Source: GuruFocus

Booking , the stock now trading at $164 at the time of writing, has recently fallen off a little cliff due to fears that people would use AI (or AI-powered softwares), replacing the platform. I recently booked a few hotel nights and I saw that the company already implemented AI travel agents (in beta testing). The business is already ahead of everyone, so that AI fear makes little sense to me.

Source: Seeking Alpha

So when should you buy the stock?

In all honesty, and that’s not because of my shareholder bias (by the way, my average entry price is $166.64), I do believe this is an amazing opportunity now at at a Price-to-Earnings (PE) ratio of 19x (2025 earnings) and 16.5x 2026 earnings. Relative to Earnings Per Share (EPS) growth of 15 to 17% annually, you are paying a Price-to-Earnings-Growth (PEG) of around 1x.

View my portfolio

So what happened for it to drop in the pre-market today?

For a growth stock, especially in the tech sector, paying a PEG of 1x is rare and amazing, especially for a greatly profitable business with a 20% net income margin. And its earnings report from last night only confirmed attractive growth rates, but the stock still dropped due to management trying to temper down high expectations. From a numbers perspective, it’s still a very healthy and high growth business. According to GuruFocus (the first chart in the article, above) the fair price is $219. That’s a 35% immediate upside potential. Add to that a potential 20% EPS growth next year. With improving sentiment, we could quickly witness a rally to $250+.

Under $200, that’s a BUY THE DIP opportunity and I am planning to buy with the money I will deposit on eToro in a few days.

Etcaetera

Did I miss the peace announcement between Putin and Zelenskyy?

I owned a couple of Russian stocks in my private portfolio prior to the invasion of Ukraine, namely Evraz, Sberbank and Yandex. They were cheap stocks of great businesses. But then Putin decided the unthinkable and I made the mistake as an investor and amateur of geopolitics to not take the U.S.’ warnings seriously that a full-scale invasion was underway.

To be fair, it was hard to imagine the invasion was actually going to happen. I lived in Russia for two years and my wife’s family is Russian, not too far from the Ukrainian border and they were used to go Ukraine often. We also have access to Russian media. And despite all of these factors, we just couldn’t and still can’t wrap our heads around any possible benefit for anybody in this conflict.

But that’s a story for another time.

So what happened with Yandex?

The founder and CEO of Nebius Group, Arkady Volozh, Russian oligarch, has been vocal in opposing the invasion of Ukraine since the beginning. Following his convictions, he proceed to divest all the Russian assets (which was the core of the Yandex business), delist from the Moscow stock exchange and stay listed on the Nasdaq despite the trading halt.

It sold its Yandex business (often labelled “Russia’s Google”) at a valuation of $5.4 bn to a consortium of Russian buyers. Not much is left of the previous business as Russian revenue was the majority. Arkady Volozh which is great news from my perspective.

Now, Nebius is a promising AI-focused business in AI cloud computing and data center.

Key Points and Outlook

🟢 Nasdaq listed (access to capital), 850 tech specialists, CEO is a founder with a successful track record and the company has no Russian assets;

🟢 GPU-as-a-service and AI Cloud has a TAM1 of $260 bn by 2030 (+35% CAGR) according to Nebius;

🟢 The company now sits on $2.3 bn of cash and has virtually no debt;

🟢 Revenue grew 1.7x in 3Q24 with core Nebius business growing almost three-fold:

🟢 Plan to spend between $600m and $1.5bn on capex, primarily on the core Nebius business (GPUs) to increase capacity;

🟢 Revenue to grow by 3-4x to $500-700m based on assumed capacity expansion, primarily driven by Nebius core business which should achieve ARR of $500m to $1bn by the end of 2025;

🟢 Expectation of positive on adj. EBITDA during 2025;

🟢 The stock is trading at an attractive valuation: the company’s market cap stands at $3.89 bn and trades at $19.57 per share. With $2.3 bn in cash, the potential of the company is trading very cheap and the stock has potential for at least x10 within 5 years.

Bottom Line

With the TAM, recent business growth, the shareholder-friendly management and the business plan in mind, the stock is a (speculative) no-brainer to own as a small portion of a diversified or technology-oriented portfolio to benefit from potential AI growth in Europe and North America.

In my opinion, the stock is an opportunity to invest in a fast-growing tech company in the AI segment and you might well regret not having considered this investment opportunity.

What do you think? Let me know in the comments and I truly hope you found this useful! 💚🙏

Etcaetera

Ford Motor Company (ticker: F), the iconic American car manufacturer. We all know the company since our early years in life the car toys we played with. We all heard of its founder, Henry Ford as well. We all know the logo.

But the stock is in trouble. One of the biggest shareholders is descendants of the Ford family is there and always will. But the rest of the market is disliking the headwinds in the automotive sector, especially in the EVs.

After its Q2 earnings on July 23, Ford's stock plummeted by a third, wiping out $19 billion in market value. The company’s recent struggles comes from an $800 million spike in warranty costs due to quality issues and labor inflation, which lowered investor confidence.

Despite this, Ford remains a strong company with several potential tailwinds, including its cash-generating internal combustion engine (ICE) unit, its growing electric vehicle (EV) division, and high dividends. Ford sold 1.14 million vehicles in Q2, boosting revenue by 6%. EV sales surged by 63.9%, while hybrids grew by 49.2%.

Not bad.

The Turnaround Confirmed Soon?

Read more

Investment Objective: TLT tracks the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years. It is fully invested in U.S. Treasuries.

Attractive yields pay for the wait: with a low expense ratio of 0.15% and a relatively high yield at 3.85% on 12m trailing yield basis and a 4.40% average yield to maturity, TLT rewards for the wait.

