November 18, 2021

Portfolio Changes/Comments:
Palantir Technologies (PLTR) - Move from Hold to Sell
Virgin Galactic (SPCE) - Sell Half Your Position

Some of you have asked about IBM’s recent spin-off Kyndryl Holdings (KD), which IBM shareholders received via the spin-off this month. For those wondering what to do with Kyndryl, I recommend that you sell KD stock.

Moving on, retailers report earnings this morning and there is continued concern about inflation and Chinese property debt. The market is choppy as investors are wary of higher interest rates. Explorer stocks in general had a quiet but up week.

Metaverse to Earth
There is one topic that brings together Wall Street, Hollywood and Silicon Valley – the metaverse. While “metaverse” definitions are varied, the idea of bringing people together in a virtual interactive world is, as they used to say, the talk of the town.

The chief driver is Facebook rebranding as “Meta”. This has spawned a wide array of sudden metaverse stock plays. Disney recently told investors it hopes to connect consumers via “our own Disney metaverse.”

Some of these stocks may indeed go up but I caution you to be selective as even Mark Zuckerberg admits it might be a decade until this technology move pays off. We’re still many years away from any sort of shared 3D alternate reality achieving the kind of widespread prevalence of internet services today. In addition, Facebook may just be trying to distract us from the government investigations into its company practices. Facebook’s metaverse pivot could fail; more than a decade ago there was a now defunct company offering a similar experience called “second life”.

The competition in the market will likely be over selling hardware. Companies will compete fiercely to be the one with the fastest headset or the newest spectacles with the longest battery life.

Energy’s Time to Shine?
One of my favorite analysts is Goldman Sachs’ head of commodity research Jeff Currie. Currie leads a newly emerging Wall Street consensus on traditional energy stocks. He was an early energy bull, predicting a surge in commodity prices back in January. Today, Currie says Goldman’s view is “far more bullish than … we could have ever envisioned.”

Why? Energy companies 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.

Currie calls the new trend “the revenge of the old economy,” as the market recognizes that higher prices are needed to increase supply to meet demand. The International Energy Agency (IEA) estimates global oil demand will grow at 1% or 2% a year. Demand for natural gas will expand at least twice that rate and the IEA even expects coal consumption to rise.

Finally, the world’s balance of power will shift. Russia still is an energy power and supplies about 40% of the European community’s energy. Its trade with China has more than doubled in the last decade and its de facto alliance with China creates the core of the Eurasian trading bloc, and this means money and power.

I am on the hunt for ways to play this energy resurgence – as well as the metaverse – and hope to have a new recommendation or two along those lines in the coming weeks.

Portfolio Updates
Bombardier Inc. (BDRBF) shares dipped again this past week, this time from 1.59 to 1.40, on no news. Bombardier is a player in aviation and a bet on renewed activity in private and corporate markets. 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. Despite recent sluggishness, momentum for the sector and company is picking up and the stock is in a positive trend. BUY A HALF

ChargePoint Holdings (CHPT) shares continued their uptrend, perhaps buoyed by the infrastructure bill, and were up two points to 27.7. It is still 50% below its high this year. ChargePoint announced this week that the next quarterly financials would be released on 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 were steady as the company announced 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. Cloudflare also announced a partnership with Oracle and now both organizations that use both 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. Cloudflare has been a steady performer aided by its aggressive sales strategy, the fact that the company is protected by several moats, its deal with Microsoft, and that the co-founders are significant shareholders. This stock has a lot of momentum behind it. HOLD A HALF

Coupa Software (COUP) shares were up marginally for the week. The company is expected to release third-quarter financials on 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, and 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. BUY A HALF

Fisker Inc. (FSR) shares were up for the week but had a poor day yesterday, down 9%. Credit Suisse initiated coverage last week with an outperform rating. 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. The Ocean 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

Marvell Technology Group (MRVL) shares were up for the week despite the tech selloff yesterday. Futures look good for Thursday morning. 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 climbed above 7 this week to finish at 7.20. 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. Novonix, which has a strategic partnership with Phillips 66, is a non-Chinese synthetic graphite producer, making it 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 up a bit in their first week as an Explorer recommendation. 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.

Oracle has the world’s first and only autonomous database. It also 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 primarily 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. In addition, Oracle has been on the prowl for new companies, spending more than $80 billion on 150 acquisitions. This is doable since it still has cash of more than $39 billion.

Oracle offers us growth at a very reasonable price. The stock trades at only 20 times earnings with big profit margins, a high return of equity, $39 billion in cash, and I like that insiders hold 42% of shares. BUY A HALF

Palantir Technologies (PLTR) shares are not demonstrating any strength as the company tries to expand into the private sector. In addition, the company announced this week it will be entering the digital crypto market for which it has launched software. An insider also reported a sale of stock close to the current price. While this stock could turn things around, it is handicapped by its association with Peter Thiel so I’m moving it to a sell, weighing the upside and downside. MOVE FROM HOLD TO SELL

Sea Limited (SE) shares had a delayed reaction to the company’s third-quarter results as the stock fell from 342 to 314 over the last couple of days. Total revenue was $2.7 billion, up 121.8% year-on-year. Total gross profit was $1.0 billion, up 147.5% year-on-year. E-commerce revenue was $1.5 billion, up 134.4% year-on-year. While the profit loss was expected, it was a bit larger than analysts had anticipated. This raises the possibility that the losses may widen going forward.

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. I would be a buyer of this stock after the recent pullback but long-time holders should definitely take partial profits. BUY A HALF

Veeco (VECO) shares were 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 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 even better for earnings. Veeco is growing earnings at a 20% clip and 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 lost a bit of ground to close yesterday at just under 18. 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. Therefore, I recommend that most investors sell half their position to lock in some profits. SELL HALF YOUR POSITION

One last thing: I have a book coming out!

Coming January 8, 2022