June 12, 2025

*Note: Your next issue of Cabot Explorer will arrive next Wednesday, June 18 due to the market holiday next Thursday, June 19 in observance of Juneteenth.

Portfolio Changes: None

Mania Stocks

Markets and Explorer stocks were mixed this week as the U.S.-China talks yielded no significant gains against the backdrop of immigration protests.

I’m always on the alert for sports analysis that can be applied to investing. This week I came across tennis great Roger Federer’s fantastic 2024 commencement speech at Dartmouth. Below is a segment that I thought was especially applicable to investing.

“In tennis, perfection is impossible. ... In the 1,526 singles matches I played in my career, I won almost 80% of those matches. ... Now, I have a question for all of you ... what percentage of the POINTS do you think I won in those matches?

“Only 54%.

“In other words, even top-ranked tennis players win barely more than half of the points they play. When you lose every second point, on average, you learn not to dwell on every shot.”

My takeaway on the above which is applicable to investing is that not every stock you purchase will work out. This may be obvious, but how you react to losses is what is important.

Specifically, minimize losses, keep your perspective, and then move on to new ideas.

In particular, you should avoid making oversized bets and resist the temptation to chase overvalued “bubble” stocks that can cause significant damage to your portfolio.

Financial history is full of these “mania” stocks. Here are just two examples.

The first one goes way back to the Dutch Republic – now the Netherlands – which had its day in the sun as a great trading and financial empire in the mid-17th century.

Tulip bulbs imported from the Ottoman Empire flowered in the springtime and then the bulb was dug up and stored through the winter. Now, one of the innovations the Dutch came up with was a futures market allowing investors to bet on future prices of a variety of things including tulip bulbs. Different tulips had different prices, and the rare, beautiful, and highly prized Semper Augustus tulip bulbs were priced accordingly.

During the height of “tulip mania,” a single bulb was worth enough to purchase a nice townhome in Amsterdam. Many crazed investors used debt to make bets as prices soared. Then suddenly, in February 1637, there were no buyers and prices collapsed.

A more recent bubble that I followed as a rookie stockbroker was in Japan. Nvidia (NVDA) may be the market’s tech darling these days but a few decades ago it was Nippon Telegraph and Telephone (NTTYY), better known as NTT.

NTT began as a government-backed entity but wasn’t the typical monopoly-like utility. Roughly three decades before the dot-com era, it launched futuristic devices such as a video phone that linked Tokyo to Osaka and even a wireless handset. This was when Japan’s economy and stock market were the envy of the world.

In the 1980s, NTT was privatized, and its stock took off like a rocket. With an IPO priced at around $8,300 per share, it raised $15.2 billion. Later rounds brought the total to $38 billion. You can triple these numbers to get today’s dollars.

NTT’s valuation ballooned to 200x earnings – and the company was worth more than the West Germany and Hong Kong stock markets combined.

NTT peaked in 1989 along with Japan’s Nikkei index. Three years later, NTT’s share price had sunk 85% and still traded at 50x earnings and even now the stock is 60% below its 1980s high. Ouch.

One final point: when these bubbles collapse, be open about buying the stock after the dust settles. Some do bounce back. But do your homework first!

Explorer Weekly Stock Commentary

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.

Explorer Disrupter Recommendations – need to watch more closely and have a 20% trailing stop-loss in place.

Agnico Eagle Mines (AEM) shares were down 3.8% this past week but are up 55% so far in 2025. Central bank purchases have been the primary factor driving up demand with China’s central bank leading the way. Buy a Half

Banco Santander (SAN) shares edged up this past week. Over the last five years, Banco Santander has increased its dividend four times on a year-over-year basis for an average annual increase of 18%. You may wish to take some profits off the table though this stock is poised for steady growth. Buy a Half

BYD (BYDDY) shares were down 3.8% this week as weaker domestic demand and price cuts impact the stock. Beijing is trying to end the price competition that is pushing out marginal automakers. One of BYD’s advantages is that it is vertically integrated, making some semiconductors and advanced lithium ferrous phosphate (LFP) batteries. Buy a Half

Coeur Mining (CDE) shares are up roughly 15% since being added as an Explorer recommendation three weeks ago. A $75 million share buyback began this month. Coeur is a mining company that explores gold, silver, zinc, and other related metals in the U.S., Canada, and Mexico. BUY A HALF

Dutch Bros (BROS) shares were steady this week after being up 18.4% during the previous two weeks. The company’s rewards loyalty program has been accounting for about 70% of traffic as the company opened 30 new locations in the first quarter. The company plans to open at least 160 shops in 2025. Hold a Half

