I Spy Golden Eyes
Welcome to another week jam-packed with market goodness, Great Stuff reader!
We’re kicking things off with a look at the most valuable malleable metal: gold.
Yes, the everyman’s auriferous aversion to risk clawed its way back into the headlines last week after it took a 10% plunge in just four days.
Since the March bottom, gold was on a tear. Through August 10, the yellow metal gained more than 37%. But that rally came to an abrupt halt last Tuesday after Russia announced it had a COVID-19 vaccine named — get this — Sputnik V.
Investors let the vaccine wishes and fast-food dreams get under their skin a bit too much, I think.
I mean, even if a Russian vaccine exists (and works), that doesn’t mean the Federal Reserve’s money printer will just stop going “Brrrr” overnight. And neither will the economy just right itself immediately after a vaccine arrives — no matter who develops it.
My colleague Brian Christopher said as much last week:
Some may have thought we would return to the lollipops and teddy bears that we enjoyed in 2019.But this logic is flawed.
The money presses continue to run.
We still have a 13% unemployment rate in the U.S.
Why should you trust Brian? Because Mr. Great Stuff says so, that’s why.
But really, Brian was a turnaround consultant for banks and attorneys for 12 years. He’s certified in financial forensics and has followed the metals market for more than a decade.
Back in May, Brian advised his readers to protect their portfolios by investing in gold. (I told you the same thing back in February, but let’s not quibble about who said what and when.)
If Brian and I aren’t good enough references (I see how you are…), then there’s this guy named Warren Buffett who owns a company called Berkshire Hathaway Inc. (NYSE: BRK.B) … maybe you’ve heard of him?
Well, Berkshire just dumped investments in oil and U.S. banks in favor of Barrick Gold Corp. (NYSE: GOLD) — the second largest gold miner in the world.
In other words, if you’re still looking for lollipops and teddy bears, give it up. You’ll be waiting for a long time.
If you’re looking to make money while protecting against a faltering U.S. economy and an off-the-hook Fed money printer … well, gold is the place to be.
Now, I know what you’re thinking: Gold is just so booooooring! I need some investing excitement during this pandemic!
I hear you. And I answer you thusly…
Brian (yes, that Brian) has a market exploit you’re going to love. It’s called “Flow Trading,” and it takes advantage of a critical flaw in the market.
Flaw? What flaw?
I can’t just up and tell you! Where’s the fun in that?
I can tell you, however, that Brian’s Flow Trading flips the script on volatility and stacks the odds in your favor. With Flow Trading, you give yourself the opportunity to double your money — every 60 days!
Have I got your attention now?
The Good: ARM Is a Leg Up
Nvidia Corp. (Nasdaq: NVDA) is about to have its best week ever. Possibly. Maybe…
The company is slated to release its second-quarter report this Wednesday, with analysts projecting a profit of $1.95 per share on revenue of $3.65 billion. That’s a rise of 58% and 40%, respectively. Not too shabby for a semiconductor-maker, especially in the middle of a pandemic.
But expectations are even higher. EarningsWhispers.com puts the “whisper” number at $2.01 per share.
Furthermore, Susquehanna, Oppenheimer and Wells Fargo all lifted their price targets on NVDA heading into the report. All three expect stronger-than-expected (“expect stronger-than-expected?” What?) second-quarter numbers, putting the whisper number firmly in focus.
But that’s only where the fun begins. Nvidia is also reportedly in talks with SoftBank to acquire ARM Holdings, the leading designer of mobile chips for smartphones and tablets. The company is making a name for itself in low-power laptops as well.
There are few details circulating at the moment, but two things are clear. First, ARM could sell for more than $32 billion. Second, SoftBank needs to make up a lot of cash after its WeWork debacle.
Acquiring ARM could give Nvidia the edge it needs to compete with Advanced Micro Devices Inc. (Nasdaq: AMD) on a much broader scale … and put yet another nail in Intel Corp.’s (Nasdaq: INTC) coffin.
The Bad: The Tesla 2-Step
I remember a time when bad news actually affected Tesla Inc. (Nasdaq: TSLA). But we are far, far removed from those days of yore.
China’s new-vehicle registrations just hit the Street, and Tesla’s had quite a reversal. The maven of electric motor vehicles saw Chinese registrations plunge 24% in July, down from record registrations in the month prior. By comparison, Nio Inc. (NYSE: NIO) saw registrations quadruple.
Before we crown Nio king, that was only 3,533 vehicles for the Chinese Tesla. The real Tesla registered 11,456 vehicles — even with a 24% drop.
Now, as I said, there was a time when this 24% drop in registrations would’ve sent TSLA shares spiraling lower and drawn bearish analysts out of the woodwork. But not now. Not today. No sir!
TSLA rose more than 8% today, riding on a price target increase from Wedbush Securities. Wedbush analyst Daniel Ives lifted his price target to $1,900 from $1,800, citing — and this is the kicker — robust demand out of China.
