The Street

When Ron Baron believes in a company, he does not dabble. He commits. He held Tesla through every dip, every controversy, every moment Wall Street laughed at him, and eventually generated billions for his investors. 

He has been saying the same thing about SpaceX (SPCX) for years. Fast forward, his latest Q2 13F filing shows he really means it.

Baron Capital reported 145,775,000 SpaceX shares valued at $24.9 billion as of June 30, 2026, making SPCX the single largest position in its $66.64 billion portfolio at 37.38% of total assets, according to GuruFocus statistics. His average reported cost basis totals approximately $170.86 per share.

SPCX closed the week ended August 21 at $136.97, meaning Baron is currently underwater on the position by roughly $34 per share. But with the time I have been a trader, I have been reminded several times that the market is a device for transferring money from the active to the patient.

In fact, the market pays you to wait. Not the other way around. For a man who held Tesla through a 50%+ drawdown, that is unlikely to change his conviction. But it does make the filing fascinating reading.

Also Read: SpaceX Latest News and Stories   

Who Ron Baron is and why his SpaceX bet is in character

Ron Baron founded Baron Capital in 1982, managing about $10 million. The firm now manages tens of billions. His investing philosophy is among the most clearly defined on Wall Street: buy growth companies with defensible niches, hold for at least five years, ignore short-term volatility, and trust the fundamental thesis until it breaks.

He became famous for Tesla. He stuck with it when the shorts were loudest, when production was failing, when Elon Musk was tweeting the company private. He made extraordinary returns for his investors. 

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Baron attended Tesla’s IPO roadshow in 2010 and was impressed by Musk, though he initially made only a small investment while waiting to see if production goals were feasible, according to his Dec. 2025 CNBC interview.In the same interview, Baron mentioned that between 2014 and 2016, Baron Capital poured $400 million into Tesla shares at an average cost of around $43 to $50 per share, after seeing strong demand for the Model S. The Payoff? Baron’s firm reaped an estimated $8 billion in realized and unrealized profits from its Tesla holdings.

Related: Legendary fund manager makes aggressive SpaceX prediction

SpaceX is definitely a duplicate of Tesla, but in a different sector. Baron has been a SpaceX bull for years through private market exposure, and the June 12 IPO was the moment that position appeared in public 13F filings for the first time. 

His top five holdings, according to GuruFocus, are SPCX at 37.38%, Tesla at 7.90%, MSCI at 2.70%, Arch Capital at 2.31%, and Hyatt Hotels at 2.12%.

SpaceX is not in a modest position. It is nearly five times his second-largest holding. That says something, right?

The case for SpaceX that Baron is making with $24.9 billion

SpaceX’s Q2 2026 earnings, reported August 4, showed what the underlying business actually looks like, without the noise.

Revenue of $7.8 billion, representing growth of 92% year over year (YOY)

Net loss narrowed to $541 million from $1 billion in the prior year period

Adjusted EBITDA of $3.5 billion grew 191%

The connectivity segment, which includes Starlink, grew 66% in revenue and 79% in operating income, driven by a doubling of Starlink subscribers

Closed $14.1 billion in contracted Cloud Services Agreements

It was awarded over $6 billion in multi-year U.S. government contracts for Starshield.

Cash, cash equivalents, and marketable securities ended Q2 at $100 billion, with a $47.5 billion backlog.Source: SpaceX Second Quarter 2026 Results

The Cursor acquisition, announced at $60 billion, adds an AI coding platform with 2.5 million developers to a company that already operates one of the largest private AI compute buildouts in the world. Q2 capital expenditure reached $18.4 billion, with $15.8 billion directed toward AI investments.

Baron is not buying launch vehicles. He is buying the argument that SpaceX is becoming one of the world’s dominant AI infrastructure companies. That’s with a satellite internet business that is already profitable and growing at 66% per year as the collateral.

Ron Baron’s average reported cost basis on SPCX totals approximately $170.86 per share.Spencer Platt/Getty Images

The valuation debate and why I think the bears also have a point

Here is where intellectual honesty matters. Baron’s $24.9 billion position is underwater at current prices, and the valuation concerns I covered in previous articles are real. But also, don’t forget Baron’s bet is long term.

Short seller Peter Andersen described a price-to-sales ratio of around 50 times as “very high for a company like this” in my previous SPCX coverage. Morningstar estimates fair value at $63 per share, less than half its price at recent trading levels.

Related: Top analyst sees trouble looming for SpaceX stock

The bear case is not about Starlink’s growth or SpaceX’s engineering capability. It is about what happens when a stock that debuted at $135, surged to $225.64, fell more than 50%, and now trades at $136.97 gets layered with $18.4 billion quarterly capex, eight tranches of insider share unlocks through January 2027, and a $60 billion acquisition that has not been proven out.

My read of the Baron position is that he is not pricing SpaceX on 2026 earnings. Just like his investing philosophy says, he is pricing it on what Starlink and the AI compute business may look like in 2030 and beyond. 

Related: Warren Buffett’s Berkshire makes backdoor SpaceX play 

Baron projects SpaceX will be worth “at least $40 trillion” within 10 to 15 years, starting from a $2 trillion IPO valuation, TheStreet reported.

That is a defensible framework with a five-plus-year holding horizon. It is also a framework that requires patience through significant near-term volatility. He knows the game when it comes to that.