Luckin Coffee (LKNCY) shares pulled back 5.4% after a 9.4% gain last week. First-quarter revenue growth was 40% as it opened 1,757 new outlets in the quarter for a total store count over 24,000. Buy a Half

Mitsui (MITSF) shares were flat again this week despite Japanese investor activity picking up along with interest in Japan’s leading trading companies. Mitsui shares trade close to book value and only 10 times forward earnings. Buy a Half

Sea Limited (SE) shares pulled back to 154 this week despite strong growth from its gaming segment. My recent caution regarding this stock based on its current valuation looks justified, but it is getting closer to a buy point. In its last quarter, sales climbed 30% to $4.84 billion. Hold a Half

Explorer Dominator Blue-Chip Recommendations – More Buy and Hold

DBS Bank (DBSDY) shares traded within a narrow range this week. Its main virtue is financial strength and stability with retail investors owning 46% of shares and private equity with a 28% stake. Buy a Half

International Business Machines (IBM) shares gained 6% this week as quantum computing is back in the limelight. IBM announced this week a plan for building what it calls the world’s first large-scale, fault-tolerant quantum computer at its New York data center before the end of the decade. Named the Quantum Starling, it will have 20,000 times the computational power of today’s quantum computers. Buy a Half

Visa (V) shares were up marginally this week and have gained 18% so far this year. Visa recently announced a $30 billion share buyback program and has an impressive 16% return on assets. Buy a Half

Watch List – Stocks we like but do not follow day-to-day

ConocoPhillips (COP), Franco-Nevada (FNV), MOOG (MOG-A)

Explorer ETF/Fund Positions

Grayscale Bitcoin Trust (GBTC) offers investors a way to track very closely to the day-to-day or “spot” movement of bitcoin prices. For aggressive investors comfortable with volatility. Buy a Small Allocation

JPMorgan Equity Premium Income ETF (JEPI) offers double-digit yield coming from both option premiums and dividends using a value-focused strategy. Buy a Full

Oberweis Micro-Cap Fund (OBMCX) fund stands out for several reasons. The fund’s sound investment process and strong management team earns it a rare Morningstar Medalist Rating of Gold. Over the past five years it has posted an impressive average annual return of 24%. Buy a Half

ProShares MSCI EAFE Dividend Growers ETF (EFAD) seeks to capture the performance of companies with at least 10 years of consecutive dividend growth. Buy a Half

Sprott Platinum and Palladium ETF (SPPP) offers direct exposure to both platinum and palladium which are selling at a sizable discount to gold offering potential upside appreciation. Buy a Half

Stoxx Europe Total Market Aerospace & Defense (EUAD) tracks an index of top defense contractors including Leonardo, Rheinmetall, and BAE Systems. Buy a Half

VanEck Junior Gold Miners ETF (GDXJ) is a basket of junior miners that has 84 positions with the top 10 accounting for 44% of total assets. Half of the stocks are Canadian, 21% Australia, and 7% from South Africa. BUY A HALF

WisdomTree Emerging Markets High Dividend Fund (DEM) offers a high dividend yield and some of the highest quality emerging market stocks. Buy a Half

Explorer Stocks Summary

Brief company summaries that will not change week to week.

Agnico Eagle Mines (AEM) follows a conservative strategy and with a history spanning more than 60 years, and now operates a sizable portfolio of 11 assets located in four countries. Management forecasted gold production of approximately 3.45 million ounces in 2024. The company estimates it has about 54 million gold ounces of proven and probable reserves. Furthermore, Agnico Eagle has paid a dividend for 41 consecutive years with a dividend compounded growth rate of 23% per year since 2005.

Banco Santander (SAN) was founded in Spain in 1857. The bank’s U.S. headquarters is in Boston, but its strength lies in Latin America and Europe where it has more than 8,000 branches with 171 million customers as well as 58 million digital accounts. About 55% of deposits and loans are in Europe with the balance in Latin America. In its most recent quarter, Santander’s revenue was up 8% while net profits increased 16%.

BYD (BYDDY) Most of BYD’s sales are still in China but it has a big international expansion underway, including in the U.S., Europe, and Asian markets. BYD will also launch a next-generation Blade battery in 2025, with longer range and faster charging. That, along with various other models, could help rev up BEV sales growth next year. BYD expects solid-state batteries for high-end models by 2027, but not fully reaching lower-end models until 2030-2032.

Coeur Mining (CD) is a mining company that explores gold, silver, zinc, and other related metals in the U.S., Canada, and Mexico. For many precious metal investors, silver is seen as gold’s “little brother,” but it has a long history as a means of payment going back centuries as the Spanish silver dollar was once the reserve currency of the day. In 2025, we passed the 100:1 mark for only the fourth time in a hundred years – a strong signal that silver may be underpriced. While gold has reached an historic high, the silver price is almost 50% off its all-time high in U.S. dollars per ounce.