TMF is TLT with 3x leverage, meaning its movements replicate TLT but multiplied by three, potentially multiplying returns on a clear uptrend.

Longer duration bonds are more sensitive to interest rates. When interest rates rise, bond prices fall (and vice-versa), with long-maturity bonds most sensitive to rate changes precisely because they have a greater duration than short-term bonds that are closer to maturity and have fewer coupon payments remaining.

And that’s where our Jay Powell, chairman of the Fed, comes into play.

This is What Will Happen in the Next 12 to 15 Months

Read more

Ryanair is one of the most iconic brands, beating by far any other airline. The Irish company, founded in 1984 by a group of Irish businessmen (including Tony Ryan), has managed to turn into an everyday conversation topic, both in real life and on social media. It branded itself as a cheap airline with a modern check-in process, and of course, its hyper-efficiency gives to its customers the image of a greedy corporation.

Still, its marketing is unbeatable and the company keeps gaining market shares versus competitors across Europe and North Africa.

I generally don’t like airlines because

1. they are capital intensive;

2. they have low margins;

3. they have very little innovative and technological breakthroughs;

4. and literally anything can affect their profitability: from fuel prices to weather patterns, from regulatory news to social troubles, from macroeconomic weakness to M&A activity in the sector - and the list goes on and on.

But Ryanair is different. And the recent performance, despite headwinds, shows resilience and opens up to optimistic perspectives.

Recent Performance - My Traffic Light Shows Resilience

Key takeaways in terms of performance in Q2 this year:

🔴 Q2 profit of €360m, compared to a prior-year Q2 profit of €663m. Strong drop in profits due to Easter timing relative to previous year and weaker than expected air fares.

🔴 PAX revenue1 fell 10% (average fare down 15%).

🟠 Total revenue almost flat (-1%, from €3.65 bn to 3.63 bn)

🟢 Strong traffic growth (+10%) to 55.5m customers in the quarter

🟢 Record Summer schedule launched (5 new bases, over 200 new summer-24 routes)

It’s a mixed picture when it comes to the number in the last quarter. There is no secret there. But I believe the toughest is behind us from a macroeconomic and energy point of view. All airlines have struggled. And Ryanair in fact outperformed its competitors.

Competition and Market Shares

Ryanair is more efficient than its competitors by a mile. Excluding fuel, the PAX cost of Ryanair is €33.7. Let’s pause here. Thirty three point seven euros to fly a passenger!

Wizzair, another low cost, is 39% more expensive and EasyJet, also a low cost spends more than double of Ryanair to fly a passenger (on average). I am not even going to comment the efficiency of Southwest Airlines, IAG, Lufthansa and Air France-KLM relative to Ryanair...

Let me show you something else.

That is growth right there. When in doubt, zoom out. The quarter was OK but not wow, despite new routes opening and a 94% load factor.2

Ryanair is establishing itself as a reference where it had no presence (Albania) or very little presence (Croatia, Austria, both highly touristic destinations) just 5 years ago. It is also successfully expanding beyond Europe (Morocco). There is potential for more growth ahead.

From a Shareholder Perspective

From an investor point of view, the picture is much rosier and the stock is in a long-term uptrend despite recent sharp sell-off (from $60 per share to $40 per share on the ADR3 stock).

🟢 A little over 50% of the currently authorized €700m share buyback that started in May is completed. When complete, Ryanair will have returned over €7.8bn to shareholders since 2008. Its market cap is around €17-18 bn, meaning the company already returned almost half of today’s MC to the shareholders.

🟢 Ryanair’s balance sheet is one of the strongest in the industry with a BBB+ credit rating (both S&P and Fitch) and €4.49bn gross cash at quarter end, despite €0.50bn capex and €0.25bn share buybacks. Net cash increased to €1.74bn on by end of Q2, up from €1.37bn at the end of Q1. Ryanair’s B737 fleet (566 aircraft) is fully unencumbered, impacting positively the cost advantage over competitor airlines (exposed to expensive lease and financing costs).

🟢 Traffic this year is expected to grow 8% subject to no worsening of Boeing delivery delays.

Valuation

The stock is trading dirt cheap.

🟢 Ryanair is trading at 14x forward earnings and 12x trailing earnings, at a significant discount from the airline sector which is trading at 22x and 24x earnings respectively (37% and 50% discount).

🟢 Ryanair is trading at around 1.2x sales (both forward and trailing) at a 35-40% discount from the sector and, perhaps even more interestingly, at a 64-65% discount relative to its own 5-year average.

That’s a screaming buy and with a slowly improving outlook I am betting my Euros that the market will reprice the stock accordingly in the next quarters.

Analysts expect a huge ramp-up in free cash flow with a significant improvement by the first quarter of 2026. I want to be in the train (or plane) when that happens.

Risks

As for every investment, there are risks. And for Ryanair in the next 12 months, there is one big risk and a smaller one.

🔴 Boeing delays: really the key risk is here. I call it a big risk because there is really nothing Ryanair can do to mitigate it in the short term and Boeing has been having its share of problems. Ryanair’s entire fleet pipeline is dependent on Boeing until at least 2034.

Ryanair has modeled as part of its growth the acquisition of 300 Boeing MAX-10. They are much larger and more efficient in terms of fuel. There is no MAX-10 to date in Ryanair’s fleet. Boeing will have to give gas… The change in CEO at Boeing a few weeks ago could turn out to be a welcome tailwind for Ryanair. Kelly Ortberg replaced David Calhoun on August 8, 2024.