Baron named his dog Big Mac after his first successful stock call. He held Tesla through years of doubt. He is the last person to be rattled by a 20% drawdown on a position he has held since before the IPO.

Related: Is SpaceX Worth More Than Earth? 

The Vanguard S&P 500 exchange-traded fund has drawn investors with its industry-low costs, a strategy that has delivered strong results so far. 

At a 0.03% expense ratio, VOO costs about $3 per year on a $10,000 investment, matching iShares’ IVV and undercut only by State Street’s SPLG/SPYM at 0.02%.

The fund has delivered a 20.69% gain over the last 12 months, and its total net assets sit near $997 billion as of mid-August 2026.

But the fee comparison that drew millions of investors into VOO says nothing about what the fund holds beneath the ticker symbol.

What VOO holds beneath the S&P 500 label

Technology stocks make up approximately 37% of VOO’s portfolio, with Nvidia, Apple, and Microsoft leading the lineup, Vanguard confirmed.

Depending on the data cut and whether Alphabet’s dual-class share structure is combined, VOO’s 10 largest positions control roughly 36–41% of total assets, meaning about 2% of the names carry more than a third of the weight.

For every $100 invested in VOO, roughly $36 flows into those 10 companies, while the remaining $64 gets divided among more than 500 other names.

That concentration extends beyond stock prices into the earnings that drive them. 

Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, noted on the firm’s On Investing podcast in May 2026 that the upward revision in full-year S&P 500 earnings is being powered by just a handful of names.

Just three companies alone, just Alphabet, Amazon, and Meta, explain about 70%, in dollar terms, of the increased earnings expectation for calendar year 2026

A decade ago, the S&P 500’s top 10 stocks held about 19% of the index, meaning concentration has nearly doubled over roughly 10 years, RBC Wealth Management reported in January 2026.

The mismatch between VOO’s sector weight and U.S. economic output

That technology tilt looks dramatically different from the economy the index is supposed to mirror, and the gap keeps widening each quarter.

The Bureau of Economic Analysis (BEA) reported that the Information sector generated just 5.6% of the U.S. gross domestic product in the first quarter of 2026.

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Real estate, the economy’s largest industry by value added, contributed 13.6% of GDP in that same period, and finance and insurance added 8.0%.

Information sector corporate profits jumped from $271 billion in the first quarter of 2025 to $352.5 billion one year later, BEA data showed.

That growth pushed the sector’s share of total domestic corporate earnings from 7.9% to 9.1%, fueling a significant portion of VOO’s recent gain.

But strong earnings and outsized index representation are two distinct things, because cap-weighted positions reflect expectations about future growth, not current economic output.

VOO’s tech-heavy portfolio looks little like the U.S. economy, highlighting how market value reflects future growth expectations rather than current economic output.Bloomberg / Getty Images

How the S&P 500’s concentration compares to dot-com-era peaks

Meera Pandit, Executive Director and Global Market Strategist, and Corey Hill, Managing Director and Global Head of Portfolio Insights at J.P. Morgan Asset Management, reported that the S&P 500’s top 10 stocks now account for 40.8% of the index.

That figure surpasses the 26.6% concentration peak reached during the late-1990s technology bubble, the firm noted. 

“When valuations are priced to perfection, they are prone to correction,” Pandit and Hill wrote, adding that elevated concentration amplifies the impact on portfolios.

During a 28-session rally from late March to early May 2026, just 10 stocks drove 69% of the S&P 500’s total gains, according to a Nomura return-attribution analysis reported by Investing.com.

The math cuts both ways: the same concentration that amplifies gains on the way up amplifies losses if those names reverse, because a 10% decline in a stock that represents 7% of the index moves the portfolio seven times more than the same decline in a stock weighted at 1%.

Goldman Sachs projects lower S&P 500 returns driven by concentration

David Kostin, Advisory Director at Goldman Sachs, and his team projected in an October 2024 note that the S&P 500 would deliver just 3% annualized returns over the next decade.

That figure would rank in the 7th percentile of 10-year returns since 1930, a steep drop from the 13% average posted over the prior decade.

“If the historical pattern persists, high concentration today portends much lower S&P 500 returns over the next decade,” Kostin’s team wrote.

Goldman’s analysis also indicated that the equal-weight S&P 500 could outperform the cap-weighted version by two to eight percentage points per year.

An equal-weight fund holds the same 500 companies but caps each position near 0.2% of the portfolio, which structurally limits any single sector’s dominance, RBC Wealth Management reported.

The trade-off VOO investors haven’t priced in

VOO’s 0.03% expense ratio still represents a genuine cost advantage, and the fund’s 87.50% five-year total return has rewarded investors who chose low-cost indexing.

But those returns increasingly depend on a narrow cluster of stocks, and online investors have started noticing, with Reddit threads questioning whether the “VOO and chill” strategy carries hidden sector-concentration risk, 24/7 Wall St. reported.

VOO’s 0.03% fee sits within one basis point of the lowest available S&P 500 tracker, so the cost side of the equation is essentially settled.

What’s not settled is whether a roughly 37% technology tilt matches the level of sector risk long-only index investors have typically expected the fund to carry.

Related: VOO shattered a barrier no ETF has cracked, here’s what it means

The artificial-intelligence boom is most often seen as a Wall Street story.

