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☕ What if it becomes the Magnificent 2?

Feb 26, 2024

Good morning! 👋

Stocks are heading into the final week of February on a high note after the major indices achieved new milestones on Friday and winning weeks thanks in good measure to Nvidia’s blockbuster results.

The Dow closed at an all-time high of 39,131.53 while the S&P 500 took out 5,100 for the first time and the Nazzy touched a 52-week high. They're up again today as I type.

Here’s my playbook.

1 – Nvidia’s a taste of things to come

I’ve only seen earnings reports like the one we saw last week from Nvidia a handful of times in my career. (Read)

A true Da Vinci moment.

Can that continue?

Yes.

Perhaps not immediately and almost certainly not in a straight line.

But most definitely, yes.

We stand on the cusp of a sixth investing wave... one so powerful that it will change the course of humanity.

Every business on the planet will adapt, adopt, or die.

Keith’s Investing Tip: Unbelievably, the naysayers still won’t let go. As always, that’s an opportunity. Armchair quarterbacks and wannabes worry about being right. Professionals and successful investors worry about being profitable... even if they’re wrong. Big difference!

2 – Inflation will go down, but prices won’t

Expectations are that inflation will moderate when we get January durable orders data on Tuesday and January wholesale inventories on Wednesday.

It might.

But prices won’t.

Retailers can’t drop prices meaningfully at this point because they’ve already got higher wages, fuel costs, benefits and labor baked into the proverbial cake.

Wonder what JPow will have to say about that? 🤦‍♂️

3 – What happens if it becomes the Magnificent 2?

First there were the FANG stocks. Then, the so-called Magnificent 7. Now there’s talk about the Mag 4.

“What happens if that were to become the Magnificent 2 and would that bother you?” asked the incomparable Stuart Varney earlier this morning. (Watch)

The answer might surprise you.

Keith’s Investing Tip: Conventional wisdom holds that the markets must be broadly based to work and that’s true under normal circumstances. However, throw in a major change like the invention of electricity, gasoline engines or even oceanic navigation for the first time... and they narrow up quickly. Most investors could double their shares on the leaderboard and still not have enough.

4 - Why there could be a pullback this week and how to play it

Tactically speaking, there seem to be many professionals who missed the run with NVDA, particularly. If that’s true – and I think it is – there is an incentive to push prices lower this week as a way of scaring the weak money out of positions while creating their own buying opportunity.

Don’t fall for it.

If you’re a longer-term investor, take a little cream off the top – meaning harvest gains - but otherwise stick to the plan and continue to invest.
If you’re a trader, consider buying ATM S&P 500 puts or picking up shares in specialized inverse funds like those I recommend for just such occasions.

Meanwhile, OBAers – Please check your email for this week’s update (which came out yesterday) because it contains immediately actionable information.

If you’ve got this covered, fabulous. If not, you may enjoy One Bar Ahead®

5 – Why you should care about BYD’s Ferrari challenger

Nissan’s got Infinity, Honda’s got Acura, and Toyota’s got Lexus.

Chinese automaker BYD has Yangwang and, now, the U9 which is being billed as a potential Ferrari challenger. (Read)

I agree.

The numbers are certainly impressive.

According to BYD the U9 will be capable of 192.12 mph and can go from 0-60 in 2.36 seconds. Ferrari’s hybrid SF90 Stradale has a top speed of 211 and can hit 60 in 2.5 seconds but 124 mph in just 6.7 seconds.

BYD intends to open factories in Europe and sell internationally. Oh, and the U9 apparently starts at $230K vs the Stradale which starts at $525K if memory serves.

Why you should care.

I’ve long said that China will move up-scale when it has stol__ - err, developed - the appropriate technology and production capacity in any industry it wants to tackle. High tech, medicine, stealth tech, AI, big data, aircraft... it’s inevitable.

Any investor who does not think this coming is making a terrible mistake.

Trade Idea: This may be super early to the party, but Long BYDDY and Short RACE.