December 2, 2021

Portfolio Changes/Comments:
Bombardier Inc. (BDRBF) - From Buy to Sell

Cleantech Strategic Metals
The market has entered a rough patch, especially for tech and stocks that have not been demonstrating relative strength. Explorer stocks are all over the map, with Coupa (COUP) and Cloudflare (NET) showing some weakness, many positions holding steady, and Novonix (NVNXF) up 25% in the last week.

In this market, I recommend that you don’t make drastic changes. Perhaps sell some weaker performers and assess whether you have a balanced, diversified portfolio. With Congress pumping significant liquidity into the economy and continued low interest rates, many investors are bracing for the possibility of persistent inflation.

Even if you are a skeptic, why not at least hedge the possibility and make some money at the same time? Perhaps the best inflation signal and hedge is commodities. Commodities are starting to move after a 10-year bear market.

The demand should be there, with the world population expected to climb over 8 billion in the next couple of years. Goldman Sachs also points out that while the energy-heavy S&P GSCI commodity index has surged from its April 2020 low, its total return has been negative-60% over the past decade against a whopping 263% total return for the S&P 500 index.

No question, natural resources like energy, metals, and agriculture are back in vogue, and perhaps we should all get on board.

Institutional investors and university endowments like Harvard’s and Yale’s have long had some investment in commodities to diversify their holdings and hedge risks. Individual investors may now want to do the same and increase their commodity exposure to 10%-15% or more of their portfolios.

But you will have to be selective. Some agricultural commodities such as soybeans, wheat and corn, after a strong start in 2021, have pulled back a bit. Traditional energy companies may have some catch-up potential left in the tank since they make up only about 3% of the S&P 500 today. They made up triple that a decade ago before investors left the old economy for the FAANG stocks.

But I believe metals are the place to be long term, though again you need to be careful. A good place to start is the metals that will fuel clean tech and electrifying the grid. Below is a graph from an IEA (International Energy Agency) report projecting how electric vehicles change the game for metals.

Here is a link to the full IEA report for those who are interested.

Portfolio Updates
Bombardier Inc. (BDRBF) has been a lackluster stock and the private aircraft trend I saw developing seems a ways off, so I’m moving the stock to a Sell. Bombardier is a player in private and commercial aviation. Headquartered in Montréal, Canada, Bombardier is active in more than 12 countries and supports a worldwide fleet of more than 4,900 aircraft in service with a variety of multinational corporations, charter and fractional ownership providers, governments and private individuals. MOVE FROM BUY TO SELL

ChargePoint Holdings (CHPT) shares have shown some strength in a tough market, perhaps buoyed by the infrastructure bill, giving back only two points. ChargePoint announced this week that the next quarterly financials would be released next Tuesday, December 7. The company offers drivers in North America and Europe more than 118,000 places to charge their electric vehicles (EVs) and has 200,000 partner ports. I believe that the stock is a buy at its current levels, with EV growth in favor with investors again. BUY A HALF

Cloudflare (NET) shares fell from 182 to 164 as the weak market hit tech stocks particularly hard. The company recently announced that third-quarter revenue increased 51% year over year to $172.3 million. Customers surpassed 132,000 in the quarter, up 31%. Enterprise customers reached 1,260, up 71%. The stock is up 220% over the last year, even in the wake of this past week’s big dip. Cloudflare also announced a partnership with Oracle and now both organizations that use Cloudflare’s cybersecurity solutions and Oracle’s cloud infrastructure will automatically save money by avoiding data transfer fees charged by cloud providers outside of the Bandwidth Alliance.

Cloudflare provides network security, performance and reliability services to a growing portion of global web traffic. I’m going to keep this a hold though more aggressive investors can add to their position on the heels of the recent big dip. HOLD A HALF

Coupa Software (COUP) shares were impacted by a the tech unfriendly market, tumbling from 195 to 181 over the last week. The company is expected to release third-quarter financials next Monday, December 6. Coupa specializes in software providing cloud-based business through its spend management platform. Its platform connects organizations with suppliers globally, and provides visibility into and control over how companies spend money, optimize supply chains, and manage liquidity, as well as enables businesses to achieve savings that drive profitability. The company already has 2,000 clients including Amazon and Wal-Mart with some estimating its potential target market at $94 billion. While the company is still unprofitable, in its most recent quarter Coupa’s revenue surged 42% and free cash flow reached $643 million. I’m keeping this stock a buy as its services are increasingly in demand. BUY A HALF

Fisker Inc. (FSR) shares were roughly flat for the week even though the stock was down 7.5% yesterday. Fisker offers investors a custom, “asset light” and “Apple of autos” strategy relative to EV maker leaders like Tesla. Its Ocean EV has a sub-$40,000 retail price point, making it a more affordable EV option. We have to accept that the company’s first product will be launched in the latter part of 2022, perhaps ahead of some its bigger competitors. This is an aggressive stock but I confirm a buy rating on Fisker even though it won’t go into production until late 2022. BUY A HALF

Ford (F) shares were flat in their first week as an Explorer recommendation. Let me recap last week’s overview of the company, its relationship with Rivian, and plans to become a major player in electric vehicles.