Nvidia (NVDA) rallies. Big Tech spends billions. Data centers multiply. Investors debate which company will become the next major AI winner.

But Bank of America says something more substantial is starting to unfold under the surface.

AI is splitting firms into two paths: those turning the technology into tangible growth and those being disrupted by it.

The BofA research note of Aug. 20, shared with TheStreet, paints a stark picture of this gap in the leveraged-finance sector.

And although bond spreads and leveraged loans may seem distant from everyday life, the companies borrowing in these markets employ workers, buy equipment, and supply products and services that consumers use.

If one group can develop and invest and the other faces slower revenue growth and more expensive financing, the implications can ultimately reach Main Street through hiring, wages, company investment, and corporate cutbacks.

BofA finds a widening gap between AI winners and losers

BofA separated issuers of high-yield and leveraged loans into those benefiting from AI (the “tailwind” group) and those facing AI-related disruption (the “AI-risk” or “headwind” group).

The data reveal a shocking gap.

Among high-yield borrowers, BofA’s AI-tailwind group posted 16.2% year-over-year revenue growth in the second quarter and 15.2% growth in adjusted EBITDA.

The AI headwinds companies grew their revenue by only 4.1% and EBITDA by 7.6%.

The disparity was considerably more pronounced for leveraged-loan debtors.

AI beneficiaries saw a 26.8% revenue increase compared with a 3.6% gain for enterprises vulnerable to AI disruption, according to BofA.

The AI-tailwind cohort’s EBITDA growth was 23.4% vs. 3% for the AI-risk cohort.

BofA describes the emerging pattern as a “Credit-K,” basically two groups going in significantly divergent ways.

That’s important because companies that make more money tend to have more room to hire, invest, and service their debt.

Companies on the weaker side of that split may have to make some tough decisions.

AI hardware is where the money is showing up first

The tech sector was again one of the best-performing sectors in leveraged finance during the second quarter.

But not all companies shared equally in the spoils.

Hardware companies in the leveraged-loan market recorded nearly 48% revenue growth and more than 50% EBITDA growth.

Hardware sales among high-yield issuers climbed 32.1%, and EBITDA jumped 85.6%.

Software and services were much softer.

Revenue rose just 4.5% among loan borrowers and 5.8% in high yield. That gap helps explain where the AI boom now stands.

The first to benefit are the companies that sell servers, data center gear, and other physical infrastructure, as huge sums of money are being invested to build out AI capability.

The advantage for firms only now rolling out AI is less clear.

BofA’s investigation identified substantial AI benefits at 31% of S&P 500 companies, compared with just 18% of leveraged-finance issuers.

Thus, the AI cash bonanza is still concentrated in the companies closest to building the technology.

BofA says AI is creating a new economic split beyond Wall StreetRon Jenkins / Getty Images

Big Tech is borrowing billions to build the AI economy

In the debt market, the scale of the investment becomes evident.

Companies have sold over $335.7 billion in AI-linked U.S. dollar debt year-to-date, according to BofA.

Investment-grade debt accounts for some $255 billion of that.

High-yield borrowing is adding another $40 billion. Loans and direct lending each are contributing about $20 billion.

Some of America’s most known corporations are in the middle of that funding tsunami.

Alphabet (GOOGL) alone sold almost $25 billion of investment-grade debt focused on AI on Aug. 6, according to BofA’s transaction tracker, after raising nearly another $20 billion in February.

Amazon (AMZN) sold $25 billion of debt in July, following an even larger debt sale in March.

Nvidia (NVDA) raised around $25 billion in June.

And Meta Platforms (META) sold almost $25 billion of bonds in April.

Those numbers are another way to think about AI.

Big Tech isn’t only hooking up chatbots to current products.

Companies are pouring unprecedented amounts of capital into data centers, semiconductors, electricity, and infrastructure.

AI borrowing comes with a price

And bond investors aren’t perceiving that expenditure as risk-free.

Investment-grade AI debt now trades at spreads of roughly 119 basis points, or around 46 basis points wider than comparable non-AI debt, says BofA.

High-yield AI spreads are around 320 basis points, a premium of about 147 basis points over similar non-AI debt.

Related: AI agents create new problem for enterprise software

That suggests lenders understand the tension at the heart of the AI boom.

If built, the infrastructure could generate huge long-term profits.

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But someone has to pay for it first.

And those costs of financing weigh more for weaker borrowers than they do for cash-rich technological companies.

The AI boom is still leaving many companies behind

The underlying fundamentals in leveraged finance remain pretty solid overall.

High-yield revenue increased 7.5% year over year in the second quarter, with adjusted EBITDA up 9%.

Leveraged-loan borrowers delivered 8.6% revenue growth and 9.5% EBITDA growth. BofA expects the broader market to maintain solid momentum in the third quarter. But the headline numbers hide increasingly different realities.

Technology and energy are performing strongly. Real estate remains pressured by elevated rates and housing affordability. Retail high-yield revenue increased only 1%, while earnings declined 2%.

Food producers had a modest 2% increase in revenue and an 11% fall in earnings as rising commodity and freight prices squeezed margins.

That’s why BofA’s AI gap matters more than traders monitoring bond displays.

If the businesses that can do AI keep pushing away, cash could progressively flow into areas that are already benefiting from the technology.

That might decide which companies expand, whose factories and data centers are built, and eventually where new employment is produced.

