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☕️ Is the selling over & a stock I don’t own… yet but might again

Mar 17, 2025

Howdy! 👋

Lá Fhéile Pádraig sona daoibh! - Happy St. Patrick’s Day to all who celebrate!

The markets are alternatively just in the green or just in the red as I type in the early going which is par for the course. Traders and a good many investors are trying to make heads or tails of tariffs.

As I noted in last night’s short, which direction prices go from here depends on whether they conclude that tariffs will work – in which case the direction is higher – or they won’t - in which case there will be more selling ahead. (Watch)

Either way, I think there’s a good case to be made that the markets are trying to put in a bottom.

Excellent!

My favorite time to buy world class stocks is when everybody else is selling ‘em.

Here’s my playbook.

1 – A stock I don’t own… yet but might again

The question on nearly everyone’s mind as we come into today’s session is whether or not the selling is over, but that’s NOT the thing to be thinking about if you’re in to win like I am.

Instead, you want to be thinking about which companies will win, why and when.

Fear never lasts long.

I spoke about Caterpillar this morning with the fabulous Ashley Webster on Fox Business.

The story is pretty simple.

Trump Administration Interior Secretary Doug Burgum caught my attention last week when he said companies developing resources on federal lands are the customers contributing to the national balance sheet.

I could make the argument that CAT accelerates if the Administration is serious about resources... more equipment, a massive $30B backlog, AI, better manufacturing, lower financing rates potentially. The fact that it’s “warned” about weaker sales sets up the stock nicely to my way of thinking.

$425ish in the next 12-24 months.

Hmmm. 🤔

2 – Nvidia’s confab starts today

I can’t wait to watch this year’s GTC conference.

Here’s what to expect via Yahoo! Finance.

Blackwell Ultra GB300 Chips: Nvidia is expected to showcase its Blackwell Ultra GB300 series, which promises over 50% more memory capacity and higher performance than previous models.
Rubin GPU Architecture: Details about the next-generation Rubin GPU architecture, slated for release in 2026, may be revealed, highlighting significant performance improvements over current offerings.
Co-Packaged Optics (CPO): Discussions around CPO technology, aimed at reducing power consumption and enhancing AI server connectivity, are expected, with implications for data center networking infrastructure.
Quantum Computing Initiatives: The inaugural "Quantum Day" on March 20 will feature sessions on the integration of quantum computing with AI, mapping the path toward practical quantum applications.

CEO Jensen Huang speaks tomorrow at 10am PST so undoubtedly the real fireworks could be a 2-day event.

Trading Idea: Wall Street missed a good portion of Nvidia’s last big run, a mistake they’re not keen to repeat. My guess is they’ll trot out the doom squad to nitpick any details that might cause “slowing demand” or something less than “expectations” while behind the scenes they’ll be buying.

Tactics that may work will in a situation like this one include LowBall Orders one or two standard deviations under the ATR and Selling Cash Secured Puts after any drop to harness a rise in premiums as volatility increases.

Statistics not your cuppa?

OBAers can use the newly introduced, “Two” to get the job done.

Any weakness is a buying opportunity, IMHO.

3 – European defense stocks – show me

Airbus, Dassault Systèmes, and more than 90 European firms and lobby groups have called on the European Commission to increase investment in European technology.

Their goal?

Reduce reliance on non-European tech—a noble ambition, at least on paper. (Read)

But will it be profitable for investors? That’s a whole different ballgame.

The EU lags light-years behind the U.S. and China in digital innovation and, sadly, the gap isn’t just about consumer tech or cloud computing—it extends to defense technology, too.

While the U.S. has Lockheed Martin, Northrop Grumman, and Raytheon, and China continues to ramp up its military-industrial complex, Europe’s defense sector is bogged down by bureaucratic red tape, fragmented policies, and underwhelming budgets.

Even Germany—arguably the continent’s economic powerhouse—has struggled to translate its ambitious defense pledges into actual, cutting-edge weaponry. And let’s not forget that Europe still relies heavily on American and Israeli defense technology for key military capabilities.

