Stock market: How to invest amid uncertainty, according to '40 Finance' host Geoff Beers

40 Finance Youtube Channel Host Geoff Beers joins Yahoo Finance Live to discuss the best ways to invest during times of uncertainty in light of last week's market selloff amid breaking news of the Omicron variant.

Video transcript

JULIE HYMAN: This is Yahoo Finance Live. We've got the NASDAQ leading the gains in today's session, or should I say, leading the bounce-back in today's session, as we are following on that big sell-off on Friday, but all three major averages giving up some of their gains today.

Let's talk about what investors should be thinking to do next. Geoff Beers is the 40 Finance YouTube channel host, where he gives his stock picks. Geoff, thanks for being here. And I know that you are looking at the QQQs, which, of course, is the NASDAQ 100 ETF, for opportunities here. What is it that is attractive to you about that right now? And were you buying on Friday when we saw the big sell-off?

GEOFF BEERS: Hi. Yes, I was. And as a matter of fact, I think the QQQ makes a lot of sense right now, particularly if you're a person like me and you're kind of trapped in this uncertain world. You know, we've seen some of the volatile or high valuation names like Crowdstrike and such, who have gotten hit here recently, along with a lot of the small caps last week. And the question is, really, where we sit right now is, which way is the world going to go from an investing standpoint when you have now we have new pandemic concerns. Yet we still see the mega cap stocks performing well.

And it's really hard to put a finger on the CrowdStrikes and the NVIDIAs and the Apples to try to figure out, you know, is this valuation fair or not? And when I get into those cycles for myself, I start to lean on the QQQ to just let that ETF sort it out. You know, it's market cap weighted. So as if you had a bad day in Apple, well, it'll go down a little bit.

But then on the same token, if you suddenly get good news from a Google or Amazon, likely what we'll see today with Cyber Monday, then those go back up and just carry the rest through. So, in my opinion, it makes a lot of sense over these next couple of weeks as we're trying to figure out what this COVID news means and what do interest rates mean and where are we going to land heading into 2022.

BRIAN SOZZI: Geoff, a lot traders were completely run over by a Mac truck on Friday. That was a very violent session. As someone who studies the market as closely as you do, what is your favorite valuation multiple in this environment? Should they be using PE ratios to look at valuations on companies? Should they be using price to free cash flow? What's your favorite? And why are you using it right now?

GEOFF BEERS: You know, I still rely on PE ratio a lot. And I think a lot-- you know, where I sit, I think the most important thing right now is having some sort of EPS, OK? There's a lot of stocks out there that have yet to generate profitability. And the future looks bright for many of them. But if you can at least hold stocks that, at the bare minimum, have an EPS, then I think your floor is limited. You can almost calculate your floor to some degree. You know that historically, PEs only go down so far before the market buys back in.

But when you get on these price to sales, you get on these EV to sales ratios that are really kind of tied to market cap, and that can be dangerous, because as you know, the market cap as a company can go up and down very, very fast. I mean, I think we saw one of those EV makers, Rivian, suddenly has a market cap worth more than practically all the automakers combined. It's hard to imagine that that's a long standing position that they'll be in.

But you turn your focus to something maybe like a Tesla or a Ford or a GM, where they have the EPS, maybe they're overvalued now. Maybe they're not. But at the end of the day, you can take that EPS and project where the floor is going to be.

BRIAN SOZZI: How do you balance your focus on valuation, Geoff, with news driven events? You have Twitter now. The stock is halted here. Potentially Jack Dorsey leaving as CEO of the company. The stock popped. I mean, but they have no earnings. I mean, are you inclined to trade a name like that or a name-- is that something you ignore?

GEOFF BEERS: Well, you know, without a gap EPS, it's going to be a hard one to project that floor. You know, I think the news is good for Twitter because nobody wants to share their CEO across two different companies. And to be fair, the track record of Twitter stock over the past, whatever, five, seven years, has basically been flat. So I think there's a lot of people jumping in, saying that this news is good because the track record of the past is mixed at best. And I'd agree with that.

I think, though, when you really stare at Twitter, you have to ask yourself, we've been doing this experiment for a long time. We have yet to really grow our stock price. What does the future hold, particularly since they're only one platform? You know, you look at what Facebook and Google and the big behemoths are doing. They're going multiplatform. They're not banking on one thing to become the next craze. And I think when you look at Pinterest and Twitter, that's probably the big catch for them, even Snapchat now that I think about it. You're stuck on one platform. If it's suddenly not cool anymore, then what do you do as an investor?

JULIE HYMAN: And Geoff, finally, to take a step back for a second, so you have a YouTube channel, and you give your stock recommendations. Do you share your record on stuff? Like, how do you sort-- how did you get into this? And how do you sort of prove your bona fides to people who you want to subscribe?

GEOFF BEERS: Yeah, sure. So I always have portfolio updates. So I share-- I have a retail account that I share on the channel, which, by the way, has gotten dings, like everybody else's this year. And, you know, for me, it's more like this is what I'm doing. This is my opinion. I use Yahoo Finance Plus all the time on the channel. And we really just look at fundamentals. And it's more of an opinion, right?

And that's where, you know, we talked about EPS earlier. We tried to, on the channel, anticipate EPS growth, compare that with historical valuations. We know we're in a very high valuation time period right now for stocks just across the board, any metric you want to look at. So I think I did a video a couple of weeks ago where I'm like, hey, let's go back to 2019 using Yahoo.

And let's look at what historical valuations were in 2019, let's just say, for PayPal, which is a holding of mine. And you could see back then that the stock market was paying, whatever it was, 30, 35x times. We know probably what the EPS is going to be within a range. And then you have to pick your poison heading into 2022, right? Do you think stretched valuations continue? Or do you think we might bounce back down to 2019, a.k.a. normal times? And it really has a tremendous impact on the price when you start thinking about it.

JULIE HYMAN: Geoff, we'll see. Geoff Beers, thanks so much for being with us, 40 Finance YouTube channel host.