The first stage of the AI boom was about exhilaration.

The following stage is getting a lot more tangible.

Now firms have to prove that standard artificial intelligence can deliver real revenue, improved margins, and enough cash flow to justify hundreds of billions of dollars of investment.

And Bank of America’s most recent data reveals that the winners are starting to separate from the rest of the pack.

Related: Goldman Sachs sends strong message on AI and jobs

On August 19, Merck (MRK) said its personalized cancer vaccine had proved effective in a large, late-stage melanoma study, and Wall Street responded fast. 

Merck shares closed up about 12.5% that day, one of the biggest single-day moves the stock has ever posted.

The rally added roughly $43 billion to Merck’s market value in hours.

The reason the market cared so much goes beyond one skin-cancer result. 

Merck faces a problem in 2028, when its top-selling drug loses patent protection. This new vaccine gives the company a way to replace some of that revenue.

For investors, the question now is whether the jump reflects real long-term value or a one-day reaction that fades. 

What Merck’s Phase 3 melanoma result actually showed

Merck and Moderna Announce Phase 3 INTerpath-001 Trial of Intismeran Autogene Plus KEYTRUDA® Met Endpoints of Recurrence-Free Survival (RFS) and Distant Metastasis-Free Survival (DMFS) in Patients With Completely Resected Stage IIB-IV Melanoma – Merck.com↗

Merck and partner Moderna (MRNA) said their Phase 3 INTerpath-001 trial hit its main goal.

The study tested a vaccine called Intismeran alongside Merck’s blockbuster immunotherapy Keytruda in patients whose melanoma had been surgically removed.

Intismeran is a personalized treatment. It reads the specific mutations in each patient’s tumor, then trains the immune system to recognize and attack cancer cells that carry them.

The trial enrolled 1,137 people with high-risk, stage 2B to stage 4 melanoma, according to Moderna‘s release.

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The combination of the two drugs beat Keytruda alone on two measures: how long patients went without their cancer returning, and how long before it spread to distant parts of the body.

The companies called it the first positive Phase 3 result for an individualized mRNA cancer therapy.

Why the $43 billion jump surprised even Wall Street

The rally looks big compared to the actual melanoma sales at stake.

Goldman Sachs analysts, in a research note shared with TheStreet, estimated global peak sales for Intismeran for treatment of melanoma at about $4.3 billion a year.

Merck and Moderna will split the profits 50/50, though Merck books all the global sales.

So why did Merck add roughly $43 billion in market value over a program worth a few billion in annual sales? 

Investors were pricing in more than melanoma.

The result validated the underlying technology, opening the door to using the same approach against other cancers.

Goldman noted that Merck shares carried lower expectations for this program going in, which left more room for the stock to move once the data landed.

Merck and Moderna’s personalized mRNA vaccine trains each patient’s immune system using mutations found in their own tumors.Cheng Xin / Getty Images

The Keytruda cliff that makes this vaccine matter

Keytruda is Merck’s best-selling drug and made up close to half of the company’s 2025 sales.

That drug loses key U.S. patent protection in 2028, which means cheaper competition can enter, and revenue could drop sharply.

Investors have worried for years about what replaces that income. Intismeran gives Merck a credible answer.

Related: UBS strongly resets Lilly stock target

A vaccine like Intismeran, tailored to each patient, is hard to copy, so it faces limited generic competition and could produce a longer, steadier revenue stream than a typical drug.

That durability is what strengthened Wall Street confidence in Merck’s future progress, after 2028, when Keytruda loses exclusivity.

How analysts reset their Merck price targets

The data triggered a wave of higher price targets across Wall Street.

Goldman Sachs raised its 12-month target on Merck to $160 from $140 and applied a higher earnings multiple, of 16 times, up from 14 times.

Other firms moved in the same direction:

UBS lifted its target to $175 from $145 and kept a Buy rating.

Bank of America raised its target to $166 from $141.

JPMorgan moved to $150.

Not every analyst turned more bullish. 

RBC Capital downgraded Merck to Sector Perform, even while raising its target to $150, a reminder that a strong result can still leave a stock fully valued after a double-digit jump.

What still has to happen for Merck

The melanoma win is one indication. The bigger prize depends on results in other cancers, and those are still pending.

For example, Merck is focusing the vaccine on tumors that respond well to immune-based treatment, such as melanoma and non-small cell lung cancer.

Here is the near-term timeline investors are watching:

Renal cell carcinoma (a kidney cancer): Phase 2 data expected in 2026 or early 2027

Muscle-invasive bladder cancer: Phase 2 data in 2027

Non-small cell lung cancer: Phase 3 data in 2027

A win in kidney cancer would suggest the approach can work in the same settings where Keytruda already helps patients.

The companies also plan to present full melanoma data at an international medical meeting and file submissions with regulators, according to Merck.

Who else moved on the news

The result lifted a group of related health care stocks in what traders call a sympathy move.

BioNTech (BNTX), which runs its own personalized cancer vaccine programs, rose about 24% as investors saw the data as broad support for the approach.

Companies tied to manufacturing and cancer diagnostics also jumped, including Maravai LifeSciences (MRVI), up about 28%, and Tempus AI (TEM), up about 24%.

Investors watched Bristol-Myers Squibb (BMY), a major player in melanoma treatment, for risk.

