Portfolio Changes:
None
Uncertainty Reigns
After a four-day losing streak, stocks surged and oil prices fell yesterday, as volatility continued. Wary investors lack conviction as they track the economic fallout of the war in Ukraine. Higher inflationary expectations and lower growth are leading to investors hedging risks and buying opportunistically.
The fallout from Russia’s invasion has been most dramatic in commodity markets as prices for oil, natural gas and critical raw materials such as rare metals, plus key crops such as wheat, fuel fears of a recession. The impact of all this on sectors varies, and can become complex. For example, high oil prices propel the electric vehicle (EV) revolution, while higher prices on inputs from nickel to rare earths raises EV costs.
Russia’s stock market has remained closed since February 25.
Sea Limited (SE) continues to drift lower, while other Explorer stocks were fairly steady with stocks having an up week.
I continue to like our recommendations despite the market upheaval. One example is Marvell (MRVL), which designs and manufactures a wide variety of semiconductor products that are at the center of 5G-capable networks.
Marvell’s products offer data rates up to 100 times faster than 4G technology, allowing business and consumer users to take advantage of much better speed and reliability.
Last week the California-based company reported that fourth-quarter earnings jumped 72% on a 68% increase in sales as revenue increased in all five of its end markets.
Marvell’s CEO projects that year-over-year growth will be more than 80% and based on this last quarter, some Wall Street analysts maintain price targets of over 100. It currently trades at 66 a share.
Portfolio Updates
Fisker (FSR) shares lost minimal ground this week and the company appears on schedule to start deliveries in November this year. Fisker has secured production partnerships with Austrian auto manufacturer Magna Steyr – a subsidiary of Magna International (MGA) and Taiwanese multinational electronics contract manufacturer Foxconn. This custom EV maker has a respected CEO, and an “Apple” asset-light strategy. The company’s sequel to its Ocean SUV is the PEAR, a smaller vehicle than the Ocean, to make its debut on roads in 2024. Pricing starts at $29,900.
This remains an aggressive stock but I confirm a buy rating on Fisker. BUY A HALF
Ford (F) shares pulled back a point as separating its fast-growing electric vehicle operations (Ford Model e) from its legacy combustion engine business (Ford Blue) was well received. Ford outlined that it expects to produce two million EVs by 2026 and intends $50 billion in EV investment through 2026. Ford said it expects earnings before interest and taxes (EBIT) of $11.5 billion-$12.5 billion for 2022, which would represent an increase of 15%-25% over 2021. Ford is still a buy. BUY A FULL
Harley-Davidson (HOG) shares retraced last week’s gains to close at 39 as the average Wall Street analyst has a projected upside for the stock over the next year of 30%. This leading motorcycle maker is banking on its LiveWire electric motorcycle to open new markets and recently reported a fourth-quarter profit that saw motorcycle revenue surge 54%.
In its most recent quarter, Harley-Davidson’s revenue jumped 40% year over year to $1 billion, driven by a 39% rise in motorcycle shipments. Harley also announced it would be spinning off its LiveWire all-electric motorcycle business into a stand-alone publicly traded company. BUY A HALF
Marvell Technology Group (MRVL) shares were steady at 66 this past week. While Marvell shares were up 84% in 2021, this year is a different story as continued supply chain issues, Russia’s invasion of Ukraine and concerns about the chip cycle peaking have weighed on semiconductor stocks recently. The Philadelphia semiconductor index, known as SOX, is down about 20% year to date.
Last week the California-based company reported that fourth-quarter earnings jumped 72% on a 68% increase in sales as revenue increased in all five of its end markets. Marvell’s CEO projects that year-over-year growth will be more than 80% and based on this last quarter, some Wall Street analysts maintain price targets of over 100. HOLD A HALF
Novonix (NVNXF, NVX) shares, while up 11.5% on Wednesday, were down slightly for the week. This strategic provider of domestic synthetic graphite is both higher quality and lower priced than Chinese graphite and has an excellent partner in Phillips 66. We are in a good position since we are considerably above our entry price and have taken some profits. This is an aggressive idea but it remains undervalued and a buy. BUY A HALF
Oracle Corporation (ORCL) stock was unable to hold on to the gains from last week as the company suspended sales to Russia in the wake of the Ukraine crisis. The company will report fiscal third-quarter earnings today. Oracle offers us cloud-computing high growth and wide margins coupled with an undervalued price relative to its peer group. This is a solid technology core holding for conservative investors that seems undervalued to me right now. BUY A HALF
QuantumScape (QS) shares are demonstrating some relative strength and were up slightly for the week. This has been a bit of a volatile stock along with its fellow EV technology companies. While it will take some time, its technology is on track to develop a battery that will charge to 80% of capacity in 15 minutes. Its successful tests have unlocked $400 MM investment from Volkswagen. QuantumScape’s stock price peaked in late December 2020 at an all-time-high of 133 so the current price (16) provides us with some potential upside. BUY A HALF
Sea Limited (SE) shares popped 8% yesterday but were down from 118 after recent mixed fourth-quarter financials did not put to bed concerns that its red-hot growth is slowing down while expenses and losses remain stubbornly high. While revenue doubled from the year-ago period, losses widened to 88 cents a share.
In short, its e-commerce wing, Shopee, is still strong while profit-making gamer Garena has been at least temporarily banned in India. The stock has made Explorer investors a lot of money and we have taken profits several times and it is far from its high so I moved the stock to a hold last week until it regains its momentum. Another concern is that it is facing stiff competition in international markets outside of Southeast Asia.
Singapore’s ministry of trade and industry (MTI) announced last week that it hoped the issue of India’s ban of Sea’s gaming group would be resolved soon. HOLD A HALF
Veeco (VECO) shares as usual held steady, inching up from 26 to 28 based on its market position, strong balance sheet and earnings growth. Veeco recently reported quarterly earnings of $0.43 per share, an earnings increase of 19.4%, and revenue for 2021 was up 28% over 2020. Veeco makes the equipment and technology essential for chip fabrication game, a business with technological and high capital barriers to entry which leads to high margins and return on equity. Veeco is a solid performer but I moved this stock to a hold last week until markets settle down. HOLD A HALF
| Stock | Price Bought | Date Bought | Price 3/9/22 | Profit | Rating |
| Fisker (FSR) | 15 | 2/4/21 | 11 | -24% | Buy a Half |
| Ford (F) | 20 | 11/23/21 | 16 | -19% | Buy a Full |
| Harley-Davidson (HOG) | 42 | 2/18/22 | 39 | -7% | Buy a Half |
| Marvell Technology Group (MRVL) | 50 | 4/1/21 | 67 | 34% | Hold a Half |
| Novonix (NVNXF) | 2.24 | 8/6/21 | 4 | 69% | Buy a Half |
| Oracle Corporation (ORCL) | 94 | 11/11/21 | 76 | -19% | Buy a Half |
| QuantumScape (QS) | 16 | 2/3/22 | 16 | 0% | Buy a Half |
| Sea Limited (SE) | 15 | 2/8/19 | 99 | 566% | Hold a Half |
| Veeco Instruments Inc. (VECO) | 23 | 9/10/21 | 29 | 24% | Hold a Half |