Red Dawn: Chinese Edition
The time has come, Great Ones, to talk of many things: Of batteries and chips and electric vehicles (EVs) … of cabbages and Xi Jinpings.
And why China is boiling hot — and whether Chinese stocks have wings.
Great Stuff Picks readers have probably already noticed that our Nio (NYSE: NIO) position is now about 20% underwater. That’s not good. And while this decline in NIO stock has very little to do with the company’s business model, it’s time to make like a tree … and get out of here.
But! But! EV stocks! They’re gonna be huge! And Nio is a major player in the fastest-growing auto market in the world! Why?!!
I hear you, Great Ones. And it pains me too. Not only do I like Nio as a company, but I also believe that EVs — whether they’re fully electric or hydrogen fuel cell powered — are the future of the auto market.
Also, I really, really, really hate taking a loss.
So, why am I selling NIO stock out of the Great Stuff Picks portfolio?
Because the Nio situation has become untenable.
Now, I could say that it’s because EV competition is getting ridiculous. Every major automaker is now on board with EVs after Toyota Motors (NYSE: TM) announced yesterday that it was dropping $70 billion on electrifying its fleet.
For those keeping score at home: Volkswagen, Ford, General Motors, Daimler, Honda, BMW and now Toyota have all thrown their hats into the EV ring. That’s bad news bears for every startup EV maker on the planet. Yes, including Tesla (Nasdaq: TSLA).
I could also say that competing technologies, such as hydrogen fuel cells and solid-state batteries, are going to further increase competition — and that Nio’s signature battery-swap program is looking less and less like an asset that customers will use or need.
I could also, also say that soaring inflation and the potential for faster Federal Reserve interest rate hikes make extreme growth plays like Nio very risky right now. We’ve already seen tech stocks and growth stocks take massive hits ahead of the Fed’s December meeting. There will likely be more weakness to come, and that poses a risk to our NIO stock position.
But, if I’m being completely honest, there is one singularly glaring reason to get out of NIO stock while the getting’s good: China.
Now, Great Ones, I’m no xenophobe. I’m very much a “to each his own” kinda guy. I’m also a capitalist and an opportunist. I’m telling you this because I want to clarify that I’m not getting out of NIO stock because “OOH! CHINA! Communism!”
If that were the case, I wouldn’t have recommended NIO stock in the first place.
The reason China is a massive red flag for Nio investors is the same reason China is a massive red flag for any Chinese-stock investors: U.S. securities regulations.
This month, the U.S. SEC finalized its rules on foreign listings on U.S. stock exchanges. Those rules ban foreign companies from listing if they do not comply with American regulator demands — specifically, information requests.
If I could name one thing that the Chinese government and President Xi Jinping hate more than anything, it’s information sharing. In fact, the entire reason this SEC law came about was because Chinese regulators repeatedly refused information requests from the Public Company Accounting Oversight Board.
But you don’t have to take my word for it. Here’s David Loevinger, managing director for emerging markets at TCW Group, talking with CNBC:
I just don’t think China’s government is going to allow U.S. regulators to have unfettered access to internal auditing documents of Chinese companies…
So the reality is, I think, by 2024, most Chinese companies listed on U.S. exchanges are no longer going to be listed in the United States. Most are going to gravitate back to Hong Kong or Shanghai.
The bottom line here is that if U.S. regulators can’t get the info they need from U.S.-listed Chinese companies, they can’t protect U.S. investors. This lack of financial information will result in the delisting of many Chinese stocks … potentially including Nio.
You do you, Great Ones, but the situation surrounding NIO stock is just too rich for my blood. And so, for that reason … I’m out.
Sell Nio stock.
Don’t want to leave the EV race completely? We have you covered!
One former Tesla employee just released a brand-new innovation promising to make every EV out there instantly obsolete.
And it goes beyond just EVs: His new technology is rolling out to power 50 million homes and businesses, setting up a new market 10X bigger than EVs — and you can buy in right away.
Click here for the full story.
The Good: Boeing Got Back
If I had a nickel for every time Boeing (NYSE: BA) stock sank on good news, I could buy myself a plane ticket out of Kentucky for the winter.
Word on the Street is that Boeing’s been kicking names and taking @&&, plane and simple. As of November, the airliner extraordinaire had shipped — erm, flown? — a whopping 302 planes off to their final destinations, and all without a single James Wong run-in.
Ready for more good news? That’s nearly double the 157 planes Boeing delivered throughout all of 2020 … and a milestone Boeing could easily pass by year’s end.
What’s more, the demand for Boeing’s planes is stronger than ever (even for those pesky 737 MAX models). At the end of November, the airline manufacturer had 829 outstanding orders from various airline companies, which far exceeds the 184 orders that Boeing had in 2020.
In other words: Business be boomin’. BA stock? Not so much…
Despite the continuously positive news coming out of Boeing’s camp, its stock sank like a lead balloon this week along with the rest of the market. (You can blame today’s Fed meeting for that, btw. Thanks, Jerome.)
At this point, I almost look at Boeing’s stock as a reverse indicator. Oh, it’s in the red? Things are going swimmingly. Uh-oh, it’s in the green? Must be some kinda witchcraft.
As longtime Boeing investors, all Great Ones need to know is that Boeing’s doing what it needs to do for a successful 2022. So, keep diamond-handing BA stock if you want exposure to the airline industry and the post-COVID travel boom.
