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Oct 11, 2023

Good morning! 👋

All green after a higher-than-expected inflation report??!!

Hmmm.

It won’t be long before the Fed’s boffins start jawboning about how they expect higher rates ahead, the number of hikes, and more. The news will pick up on this, of course. Then, traders being traders, Wall Street’s marauders will probably use this as yet another excuse to separate the weak hands from their money.

I don’t know if you’ve ever played poker, but this is a lot like that.

What you want to do now is “read the table”—meaning take a look around you and use what you see to evaluate the strength of your hand (investments) as well as that of your opponents (other investors).
Then figure out the combinations needed to determine YOUR best course of action.

The big money is moving higher because they are trying to a) create a short burn that pushes prices higher and b) create FOMO to bring the momentum buyers off the bench.

It’s a repeat of what I wrote to you about yesterday… Treasury yields down, markets up.

Do NOT play that game if you know what’s good for you… there is no rush whatsoever despite the urgency they’re trying to create.

Buying GREAT companies never goes out of style, so stick to the game plan.

Here’s my playbook.

Exxon/Pioneer: Take the money and run

Exxon has agreed to buy Pioneer Natural Resources in an all-stock deal worth $59.5B or $253 a share that will see every Pioneer stockholder receive 2.3234 shares of Exxon for every share of Pioneer they own. (Read)

The story is pretty simple.

Both companies are stronger together than they are apart.

Pioneer is up 10% since the Wall Street Journal announced that both companies were approaching a deal. The assumption is that’ll continue.

I wouldn’t count my chickens before they hatch, especially if you’ve owned Pioneer for any length of time and have a profit on the table.

Pioneer has only tacked on 3.9% YTD while Exxon has returned 2.62% over the same time frame. The S&P 500 has tacked on 13%.

The old expression, “Take the money and run,” comes to mind.

There are better oil companies out there, not to mention gobs of other great choices in other industries too—especially if you’re a dividend investor craving income. Upgrade to paid

Birkie IPO

I love Birkenstocks and, as a matter of fact, am wearing a pair of ‘em now.

An IPO sounds great, but the usual caveats apply. (Read)

The company is pricing at the very low end of the range, meaning that it is coming out of the proverbial gate weaker than expected. So-called “hot” IPOs inevitably come out of the gate to begin trading at the upper end of the range before pushing higher.

Every share you buy now (at the IPO) could make you a pile of money if it charges higher. But there is almost no doubt that it will make insiders and Wall Street investment bankers wealthy.

Your entry is their exit.

I suggest giving the company a quarter or two, then—if the numbers play out—consider buying.

You know it’s bad when…

This is super interesting.

Wall Street is meeting in Washington to try to figure out how to deal with the SEC. (Read)

Only there’s no figuring whatsoever.

Wall Street is gathering because they want to figure out how to best protect themselves and manage the status quo, which, predictably, is at the expense of individual investors. Everything from AI to market structure is on the agenda.

Let’s hope Gensler (who is not expected to attend) stands his ground.

Israeli cybersecurity stock up triple digits

HUB Cyber Security (HUBC) has popped by triple digits, over 252% in recent days if I’ve done my math correctly at this hour.

It’s a 43-cent stock.

It’s also at risk of de-listing from the Nasdaq.

Still, I think the company might be worth a speculative flyer.

The company has an interesting approach to securing data that allows protection from so-called “edge” locations to core operations, even clouds, and even if passwords or the underlying infrastructure has been compromised.

I’m tempted, but only after prices relax.

A perfect choice for cautious investors

That’s how I would describe a company like Costco (COST).

Inflation continues to rage, and people need to make every dollar go farther.

It’s “expensive,” critics challenge.

Compared to what?

The company has had 18 consecutive years of annual dividend increases that reflect an average annualized growth of 12.62% over the past decade. The payout ratio is a low 19.88%, and it’s due for a special dividend sooner rather than later.

Besides, I like their hot dogs, even though I am under strict orders from my bride to keep both hands on the cart at all times while shopping. 😊