Portfolio Changes:
Harley-Davidson (HOG) – MOVE FROM HOLD TO SELL
The Fed is Taking Away the Punch Bowl
The rise in interest rates and the Russia-Ukraine situation are roiling markets and the Fed will soon begin reducing its $9 trillion holdings of Treasury bonds, putting a dent in liquidity that was propping up markets. This is impacting stocks, especially the tech-heavy Nasdaq market.
Agricultural and food markets are also volatile since almost one-quarter of the world’s grain comes from Russia and Ukraine. Across Ukraine’s farm belt, silos are stuck with 15 million tons of corn from the autumn harvest – most of which should have been hitting world markets by now. Impacted by supply-chain bottlenecks and surging freight rates, the $120 billion global grains trade is bracing for upheavals and severe shortages, not to mention political instability.
Elsewhere, the Shanghai lockdown of its 26 million residents has to impact economic growth as China’s stock markets struggle to develop an uptrend.
The CSI 300 Index, which consists of the largest companies listed in Shanghai and Shenzhen, already lost nearly 15% in the first three months of the year, while the 500-stock Shenzhen Component Index dropped 18%. For both benchmarks, this was the biggest quarterly decline since the third quarter of 2015. The Shanghai Composite Index, which has larger and less volatile state-owned companies, fell about 11%, its worst performance since the fourth quarter of 2018.
Back in the States, is Miami becoming the Silicon Valley of crypto?
“We are literally taking the gravitational centers of America, in finance it was New York and tech it was Silicon Valley, and we’re just basically yanking it down and making it Miami,” said the city’s mayor, Francis Suarez.
In May 2010, a Laszlo Hanyecz became the first person to use cryptocurrency to buy something when he paid 10,000 bitcoin for two Papa John‘s pizzas. Back then, that represented about $41. As of market close today, those pizzas are worth $476 million.
I hope it was a good pizza!
You might think of cryptocurrencies as virtual money, available to anyone, anywhere, anytime. It is largely an unregulated market but it seems that crypto has passed an inflection point similar to electric vehicles and should probably not be seen as a fad.
Cryptocurrency could be a revolutionary development in financial circles as nearly 25% of millennial millionaires have 25% or more of their wealth in crypto, according to CNBC.
But you need to educate yourself before taking the plunge, and that is why Cabot Wealth has just launched a new investment advisory to guide you in this exciting arena.
It’s called Cabot Sector Xpress Crypto Advisor, and its chief analyst is Ian Beaudoin, a cryptocurrency expert and investor – both of which are hard to find! If you’re interested in learning about cryptocurrency, and perhaps making some good money investing in it, I highly recommend Ian’s newsletter. A click here will get you started.
Portfolio Updates
Fisker (FSR) shares were up slightly this week after a surge on Monday as the company announced 40,000 initial reservations for its fully electric Ocean SUV. Production is expected to begin in November and the SUV models range in price from $37,499 to $68,999. Next up after the Ocean SUV is the PEAR, a smaller vehicle than Fisker’s Ocean, with pricing starting at under $30,000. BUY A HALF
Ford (F) shares gave back two points this week as the company announced plans to produce over 2 million EVs (about one-third of its total auto sales) and generate a 10% adjusted operating profit margin by 2026. By 2030, it expects half of its global sales to be fully electric vehicles and targets $50 billion in EV investment through 2026.
Trading at just 3 times trailing earnings, a fraction of its sales, and just 7 times free cash flow, this is perhaps the best value of the leading EV makers so I encourage you to buy if you have not already done so. BUY A FULL
Harley-Davidson (HOG) shares backtracked 10% so far this week after we downgraded the stock last week. Based on its lack of performance, we are removing Harley from the portfolio despite its exciting move into LiveWire electric motorcycle to open new markets. MOVE FROM HOLD TO SELL
Local Bounti (LOCL) shares advanced from 7.9 to 8.7 in their first week as an Explorer recommendation. The company announced the successful completion of its acquisition of California-based Hollandia Produce Group, which operates under the name Pete’s. Local Bounti uses proprietary technology to grow leafy greens such as romaine and butter lettuce along with herbs like cilantro and basil using 90% less land and water than traditional agricultural methods – and without pesticides.