In theory, increased investment should be good news for European defense stocks, but I see 3 significant hurdles:

Too Many Cooks in the Kitchen – Unlike the U.S., where the Pentagon drives military innovation with clear directives, Europe’s defense procurement is a patchwork of national interests, competing priorities, and political infighting.
Spending vs. Strategy – The EU talks a big game about ramping up defense spending post-Ukraine invasion, but actual spending has been slow, inconsistent, and plagued by inefficiencies. Meanwhile, U.S. defense contractors are raking in billions and so are the investors who own ‘em.
Tech Infrastructure Weakness – If Europe can’t even agree on how to build a viable cloud provider to compete with AWS, Azure, and Google Cloud, how exactly does it plan to field cutting-edge AI-driven defense systems?

To be fair, I think there’s a strong case for picking individual winners—Airbus and Dassault, for example, but betting on European defense as a whole?

That’s still a show-me story.

Until Europe gets serious about efficiency, speed, and long-term defense strategy without the regulatory burden preventing tech innovation, the U.S. and China will continue to dominate the field.

I’ll stick with US defense tech for now, thank you.

Two of my faves have been battered around the past few years but continue to hold their own, particularly as all things AI accelerate. Both also have consistent and very appealing dividends, too.

If you don’t have defense tech in your portfolio, I’d urge you to rethink that premise – and I’ll be here if you need me.

4 – A big misstep for Buffett or something else?

Warren Buffett just cranked up his stake in Japan’s trading houses to nearly 10%. (Read)

Millions will see that and blindly follow.

I can’t help but wonder if he’s making an epic mistake—potentially a very expensive one.

Financial heresy to question the Oracle - I get it.

Here’s the problem:

Japan’s corporate governance is still a train wreck. Keiretsu-style conglomerates hoard cash, cross-own shares to limit competition, and move at a glacial pace. Old-school execs barely grasp modern digital tech, let alone how to leverage it.
The demographic bomb already went off. Shrinking workforce, slowing consumption, and ballooning social security costs? Not exactly a growth cocktail.
Currency roulette. A weaker yen props up Japanese exporters—until it doesn’t. One bad swing and U.S. investors could get crushed.
Buffett’s treating Japan like it’s America. Mitsubishi, Mitsui, Sumitomo—he loves them because they remind him of classic U.S. conglomerates. But Japan isn’t the U.S., and this bet could turn into a slow, painful lesson in cultural miscalculation.

Hard pass, or in Japanese 遠慮しとく (Enryo shitoku)

My guess?

Buffett’s playing some high-level currency or debt arbitrage—maybe even using this to “wash” parts of his portfolio.

He’s always been a master at interest rate differentials so this could be a case where he’s borrowing in Yen at dirt cheap rates to finance his stake, effectively creating a carry trade that earns him more in dividends than he pays in interest.

The other possibility – seems to me – that he’s layering in Japanese trading companies to add as a proxy for industrials, commodities and global trade – without having to dump more US holdings. This, if true, would simultaneously “de-risk” his holdings while boosting cash flow without the need for a complete reset.

No doubt Unka Warren has his reasons.

But this move?

Zero logic for most investors - especially when better, faster, higher-profit plays are sitting right in front of us.

5 - The Real Winner Isn’t Klarna. It’s Walmart

Swedish fintech Klarna just scored a big win, replacing Affirm as Walmart’s buy now, pay later (BNPL) partner. (Read)

Meanwhile, Klarna is gearing up for a flashy IPO, set to trade under ticker KLAR on the NYSE. (Read)

Investors will fall all over themselves chasing this one. BNPL? Hot sector. IPO? Even hotter.

The real money isn’t in Klarna, though.

It’s in Walmart.

Think about it.

Walmart doesn’t care which BNPL provider it uses. It owns the customers.

Klarna? Just another interchangeable piece in its financial engine.

So while millions rush into Klarna’s IPO—paying premium prices for a business that still has to prove itself in public markets—the better bet is the company actually making the rules.

Let the hype crowd chase Klarna.