Goldman estimated a long-term risk of up to $1 billion to Bristol’s melanoma franchise, but expects the impact to be limited and gradual.

This is because Intismeran targets earlier-stage patients, while much of Bristol’s melanoma revenue comes from later-stage, metastatic cases.

What Merck’s move means for your portfolio

Merck’s rally reflects a real change in the company’s long-term outlook.

For investors, a few things are worth keeping in mind:

The stock already climbed sharply, so much of the good news is now in the price.

The melanoma result is strong, but survival data is still early, and full results have not been published.

The larger payoff depends on kidney, bladder, and lung cancer trials that report in 2026 and 2027.

If those readouts succeed, Merck’s case for replacing Keytruda revenue gets much stronger.

If they disappoint, the stock could give back some of this gain, which is why the coming trial dates matter more than the one-day rally.

For long-term investors, Merck now offers a clearer story beyond its patent cliff, backed by a technology that just proved it can work.

Related: Goldman Sachs sees writing on the wall for Eli Lilly stock

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Happy Monday.  Stock futures were falling as investors weighed new U.S. economic sanctions against Iran, failed U.S.-Canada trade talks and reciprocal tariff threats, along with earnings from chipmaking giant Nvidia (NVDA) and the Federal Reserve’s annual symposium in Jackson Hole, Wyoming.

Treasury Secretary Scott Bessent is expected to reveal details of the administration’s sanctions plans against Iran later today after President Donald Trump threatened the country with “economic D-Day.”

The Federal Reserve will hold its annual symposium beginning Thursday, with Chairman Kevin Warsh expected to deliver a speech on Friday.

“Warsh is scheduled to deliver keynote remarks on Friday, and markets will be looking for greater clarity on both his assessment of inflation and the broader ‘regime change’ he has advocated at the Fed,” said Daniela Hathorn, senior market analyst at Capital.com.

“He has been reluctant to provide conventional forward guidance, meaning the speech may focus more heavily on the Fed’s reaction function and longer-term philosophy than explicitly signaling what policymakers will do in September.”

In addition to Nvidia, Intuit (INTU), Salesforce (CRM) and Marvell Technology (MRVL) are also slated to report earnings this week.

Stocks closed higher on Friday, rebounding from earlier losses, but the major indexes still finished the week lower amid volatile Treasury yields and heightened Middle East tensions.

Materials have quietly climbed this year. 

At the same time, the options tied to the sector have gotten cheaper, trading closer to their five-year low than their five-year average. 

That combination caught the eye of a well-known CNBC options strategist, who now sees a rare setup forming.

His view is simple. When a sector is rising and the cost to trade it is falling as well, patient investors get a chance that does not appear often.

Here is what he sees and where the trade can go wrong.

Why a top analyst is watching the XLB materials ETF right now

Michael Khouw, chief strategist at OpenInterest.PRO and a familiar face on CNBC, told viewers that the materials sector deserves a fresh look.

His focus is the State Street Materials Select Sector SPDR ETF (XLB), the most widely traded fund that tracks materials stocks in the S&P 500. 

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It charges a low 0.08% expense ratio and holds 28 stocks.

XLB has gained close to 17% so far in 2026, beating the S&P 500, CNBC reported.

The fund closed at $53.54 on Aug. 21, StockAnalysis data show, near its 52-week high of $54.14.

A rising fund’s options usually get more expensive. Here, they got cheaper. That difference is what makes the setup stand out.

What’s actually pushing materials stocks higher

Two forces are lifting the sector.

The first is the artificial intelligence buildout. Every new AI data center needs vast amounts of copper, specialty chemicals, and construction materials.

A single one-gigawatt AI data center requires roughly 50,000 tonnes of copper, Yahoo Finance reported, and hyperscalers are building many of them.

The second force is money and policy. 

Concerns about government deficits have kept inflation worries alive, and hard assets like copper and gold tend to hold up well when the dollar’s purchasing power is in question.

That backdrop has already helped gold and copper miners. 

Freeport-McMoRan (FCX) reported second-quarter 2026 revenue of $7.03 billion, which beat expectations. 

Copper hit an all-time high on the COMEX exchange on Aug. 12, Yahoo Finance reported, with inventories falling for over 40 straight days.

Simply put, the same AI and inflation themes driving tech and gold headlines are now driving demand for raw materials.

Copper and construction materials sit at the center of the AI data center buildout, driving demand across the materials sector.Jordi Salas / Getty Images

Why the options market is handing investors a discount

Here is the part Khouw finds unusual. The cost to trade XLB has dropped, even as the fund has climbed.

That cost is measured by implied volatility, a number that tells you how expensive an option contract is. When it falls, options get cheaper to buy.

Right now, one-month implied volatility on XLB sits at barely over 14%, CNBC reported.

How cheap are XLB options vs. history?

Over the past five years, XLB’s implied volatility has looked very different:

Five-year average: 19.5%

Five-year high: 47.25%

Five-year low: 11.8%

At about 14%, options are priced much closer to their five-year floor than to the average.

For investors, cheaper options mean a smaller upfront cost and a smaller amount at risk on a directional bet.

What the trade looks like in plain numbers

Khouw laid out a straightforward example so readers can see the math.

Khouw’s example is the September $52.50 call, which recently cost about $1.00 per contract. That $1.00 is the most a buyer can lose, and it’s less than 2% of the fund’s price.