Local Bounti is one of the few startups that went public via SPAC last year that exceeded its 2021 revenue projections, with 32% gross margins. The company raised $125 million including from agriculture giant Cargill, which is providing $200 million in debt financing.
The company is poised to expand distribution to major food retailers such as Walmart, Kroger, Albertsons and Target. There is also the potential opportunity to license its technology to major agriculture players since the company has already has more than 50 patents. Local Bounti is disrupting the cultivation and delivery of produce and has the potential to be a big winner. BUY A HALF
Marvell Technology Group (MRVL) shares struggled this week, though from a total performance standpoint it remains a solid pick. The stock is trading about 22 times trailing earnings compared to the average of 33 on the Nasdaq 100. The average projection by Wall Street analysts for Marvell in the current fiscal year is revenue growing 37% and earning per share up 46%.
5G and cloud and data centers should be a strong driver of Marvell’s growth in the next few years and Marvell’s last quarter was impressive as revenue increased in all five of its end markets. HOLD A HALF
Novonix (NVNXF, NVX) shares came out of the gates hot this past week, surging 20% before settling at 5 even on no news. The Australian company plays a critical role as a strategic provider of U.S. synthetic graphite that is both higher quality and lower priced than Chinese graphite. Another plus is its strong partner, Phillips 66. This is a speculative idea and the company is at least a year away from reaching breakeven in terms of profitability but it remains undervalued and a buy recommendation. BUY A HALF
Oracle Corporation (ORCL) stock held firm this week as the company recently announced the availability of Java 18, the latest version of the world’s number one programming language and development platform. Java 18 delivers better performance, stability, and security that will further improve developer productivity. Oracle’s co-founder Larry Ellison owns 43% of the company and is focused on the long-term success of the company. BUY A HALF
QuantumScape (QS) shares demonstrated relative strength this week and finished the week unchanged. Over the past two weeks, however, the stock is up nearly 35%.
Quantum’s technology could allow us to create electric vehicles that could last for thousands of miles without needing to be recharged. These so-called “forever batteries” will take some time to develop but German luxury auto brand Porsche may use QuantumScape’s batteries in its electric vehicle lineup, including an electric version of its 911 model. You will need some patience with this one but solid-state batteries could be one of the most promising technological breakthroughs of the EV revolution. BUY A HALF
Sea Limited (SE) shares jumped 15 points on Monday but finished the week where they started, at 120. Sea’s recent exit from the India market has improved the stock’s risk/return profile and will limit the losses that normally accompany early expansion in a new e-commerce market. Plus, Sea’s e-commerce wing, Shopee, remains strong. This stock is still a hold for now. HOLD A HALF
StoneCo Ltd. (STNE) shares are up over 20% since being added as a recommendation just three weeks ago. The stock is still a mile below its high of 95, posted in February 2021. Based in Sao Paulo and founded in 2000, StoneCo is a digital payments company providing financial technology solutions for merchants to conduct electronic commerce across in-store, online, and mobile channels in Brazil. Warren Buffett’s Berkshire Hathaway invested $340 million in this Brazilian fintech company at its IPO in late 2018. Brazil is largely a cashless society and 45 million Brazilians still don’t have a bank account, so there is plenty of room for Stone to grow. BUY A HALF
| Stock | Price Bought | Date Bought | Price 4/6/22 | Profit | Rating |
| Fisker (FSR) | 15 | 2/4/21 | 13 | -12% | Buy a Half |
| Ford (F) | 20 | 11/23/21 | 15 | -24% | Buy a Full |
| Harley-Davidson (HOG) | 42 | 2/18/22 | 36 | -13% | Sell |
| Local Bounti (LOCL) | 9 | 4/1/22 | 9 | 0% | Buy a Half |
| Marvell Technology Group (MRVL) | 50 | 4/1/21 | 67 | 34% | Hold a Half |
| Novonix (NVNXF) | 2.24 | 8/6/21 | 5 | 124% | Buy a Half |
| Oracle Corporation (ORCL) | 94 | 11/11/21 | 82 | -13% | Buy a Half |
| QuantumScape (QS) | 16 | 2/3/22 | 19 | 20% | Buy a Half |
| Sea Limited (SE) | 15 | 2/8/19 | 121 | 713% | Hold a Half |
| StoneCo Ltd. (STNE) | 9 | 3/11/21 | 11 | 23% | Buy a Half |