Portfolio Changes:
Anglo American (NGLOY) Moves from Hold to Sell
Pandemic Fades, Economy Moves
The market seems to have found its footing this week as the economy reopens amidst some supply shortages and inflationary pressures. Electric vehicle stocks are coming back as Ford announced a big push into EVs and its new F-150 Lightning received 70,000 deposits in just 10 days.
After some weakness, Fisker (FSR) and Virgin Galactic (SPCE) have bounced back nicely over the last two weeks—50% and 100%, respectively. Marvell Technology Group (MRVL), our play on 5G, has developed a nice uptrend over the past two weeks as the company expects to announce first-quarter earnings next week.
The strategic, even revolutionary importance of fifth-generation mobile broadband (5G) is not just its speed but the applications and future technologies that it enables.
Instead of just calls and data, 5G allows machines to communicate with other machines and enables connections between sensors, robots, autonomous vehicles and other devices. This is referred to as the “Internet of Things.”
China really has had the jump on America in the 5G arms race since April; 700,000 base stations have been installed in China versus a mere 10,000 in America. To highlight the challenge we face, work is already underway on China 6G technologies, with speeds 10 times greater than the 5G.
Meanwhile, Taiwan Semiconductor Manufacturing (TSM) has started construction at a site in Arizona where it plans to spend $12 billion to build a computer chip factory on track to start volume production of chips using the company’s 5-nanometer production technology starting in 2024. The company is expected to be one of several companies, including Intel Corp and Samsung Electronics Co Ltd, competing for some of the $54 billion in subsidies for the chip industry that advanced in the United States Senate last week.
Portfolio Updates
Altimeter Growth Corp. (AGC) shares were steady this week as we await this SPAC’s acquisition company, Grab, to open trading on Nasdaq under the symbol “GRAB”.
Grab is the leading super-app platform in Southeast Asia and the Grab app has been downloaded onto millions of mobile devices, giving users access to over nine million drivers and merchants. Grab offers a wide range of on-demand services in the region, including mobility, food, package and grocery delivery services as well as mobile payments and financial services in eight countries. I suggest you buy a half position here if you have not already done so. BUY A HALF
Anglo American (NGLOY) shares gained two points after we moved this to a hold last week. This play on infrastructure basic materials is also the largest producer of platinum, with about 40% of world output, and explores for diamonds, copper, platinum group metals, coal, iron, nickel, and manganese ores. This stock has been a disappointment and I’m going to move this to a sell as I look for a better play on clean tech growth. MOVE FROM HOLD TO SELL
Cabot Corporation (CBT) shares gained marginally this week as a play on specialty chemicals and materials. Headquartered in Boston, the company was started in 1882 and now operates 45 manufacturing facilities in 21 countries around the world with strong growth in emerging markets.
Cabot’s edge is a combination of technical, commercial and manufacturing talent among the best in the industry. One of the company’s key growth end markets is material used to make lithium-ion batteries. Cabot recently reported its second-quarter results, posting earnings per share that were up a record 79% year over year.
For fiscal 2021, Cabot projects earnings of around $5.00 a share, meaning that the stock is trading at just over 12 times forward earnings. In addition to a healthy balance sheet, Cabot also has a dividend yield of 2.2%. The stock is an effective hedge against inflation, and a play on the economic recovery with exposure to the lithium-ion battery sector. BUY A HALF
Cloudflare (NET) shares had another good week and, after some weakness in early May, have rebounded into a nice uptrend. The company provides a broad range of network services to businesses in more than 200 cities and over 100 countries. It offers network security, performance and reliability to a growing portion of global web traffic. Cloudflare ended the first quarter with 119,206 paying customers, up 34%. But 945 of those customers now pay over $100,000 each year, a 70% increase from the same period last year.
I’m going to keep this a hold though more aggressive investors can add to their position. Cyber is still a strong power trend and Cloudflare has built a global cloud platform that delivers a broad range of network services. HOLD A HALF
Fisker Inc. (FSR) shares were up 15% this week and have risen close to 50% over the last two weeks. Fisker recently reported its first quarter for 2021 with cash equivalents of $985 million and zero debt. Losses from operations totaled $33.1 million.
