Portfolio Changes:
Atlas Corp. (ATCO): MOVES FROM BUY TO HOLD
Stocks Steady But Investors Stay Cautious
With the exception of the surge by Sea (SE), Explorer positions were relatively quiet this week.
Nearly 95% of companies in the S&P 500 are now trading above their 200-day moving average, according to Dow Jones Market Data, the highest percentage since May 2013. As if we didn’t have enough to worry about, as of late February, investors had borrowed a record $814 billion against their portfolios. That was up 49% from one year earlier, the fastest annual increase since 2007, during the frothy period before the 2008 financial crisis. Before that, the last time investor borrowing had grown so rapidly was during the dot-com bubble in 1999.
On the good news front, Tesla sold 184,800 vehicles in the first three months of 2021, up from 88,500 a year ago. It produced 180,338 vehicles, compared with 102,672 in the first quarter of 2020. Tesla was helped by the arrival of the Model Y, a larger version of its Model 3 sedan. Those two cars accounted for almost all of its deliveries in the first quarter. It reported just 2,020 deliveries of its Model S luxury sedan and the Model X sport-utility vehicle.
Moving to the power sector of aerospace, by 2025, it may be possible to fly from D.C. to Paris in four hours, instead of the current eight, or from San Francisco to Tokyo in just six hours on a supersonic jet, according to Axios Future. You may recall that British Airways and Air France flew the Concorde from 1976 to 2003 from New York to London in three hours. But the Concorde was unprofitable, not to mention terrible for the environment. Now, lightweight materials, more efficient engine technologies and cleaner fuels can make supersonic jets both cheaper and profitable.
For example, Aerion is developing a supersonic business jet with the backing of Boeing that will begin production in Florida in 2023, and should be ready for customer delivery by 2027. NetJets has ordered 20 of the planes at a $120 million price tag for each.
Position Updates
Anglo American (NGLOY) shares were up 5% this week but have generally been unimpressive and sitting right where they were a month ago. 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. I recommend you buy a half position if you have not already done so. BUY A HALF
Atlas Corp. (ATCO) shares inched up this past week and somehow have misfired as a trading play on dislocations in container shipping caused by the pandemic. Atlas charters a fleet of 118 containerships and the pandemic has led to distorted trade flows and a worldwide container shortage crisis. Demand for these shipping containers is surging so I’m hopeful that Atlas can replicate its last reported quarter’s operating margins of 40% with revenue increasing for the quarter, year on year, 36.6%. We’ll move this to a hold as my patience is waning. MOVE FROM BUY A HALF TO HOLD
Cloudflare (NET) shares, after last week’s spurt, held firm this week as the company announced that it will report its financial results for the first quarter after the market closes on Thursday, May 6. Given that we have taken some profits off the table, I’m going to keep this a hold and will watch the stock to see if it forms a new uptrend. Cyber is still a strong power trend and Cloudflare has built a global cloud platform that delivers a broad range of network services, making them more secure and eliminating the cost and complexity. I suggest we stick with this stock. Aggressive investors can purchase additional shares on dips. HOLD A HALF
Fisker Inc. (FSR) shares have stalled a bit along with many electric vehicle stocks. There is no news on the company with the exception that Foxconn recently announced it plans to build Fisker’s second generation EV. The company will have little or no sales revenue in 2021 and its first product will be the Ocean, a mid-priced SUV. If you have not yet purchased shares, I encourage you to do so at these levels. BUY A HALF
International Business Machines (IBM) shares continued a steady uptrend, reaching 135. IBM has begun the process of exiting its managed infrastructure services business, and expects to execute the spinoff later this year. IBM will continue to build supercomputers and operate IT systems but the key emerging growth driver in the company has become the hybrid cloud. IBM trades at just 12 times prospective earnings and seven times the company’s cash flow guidance. Plus, the company is sitting on $13.8 billion of cash. As a bonus, IBM delivers a 4.9% current dividend yield. BUY A HALF POSITION
Marvell Technology Group (MRVL) shares were up 5% in their first week in the Explorer portfolio. 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 markets include drones, data integration and consumer and industrial robotics. These are all huge markets giving Marvell a long runway of growth as the company expects double-digit growth in both sales and net profit for 2021. Despite these high-growth markets, the stock is trading at a reasonable 22 times earnings. I suggest we take advantage of the pullback in tech stocks to begin with a half position. BUY A HALF
Paysafe (PSFE) shares lost a little ground this past week as the company began trading independently of its SPAC. Founded in 1996, Paysafe, based in London, is a payments platform that connects businesses and consumers across 70 payment types in over 40 currencies globally. I still rate this stock a buy and recommend you purchase shares if you have not already done so. BUY A HALF
QuantumScape (QS) shares added a couple of points this week despite some weakness yesterday. Last week, the company announced that it has successfully met the technical milestone that was a condition to close of Volkswagen investing an additional $100 million into QuantumScape. The company’s solid-state battery can achieve greater range, superior reliability and a longer life than their lithium-ion cousins. In addition, they’re also capable of charging to 80% in as little as 15 minutes, half the time the fastest Tesla Supercharger takes to charge.
I recommend that you purchase shares if you have not already done so. BUY A HALF
Sea Limited (SE) shares continued to strongly rebound this week and have zoomed from 199 to 245 in just two weeks. Sea’s gaming group continues to grow its user base and the company now has 610 million quarterly active users, a total that is growing at an annual rate of 120%. Morgan Stanley came out this week with a target price of 305.
E-commerce is Sea’s second growth engine with a gross merchandise value of $12 billion last quarter on a record billion orders. We have taken profits several times over the remarkable rise of this stock but after its pullback a few weeks ago, I moved this stock to a buy. BUY A HALF
Taiwan Semiconductor (TSM) shares were up and down this week, settling around 120. I believe this is an excellent entry price if you have not purchased shares yet. Taiwan Semiconductor, usually referred to as TSMC, is dominant in the premium microchip sector and the company recently announced it will raise capital expenditures to $28 billion in 2021, a 47% year-over-year increase.
TSMC was formed when the Taiwan government and Taiwan’s Electronics Research and Service Organization persuaded Philips to start a chip foundry in 1986 together with several local public and private firms and provided half of the start-up cost. I’m convinced that Taiwan Semiconductor is the most strategically important company in the world. BUY A HALF
Virgin Galactic (SPCE) shares were relatively quiet this week as the company looks to resume test flights in the coming months at its headquarters in New Mexico. It will likely be summer before the ship, designed and manufactured in California, undergoes glide flight-testing.
While Virgin’s test-flight program in New Mexico remains on hold, its Texas rival, the private SpaceX, is test-flying Starships at a rapid clip. It is further from commercialization than Virgin but it eventually will have a spaceship capable of flying 100 tourists at a time on days-long excursions through space compared to Virgin’s six-seaters able to provide just a few minutes of weightless flight at a time.
We have taken profits several times, and the share price is four times our entry point. I’m keeping this stock a hold for now and we can afford to wait as the company has over $660 million. HOLD A HALF
