48
Alliant Energy earnings growth is expected to accelerate after 2027.
“we're looking for accelerating earnings growth after 2027.”
Listen at 51:15
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.