Tech stocks steadied a bit this week as quarterly earnings started coming in. Sea (SE) was up this week on two analyst upgrades. Super Micro (SMCI) will report crucial quarterly earnings early next week.

The Explorer’s one current European stock recommendation is Danish drugmaker Novo Nordisk (NVO). It has passed French luxury group LVMH Moët Hennessy Louis Vuitton to become Europe’s most valuable company.

Inflation appears stuck at a much higher level than acceptable for the Federal Reserve so lower interest rates are on pause. Gold is one beneficiary.

This means that some high-flyer tech stocks may be vulnerable. Meanwhile, Japanese stocks remain near all-time highs.

Fortunately, we have exposure to both gold and Japan in the Explorer portfolio, and today we add to that exposure.

The bull market rages on, and technology stocks continue to garner most of the headlines, some of which we’ll examine today. But our new recommendation isn’t some go-go artificial intelligence play: it’s a small-cap U.S. titanium maker that’s off to a very fast start (+56%) in 2024 ... with plenty more runway ahead.

Bitcoin is sometimes referred to as “digital gold,” but investors should also have some of the real stuff. As J.P. Morgan put it, “Gold is money. Everything else is credit.” So today, with gold prices on the rise, we add exposure to the yellow metal in the form of a low-risk streaming and royalty company.

You may have noticed that last week when Nvidia (NDVA) announced its earnings, its stock rose 16% while Explorer recommendation Super Micro Computer (SMCI) went up 32%.

This is consistent with my view that Super Micro is a leveraged bet on artificial intelligence (AI), and I expect this will also be the case when Nvidia’s stock price moves the other way. Nvidia is now priced at an incredible 32 times trailing annual sales and has a larger market cap than Germany’s entire blue-chip DAX index. Super Micro has already tripled in 2024 so consider taking partial profits. Remember, J.P. Morgan allegedly stated that he made his greatest profits by selling too soon.

The latest earnings reports were mixed but generally encouraging.

The S&P 500 exceeding the 5,000 mark reminds us that while our dynamic economy leads to disruptions in companies and markets, and Fed interest rate moves can impact the market, it is revenue and earnings growth that really drives stock returns over time. Companies normally become more profitable over time, and that’s what leads to higher stock prices. Staying in the market and leveraging the power of compounding returns is important to successful investing.

So today, we expand our portfolio by starting a small position in a brand new asset class.

The Federal Reserve held interest rates steady and signaled it is open to cutting later this year, especially if economic growth and employment slow in an election year. Big tech earnings so far are a mixed bag and below elevated expectations.

But cybersecurity companies have been resilient due to ever-growing demand. And today, we add a familiar cybersecurity name to the Explorer portfolio.

While every situation is different, a pretty good rule of thumb for investors is to look for stocks of well-run companies with solid fundamentals in a sector that has been out of favor. Then check that the stock is in an uptrend with clear catalysts that support a further rise in its stock price.

Today, we add a stock that checks all those boxes.

Although markets have stumbled a bit out of the gate, investors looking to see the S&P 500 build on the 11% advance in the final quarter of 2023 may not have long to wait. U.S. companies are due to start reporting results next week, with the big banks leading the way.

An election year like 2024 with a sitting president running is historically a bullish scenario for U.S. stocks. Since 1949, the S&P 500 is averaging a gain of nearly 13% in those election years, per the Stock Trader’s Almanac.

So let’s kick off the year by adding another aggressive growth stock.

In our final Explorer issue of 2023, we add a new artificial intelligence play whose revenues are on track to expand by nearly 50% this year, and whose share price has more than tripled YTD - and yet trades well below its July highs. Back on the upswing, it’s worth buying now.

Enjoy, and happy holidays!

Led by the Magnificent Seven, the S&P 500 is a bit overcooked at the moment. Small and mid-caps, on the other hand, are cheap - and appear poised for outperformance in the New Year. So today, we add a mid-cap life sciences company with high upside potential in an emerging area of biology.

The S&P 500 and Explorer stocks are in an uptrend in November as investors bet that the Federal Reserve’s interest rate hikes are done for now and that inflation will moderate without a recession. In addition, with most S&P 500 companies having reported third-quarter results, more than 80% have beaten analyst expectations.

With the investing climate improving, today we add two new positions to the portfolio. Enjoy, and Happy Thanksgiving!

When I started in this business as an institutional stockbroker, Peter Lynch, the portfolio manager for Fidelity’s Magellan fund, was seen as a master of the game. His forte was picking smaller growth stocks. Upon stepping down in 1990 after his fund became too big to make any small-cap stock pick meaningful, he had delivered, over a 13-year period, a 29% per annum return to investors.

His lessons still ring true today.

The first week in April was quiet for Explorer stocks. Looking at what sectors are doing particularly well through the MSCI World index, technology and other cyclical sectors such as energy have outperformed.

Where are the bargains? Consumer staples, Europe, and perhaps even electric vehicle stocks. The EV slowdown can’t be denied – their first-quarter growth rate was a weak 2.7% vs. last year’s 47%. Hybrids vehicles are clearly preferred by many, and on the rise.

This week the Fed left interests rates again unchanged and Super Micro Computer (SMCI) became part of the S&P 500 index. An announcement of a two million convertible shares offering by Super Micro led to a pullback in the stock though long term, it’s smart to raise capital after the sharp rise in the share price.

