☕️ Nvidia 1, Naysayers 0 – Eyes on $5T

Howdy! 👋 

The markets are split as I type. 

The Nasdaq, of course, touched a new record high yesterday but this morning the story is right back to trade. 

Steady as she goes. 

For now. 

Once again, I anticipate this season’s earnings to be stronger than many expect which will a) introduce some volatility because so many big money traders are still offsides and b) prove to be yet another tremendous opportunity for smart investors. (Watch) 

Particularly tech. 

Not all “tech” is the same so it’s important that you choose wisely, but that’s a story for another time. 

Meanwhile, keep this in mind. 

History shows very clearly that being invested in markets that may not be perfect beats waiting to invest in perfect markets. 

Here’s my playbook. 

1 – Nvidia 1, Naysayers 0  

Again. 

Yesterday, Nvidia briefly touched a $4 trillion market cap, making it the first company in history to cross that milestone. 

Think about that for a second. 

A decade ago, Nvidia was a niche GPU maker riding gaming cycles and had a market cap of around $11B and a split-adjusted share price of about $20. 

Today it’s the backbone of modern markets, not to mention one of the greatest investing opportunities in recorded human history. Certainly, modern markets. 

People have argued with me the entire time – for years actually - about how “expensive” it is or “overvalued” it’s become… both of which are new iterations of the same, tired old argument. 

One particularly nasty individual just wouldn’t let go, calling me every name in the books while insisting Intel was the better value. Perhaps not surprisingly, he’s vanished into the Internet and, like many others, I haven’t heard a peep from him for the past 24 months. 

Then there was a particularly precocious young analyst who billed himself as a “valuation” guy and, I think, still does. He produced loads of spreadsheets to “prove” his point, usually while being very rude and in my face. Suddenly, he’s concluded “valuations” don’t matter and embraced my talking points as if they’re his own. P/E, P/S and other metrics no longer matter he’s busy telling folks when it comes to companies like Nvidia and Palantir, for example. 

Nvidia has returned 33,894.98% over the past decade while Intel has turned in 4.13% over the same time frame. If what both of these individuals has insisted to be true was actually true, the numbers would have been reversed. 

To each his own. 

Still, the valuation crowd has a hard time letting go. 

I get it. 

The concept of valuations has been sacred ground for 100+ years of investing history and, if you’re talking tractor parts and other hard goods, still is.  

But digital spend?  

Not for at least a decade. 

That’s even more reason to focus on what happens next, particularly with a company like Nvidia. 

I’m wondering if it wins the race to $5T. 

MyPOV: The markets are constantly evolving which means that your thinking, your approach and your tactics must, too. I’ll be here if you’d like some help.  

**OBAers: If you’re wondering about what I called “Value Investing’s Blindspot” – be sure to check out the December ’24 issue where I wrote about it in considerable detail. 

2 – Pay attention when DC and Wall Street both throw money at the same company 

The Defense Department has announced that it will be buying $400m worth of preferred stock in MP Materials which – ta da – owns the only operational rare earth mine in the US. (Read) 

I’m not crazy about the government getting into business but I’m not entirely surprised either. 

Rare earths are a critical part of military weapons systems and other manufacturing including electric vehicles, wind turbines, smartphones, and MRI machines. 

Why now? 

The US is almost entirely dependent on rare earth imports, some 70% of which come from China according to various sources. 

The Pentagon is stepping in with a 10-year guarantee that every single magnet made at MP Materials’ new 10X facility will be bought — either by defense or commercial customers.  

Uncle Sam is also putting a floor under MP’s profits — guaranteeing $110/kg for NdPr (the rare earth compound used in permanent magnets).  

In other words, if market prices dip, the U.S. cuts the check. 

Meanwhile, JPMorgan and Goldman Sachs are apparently backing the deal with $1B in financing. Plus, MP expects a $150M loan from the Pentagon to beef up its rare earth separation ops at Mountain Pass. 

Should you buy it? 

Several ideas come to mind. 

• Loads of people are going to jump in but you don’t want to be the last person at the party before they turn out the lights if you can help it. I think the better move is to wait for a pullback after the go-fast crowd settles down.  

• And keep your eyes peeled for any other micro-caps that happen to stumble into the rare earths/strategic metals space. 

• Putskies could be interesting now that all the focus is on the “upside.” 

Structured demand = a runway. 

3 – Talk about vindication! 