Ford earlier made a 12% capital investment in Rivian, which has been a terrific investment. Ford’s strategic plan, outlined in May, has positioned the company as an aggressive player in electric vehicles, committing $7 billion for three new battery factories in Tennessee and Kentucky, along with a plant to build electric pickup trucks, as part of $30 billion in electric-vehicle investment planned through 2025. Its Mustang Mach-E electric SUV, a competitor to the Tesla Model Y, is off to a strong start with about 22,000 Mustang Mach Es sold so far this year. Ford estimates global Mach-E demand could be 200,000 vehicles a year in the near future.

In addition, Ford has more than 160,000 nonbinding orders for its electric F-150 Lightning pickup truck, which is scheduled to go on sale this spring. Ford plans to produce 80,000 F-150s a year. The Ford F-150 Lightning is expected to have a starting price of just $40,000 without the bells and whistles and will have a range of over 300 miles. Ford also has a big footprint and is a quality brand in Europe where there is a strong affinity to electric vehicles. Furthermore, Ford expects to earn between $4 billion to $5 billion in adjusted free cash flow (FCF) and an estimated $11 billion in earnings before interest and taxes. This is a low-risk way to play the EV boom. BUY A HALF

Marvell Technology Group (MRVL) shares held firm this week, demonstrating some welcome relative strength in the tech sector. Marvell’s semiconductor chips are used in a number of growth applications such as 5G wireless networks, cloud computing, automotive, and industrial markets. Several Wall Street analysts have raised estimates and Credit Suisse recently upgraded the stock, calling Marvell “one of the most strategic assets in semiconductors.”

Marvell’s semiconductor products are state-of-the-art and in high demand, allowing businesses and consumers to take advantage of 5G capabilities. I recommend buying this stock if you have not already done so. BUY A HALF

Novonix (NVNXF) shares continued their solid and strong upward trend, jumping from 6.8 to 8.6 for a gain of 25%.

The stock has more than doubled in the last month. Based in Australia, the technology and advanced materials supplier is focused on synthetic graphite for the electric vehicle and storage battery industry. It is scaling up its synthetic graphite anode operation to fill the gap in the U.S. supply chain as its operations are now almost entirely in North America, its senior executives are all based in North America, and its largest shareholder, Phillips 66, was founded in Texas in 1927.

Novonix, as a non-Chinese synthetic graphite producer, is immune to any potential disruptions caused by either Chinese politics or its international trade disputes. Getting Phillips 66 involved in its operations will give Novonix better access to specialty coke and other materials that the energy company makes for electric car battery producers. Novonix expects to manufacture 20 million tons of graphite anodes in 2025, and projects its annual output could grow to 100 million tons by 2030, leading to about $1 billion in revenue.

This is an aggressive idea but this stock is a play on an important clean technology. It is a speculative stock but I still rate it a buy. BUY A HALF

Oracle Corporation (ORCL) shares were steady in a weak market. Oracle is the world’s largest database management company, with more than 430,000 customers in an incredible 170-plus countries. For close to 50 years, the company has offered its software and, more recently, cloud-engineered systems. It has the industry’s broadest and deepest suite of cloud applications. More than 18,000 patents worldwide protect Oracle’s business model and profit margins. Most importantly, Oracle is now taking on the “big three” in cloud services.

While most investors still view Oracle as a software company, it is positioning itself primarily as a cloud company, so sales and earnings should expand. Oracle can build on its already hundreds of thousands of corporate customers by moving them to the cloud. Oracle offers us growth at a very reasonable price. The stock trades at just under 20 times earnings with big profit margins, a high return of equity, $39 billion in cash, and I like that insiders hold 42% of the stock. BUY A HALF

Sea Limited (SE) shares were off again this week, going from 279 to 261 as a minority of analysts seem to detect less rapid growth. Since late 2016, revenue has grown some 2,800%. It has been a spectacular stock and I have encouraged taking partial profits during it steady rise.

If the stock continues to weaken, I will move this to a strong buy as its growth fundamentals are clear. Southeast Asia’s booming internet economy is set to double to $363 billion by 2025, eclipsing the previous forecast of $300 billion, according to research from Google, Temasek Holdings, and Bain. Shopee also plans to expand into Poland, India and Spain and is looking at Brazil and France. I also see further potential upside to Sea because of strong momentum in its gaming portfolio and increasing fintech revenues. Aggressive investors should be an incremental buyer of this stock after the recent pullback. BUY A HALF

Veeco (VECO) shares were largely unchanged this week after the company recently came out with quarterly earnings of $0.40 per share, beating expectations of $0.35 per share. It also bought back more than $100 million in convertible notes. This is an American high quality provider of state-of-the-art semiconductor fabrication equipment. The company delivers the leading edge technology to U.S.-based and international high-end class chipmakers, some of which are 100% reliant on Veeco technology. Revenue growth for 2021 may be up 30% and Veeco is growing earnings at a 20% clip. The stock represents a backdoor play on semiconductors. Our expectation is that Veeco is building a base to move a leg higher.

I recommend that you acquire shares if you have not already done so. BUY A HALF

Virgin Galactic (SPCE) shares fell from 16.6 to 14.9 this week. Last week, I recommended selling half your shares as we are still up more than 100% from our initial entry point. This concept stock on space mania is still intriguing as the company mentioned that $450,000 space-tourism seats are selling faster than it anticipated. I’m still on the positive side on this high-risk stock and believe it is similar to Tesla in its early days. However, I fully admit they have missed targets and there is more competition out there, such as Blue Origin. The company has to end the delays and increase revenue or investors will jump ship. I recommend that most investors sell half their position to lock in some profits if you did not do so last week. SELL HALF