🟠 Fuel prices. The higher the price of fuel, the more expensive it is to fly a plane. That is why oftentimes the airline sector performs in a reverse manner to the price of oil. The good thing is that Ryanair has fuel price hedges in place and has extended them at an interesting price: 75% FY25 at under $80bbl saves over €450m and c.45% FY26 is hedged at $78bbl. This strong hedge position helps insulate the Group from significant fuel price volatility. The hedge proportion is declining from 75% to 45% but in my opinion it’s a smart strategy of management as oil has been less volatile than at the outbreak of the Ukraine-Russia war.

Bottom Line

I don’t like airlines. That’s not a secret. But Ryanair is something else. It has the alpha in the sector that I needed to see to add it to my portfolio. I bought a large position in Ryanair this week. The business is much more efficient than its competitors. Sure, there is the Boeing risk - but that risk weighs on the others too. The management team has over the year demonstrated being extremely shareholder-friendly.

The stock is trading at a dirt cheap valuation, following recent sector turbulence (pardon the pun…). But it showed resilience and the outlook is much rosier than the past quarters that are now in the rear mirror. It’s a company that is always looking to innovate and become more efficient in a stagnant sector. Using the below rating matrix, I rate it a “BUY”.

I hope you enjoyed the read. 💚🙏 It was a little longer than usual, so let me know if you liked it or prefer a shorter format.

Consider upgrading your subscription to “paid” to support my independent work.

Thank you so much!

Etcaetera

My first reaction was “nah, not going to happen. The medias are trying to make headlines again.” I kind of still stand with it. Because there is a big footnote. A very large one. Qualcomm will not acquire Intel. Qualcomm might buy business parts of Intel (probably only one business unit actually). The rest of the units would stay with Intel or be bought by other big tech companies.

I came up with a new concept a little bit by coincidence and it has received really great feedback. Therefore I plan to apply to all my stock analyses: it’s the Traffic Light Scorecard. There are green, orange and red bullet points, corresponding respectively to positive, mixed and negative aspects of a stock or of a transaction. Let me know what you think. 😉

Qualcomm is known for chips found in smartphones and counts Apple as a large customer. The company manufactures and designs semiconductor and wireless products. And its main interest in Intel resides in Intel’s PC design unit. So that’s quite specific. Much more specific than most headlines on Friday. But not as sexy.

As you remember, Intel reported a disastrous second quarter, including a 15% reduction in its staff and a pause on paying dividends. Its PC client business revenue dropped 8% to $29.3 billion last year, amid overall weakness in the PC market.

So, here is my Traffic Light with what I think about the acquisition of parts of Intel’s business by Qualcomm:

🟢 The acquisition of parts of Intel is good for Qualcomm. At first when I heard about the “acquisition of Intel”, I was like what the actual pancake is Qualcomm doing? Buying an entire business that is failing? For half its market cap (Qualcomm’s market is $193 bn while Intel’s $90 bn)? But after digging a bit, I understood that Qualcomm is only interested in the best business units of Intel (PC, design). Qualcomm (QCOM) was down 3% on Friday. That is usually the case because shareholders fear dilution in case of an acquisition paid in shares.

🔴 Terrible for Intel. I think this is the end of Intel, if the corporation starts selling its best business units to competitors. Perhaps management wants to sell all units and reinvest everything in the semiconductor chips foundry business (subsidized by the U.S. federal government). Still, I would not want to be a shareholder in Intel right now. The stock was up 3% on the news as shareholders are hoping to be paid in Qualcomm shares and/or to sell parts of the business at a premium versus current valuation.

🔴 It quite unlikely that the U.S. antitrust regulator (and the U.S. government) will remain silent on a potential merger (even of parts). Even if there is an agreement between both companies, it is likely going to be a long and tricky process, with a potential politicization of the matter. I like to trade M&A news and rumors. But I would not trade this one.

🟢 The U.S. regulator could however agree on a M&A where multiple participants buy out Intel’s parts, ensuring fair competition within this sector of critical national interest for the U.S. That’s in my opinion the only scenario where Intel could be sold without objection of public authorities.

🟠 The fact of the matter is that Qualcomm has not approached Intel about a potential acquisition. At least that is what an Intel spokesperson said. Intel is "deeply committed to our PC business," the spokesperson said. On the same token, Qualcomm declined to comment. So much for news headlines…

I hope you found this summary comprehensive and interesting.

Drop me a comment with your thoughts about my new Traffic Light concept and/or about this Qualcomm/Intel news.

Thank you for subscribing! 💚 It means the world to me. Feel free to upgrade to paid to support my independent work.

Cheers!

Etcaetera

GuruFocus Full Article

My Extended Thesis

🟢 Strategic Positioning for Interest Rate Cuts

• Anticipation of Monetary Policy Changes: BlackRock is proactively positioning itself to capitalize on potential interest rate reductions by central banks. Lower interest rates typically lead to increased investment in various asset classes, including bonds and equities, areas where BlackRock has significant expertise.

• Fixed-Income Portfolio Management: With rate cuts, bond prices generally rise, benefiting BlackRock's extensive fixed-income portfolios. The firm may adjust its bond holdings to maximize returns in a low-rate environment, leveraging its deep market insights and analytical capabilities.

🟢 Diversified and Robust Asset Management Portfolio

• Broad Asset Classes: BlackRock manages a wide array of asset classes, including equities, fixed income, real estate, and alternative investments. This diversification helps mitigate risks associated with market volatility and economic shifts.

• Global Reach and Local Expertise: Operating in numerous global markets, BlackRock leverages local market knowledge combined with its global strategy to identify and invest in high-potential opportunities, ensuring resilience across different economic conditions.

