February 2, 2023

International Stocks Start Strong in 2023

Portfolio Changes:

Rolls-Royce PLC (RYCEY) Moves from Buy to Sell

Novo Nordisk (NVO) Moves from Buy a Half to Hold a Half

Explorer stocks had a good week as the Fed signaled that interest rate hikes may be slowing.

It is only a month into 2023 but playing safe has not paid off as the Nasdaq 100 (QQQ) is the best-performing U.S. index ETF with a gain of 10.6% thus far. The small-cap Russell 2,000 (IWM) is next, up 9.8%. The Dow Jones 30 (DIA) – which fared the best in 2022 – is up only 2.95%.

At the sector level, Consumer Discretionary (XLY) jumped 15.1%, followed closely by Communication Services (XLC) at 14.8%. Three conservative sectors fell in January: Consumer Staples (XLP), Health Care (XLV), and Utilities (XLU).

International markets also got off to a fast start in January. Up 10% or more were Australia (EWA), China (ASHR), France (EWQ), Germany (EWG), Italy (EWI), Mexico (EWW), and Spain (EWP). India (PIN) was the laggard.

I anticipate a rebound in some tech and cyclical ideas. I am keeping a close eye on semiconductors, biotech, electric vehicles, fintech, and nuclear energy.

Bloomberg reported global EV sales for 2022 last week and while overall global auto sales declined to 81 million cars sold, EV sales jumped 68% and for the first time, account for 10% of all auto sales. But Tesla’s price cuts have cascaded to other EV makers and have led to questions about profit margins.

It will be interesting to see how lower prices affect the EV industry going forward.

Weekly Explorer Stock News

Below is a brief update on each Explorer stock. Any changes in ratings will be highlighted. This section is all you need to read each week and will be followed by a new recommendation every other week.

Explorer recommendations outperformed this week, with most having an up week.

Butterfly Network (BFLY) shares were up this week on no news. Buy shares if you have not already done so. Buy a Half.

Centrus Energy (LEU) shares jumped from 38 to 42 this past week as nuclear energy expansion is getting more politically acceptable to talk about, as evidenced by a new movie by Oliver Stone called “Nuclear Now” that screened recently at Davos (and received a warm reception, reportedly). Centrus stock trades at relatively low multiples to future earnings. Buy a Half.

Corteva (CTVA) shares were moved to a hold last week primarily due to the stock being on the expensive side. No action is required except that you should be cautious about buying more shares right now. This is what a hold means for all Explorer stocks. Hold a Half.

Ford (F) shares regained a point this week as the company gains traction in EV markets. Ford announced a price cut to its Ford Mustang EV to match Tesla’s cut to its Model Y. Ford continues to offer a solid dividend and a relatively low valuation. Buy a Half.

Kraken Robotics (KRKNF) shares slipped a bit this week as analysts see the company bordering on breakeven as the company recently released that non-audited preliminary results show that Kraken has met its $40 million revenue guidance for 2022. Aggressive - Buy a Half.

MP Materials (MP) shares moved up three points this week to approach 34. The company has a couple of ambitious development projects for 2023 with a cash position of $587 million to fund them. The third project in the works is a heavy rare earth elements (HREE) processing facility, partially funded by a $35 million Department of Defense award. Hold a Half.

Novo Nordisk (NVO) shares were steady this week as the company reported strong sales and earnings in line with expectations. The company reported fourth-quarter 2022 earnings of 83 cents against earnings of 73 cents in the year-ago quarter. Revenues of $6.6 billion were driven by higher Diabetes and Obesity care sales. That’s all good news, and the stock looks great. However, I am moving NVO shares to a hold primarily due to the stock being on the expensive side. No action is required except that you should be cautious about buying more shares right now. Move from Buy a Half to Hold a Half.

Novonix (NVX) shares were steady this week on no news. This Australian technology and advanced materials supplier posted a 52% year-over-year improvement in revenue during its last quarter. Buy a Half.

Polestar (PSNY) shares held firm in their first week as an Explorer recommendation and represent one of the few EV companies besides Tesla to post profits as a public company. The company has adequate resources to execute its plan with about $2 billion in cash and to support increasing production volumes, and Volvo is providing $800 million in financing. For 2023, Polestar anticipates global volumes to increase by nearly 60%. Buy a Half.

Rolls-Royce PLC (RYCEY) shares are up about 20% over the last month as new CEO Tufan Erginbilgic takes the helm. However, this week he gave a brutal assessment of near-term challenges, so this now seems like a long-term turnaround situation with high risk. I’m moving this stock to a sell. Move from Buy to Sell.