Elsewhere, Washington is fixated on the potential push to force a change in the ownership of TikTok while China, as strongly expected, objects. This is a bit ironic since X, Instagram, Facebook, and Google aren’t available to Chinese citizens.

Luxury leader LVMH Moët Hennessy (LVMUY) CEO Bernard Arnault has a mantra that can be applied to business and investing: “In times of uncertainty, be patient.”

I would add that this requires playing both defense and offense.

Our offense has been working quite well of late: Super Micro Computer’s (SMCI) share price was up another 40% this week and is now up 300% since the start of the year. Sea (SE) had a good first week in our portfolio as well, up 22% after an encouraging financial report.

It was a relatively quiet week for Explorer stocks as a financial media frenzy focused an unprecedented amount of attention on the expected financials of one stock – Nvidia (NDVA).

Nvidia has quickly become the third most valuable company in the United States.

As of last Friday, about 30% of the S&P 500’s gain for the year was due to Nvidia, according to an S&P analyst.

U.S. stocks, buoyed by positive earnings, continued their move higher this week with the S&P 500 within striking distance of the 5,000 milestone.

Super Micro Computer (SMCI) shares performed even better, surging another 26% this week alone, and are now up over 100% in 2024. I suggest that you seriously consider taking some partial profits and letting the balance run. Super Micro is a leveraged play on Nvidia (NVDA) and other advanced chips for AI since it sells to the servers and systems that incorporate and support those premium chips in data centers.

In my view, the best strategy for overseas markets is to play the trends with a contrarian value approach. For example, the Hang Seng China Enterprises index, a closely followed gauge of large Chinese listings in Hong Kong, has fallen about 11% so far this month after losing 14% last year. Foreign investors have sold about 90% of the $33 billion worth of Chinese stocks that they had purchased earlier in 2023 and have continued selling this year.

So today, we go against the grain on China.

A major challenge in 2024 for investors and analysts alike will be separating the artificial intelligence (AI) “pretenders” from the “contenders.” Super Micro Computer (SMCI), a recent Explorer recommendation, was up 23% this week, and Exscientia (EXAI) shares were up 13% yesterday.

Welcome news: The Fed holds interest rates steady in a sign tightening has peaked and that rates cuts may be coming in 2024. Big positive for stocks.

One of the Explorer’s themes is the exciting and potentially profitable sector of medicine and life sciences. A success story is Novo Nordisk (NVO), which is up about 45% this year. The Denmark-based company has been the talk of the pharma and medical world and even Hollywood with stars trying the firm’s diabetes and weight-loss medicines, Ozempic and Wegovy.

Many analysts now expect a “Goldilocks scenario,” with the economy growing nicely but not too fast. This would mean that the Fed does not need to worry about raising interest rates further to combat inflation. Good news for stocks.

I would like to clarify there are two reasons that I remove a stock as an Explorer recommendation. When I recommend a stock, I expect that it will deliver appreciation and dividends over the long haul unless I highlight that it is a more of a short-term trading opportunity.

With a 29% average annual rate of return over 13 years at Fidelity, Peter Lynch certainly earned his status as a legendary investor.

Recently, Lynch revealed that indexes like the S&P 500 and Nasdaq have been propped up by a handful of high-flying tech stocks. “The truth is, we’ve been in a stealth bear market for a long while now if you don’t count those 10 or so darling mega-caps,” Lynch remarked with his trademark sarcasm.

That may soon be coming to an end.

Over the past month Tesla (TSLA) has struggled as continued price cuts have boosted sales but narrowed profit margins. It is also failing to live up to its brand as more than just a maker of electric cars (EVs).

Higher interest rates are eating into EV demand. Competition is catching up as Tesla last launched a new passenger vehicle in 2020. In October, BYD (BYDDY) outsold Tesla for the first time.

MP Materials (MP), a rare earths mine and processor, is down about 11% this morning.

MP Materials (MP), a rare earths mine and processor, is down about 11% this morning.

Exscientia (EXAI) is down about 10% this morning.

Exscientia (EXAI) pulled back yesterday but is recovering this morning.

Based on market conditions and to limit losses, I suggest you sell the following two Explorer recommendations:

Due to escalating regulatory risk by Chinese authorities, please sell Pinduoduo stock. I will have more in this Thursday’s update but, in short, the Chinese are exerting their authority on Chinese companies that have used offshore entities to list on U.S. markets. China wants these companies to list in Hong Kong or Shanghai. There may be some trading and arbitrage opportunities developing, but the risk for Pinduoduo is now too high.

To follow up on today’s issue and new recommendation of Fisker, Inc.

Based on the below press release highlighting the agreement for Australia’s Lynas to build a rare earths refinery in Texas, I recommend you sell your MP Materials (MP) position.

Two portfolio stocks reported earnings yesterday and both remain Buys.

This portfolio stock was up 18.3% yesterday in anticipation of earnings that were released after the market closed.

Sell half your position for a 142% gain.

As I mentioned in yesterday’s issue, we got some bad news on this portfolio stock before the market opened regarding an internal investigation of fraud by the company’s COO and several other employees who apparently significantly overstated sales in 2019.