To break even, XLB just needs to reach $53.50 within four weeks. That’s a move of less than 2%.

Because premiums are so low, Khouw noted that traders do not need complex strategies to offset cost. A simple call does the job.

Khouw also has an idea for investors who expect the sector to drop. 

Buy a September $52.50 put instead of a call. It costs about the same and caps your loss at that same small amount. He said it’s a safer bet against the sector than shorting the ETF.

What you give up by owning only one sector

XLB isn’t evenly spread across the sector. A handful of stocks make up a large share of the fund.

Linde (LIN) makes up about 12.94% of the fund, with Newmont (NEM) near 7.13% and Freeport-McMoRan near 5.62%, StockAnalysis shows.

Related: Top European bank has a message for investors on gold price

The top 10 names account for roughly 58% of the fund. So a move in a few big stocks can swing the whole position.

That’s why this trade works best alongside a diversified portfolio, not a replacement for one.

The risk that can wipe out the whole trade

Options carry a hard deadline that stocks do not, and that deadline can erase your money.

Every option loses value as time passes, a process traders call time decay. 

If XLB stays flat over the next few weeks, the contract can expire worthless. In that case, a buyer loses 100% of the premium paid on the trade, even if the shares themselves barely move.

3 things to weigh before placing this trade

You need direction and timing. The fund has to move your way before the option expires, not just eventually.

Cheap does not mean safe. Low premiums lower the risk, but the entire premium can still go to zero.

Size it small. Treat it as a limited-risk add-on to a core portfolio, not a central holding.

Where materials go from here

A rising sector with cheap options gives investors a way to participate at limited risk.

The catalysts behind it, AI construction and inflation-driven demand for hard assets, are shaping much of the 2026 market.

Whether XLB pushes past its 52-week high depends on copper and chemical demand staying firm and the AI buildout keeping its pace. Neither is guaranteed, and a stall in data center spending would take pressure off the trade.

The takeaway for readers is simple. The sector is worth a second look, as long as you size the position carefully and know your exit before you get in.

Related: Jim Cramer sees trouble brewing for stock market 

With jet fuel prices continuing to sit at highs amid a lack of a ceasefire between the U.S. and Iran, numerous small and mid-size airlines have ended up having to shut down since the start of 2026.

For airlines testing “green” aviation, the lack of funds and investor unwillingness to take a risk can be even more astute. In January 2026, a startup once envisioned as the world’s first zero-emission regional airline entered voluntary liquidation. The plan, which British green investor Dale Vince launched with an early investment of £1 million of his own funds, was to convert the kerosene engines of old Twin Otter and ATR 72 planes into hydrogen-electric ones.

Ecojet Airlines unveiled its branding and flying plans but ultimately never got off the ground after lack of additional investment interest and missed deadlines to demonstrate progress to regulators led to an eventual decision to shut down.

Stralis Australia to shut down after hydrogen-electric air taxi model struggles to get off the ground

Maeve Aerospace, a Dutch hydro-electric airplane developer, was declared insolvent by a Dutch court in July 2026 after the initial plan that caught the attention of multiple investors ultimately failed to take off.

A similar situation has now fallen upon Stralis Australia, a local airline startup based in Brisbane that was also testing technology to run hydrogen-electric air taxi flights in the country.

Related: Here is why one airline CEO keeps saying sustainable fuel is a myth

The company founded by Australian airspace engineers Bob Criner and Stuart Johnstone had been testing emission-free, high-temperature proton-exchange membrane (HTPEM) fuel cell technology to run short domestic flights since 2021.

It found its first customers, aviation logistics provider Eviate Aviation in California, and had the interest and backing of major carriers such as Air New Zealand.

Stralis Australia was aiming to start running hydro-electric flights on Beechcraft turboprop planes.Stralis Australia

Why and when is Stralis Australia closing down

But ultimately, the founders said that they “could not close the gap between proof and commercial readiness quickly enough to sustain the business.” The high costs of regulatory approval and lack of hydrogen-electric infrastructure for early adapters to enter the market were named as the major roadblocks.

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As a result, Stralis announced plans to wind down operations by the end of August. Earlier plans had been to launch the first commercial flights from Brisbane on six Beechcraft 1900D-HEs planes that German startup Evia Aero had given to the airline by the first half of 2027.

As no passenger flights have yet been launched, Stralis’ shutdown does not directly affect passenger but takes the local industry one step farther from gaining headwinds on sustainable aviation.

More airlines that shut down in 2026:

Flamingo Air and Aerodiana: The regional airlines with large client bases among tourists to the Bahamas and Peru, respectively, currently have suspended AOCs after fatal accidents in their home countries in July 2026.

Spirit Airlines: The largest airline shutdown of the year occurred when Spirit Airlines canceled all remaining flights on May 2. Although the airline had filed for Chapter 11 protection twice before, the skyrocketing price of jet fuel dealt the final blow.

Magnicharters: The Mexican low-cost airline canceled all flights and filed for bankruptcy in a shutdown that left thousands stranded.

Starflite Aviation: Houston-based Starflite Aviation had its AOC license revoked in March 2026, amid FAA claims that owners falsified pilot training records to bypass safety audits.

AlpAvia: Slovenian charter airline AlpAvia was also shut down in March 2026 due to financial problems.