🟢 Growth Potential in Exchange-Traded Funds (ETFs)

• iShares ETF Platform: BlackRock's iShares is one of the largest and most popular ETF platforms globally. In a lower interest rate environment, investors often seek ETFs for their liquidity, diversification, and cost-effectiveness, potentially driving significant inflows.

• Innovation and Product Expansion: BlackRock continues to innovate within its ETF offerings, introducing new products that cater to evolving investor needs, such as thematic ETFs, ESG-focused funds, and smart beta strategies, positioning itself to capture a larger market share.

  

🟢 Stable Revenue Streams from Management Fees

• Assets Under Management (AUM): As one of the largest asset managers in the world, BlackRock benefits from economies of scale. Its substantial AUM ensures consistent revenue from management fees, regardless of market conditions.

• Performance-Based Fees: In addition to fixed management fees, BlackRock may earn performance-based fees, especially in its alternative investment strategies, aligning its interests with those of its clients and enhancing revenue potential during strong market performance.

🟢 Long-Term Strategic Advantages and Adaptability

• Technological Integration and Aladdin Platform: BlackRock's proprietary Aladdin platform offers advanced risk management and portfolio analytics tools, giving the firm a competitive edge in managing complex investment strategies and enhancing operational efficiency.

• Sustainability and ESG Focus: Emphasizing Environmental, Social, and Governance (ESG) factors, BlackRock aligns its investment strategies with growing investor demand for responsible and sustainable investments, attracting a broader client base.

• Adaptability to Economic Shifts: BlackRock's ability to swiftly adapt to changing economic landscapes, regulatory environments, and market trends ensures its continued relevance and leadership in the asset management industry.

🟢 Client-Centric Approach and Innovation

• Customized Solutions: Offering tailored investment solutions to meet the specific needs of institutional and individual investors, BlackRock enhances client satisfaction and loyalty.

• Thought Leadership and Research: By providing in-depth market research, economic forecasts, and investment insights, BlackRock positions itself as a trusted advisor, fostering deeper client relationships and attracting new business.

🟢 Global Economic Outlook and Market Opportunities

• Capitalizing on Emerging Markets: BlackRock's strategic investments in emerging markets tap into higher growth potentials, diversifying its portfolio and enhancing returns.

• Sector-Specific Investments: Identifying and investing in high-growth sectors such as technology, healthcare, and renewable energy allows BlackRock to benefit from sector-specific booms driven by innovation and changing consumer behaviors.

🟢 Risk Management and Compliance Excellence

• Robust Risk Frameworks: BlackRock employs sophisticated risk management practices to safeguard client investments and ensure compliance with global regulatory standards.

• Transparency and Governance: Maintaining high standards of transparency and corporate governance builds trust with investors and stakeholders, reinforcing BlackRock's reputation as a reliable and ethical asset manager.

Bottom Line

BlackRock is really well positioned to thrive in an environment anticipating interest rate cuts but also once they are effective. Its diversified portfolio, technological advancements, and commitment to sustainability, BlackRock is an immediate market opportunity but also a super attractive long-term play. At least that is my bet. 😉

Thank you for subscribing to Etcaetera. 💚🙏

Akim

Part 1 Here

In this second part, we focused on Alphabet's stock performance, the bright financials, its attractive valuation, and the regulatory risk currently shadowing the stock.

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Financials and Valuation of Alphabet Inc.

Alphabet’s growth has been truly exceptional. It is one of the few stocks with double digit growth rates for 8 years in a row in the last decade! The company has had an average revenue growth of 19% per year in the period 2014-2023.

There’s been a slowdown in 2022 and 2023. And this caused a rough stock price slump amidst an already difficult stock market, causing the stock to lose 30% of its value within a few months. 

There is a double reason for that revenue growth slowdown: first is the 2021 base year effect with an extraordinary 41.2% revenue growth rate. This naturally caused the couple of years after to have a slower than average growth rate. 

The second reason for the revenue growth slowdown is actually a temporary growth break (so to speak) the CEO Sundar Pichai and his management took to 1. invest massively in AI (which affects the revenue growth temporarily) and 2. increase the business efficiency. Indeed, both ROE and ROA hit record levels in 2022 and 2023.

The CEO performed an “efficiency reset” and we start seeing the results today. We are noticing a reacceleration in the growth which potentially opens the door to a return to the 19% average growth rate or above, in case of AI and Cloud advancements as described in Timothy’s first part.

LTM key figures:

• ROA of 22.0% and ROE of 30.9%, the highest ratios in the last decade (except for 2021)

• Gross profit margin of 57.6% and FCF of 18.5%

• $1.8 mn revenue per employee (highest in a decade, matched only by 2021 revenue per employee)

Quite logically, when you have such an impressive financial health, the shorters will stay away from the stock. As a matter of fact, it is the least shorted stock in the S&P 500, less shorted than stocks like Microsoft even!

Despite the low short interest, the stock is far from trading at an expensive level. Actually, it is the cheapest stock among the Mag-7 stocks in terms of price to earnings. Also when considering its own historical valuation, the stock is looking pretty cheap.

Alphabet is trading at 22.5x LTM earnings and 19.8x NTM earnings, clearly on the very lower end of the decade-long range. The stock has frequently traded around or above 30x LTM earnings, indicating at least 30% upside, which would put it a little above $200 per share. Interestingly, that is also where lies the average price target of the Street ($202). The main reason the stock is currently trading for cheap is its current principal fear factor, the regulatory one.