I can’t make this stuff up. Of course, TSLA now trades just shy of all-time high territory.
Now, I like Tesla as a company, but I have to wonder just how long it can continue to rally. Price-to-earnings ratio? Never heard of it.
The Ugly: Selling Tomorrow
Consider the following: You’re a globally recognized leader in your market (congrats, by the way). You have cutting-edge technology, more than a century of expertise and could easily throw your weight around to put your biggest upstart competitor in its place.
What do you do?
Well, if you’re General Motors Co. (NYSE: GM), you spin off all that newfangled tech and keep making combustion engines for grandpa. At least, that’s what you do according to Deutsche Bank.
I’m still flabbergasted by the fact that if GM (and Ford as well) wanted to, it could flex its muscles and easily overtake Tesla as a leading electric vehicle (EV) maker. But, because GM still rakes in big-truck bucks, challenging Tesla will likely never happen.
Unless … GM follows Deutsche Bank’s advice and sells its EV affairs.
Besides getting GM’s EV unit out from under a company that’s stuck in the previous century, a spinoff would give the new entity access to cheap capital to fund growth. Plus, it’d have the ability to recruit and retain new forward-thinking talent.
Now, this is all one analyst’s pipe dream at the moment. GM isn’t seriously considering spinning off its EV unit right now. And why would it?
The company has to know that the combustion engine is running on borrowed time.
GM’s EV unit has long been its fallback plan for when that happens. The company’s leadership is too addicted to big-truck margins to ever seriously pursue EVs. But that same leadership knows that, if it spins off the EV unit, GM effectively has no future.
Sure, it won’t be tomorrow. I give it 5, maybe 10 years.
The EV revolution’s leading edge is already here. By the time GM finally does something with its EV unit, it could be too little too late. Better to spin it off now, let it grow and let GM fade into obscurity.
In the meantime, we could invest in the electric vehicle market’s biggest and brightest — the stocks actually bringing about said energy revolution. (Thanks but no thanks, GM.) But don’t take a single step into the EV market before you see this!
Before the dust settles on this earnings season, let’s check in on our Earnings Whispers compatriots one more time. I mean, this is far from the last time we’ll bring out the beloved Calendar of Confessions, and it won’t be long until the eternal earnings wheel restarts its cycle once again.
While the earnings crowd has thinned out since past weeks, Wall Street’s spotlight falls heavy on the retail sector this week, with a smattering of semiconductors for good measure.
Here’s the lowdown:
See, even among the final soggy dregs of this earnings season come huge, hard-hitting contenders such as Target Corp. (NYSE: TGT) and Walmart Inc. (NYSE: WMT). This is a retail battle fought on multiple fronts, with both big-boxers upping their e-commerce game to take on the Amazons of the world.
Then, there’s the side story here with Walmart’s Sam’s Club going toe-to-toe with BJ’s Wholesale Club Holdings Inc. (NYSE: BJ) in the bulk-buying arena.
We’re due for a do-it-yourself free-for-all this week, with reports on the home improvement front from Home Depot Inc. (NYSE: HD) and Lowe’s Companies Inc. (NYSE: LOW), and Advance Auto Parts Inc. (NYSE: AAP) for all those “daily drivers turned weekly drivers.”
Typically, we see discount retailers such as TJX Companies Inc. (NYSE: TJX) or Ross Stores Inc. (Nasdaq: ROST) hold their own and power through recessions and recession-like conditions. But how about this time?
We’ll find out together this week with both reports. And who knows? We might even try to figure out just what Kohl’s Corp. (NYSE: KSS) is up to these days too.
Now, the retail hoedown isn’t just stateside, either. We’ll also check in on China’s e-commerce situation with JD.com Inc. (Nasdaq: JD) and Alibaba Group Holding Ltd. (NYSE: BABA). Consumer confidence both here and abroad will continue to be a hot-button topic, but for how long remains to be seen.
And finally, like the tech beacons of Minis Tirith shining through the retail rampage comes Nvidia! Like I mentioned earlier, Nvidia’s report is one that we’re watching — whether the chipmaker actually ARMs up or if the buyout deal is but a silly rumor.
Great Stuff: Tomorrow’s Dream Becomes Reality to Me
Another Monday, another dance between monotony and mania!
How are you faring out there, dear reader? Staying optimistic, I’d hope? How’s your portfolio hanging? It feels like forever since we’ve caught up. We sincerely care about how each and every one of you Great Ones.
Why not drop us a line at GreatStuffToday@banyanhill.com? We’d love to hear your thoughts on the current market madness and the rest of the world’s craziness.
We’ll be back tomorrow! Until then, why not keep up with us on social media? We’re on Facebook, Instagram and Twitter.
Until next time, stay Great!
Editor, Great Stuff