Related: Another airline files for bankruptcy, will liquidate

Every automaker keeps a private list of products it knows how to build, could build tomorrow, and has quietly decided not to. The engineering exists. The supplier contracts exist. The customers exist.

What does not exist is a spreadsheet where the margin survives contact with a $27,000 window sticker.

That list is invisible to shoppers. You see the cars on the lot, not the ones that died in a planning review when someone ran the numbers on an entry-level crossover.

Right now, that math is running headfirst into the most fuel-conscious car market in years.

The national average for a gallon of regular sat at $4.10 on Friday, Aug. 21, and this August is tracking as the most expensive August ever recorded at the pump, according to AAA. Crude has been stuck in the $80 range.

Buyers reacted the way buyers do. They stopped waiting on cheap electricity and started buying hybrids. Honda (HMC) moved a record 213,513 hybrids in the first six months of the year, with hybrid trims making up about 30% of Honda brand sales, according to American Honda.

This makes the hole in the lineup impossible to miss. The Honda HR-V and the Acura ADX, the two cheapest crossovers the company sells, still cannot be ordered with a hybrid powertrain at any price.

At Monterey Car Week last week, a Honda executive was finally asked about it directly.

Why cheap crossovers keep losing the hybrid argument

The subcompact crossover segment is where affordability gets decided. The HR-V starts at $26,600 and the ADX at $36,450, according to Honda and Kelley Blue Book.

These are the vehicles people buy when the monthly payment is the whole conversation. They are also the vehicles where a hybrid system’s added cost has nowhere to hide.

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Bolt a second motor, an inverter, and a battery pack onto a compact SUV that stickers near $40,000, and the customer absorbs it. Bolt it onto one that stickers at $27,000, and either the price jumps into the next segment or the margin disappears.

Honda’s rivals decided to eat that tradeoff years ago.

Toyota (TM) sells the Corolla Cross with a hybrid powertrain, and Subaru (FUJHY) offers the same on the Crosstrek, according to Autoblog.

Kia (KIMTF) covers the segment with the Niro, and Lexus handles the luxury end with the UX, an option Acura has no answer for, Carscoops reported.

Honda’s smallest hybrid crossover remains the compact CR-V, whose hybrid trims accounted for 124,017 sales in the first half, according to American Honda.

Meanwhile, U.S. auto giants are still sending car buyers mixed messages about their EV plans, which leaves hybrids doing the heavy lifting in the middle of the market.

Honda’s cheapest crossovers still skip hybrids as gas hits $4.jetcityimage / Getty Images

What Honda said about an HR-V hybrid and ADX hybrid

Asked whether hybrid versions of the two crossovers were coming, American Honda product planning chief Gary Robinson said, “I don’t know that there’s any reason why not,” according to Automotive News.

He declined to discuss whether or when it would happen, and named the segment’s price sensitivity as the sticking point, a challenge he described as sharper on the Honda side than the Acura side.

That is not an engineering excuse, and it is worth sitting with. The hardware already exists inside the building. The CR-V, Accord, and Civic all run Honda’s two-motor system, and the ADX shares its architecture with the HR-V, the Civic, and the Integra.

Related: Honda’s million-vehicle recall hits core SUVs and trucks

What struck me reading Honda’s own first-half release is how cleanly the lineup splits.

Every model with a hybrid option is setting records. Accord hybrids ran 43% of the model’s mix and Civic hybrids 30%, according to American Honda. The HR-V, with no hybrid to sell, managed a 7% June gain that the company itself attributed to working through supply constraints.

The ADX is the more interesting case. It reached 16,554 units through June with second-quarter growth of 94%, according to American Honda, and it did that while every direct luxury rival could offer a hybrid and it could not.

What the missing hybrid actually costs Honda shoppers

Here is where it stops being a product-planning story and starts being your money.

The usual defense of a missing hybrid is that the customer can simply buy the next model up. Honda has that model. It is the best-selling SUV in America. The problem is what the ladder costs to climb.

I ran the EPA ratings against AAA’s current national average to see what an HR-V shopper actually gives up. The all-wheel-drive HR-V is rated at 25 mpg city and 30 highway. The CR-V Hybrid is rated at 43 and 36.

At 12,000 miles a year and $4.10 a gallon, my analysis puts the HR-V at roughly $1,821 in annual fuel and the CR-V Hybrid at about $1,245. Call it $576 a year, or roughly $2,900 across five years of ownership.

Now for the catch. The cheapest CR-V Hybrid trim starts at $35,630, according to U.S. News & World Report. That is about $9,030 above the HR-V.

Compare that with the alternative on the same lot next door. A subcompact hybrid priced within a few thousand dollars of an HR-V delivers most of the same fuel savings without the segment jump, which is exactly why Toyota, Subaru, and Kia keep selling them into a price band Honda has decided to sit out.

Divide the savings into the gap, and the fuel economy pays for the upgrade in just under 16 years. No rational budget shopper makes that trade. They buy the gas HR-V and eat the fuel bill, or they walk across the street to a Corolla Cross Hybrid.

That is the real cost of the empty slot, and it is showing up in a market where tariffs have already pushed prices higher at major retailers and household budgets have no slack left.

Where Honda’s hybrid gap likely closes

Honda has already signaled it intends to fix this, just not on the timeline a 2026 shopper can use.