Regulatory Risk Factor

Alphabet (and Google in particular) is often subjected to enhanced scrutiny (and fines) in multiple jurisdictions. This more of a luxury than anything else, because it shows the importance that the business has gained in the data segment with a fairly constant 90% market share despite high competition.

But these fines and other lawsuits have been fairly immaterial, given the cash that the company generates. The major risk that causes shareholders to tremble in recent weeks is an antitrust suit by a U.S. District Court that says Google violated Section 2 of the Sherman Act by behaving in a monopolistic manner. Alphabet allegedly used expensive agreements in order to maintain its monopolistic position as the number one search engine in the world. This could cause the regulatory bodies to require a split of Alphabet, although in our opinion this is more of a feared rumor than anything else. The U.S. needs large tech companies to stay ahead in the big data game, especially at a time where it is becoming more crucial than ever for generative AI advancements. It is also probable that the regulatory risk is already fully priced in, given how cheap the stock is trading.

The Chart

GOOG is currently testing its 200-day moving average (green), a level that has previously served as a strong level to hold. Additionally, it's trading at a 21% discount compared to its $202 valuation, indicating potential upside.

Bottom Line

Alphabet is an attractive investment opportunity and a great stock to own in a diversified portfolio. The growth rates, the increased efficiency and the relatively low valuation make the stock perhaps the most attractive of the Mag-7 - especially after the recent regulatory fears providing a discount and an excellent entry (or accumulation) opportunity. It is not for no reason that the stock is at the top of the holdings of both my portfolio (Etcaetera) and Timothy’s (Panic Drop).

Thank you for reading the second part of this deep dive on Alphabet. We hope you enjoyed it! Please remember to subscribe to both newsletters if you liked our analysis. We plan to continue doing collaborations together, this one being already our third in as many months! 

Etcaetera & Panic Drop

Consider subscribing to Panic Drop as well:

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First Solar Inc. (FSLR) is a U.S. solar technology company that provides photovoltaic (PV) solar energy solutions in the United States primarily. It is a business that has the attention of the federal government due to its critical role in the energy agenda of the country. The government has been protected and will continue to protect the company against the cheaper Chinese manufacturers.

First Solar is trading at fair value, having dropped some 20% from its recent highs. It's trading at $227 after briefly reaching the symbolic $300.

The stock is trading at 20 times earnings, below the pre-Covid levels of 25 to 30. I like to look at pre-covid, as many valuations ballooned during the pandemic and favorable monetary policy. First Solar is cheaper now despite improved growth prospects.

Generational Tailwinds

A few things that keep me excisted as a shareholder:

• Wind and solar combined also surpassed coal generation during the first four months of 2024.

• Q2 showed a doubling of quarterly profits, driven by a demand surge in artificial intelligence. The energy demand of data centers has increased almost exponentially over the last several years.

• Sufficient demand pipeline already until 2030!

All these tailwinds should continue supporting the impressive growth rates from top to bottom line and across the balance sheet. It’s a wonderful stock to own within a diversified portfolio, or within an AI + Energy mix.

𝐔𝐒 𝐄𝐥𝐞𝐜𝐭𝐢𝐨𝐧 𝐅𝐞𝐚𝐫𝐬

Fears of a Trump-Vance victory (pro fossil fuels) are irrational and the company together with the solar sector actually performed very good during both Trump's and Biden's presidential terms. There is a real long-term growth trajectory based on solar energy demand in the US, especially given the incredible sun exposure in the American Southwest. These fears give a great entry point before it flies up.

The increasing share of renewables and in particular of solar energy within the U.S. energy production (thanks to an extremely sunny South of the U.S. with large financial means) will likely act as a tailwind for First Solar, regardless of internal politics.

For all these reasons, in my opinion it's a potential multibagger stock, with a steady growth and likely to double in price in the next 3 to 5 years.

Thank you for your support and don’t hesitate to turn on the paid subscription to support my independent work.

That would mean the world to me. 💚🙏

Akim

Business Overview

The group is composed of twelve brands, including sports cars, motorcycles, and heavy trucks. The 87-year old company operates Volkswagen, Škoda, SEAT/CUPRA, Audi, Lamborghini, Bentley, Ducati, Porsche, Scania, MAN, Navistar, and Bugatti. All these brands are unlikely to go bust all at once.

Most likely they will continue thriving, with some performing better than others, with generally great business performance in ICE (Internal Combustion Engines) and a more mixed picture in the EV segment.

Additionally, the Group CEO Oliver Blume already gave strong indications that further IPOs of individual entities of the group could take place, similarly to P911 (Porsche) where Volkswagen still owns a large portion of the business, to create additional value to the current group shareholders. That is part of the plan to simplify the group structure and make it more attractive to the public markets.

The main external shareholders of the Group are the German State of Lower Saxony (Niedersachsen) (11.8%), where the Group is headquartered, and Qatar Holding LLC (10%), demonstrating the Group is backed by reliable shareholders.

The Hard Numbers

The stock reached a low point from a technical analysis perspective that sends the share price back to 2015-2016 (it reached that level also in early 2020 due to the covid fast crash).

You don’t believe in charts reading? That’s fine, let me break you down some tangible numbers that prove the stock is oversold.

🟢 The business revenue (LTM) has increased by 52% since December 2015.

🟢 The December 2015 EPS stood at -3.2€ while today the company sits on +29.8€ EPS, 2€ shy of its all-time high.

🟢 EPS is expected to break its ATH and reach 33.02€ by December of next year (+16.16% YoY)

🟢 The dividend payment per share (9.06€ per share) and the dividend yield (9.42%) are both at impressing high levels

🟢 Price to Earnings of 3.23 and Price to Book of 0.29 show that the company could (theoretically of course) retain 3 years of its earnings or sell a third of its book value to buy out the whole group.

