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☕ A high tech stock to buy before it splits

May 21, 2024

Good morning! 👋

The markets are mixed-to-muddling with short-term traders trying their very best to goad long-term investors into making stupid decisions ahead of Nvidia's earnings and upcoming FOMC remarks.

Do NOT fall for it.

The path forward at times like this is to take a step backwards first. Then, a deep breath that keeps you above the fray.

It’s one thing if you’re a trader and live for this kind of stuff (in which case you should be grinning ear to ear and having a field day) but completely another if you’re an investor who simply wants to get through it all profitably (and without losing a lot of sleep).

Here’s my playbook.

1 – Fed's Waller throws shade... on everything

Federal Reserve Governor Christopher Waller just threw a whole bunch of shade on a market that was trying to find the sun saying that he will need some convincing before he backs rates cuts. (Read)

Of course he will.

Waller is notoriously hawkish – meaning he prefers tighter monetary policies and higher rates than more accommodative lower rates. Asking him what he thinks about rates is like asking a guy with scissors if you need a haircut.

Futures took a header when his prepared remarks hit the tape but appear to be fighting their way back topside. You may even see some green by the time you read this.

Sigh.

MyPOV: The Fed is a failed institution and I wish to heck they would take away the mic from everybody but the Chair who, in this case, is Powell. Not that he’s going to say anything particularly inspiring, but doing so would go a long way towards smoothing out the daily volatility that causes fear and uncertainty for so many.

Keith’s Investing Tip: Being successful over long periods of time means learning how to separate remarks like those Waller has made from the business case for owning great stocks we talk about frequently which – when you think about it – is getting stronger.

2 - Dimon: our stock is too expensive

JPM’s CEO Jamie Dimon said he’s not in a hurry to boost the company’s buyback program because the bank’s share price is too high.

I get it – and I agree.

Dimon wants to make sure he’s getting a good return on his money, and he knows that buying shares over 2X book value generally isn’t a good idea. If JPM were a tech company, that’d be different.

I’ll have more in the upcoming OBA Issue including specific thinking on what this means for our money and what to do next. Upgrade to Paid

3 - Lowes: still sinks, not bathrooms

Lowes reported a double beat, but I’m still not interested as long as DIYers continue to buy sinks rather than redoing the entire bathroom. (Read)

4 - Fake meat was just the beginning

OBAers know all about an investing theme I call “synthetic biology” because we’ve been talking about it for a while now.

Nestle’s newest frozen food brand, Vital Pursuit, is a step in that direction. (Read)

The weight management-oriented line up apparently includes pizza, grains, protein-based sandwiches and more that will be on shelves by the end of the year.

Nestle’s CEO Steve Presley says – and I am paraphrasing here - that the “diet has been dying over the past 25 years” but I think that’s only partially true.

My two cents is that society has made a Faustian bet on food science, convenience, and the easy way out that is quite literally killing us. The concept of exercise has fallen by the wayside.

Glop, what I call nutritionally-dense, biologically-sound edible material is a logical outcome as is the development of weight loss drugs and new technology to make the most of both.

There are big profits ahead.

Meanwhile, there’s Nestle. 😊

5 – A high tech stock to buy before it splits

AI will be regarded as one of biggest single, most sustainable, and profitable investing themes in human history when the dust settles.

Paying attention is more important than ever, especially when you can identify companies critical to making that happen that are poised for a big move if there’s a catalyst.

Like ASML.

We’ve talked about this company before.

ASML has a near-monopoly on what’s called EUV technology which stands for extreme ultraviolet lithography. (Read)

Never heard of it?

You’re not alone even though chances are good you’re reading this on a device their technology helped create.

EUV makes it possible for chip makers to create extremely tiny, super fine transistors using light wavelengths that do not exist naturally. Most of the biggies are clients, in fact.

Shares have returned 34.56% over the past 12 months but may be stalling around $930 and change if my take on chart action is correct.

My guess is they’ll split the moment Nvidia does in “me, too” move that could be great for anyone who owns a few shares ahead of time.

Keith’s Investing Tip: Stock splits can be an important sign that management has confidence in a company’s future growth. Plus, splits lower prices per share which typically results in higher liquidity and demand, both of which are music to my ears. Most of all though, stock splits attract a broader range of investors including smaller shareholders who would otherwise be priced out and who's onboarding typically reduces volatility while improving stock prices. Hooyah!