The company plans 15 new hybrid models globally by 2029, with a next-generation system targeting a cost reduction of more than 30% and a fuel economy gain above 10%, according to Autoblog. That cost figure is the whole ballgame. Robinson’s objection is arithmetic, and Honda is engineering the arithmetic away.

The tell came in May, when Honda showed an Acura Hybrid SUV Prototype sized and styled close to the ADX. Because the ADX and HR-V share a platform, a Honda version becomes the obvious follow-on, according to Cars.com.

So the question for anyone shopping this fall is not whether Honda builds a small hybrid crossover. It is whether you can afford to wait two or three model years while paying $4 gas to find out.

Related: Honda CEO withstands investor backlash after $9B EV misstep

TheStreet aims to feature only the best products and services. If you buy something via one of our links, we may earn a commission.Why we love this deal

Whether you are coming home late at night or walking your dogs after dinner, outdoor lights are a must-have to keep you safe in the dark. Outdoor lighting doesn’t have to be complicated, there are plenty of alternative solutions on the market that don’t require running messy wires and dealing with a complex setup.

We found outdoor solar lights on sale at Walmart with savings of 12% and easy installation. A set of two Daybetter Outdoor Solar Lights is discounted right now for just $23. This deal, originally $26, is a great find for illuminating any outdoor space in the dark.

Daybetter Solar Lights Outdoor, $23 (was $26) at Walmart

Courtesy of Walmart

Shop at Walmart

Details to know

Solar-powered lights are a great option if you are looking to be more eco-friendly and keep your electric bill down. These outdoor solar lights are waterproof and have multiple adjustments so you can customize the lighting to work for your space. Each light has a solar panel, 278 LED bulbs, and three light panels that can rotate 90 degrees. The sensor detects movement up to 26 feet away, and there are three sensor settings so you can choose if the light stays on all night or turns on and off with motion. These lights can be installed anywhere the solar panel will receive sunlight during the day using the included mounting plate.

Related: Walmart has a 2-pack of waterproof solar lanterns with multiple lighting modes for just $27 

Why do shoppers love it?

This set of two outdoor solar lights has over 1,300 5-star ratings and a total of 4.3 stars at Walmart. “They give more light than another brand I bought and the sensor works better as well,” one reviewer wrote.

Another shopper called the lights “bright” and added that they were “easy to install.”

With a savings of 12%, this deal on Daybetter Outdoor Solar Lights won’t last long, so be sure to add it to your cart while it’s still available.

TheStreet aims to feature only the best products and services. If you buy something via one of our links, we may earn a commission.

Why we love this deal

Diamonds may be a girl’s best friend, but they’re not always a friend to your wallet. As much as we think everyone deserves something that sparkles the way diamonds do, quality pieces usually become a long-waiting wishlist item that many can’t afford to splurge on. But for those who don’t want to spend years pining after a pair of diamond earrings or lusting after a truly stunning diamond bracelet, there are great sales every once in a while that give you the chance to score your sought-after pieces — and Macy’s has an amazing one going on right now. 

For a limited time, the Macy’s Diamond Baguette Cluster Pendant Necklace is on sale 75% off. That means you can score the dazzling piece, which usually retails for $699, for just $175. 

Macy’s Diamond Baguette Cluster Pendant Necklace, $175 (was $699) at Macy’s

Courtesy of Macy’s

Shop at Macy’s

Why do shoppers love it?

Diamonds always make a statement, but this pendant necklace takes it to a whole new level. The sterling silver chain, which measures approximately 18 inches long, has a dangling pendant that features a cluster of diamonds in the center. The necklace has round and baguette diamonds arranged in a round, circular pattern, with an additional border of diamonds around it, which comes together and meets at the top of the charm. All together, the weight of the diamonds equals ½ carat, and they have a color rating of I-J, indicating they are nearly colorless. Although the diamonds are on the smaller side, clustered together, the necklace still catches the eye and adds a strong sparkle to any outfit it’s paired with. 

The pendant itself has a drop measuring ⅔ of an inch, meaning it hangs quite close to the chain with little room in between. It fastens with a spring ring clasp, which feels lightweight and is ideal for lightweight chains and more delicate jewelry pieces. It also gives it a more classic look. 

Related: Macy’s has an adjustable gemstone bolo necklace for 77% off that comes in 3 colors

Since every piece of jewelry should sparkle and shine, when the necklace does get dirty or loses some of its sheen, take it to a local participating Macy’s for a free in-store jewelry cleaning. 

Details to know

Material: Sterling silver.

Carat: ½. 

Chain Length: Approximately 18 inches.  

Pendant drop: ⅔ inch. 

Closure: Spring ring clasp.  

Shoppers love the elegant design of this necklace and appreciate that it’s dainty yet still catches the eye and is noticeable to others. “This necklace exceeded my expectations,” one shopper said. Another said they get “so many compliments” on it when they wear it. It’s a great piece for a great price, and shoppers are very pleased with how it looks. 

Shop more deals 

Macy’s Gemstone and Diamond Accent Birthstone Drop Earrings, $88 (was $250) at Macy’s

Macy’s Diamond Cross Pendant Necklace, $135 at Macy’s

Quality jewelry doesn’t have to be super expensive, and great sales like this one on the Macy’s Diamond Baguette Cluster Pendant Necklace for 75% off prove that.