Unka Musk just confirmed that Grok will be integrated into Tesla vehicles next week. (Read) 

This isn’t just a new feature. It’s a game changer of the first order and something I’ve been talking about for several years. 

Musk is thinking so far beyond “cars” that it’s not even funny. 

With Grok on board, drivers will have real-time conversational AI woven into their daily lives, not just their drive. It’s a rolling AI platform, a robot - not a car or even a truck. 

Meanwhile, Alexa – aka “she who shall remain nameless” in our home – is still dumber than a bag of rocks, unless you like being told “this is what I found on the web” 37.28 times a day. Siri is better but Apple’s addressing that problem differently via their own form of LLMs and vertical platforming. 

Ford, on the other hand is busy touting new touch screens and hands-free highway driving, connected services and complimentary mobile service. Uh, yeah. 🤦‍ 

You know what to do. 

Keith’s Investing Tip: The best opportunities almost always look ridiculous before they look genius. As do the individuals leading the charge. Be sure you’re on board early – pun absolutely intended – or be comfortable with the fact that you’re not. 

4 – Delta pops… but I’m not boarding 

Delta shares jumped ~10% after management slapped a fresh coat of optimism on its 2025 profit forecast. CEO Ed Bastian says bookings have “stabilized” – which is a bit like saying the plane’s not crashing, it’s just gliding lower. (Read) 

Adjusted EPS is now pegged at $5.25–$6.25, down from the $7.35+ they were hoping for earlier. Meanwhile, they’re trimming flights during off-peak times and leaning hard on premium seats and AmEx points to pad revenue. 

Color me unimpressed. 

Yes, Q3 guidance beat the Street ($1.25–$1.75 vs $1.31 expected), but revenue per seat mile fell 4% and fares are sliding.  

Airlines are still a no-fly zone for me for several reasons not the least of which is high debt, prone to economic shock, fuel roulette and unruly, legacy labor contracts. 

Keith’s Investing Tip: Companies with serious pricing power are almost always better investments than those where a passenger's snack choice can blow the margin. 

Trade Idea: If you're tempted by the bounce, consider a short-dated put spread or skip the sector entirely. Plenty of better landings elsewhere – pun absolutely intended! 🤷🏻‍ 

There are better places to put your money to work, imho. 

One of my most recent choices is well into the double digits since I mentioned it less than a week ago, for example. Now obviously, there are no guarantees that this will continue, but it’s a great start!  

To be fair, it’s a speculative choice rather than a mainstream, core holding, but that’s the tradeoff I’m encouraging you to think about. 

Smart investors constantly weigh a choice like Delta against other opportunities and, if needed, adjust. And I encourage you do the same thing. 

5 – A $3.1B breakfast hangover in the making 

Ferrero, maker of Nutella and Ferrero Rocher, is buying WK Kellogg for $3.1 billion, sending Kellogg shares up 30%. (Read) 

WK Kellogg, home to super-unhealthy childhood cereal staples like Froot Loops and Frosted Flakes, was spun off in 2023. I ate a ton of both growing up, so maybe that 'splains a lot about me today but I digress. 

The company had a market cap of roughly $1.5 billion before the deal, meaning Ferrero is paying a hefty premium. 

This acquisition deepens Ferrero’s US ambitions as it pushes beyond candy into broader packaged foods. The company recently launched peanut Nutella and Dr Pepper Tic Tacs as part of its American expansion. 

I’m scratching my head. 

We know junk food is a problem—as is all the schtuff that’s worked its way into our food supply over the years in the name of food science and profit. Cereal, in particular, continues to struggle as consumers shift toward healthier breakfasts and cheaper private-label alternatives. 

It’d be one thing if this deal looked strategic or like a bailout, but that doesn't appear to be the case. Ferrero is simply betting on a revival. 

To be fair, I could be missing something. But this reminds me of those classic Japanese deals back in the day (late 80s and early 90s) —when the concept of return on capital was apparently not at the dealmaking table. 

I cannot imagine how this ends well. 

If I owned Kellogg - and I don't - I'd think seriously about getting while the getting is good. 

Bottom Line  

Many people think you’ve got to take huge risks to make the big bucks, but I don’t think that’s quite right. 

What you’ve got to do is take smart risks. 

Let me explain. 

Most people ask themselves “what am I going to lose if I do XYZ” but the most successful investors and traders flip that around. They ask what will I lose if I don’t. 

My point is that you’ve got to be in to win, or you won’t… win! 

As always, let’s MAKE it a great day. 

You got this – I promise! 

Keith 😀