Watch List: ConocoPhillips (COP) is a global energy industry giant and one of the largest independent exploration and production (E&P) companies in the world, as measured by production levels and proved reserves. The company, founded in 1917 and based in Houston, has operations in 13 countries, although almost half the company’s production is derived from U.S. sources.

DBS Bank (DBSDY) is one of the largest banks in Southeast Asia with a presence in 19 markets. It is headquartered in Singapore, with its main listing on the Singapore Stock Exchange, and is the largest constituent of the Singapore Straits Times Index. The Government of Singapore established DBS in July 1968 and its largest and controlling shareholder is Temasek Holdings, which is one of two large sovereign wealth funds controlled by the Government of Singapore. DBS has assets of roughly $750 billion and a growing presence in the three key Asian areas of growth, which it defines as Greater China, Southeast Asia, and South Asia, meaning India. It is the largest and strongest bank in Southeast Asia and the leading consumer bank in both Hong Kong and Singapore.

Dutch Bros (BROS) is an operator and franchisor of drive-through coffee stores, with 1,012 stores as of the end of the first quarter, including 30 that it opened in the quarter. It’s expanding at a steady pace, expecting up to 150 new stores in 2025, and it envisions up to 7,000 stores over the next 10 to 15 years.

Watch List: Franco-Nevada (FNV) is a company with more than half of its revenue coming from gold, but it also offers exposure to platinum, silver, and oil and gas. Franco-Nevada’s focus on royalties and streaming reduces risk and enables it to sidestep the huge capital costs that impact traditional miners. It enjoys cash flow and profits as its mining partners finance and complete exploration and expansion projects. That cash flow enables it to invest in new deals, pay a dividend, and operate debt free. Franco-Nevada has increased its dividend each year since its IPO in 2008.

International Business Machines (IBM) is a blue-chip artificial intelligence (AI) and India play with a nice dividend yield. Known as “Big Blue,” IBM now primarily helps businesses and governments manage their information technology in the cloud era. The stock sells at a discount to the S&P 500 multiple and the information technology sector’s forward earnings multiple. IBM has paid a dividend every quarter since 1916 and has had 30 consecutive years of dividend increases.

Luckin Coffee (LKNCY) is a leading purveyor of coffee and specialty drinks in China. The price of a cup of Starbucks coffee is more than double that of Luckin coffee. In addition, Luckin is adept at adapting to local tastes and launching new products that broaden the market. For instance, it brings to market about 60 new products each year, offering a new drink every week. Its new coconut latte sells nearly $140 million worth annually.

Mitsui (MITSF) stands out among the big five by leaning into mining and materials. Mitsui has entered joint ventures around the world, taking project stakes in iron ore, metallurgical coal, copper, nickel, and LNG with 50%-60% of profit coming metals and energy. But Mitsui’s chairman emphasizes that Mitsui is not a resource company. Rather he describes the company as a place where smart people identify new trends and pursue big profits through small experiments. For example, Mitsui owns 33% stake in IHH Healthcare, the largest hospital group in Asia, and stake in Penske Automotive in North America. Other sectors of activity include energy, infrastructure, agriculture and food, and consumer retail.

Watch List: Moog, Inc. (MOG-A) supplies advanced primary flight controls on the most modern military aircraft. That includes the Lockheed Martin F-35 Lightning II and the Future Long Range Assault Aircraft program. The company’s major platforms include the 787, A350, Joint Strike Fighter (F-35 Lightning II). The company also supplies primary flight controls for the Boeing 787 and Airbus A350 widebody aircraft, as well as business and regional jets from Embraer (ERJ) and Gulfstream, owned by General Dynamics (GD).

Sea Limited (SE) has three core businesses: 1) digital gaming/entertainment, 2) e-commerce, and 3) digital payments and financial services, known as Garena, Shopee, and Monee (formerly SeaMoney), respectively. Garena is a leading global online games developer and publisher. Shopee is the largest e-commerce platform in Southeast Asia and Taiwan. Monee is a leading digital payments and financial services provider in Southeast Asia.

Visa (V) doesn’t extend credit but provides the plumbing for financial payments and communications throughout the world. Visa’s financial infrastructure also underpins much of the world’s commerce. The duopoly between Visa and Mastercard is often referred to as one of the best businesses in the world, with insurmountable moats, low operating costs, and plenty of opportunities for unlocking additional value. Visa currently trades at a discount to its archrival MasterCard.

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