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☕ You can’t keep a good stock down for long

Apr 03, 2024

Good morning! 👋

A coupla down days bothering ya?

Forgettaboutit....

The markets have a rock-solid upside bias over time which means the better course of action is to play offense even if you must think defensively to do it at moments in time.

There is always a path to profits!

Here’s my paybook.

1 - Jobs gains largest in 8 months

JPow and his band of merry marauders are undoubtedly huddled in a paneled boardroom somewhere this morning after an ADP report showed 184,000 private jobs added... considerably better than expected and the largest gain in 8 months. (Read)

Treasury yields – which as we have discussed many times reflect risk - rose almost instantaneously as a result.

Why?

“Better than expected” means the economy is running “hotter” than the Fed wants in pursuit of its 2% inflation target (which, btw, is a completely fabricated number pulled out of thin air in 1988 when New Zealand’s finance minister at the time, Roger Douglas, made an off the cuff remark about what he thought would be an ideal level in response to a TV reporter’s question).

And just like that – bada boom - rates rise because traders think that means higher rates for longer.

Naturally Atlanta Fed President Bostic wasted no time piling on saying that he now sees only one rate cut this year. (Read) I wish somebody would take away the mic but that’s just me.

Anyway, long story short, go shopping.

The last few days of selling have dropped prices on otherwise great companies making “must have” world class products and services.

If you’d like some help, you know where to find me.

2 - Noted hedge fund manager says Tesla could go bust 🤦‍♂️

In my best spooky voice... “ooooooooo”

There are two problems here.

First, Per Lekander – the guy who made the comment – is “talking his own book,” a particularly nasty Wall Street practice in which big money managers make news appearances or drop a few well-placed comments about specific stocks in ways that enhance their profits.

CNBC’s Jim Cramer posted a now infamous video about the basics of stock manipulation years back that’ll make your hair stand up if you haven’t seen it yet. (Watch)

Second, Lekander has been shorting Tesla since 2020 according to CNBC which is reporting his comments. (Read)

Tesla has returned 497.48% since January that year, which means that chances are good Lekander could well be upside down – meaning losing a pile of money.

Still, even blind squirrels find a nut every now and then.

Sigh.

MyPOV: Investing isn’t about who’s right or wrong so get that out of your brain if you’re looking at Tesla this morning and wondering what to do. The question you want to be asking yourself is what are you going to do about it.

Personally, I hope I’m smart enough to buy more shares.

No doubt, Tesla’s got a lotta ‘splaining to do after yesterday’s report but the company’s been here before. I also think, as I noted yesterday, that there’s still a lot going right.

And if you think it’s not, sell.

Simple as that.

3 - It's Disney day!

Shareholders will vote today on the long-brewing board battle between activists Nelson Peltz who thinks he can do a better job and Bob Iger, Disney’s current re-re-returning CEO who believes he’s on the right track.

The board meeting starts at 1pm EST so the markets won’t be open when the results hit the wire. Which means that you’ve got to place your bets ahead of time if you want to play along.

Reports circulating at the moment suggest that Disney has the votes it needs to win. (Read) But I learned a long time ago never to count my chickens before they hatch in this business.

Trade Idea: Buy 1 ATM $123 straddle (1 call, 1 put) for the April 5th expiration. This’ll set you back roughly $2.79, excluding commissions etc. The net return at the end of the week will be the based on the ending value of the options less the cost to buy ‘em. No hedging, just a straight up speculative trade with the put side having a slight theoretical edge as I write.

Note: If you have no idea what this trade is, how to run it or the appropriate risk tolerance for speculative potshots like this one, do NOT try it – period!!!

4 – I've never been more glad to have sold Intel

I’ve made no bones about the fact that I think CEO Pat Gelsinger is the right man for the job. I’ve met him several times and think he’s super sharp, very focused, and knows exactly what’s got to get done.

That said, I’m not willing to hang around while Intel spins its wheels.

Reports suggest that Intel has a massive and growing $7B loss on its hands because the foundry unit isn’t going to plan. Gelsinger doesn't see the unit breaking even until 2027. (Read)

Keith’s Investing Tip: This is the problem... investments like foundry are a long-cycle, capital intensive activity but earnings are a quarterly cycle that comes and goes every 90 days. It's no wonder many investors have the attention span of a gnat. You’ve got to learn to look beyond short-term information if you’re interested in long-term success.

And, in some cases, beyond struggling companies like Intel to find better alternatives in the meantime ... like the two other chipmakers I recommend and which, fortunately, have enjoyed spectacular results so far. (Upgrade to Paid)

5 – GE Vernova worth a look-see

It’s official... the GE of yesteryear is no more.

I’m particularly interested in GE Vernova, the company’s newly independent renewable energy and power unit. Ticker, GEV.

Expectations are for mid-single digit growth for the next few years and an EBITDA of around 10%.

I’m inclined to give GEV a bit to settle down then take a hard look; there could be a new “steady-Eddie” in town for investors interested in alternative energy.

You can learn more here. (Read)