The Reason It’s So Cheap

A capital-intensive European car manufacturer at a time of AI hype and chips craze - that’s not really sexy. But I don’t care about sexy stocks. What matters if the fair value, the upside potential and the reward for the wait (dividends) that I would receive for holding Volkswagen AG.

The EV fiasco (not specific to the Group) with the valuation bubble popping across the segment definitely impacted Volkswagen, although EVs are only a portion of the Group total revenues.

Another reason, and probably the main reason, for the stark undervaluation is the high interest rate environment affecting the capital intensive industries. The macro fear is mirrored in the company’s balance sheet with both rising short-term and long-term liabilities of Volkswagen perceived as a risk and a problem, respectively. The dividend payments are seen as unsustainable.

Two mitigants here:

1. The internal mitigant: the debt to equity ratio at 1.3 (the company has a large cash pile), a current ratio still above 1 (meaning the company can meet its short-term obligations with its liquid assets) and EBIT of 6.9x interest expense (the lowest since 2016) are convincing enough for me to believe the company should be able to stay afloat without slashing its dividends, while the cost of debt declines and the company continues growing. The €10 bn cost saving plan (by 2026) that was announced at the end of 2023 is already underway and, even if the target is not achieved, at least a portion will and that should already reduce the burden.

2. The external mitigant: interest rates are coming down - the European Central Bank has already started cutting. The refinancing of the Group’s debt could and should lead to lower debt-related costs and to an improvement in financial health. Lower interest rates also boost the consumers’ demand for debt (and for large expenses like cars), acting thus as a double trigger on the Group’s financial health improvement.

Bottom Line

As for every investment, there are risk factors. But when plotting the risk-reward ratio, Volkswagen’s is, to say the least, rewarding. The stock price might or might not recover in the next twelve months. It depends a lot on how fast the cost saving plan is implemented. The initial target was 2026. But that’s fine. As a shareholder, I can wait. Especially if I am being paid over 9% dividend yield for the wait. I don’t want to miss this opportunity and I will therefore make it my Top 5 stock holdings.

What do you think about Volkswagen? All opinions are welcome!

And thank you for reading! If you enjoyed, do leave a comment or a like. 💚🙏

Etcaetera

I had mentioned that expectations were too high and rising, and the beats were milder quarter after quarter. The valuation was also quite stark already. All of these factors made it impossible for the company to smash expectations sufficiently.

Nvidia returned to a fair value and given its high growth rate profile, it’s an attractive long-term hold with potential to double in 2-3 years time. I bought the dip.

Earnings Dive

🟢 122% YoY revenue increase to $30 bn (exceeding expectations by $1.31 bn)

🟢 Data center revenue reached a record $26.3 bn (vs $25.08 est.), up 16% from Q1 and 154% YoY.

🟢 Q3 outlook also exceeded expectations, forecasting $32.5 bn in revenue (vs. $31.71 bn est.).

🟢 Adjusted gross margin reached a whopping 75.7%.

🟢 Announcement of a $50 bn share buyback program. There’s still $7.5 bn left of the previous share repurchase authorization.

🟢 Nvidia CEO Jensen Huang declared: “NVIDIA achieved record revenues as global data centers are in full throttle to modernize the entire computing stack with accelerated computing and generative AI.”

Despite all these green dots, beats and positive news, Nvidia sold off sharply on the following trading day. So I bought. Plain and simple. Nvidia created a whole industry by itself and its moat remains intact.

Thank you for reading and let me know your thoughts on the company. 💚🙏

Etcaetera

This is my attempt to predict what is going to happen - take it lightly and let me know if I forgot any crucial factors!

First, let’s start with the base which is the valuation and then we will look at the earnings, which Nvidia is expected to release next week on Wednesday, August 28.

Valuation

Well, the stock is expensive by all metrics. It doesn’t matter what reputable stock screener you use. They all tell the same story: the story currently exchanging hands at $130 (at the time of writing) is freaking expensive (pardon the expression).

Its fair value based on historical valuations is somewhere in the range of $90-110. You find it on Simply Wall Street, but also on my favorite stock screeners GuruFocus and Seeking Alpha. I initiated my position on the day of the Japanese carry trade induced market meltdown and have an average price of $100 per share which is reasonable in my opinion.

By the way, make sure to check the tools and stock screeners that I love to use (link in the footnote).1

I won’t debate about it. It’s a fantastic business and in the long-term we will probably be in the multiples of today’s price. But fact is the expectations are VERY high and the bar is set at a level where it is getting more and more difficult for Nvidia to surprise the markets (to the upside).

Earnings

Let’s move to the interesting stuff.

Nvidia is expected to announce for Q2 $0.64 EPS and $28.59 bn REV (up from $0.61 and $26.04 bn respectively reported for Q1).

On the top line (revenue), historically Nvidia has 11 out of the last 12 times reported mild surprises, oftentimes in a range of 1-2%. Per se given the high bar and high valuation, I doubt that will excite the markets a lot. And it usually doesn’t to be honest.

Where Nvidia has excelled was in surprising everyone, repeatedly and constantly on the bottom line, the earnings per share.

Only beats - and of impressive magnitude!

Nvidia’s profitability has surprised the markets every year, and except in Jan 2019 the average size of the surprise ranges from 2% to 9%.

But! And there is a big but: there is a clear downtrend in the surprise. You know when you apply an anti-cockroack product on cockroaches, and they just adapt and at some point it doesn’t work anymore? 😄

Well markets are the same! As Nvidia continued surprising the markets, the analysts have rectified their expectations, always raising them higher and higher to a point where Nvidia is going to be practically unable to properly smash expectations.