The Bad: Don’t Diss The Disney
Anyone else think Alphabet (Nasdaq: GOOGL) could use a mood stabilizer or two? Maybe a Xanax to steady the emotional maelstrom? I mean, call me crazy, but every time I turn around, the tech titan’s picking fights with someone new…
First, it tried to strongarm Roku into prioritizing YouTube search results on Roku’s streaming platform. When that didn’t work, Alphabet immediately started looking for another victim to take its aggression out on.
The latest casualty? The Walt Disney Company (NYSE: DIS).
The long and short of this saga is that YouTube TV, which is owned by Alphabet, feels unfairly treated by Disney and wants to negotiate a better carrier agreement. I’ll let you hear this one straight from the horse’s mouth:
YouTube has reiterated that customers can pause or cancel their memberships if they’re unhappy with the prospect of losing 17 Disney streaming channels — not to mention eight local ABC stations — if a “fair” deal can’t be brokered by Friday. (Note: That’s just two days from now, depending on when you read this.)
To let Disney know it’s super-duper serious, YouTube has even started directing people toward Disney’s own subscription package so they don’t experience any streaming interruptions. Weird flex, Alphabet, but OK…
If YouTube’s recent Roku spat taught us anything, it’s that a deal will likely materialize between these two companies — even if it comes at the eleventh hour. Neither streamer really wants to break up with the other. They just wanna be heard and maybe courted a bit more, you know?
Now, as for who comes out on top? My money’s on the mouse…
The Ugly: Lowe’s Gets Hammered
Nailed. Sandblasted. Sawed in half. Bolted. Jolted.
Whatever you call it, Lowes’ (NYSE: LOW) investors woke up feeling like they just reorganized the garage without any lower lumbar support. (Don’t you make fun of my back brace, now.)
The don of all things DIY, Lowe’s decided the midweek slump was a great time to announce that it expects 2022’s sales to fall as much as 3% or remain flat with this year’s relatively remarkable results. This has made a lot of investors very angry and been widely regarded as a bad move.
And, just as you’d expect from any retailer lowering Wall Street’s expectations, Lowe’s stock was pummeled into oblivion in no time flat, sinking 4% before the bell … and before a surprise burst of homebuilder confidence lifted LOW shares into the green.
Now, while I keep seeing this sentiment of “oh noes! DIY is dead” tied to Lowe’s guidance guffaw, that’s far from the whole story here.
In recent quarters, Lowe’s and Home Depot alike have been forced to pivot from DIY sales to courting contractors again — like, actual contractors. Those “home professionals” whom Lowe’s thanked ever-so-graciously in its report on November 17:
Well, guess what? It seems Lowe’s isn’t really keeping its pandemic-propelled success going. And I’m sure winning back some of these home professionals and their deeper pockets would go a long way in helping Lowe’s pick up the slack in its sales guidance.
So, while Lowe’s still sees sales sinking amid a “modest sector pullback in 2022,” LOW stock remains afloat today simply by the buoyed optimism of homebuilder sentiment. Lucky you, Lowe’s investors.
Editor’s Note: Made In America Is Back!
Business Insider calls this “the biggest change to manufacturing since Ford’s assembly line,” creating all-new electric cars, spacecraft and even medicines. All while disrupting three dozen industries … industries worth trillions.
And one small, little-known company is at the forefront of this $100 trillion shift.
It’s poll time, Great Ones!
If this ain’t your first poll-replying rodeo, welcome back. But if you are new around these here parts, thankfully, the Poll of the Week is incredibly easy to understand.
We ask you a question … then you answer the question. Got more to say? Write to us in the ol’ inbox-a-roo, aka GreatStuffToday@BanyanHill.com. It’s as simple as that — easy like lounging in a Lovesac on a Wednesday morning.
I must’ve missed something here … sacs?
Last week, we learned to stop worrying about bean bags and love the Lovesac. You know, the ultra-expensive fake phur foam-based bean bags that analysts think millennials love … and can afford? Yeah, those abominations.
(By the way, if any of you would like to send Great Stuff some Lovesac action to test out — for research purposes, obviously — let’s discuss deets in the inbox.)
In last week’s poll, we asked how many of you would buy a Lovesac, and the results might surprise you … one way or another.
70.7% of your fellow Great Ones hold anti-sac sentiments, which is somewhat reassuring, but the 12.3% of you Lovesac addicts wanting to be called “daddy fat sacs” washed away all that reassurance.
Another 14.6% of you just want to drop the puns and go back to talking about Papa Musk, while the final 2.4% of you are still stumbling over Lovesac’s sac-specific “phrasing.”
Now, seeing as how people are already dropping wads of real cash for virtual Nike sneakers … it’s only a matter of time before stylish digital Lovesacs enter the metaverse too. Oh joy. What a time to be alive.
And if the majority of you aren’t into real, physical Lovesacs, methinks even fewer of y’all would buy a virtual bean bag.
Anyway … we’ve progressed deeper and deeper down the metaverse rabbit hole these past few weeks. But we’ve yet to come right out and ask … do y’all actually like the metaverse trend? Or do you see one mention of the digital ether and skim, skim, skim?
Click below and let me know:
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Until next time, stay Great!
Editor, Great Stuff