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Jun 18, 2024

Good morning! 👋

The S&P 500 logged yet another record close yesterday but things have softened up this morning on the heels of weaker than expected retail sales data.

Par for the course.

Until very recently that bit of bad news would have been considered good news for markets because traders believed that the Fed would be more inclined to cut or at least stand pat on rates.

Now, they’re not so sure.

JPow has made it very clear recently that he’s definitely maybe possibly going to be “one and done” this year. 🤦‍♂️

Honestly, it’s a sideshow.

The smartest move you can make right now is to remain laser-focused on companies putting up the numbers including many of the names we talk about frequently.

I’ll be with you every step of the way.

Here’s my playbook.

1 – Apple nixes buy-now-pay-later but...

Apple has a long history of making exploratory moves, then quickly sidelining those that don’t pay off or match its vision. (Read)

BNPL (Buy Now Pay Later) qualifies.

Many investors are going to assume that the company’s outta the game but that’s a bet I wouldn't take.

If I know Apple like I think I do, Team Cook is already working on a new program and new financial partners that draw consumers farther into the Apple ecosystem than using a 3rd party vendor would.

Apple Pay enabled banks are the key.

Plural... banks.

You know what to do.

2 – Size matters more than ever

We talk a lot about the transition from making things to technology as part of the investing process and key to your future financial well-being.

Admittedly, it’s hard to visualize for many.

That’s why I’m a big fan of sharing powerful images that make the point whenever I come across ‘em.

Like this one from Goldman Sachs that does the job nicely.

I expect Nvidia, Apple and Microsoft to dominate the investing landscape through much of the next decade. Perhaps longer.

Investing Implication: Millions of folks are making a critical mistake by thinking about AI as just another “tech” when, in fact, it is very likely the greatest technology shift in recorded human history.

Tip o’the hat btw to Maverick Equity Research who brought it to my attention.

3 – Buy, sell or hold NextEra?

NextEra announced the sale of $2B worth of equity units for $50 a pop. Buyers will be required to buy shares by June 2027. (Read)

Why?

Issuing equity units gives NextEra more financial flexibility, reduces dilution, offers an attractive yield and tax benefits.

I’m leery.

The company has been a media darling lately for two reasons: 1) because it’s one of the largest renewable energy providers and 2) because retail investors believe it will help power energy hungry AI data centers.

Here’s the deal.

Equity units are not stock, but effectively a contract – in this case – to buy NextEra Energy common stock in the future and a 5% undivided beneficial ownership interest in a NextEra Energy Capital Holdings, Inc. Debenture due June 1, 2029, issued in the principal amount of $1,000.

Got all that?

Yeesh, what a mouthful!

Here’s the skinny.

A debenture is an unsecured debt instrument typically issued by companies that want to raise capital without providing collateral. Unlike secured debt that is backed by property, equipment and other assets, debentures are backed by nothing more than a fancy IOU. Guaranteed in this case by NextEra Energy, Inc.

Debenture owners are considered a lower priority creditor which means that anybody owning ‘em has a lower claim compared to other creditors.

Translation... you’ll be last in line if the stuff hits the fan.

Keith’s Investing Tip: I am a big proponent of keeping things simple. Run the other direction if you can’t explain what you’re buying in terms a 5-year old would understand. If you’re going to buy energy because you think it’s going to play into AI, buy energy. If you’re going to buy an income stream because you fancy dividends, buy a stock that kicks off both.

Speaking of which...

4 – An excellent dividend choice for income starved investors

Philip Morris International split from Altria in 2008 and has charged forward for years in international markets.

The dividend is currently 5.12%, which makes it a good potential choice for income starved investors who understand that the company has boosted payments every year since setting out on its own.

Should you buy Philip Morris now?

Before you do, consider this.

The OBA Family owns a stronger player in the Fund Folio that’s growing faster and has a True Shareholder Yield that’s 4.34X higher. Plus, it’s a so-called Dividend King and shares are approximately 30% less volatile than the S&P 500. The stock has returned nearly double the SPY, a popular ETF choice, over the past 20 years.

Dividend income is only part of the picture. Understanding True Shareholder Yield can really put you and your money on the proverbial map. Which is why I prioritize it as part of the investing process.

I’ll be here if you need me or would like to learn more. (Upgrade)

5 – The plane Boeing should have built

I’ve been watching Boom for quite some time.

The company, in case you’re not familiar with it, is leading a supersonic passenger aircraft revival and has already secured 130 Overture orders and pre-orders with global airlines.

This is the plane Boeing should have built.

Continue to short or avoid Boeing.

Putskies could also work.

I submit that we may be watching the end of Boeing as we know it, a comment I first made in 2019 when the stock was trading in the high $300s.

$150 – ouch!

Keith’s Investing Implication: Once great companies fail a lot more frequently than everybody realizes. The dividing line – and what you want to look for – is how customers regard their products and, in this case, the reputation they enjoy. Personally, I don’t want to set foot on a Boeing aircraft if I can avoid it and I know a lot of folks share that thinking. Not for nothing, but the view from 6 feet (on one of our motorcycles) is a lot more enjoyable. 😊