A key element to the Fisker story is that it won’t manufacture its own vehicles. Rather, it will use large contractors, such as Magna and Foxconn, to build its vehicles. We have to accept that the company will have little or no revenue in 2021; the company’s first product will be the custom Ocean, a mid-priced SUV to be launched in 2022. This is an aggressive stock. BUY A HALF
International Business Machines (IBM) shares added another two points this week as the company announced yesterday that it is creating the IBM Center for Government Cybersecurity, a collaborative environment focused on helping federal agencies address cyber threats. The center will deliver software and managed services to over 17,500 security customers globally. IBM is trading just over 13 times forward earnings and 12 times free cash flow, bundled with a 4.5% dividend yield. BUY A HALF
Marvell Technology Group (MRVL) shares have developed a nice uptrend over the past two weeks as the company expects to announce first-quarter earnings next week.
Marvell designs, develops and sells a wide variety of semiconductor products that are at the core of 5G-capabable networks. The company’s processors and products are cutting-edge and already generate $3 billion in annual sales. Marvell’s key growth markets include drones, data integration and consumer and industrial robotics. The company expects to post double-digit growth in both sales and net profit in 2021. Despite these high-growth markets, the stock is trading at a reasonable 22times earnings. BUY A HALF
Palantir Technologies (PLTR) shares were up 14% in the stock’s first week in the Explorer portfolio as the company signed a deal worth $111 million with the United States Special Operations Command (USSOCOM) to continue to serve as its enterprise data management and AI-enabled mission command platform.
Palantir is a software company specializing in big data analytics. Peter Thiel and a few others from the PayPal mafia founded Palantir in the early 2000s. Its software is used by government agencies in a wide range of applications and the company sees plenty of room to expand into the commercial sector. On May 11, the company posted its first quarterly profit as revenue reached $341.2 million. PLTR stock is roughly 35% off its January peak but the stock has been in a clear uptrend. BUY A HALF
Sea Limited (SE) tacked on a five-point gain this week to reach 258.
Sea Money, Sea’s fintech division, saw adoption accelerate throughout the quarter. Mobile wallet payments volume more than tripled year over year to $3.4 billion, while quarterly paying users grew 145% to 26 million.
Shopee, Sea’s e-commerce arm, grew even faster than Garena in the quarter. Revenue rose 250% to $922 million on the back of a 153% rise in orders and 103% surge in gross merchandise volume. We have taken profits several times over the past two years with this impressive growth stock. It benefits greatly as a fintech leader in the fast-growth markets of Southeast Asia. BUY A HALF
Taiwan Semiconductor (TSM) shares breached 119 as the company announced it has started construction at a site in Arizona where it plans to spend $12 billion to build a computer chip plant on track to start production of chips using the company’s 5-nanometer production technology starting in 2024.
Taiwan Semiconductor controls 84% of the market of the smallest, most efficient chips. About 60% of revenue came from customers with headquarters in North America and 20% from those based in China. I would take advantage of recent weakness to be a buyer of this dominant, strategic semiconductor stock. BUY A HALF
Virgin Galactic (SPCE) shares jumped 38% last week and this week continued higher, from 26 to 31. Over the past two weeks the stock has nearly doubled after it successfully landed a powered test flight of its SpaceShipTwo spaceplane on May 22 and fueled by a couple of analyst upgrades.
This stock debuted on the NYSE on October 28, 2019, becoming the first publicly traded commercial space tourism company after a reverse merger with Social Capital Hedosophia Holdings.
This test flight was needed to obtain the final data points required for FAA approval of commercial passenger service. Virgin Galactic previously said that following the successful completion of the test flight a second test flight will include two pilots with a full cabin. A third flight will include founder Richard Branson, with sales of seats to private astronauts reopening around the same time. And a fourth flight, the last of the test flight program, will be with the Italian Air Force to demonstrate Virgin Galactic’s capabilities for microgravity research and professional astronaut training.
The space sector is becoming increasingly more crowded, with more opportunities for investors outside of Virgin Galactic as blank check companies plan to take Rocket Lab, Spire Global, and Astra Space public. I’m keeping this stock a hold for now but depending on when you purchased the stock, feel free to take partial profits after this sharp jump. HOLD A HALF