ASML, a semiconductor stock critical in the chips supply chain, recently disappointed in its earnings release (you can have a read at my last article).2 The CFO had mentioned that the demand for semiconductor chips has been weak given the economic uncertainty in the world.

It is difficult to conceive that ASML (with a quasi monopolistic technological position in the semis supply chain) would have a weak demand for chips but down the chain companies like Nvidia would continue expanding and seeing accelerated growth.

Bottom Line (Got the Pun?)

Nvidia has ultra high expectations on its earnings with an overstretched valuation. Its surprise factor has been on the decline in recent years (due to analysts’ upgrades that pushed the stock price up), and the disappointing earnings in other chip companies altogether hint to a potential stock price correction for Nvidia in a week time.

Nvidia has to smash expectations. Otherwise it will get smashed. And so will the markets.

Thank you for reading and don’t hesitate to add your comment! It’s always appreciated. 💚🙏

Etcaetera

MetaMask and Mastercard are teaming up to launch a crypto debit card, the Metamask Card. And that’s a big novelty, perhaps the biggest since the launch for Bitcoin and Ethereum ETFs!

What exactly is happening?

Both corporations are developing together a crypto credit card, but it has nothing to do with the one you may already have - covered with dust and forgotten in some drawer - nor all the ones currently in circulation!

This Web3 card compatible with a Web2 world will work like a traditional credit card but you can choose with which crypto held in your MetaMask you wish to pay!

All transactions happen on Linea, an Ethereum layer-2 network, guaranteeing security and fast processing.

When you go to a shop and want to make a payment with your Web3 card, you will be asked to choose with which coin you would like to spend. Crypto spending and transactions in general have the reputation (mostly true) of being inconvenient and expensive. Ever had to type these super long wallet addresses and ensure you chose the right one to perform a transaction, otherwise you lose it all?

Well… That way yesterday. Indeed…

… The fees are pretty reasonable

You will also be charged a minimal fee for each transaction: when you use stablecoins like USDC and USDT, you’ll be charged the Linea gas fee, which is variable, but typically $0.02. When you use a non-stablecoin like WETH, you’ll be charged the Linea gas fee, which is variable, but typically $0.02. You’ll also be charged a swap fee of 0.875%.

It’s enormous news because it enhances mainstream adoption of crypto. Almost every store accepts Mastercard and now you will be able to spend in a swipe your crypto coins just like you do with your Mastercard.

This should also increase the number of transactions on the Ethereum chain, boosting the price of Ether, its native cryptocurrency. It’s one of my top holdings because of the number of applications on the chain - plus we start seeing more and more real world accesses like ETFs and now this Metamask Card.

What do you think? Bullish for crypto?

You may already know but some of my other favorite cryptos currently in my portfolio are Hedera, Cardano, Bitcoin and... Ethereum of course!

Thank you for subscribing if you haven’t yet and don’t miss my next crypto spotlight! 💚🙏

Etcaetera

4 minutes that save you days of research and might bring you years of solid stock performance.

Timothy presented in great fashion ASML’s business and its moat. His part is available on Panic Drop, his newsletter through this link: Part I .

Panic Drop explained it well: ASML’s moat is its unique capability in EUV lithography, supplying the indispensable tools for cutting-edge semiconductor manufacturing, which directly impacts AI chip production. Companies like Nvidia are heavily dependent on ASML.

And as Timothy mentioned, and I actually like that sentence very much: “a great business can be a lousy investment if you pay too much for it.” This would probably have become a famous quote if it came from Warren Buffett or Charlie Munger. 

So let’s look at the hard figures now and see why today’s stock price is a pretty good entry price.

Financials

Starting with the financials, one thing pops to the eye almost immediately: ASML’s growth rates in the last decade has been absolutely impressive. The company’s revenue grew by an average of 18.42% per annum, with seven years of double digit growth and three years of upper single digit growth.

2024 is expected to be the worst year for the business since 2012 with no growth (+0.4% on the year) and a slight decline in net income. This is due to several headwinds. The CFO Roger Dassen described the customers as "being very cautious with cash, being very cautious with capex, and as a result of that, they're also very cautious with putting in orders".

The company reassured that 2024 is a “transition year” and the growth slowdown is only temporary, because of supply chain disruptions, tight monetary policies across the global, inflationary pressures on labor costs and the resulting economic uncertainty.

This explains the 25% drop in stock price we witnessed within just a few weeks, and that completely discounts the lack of growth this year and puts it back to its fair value, as shown in the below GuruFocus chart. To put it in perspective, the stock is still up 190% over the last five years and an impressive 755% over the last ten years. It’s now trading at both a fair value support and at a 50-day moving average confluence. 

There is no change in the fundamentals however, and that is what matters to an investor. And investors are forward looking: what matters is the next couple of years. Good news on that front: ASML is expected to grow by over 30% in 2025 and remain on double digit growth for at least three years after that.

This doesn’t mean the short term also isn’t brighter. The management likes to be conservative in its estimates. And despite a somewhat pessimistic outlook (perhaps representative of European mentality?) for 2024 by the management, ASML has a proven track record of beating expectations. And Wall Street analysts expect a pick-up in earnings in the last two quarters of the year, in particular the last quarter (28.69% earnings growth year-over-year). 

That could well trigger a wonderful rally going into the end of the year, combined with interest rate cuts by most major banks in the world to boost the economies again.

