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Why Microsoft really wants Activision (and so do I)

Sep 22, 2023

Good morning! 👋

There was a tiny bit of buying this morning ahead of the bell and some green on the screen.

I’m not holding my breath.

But I am doing a little extra buying.

Here’s my playbook.

Russia indefinitely bans diesel fuel exports

According to the Kremlin, the “temporary” restrictions are intended to stabilize domestic market prices, but “that dog don’t hunt,” as my grandfather would say. (Read)

For one thing, the ban doesn’t have an end date.

For another, the war in Ukraine is wreaking havoc on Russia’s domestic resource base.

MyPOV is that Russia is (once again) weaponizing fuel oil ahead of the winter heating season.

Big energy and defense stocks.

Global diesel inventories are already at extremely low levels, as are armaments.

Hope you got ‘em.

Report: AI and the cloud to unlock billions for small and medium businesses

Yep.

We’ve talked about this many times.

AI isn’t just a big-business thing. In fact, some of the biggest gains are going to come from small and medium-sized businesses.

New research from Amazon Web Services and Accenture agrees with my assertion months ago when AI first hit the mainstream. (Read)

This has BIG investment implications.

Why?

Small and medium businesses are the ones that innovate… then get acquired by bigger fish looking for an upgrade.

This isn’t surprising.

Small and medium businesses see the world differently. They’re scrappy fighters because they don’t have the luxury of waiting for a paycheck like the big players.

Mine included.

We start our day at 0430 and are constantly pushing the envelope when it comes to business practices, analysis, and even web design. So much so that what we do is regularly “borrowed” by others, to put it gently.

I could spend time grousing about that, but you know as well as I do what they say about imitation… sigh.

Meanwhile, I’d rather invest in the digital drivers making this possible.

Like, oh, I dunno… Nvidia.

Bought a few shares yesterday and hope I’m smart enough to buy more. Selling Cash-Secured Puts at these levels while volatility has exploded is an appealing idea, too.

Hmmm.

Speaking of digital…

Apple’s iPhone 15 goes on sale in test of holiday resurgence

The mainstream media did its best to stomp all over Apple recently, citing iPhone demand fears, Chinese bans, and the like.

I told you not to pay attention.

Seems like I may have been on to something.

Apple’s new iPhones, watches, and more go on sale in 40 countries today—with the iPhone 15Pro and Pro Max at the top of the proverbial food chain.

Demand is not only strong, but reports suggest that pre-orders have sold out and there are already long lines, even in—ta da—China. (Read)

You know what to do.

Activision nears Microsoft offer price as UK approval in sight

This is a great deal, and one that I think puts a few bucks on the top line for both Activision and, of course, Microsoft. (Read)

People grousing about the deal and platform dominance are missing the picture.

Microsoft wants subscription dominance, meaning the ability to cover all its offerings with a single signup. Effectively, they’re building out the digital gaming equivalent of cable TV, meaning you’ve got to pay for this to get that.

At the same time, I find the deal very compelling because Microsoft will absorb some super-creative engineering knowledge that, as is the case with other acquisitions, will be absorbed and reverse propagated into the company’s other offerings.

If you’re not smacking your lips…

Lockheed (LMT) wins contract to support CH-53K helicopters

According to Mordor (an intelligence firm), “the military rotorcraft market is likely to witness a CAGR of more than 4% during the 2023–2028 period.” (Read)

I think that’s low, but we’ll roll with it.

One of my favorite choices, for example, LMT, snagged a $21.7 million contract in August to support the production of CH-53K helicopters. The contract is worth $21.7 million and is expected to be completed by March 2029. According to Sikorsky, deliveries start in 2026.

**Correction: Turns out we could use some more coffee! There are actually two contracts: a $21.8 million contract modification for CH-53K training system efforts including a containerized flight training device and a $2.7B contract last August to $2.7 billion contract to build and deliver 35 additional CH-53K® helicopters—the largest procurement to date for this multi-mission aircraft."

There’s an even bigger angle, though.

This story isn’t just about the CH-53K; the global defense market will hit $687.84B by 2026, according to Global Newswire.

I think that’s also low, which means that half a dozen defense stocks scraping along at the bottom of their range right now look super appealing. Upgrade to Paid