Explorer Stocks Summary

Brief company overviews that will not change week to week.

Butterfly Network (BFLY): Butterfly’s breakthrough software can be tied into a medical network to provide instantaneous images and improve both the speed and quality of healthcare. This is so much better than scheduling a test in a week and then having the patient come back and must pay for another appointment.

However, if your doctor has the Butterfly iQ+ in their pocket, he (or she) just connects it to an iPhone, it scans your body and has a digital image right in front of him.

Plus, while an MRI machine can cost more than a million bucks, the Butterfly iQ+ costs a little over $2,000. Since it also requires a subscription service, it’s a steady source of recurring revenue for the company. The top 100 hospitals in the country already use Butterfly iQ devices. BUY A HALF

Centrus Energy (LEU) is a nuclear fuel supplier for utilities in U.S. and abroad has net income margins are above 50% so far this year with new nuclear fuel sales contracts and commitments worth an estimated value of $270 million. Nuclear power provides 20% of the power for our electricity grid and more than 50% of U.S. emission-free energy, according to the Department of Energy. BUY A HALF

Corteva (CTVA) uses emerging technology to help farmers improve crop yields and boost output. Stocks like Corteva are recession-resistant and outperforming the market on a relative basis. BUY A HALF

Ford (F) is making the transition to a leader in both conventional and electric vehicles (EVs). It continues to see rising demand for its electric vehicles and Ford stock will benefit from the big $7,500 EV subsidies. Ford remains my favorite conservative stock despite a challenging market and supply chain issues. Ford wants to produce EVs at annual rates of 600,000 cars by late 2023 and more than 2 million by 2026. BUY A HALF

Kraken Robotics (KRKNF) is probably the most speculative of Explorer stocks, but it is a well-run company and a prime takeover candidate in the growth defense sector, coupled with a strong management team. Based in Newfoundland, Kraken Robotics is a marine technology company providing ultra-high resolution, software-centric sensors and underwater robotic systems. BUY A HALF

MP Materials (MP) is an effective way to play clean tech, defense, semiconductors, and other advanced and emerging technologies. It is America’s only active rare earth mining and processing site, producing approximately 15% of the rare earth content consumed in the global market in 2021. HOLD A HALF

Novo Nordisk (NVO) specializes in treatments for diabetes, hemophilia, and obesity. The company supplies half of the world’s insulin, and its diabetes care products are used by over 34 million people today. Novo highlights that more than 750 million people are currently living with obesity and that this is up a multiple of 3X since 1975. In summary, based on sizable and growing demand for this weight-loss drug, this well managed, highly profitable company with an excellent growth profile and potential to develop new products has limited risk. HOLD A HALF

Novonix (NVX)
Novonix is an Australian technology and advanced materials supplier to the electric vehicle and storage battery industry. Founded by members of a research team at Canada’s Dalhousie University, the company is a supplier of high-performance materials, equipment, and services for the global lithium-ion battery industry with a focus on North America.

Novonix is an unusual blend of both exploring and mining graphite and developing synthetic graphite, a key lithium-ion battery material. The focus is on electric vehicles, which are projected to go from global sales of 3.1 million in 2020 to 15 million in 2025 and then on to about 40 million in 2030. BUY A HALF

Polestar (PSNY)
Polestar Automotive is a Swedish premium electric vehicle manufacturer. Founded by Volvo and Zhejiang Geely Holding Group in 2017, Polestar enjoys technological and engineering synergies with Volvo.

By the end of this year, the company plans that its cars will be available in 30 markets. Polestar cars are currently manufactured in China, with 2024 manufacturing planned in America. Polestar has an edge on much of the competition for two reasons. It has an “asset light” strategy through access to world class owner/partner Volvo’s factories. It has a firm foothold in China – the fastest growing EV market in the world. And it has a growing reputation for elegant and arresting design. For 2023, Polestar anticipates global volumes to increase by nearly 60% to approximately 80,000 cars. BUY A HALF

Rolls-Royce PLC (RYCEY)
Shares are up over 20% over the last month as new CEO Tufan Erginbilgic takes the helm. However, this week he gave a brutal assessment of near-term challenges so this seems a long-term turnaround situation with high risk and I’m moving this stock to a sell. MOVE FROM BUY A HALF TO SELL

Explorer ETF/Fund Positions

WisdomTree Emerging Markets High Dividend Fund (DEM) offers a high dividend yield and some of the highest quality emerging market stocks. This ETF gives broad exposure with an emphasis on income and value. BUY A HALF