Valuation

From a valuation perspective, the recent drop powered by fears of macroeconomic slowdown was quite healthy for the company. It looks like it returned to its fair value.

It is trading right at the historical median of 30x FWD earnings. Given the expected acceleration in earnings in the next years, and even if the valuation remains at 30x (without multiples expansion, which usually happens when interest rates come down), that could send the stock up by at least double digits every year. The stock price appreciation would at least reflect 1-to-1 the expected growth rates in both top and bottom lines in the next few years.

In our opinion, the Wall Street Target above $1,000 per share (minimum +20% upside) are far from exaggerated and quite reasonable, especially given we were at that level very recently.

Risk Factors That Could Impact Our Buy Case

As for every investment, there are real risks. There are general macroeconomic risks, such as the extension of what caused the business to have a flat growth this year: inflation, supply chain disruptions, economic uncertainty.

Additionally to those risks that essentially all companies face, there are company-specific risks. The main one is how strategic ASML is (geo)politically speaking. This provides privileges of course, but it’s also a real risk. Trade wars between the U.S. and China (and Taiwan through TSMC) for chips, could lead to increased pressures on the Dutch government to restrict the export of certain products by ASML.

The U.S. and China are both very large and strategic trade partners for the Netherlands and ASML could well be stuck between both chairs. For now the risks looks somewhat mild, but a Trump election could reactivate the risk given his hard stance against China. But even then, it’s extremely unlikely that the Netherlands will throw ASML under the bus. It’s a strategic company of national interest that can count with the political national support.

Bottom Line

Timothy (Panic Drop) and I, we both have the stock in our publicly copiable portfolios on eToro. So the buy case here is really no secret. We actually both liked the recent stock price drop of this fantastic business because it resets it for a healthier rally in the next few quarters and years as ASML’s order flow and financial growth re-accelerate.

There are real risks from the macroeconomic level to company-specific risks, but all these are sufficiently mitigated at the moment and the fundamentals remain unaltered.

Indeed at the end of the day, it’s a company with a unique moat, that is currently irreplaceable given the technology it masters. And that’s reason enough to hold the stock for the long-term. Warren Buffett said “it's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

We have in ASML a wonderful company at a pretty good price.

—

Make sure to subscribe to both newsletters and thank you for reading!

Etcaetera & Panic Drop

I was listening to the CEO of Airbus, French engineer Guillaume Faury, this week on CNBC and he continues to give me a good impression. When asked about Boeing, he said he had enough to manage with Airbus to not think of other companies.

What I like about the CEO is that he had a long career of engineer, having worked in testing, safety and R&D in Peugeot & Airbus. That gives him excellent knowledge on how to manage Airbus from a technical perspective, and not only in terms of management.

Here are the earnings release from Wednesday this week also available on Seeking Alpha (link).

For Q2

• Q2 Revenue of €16 bn (+1% Y/Y) 🟢

• Earnings Per Share down to €0.29 🔴

• Net income of €230 mn (-78% Y/Y) 🔴

• EBIT Adjusted €814 mn (-56% Y/Y) 🔴

• EBIT (reported) €847 mn (-43% Y/Y) 🔴

For H1

• EPS of €1.04 🟢

• Revenue of €28.83 bn (+4.2% Y/Y) 🟢

• EBIT Adjusted €1.4 bn; EBIT (reported) €1.5 bn 🔴

• Free cash flow before customer financing -€0.5 bn 🔴

• 323 commercial aircraft delivered 🔴

For 2024

• The company expects around 770 commercial aircraft deliveries (down from 800 previously) 🔴

• EBIT Adjusted of around €5.5 bn (down from €6.5 bn); 🔴

• Free Cash Flow before Customer Financing of around €3.5 bn 🟢

I know how it looks. 🫣 It’s a sea of red when it comes to earnings and guidance. And yet the stock is down only 4% YTD. Do you know why?

Because the company is still:

1. a duopoly

2. has solid fundamentals

3. and management is of excellent quality and shareholder friendly.

So what’s the problem? Simple: deliveries (770 expected instead of 800 this year). Airbus gets paid on every aircraft that gets delivered. And the demand is there, and the deliveries could be much higher.

Unfortunately it is not managing to receive the critical parts from the suppliers (Boeing is facing the same issue, on top of many other issues!) because these suppliers slashed their workforces during the covid years when airline orders for aircrafts were down.

And the lack of inventory and slow production scaling had an immediate effect in 2020 and continues to impact the company since then.

The problem is not Airbus. It’s the suppliers. And in the duel against Boeing, Airbus is the one with solid fundamentals - not Boeing.

Therefore I am long on Airbus and the sea of red in the earnings do not scare me. The company is healthy, the demand is there and the suppliers are slowly ramping up operations - and I am sure that we will see a revenue boost in the next years. The stock is down and attractively valued as you can see in the above chart.

It’s the right time to accumulate shares, in my opinion. It’s not an investment advice. I do have it in my portfolio as one of my top positions.

Thank you for reading. 💚🙏 Which one do you prefer and why, Airbus or Boeing?

Etcaetera

A little word about bitcoin mining stocks today…

Bitcoin mining stocks are radically different from other stocks in the market. They don’t follow the same logic, correlation or even valuation metrics.

Dividend yield, share buybacks, price to earnings and even revenue growth trajectory are secondary to bitcoin mining stock pickers.

We know it - the miners’ stock price action is heavily correlated to the price of bitcoin. But there is something else that matters. It’s the bitcoin miners’ efficiency (cost) of mining operations and their ability to retain and grow their bitcoin holdings.

As of today only four bitcoin miners managed to exit the basket of listed small cap bitcoin mining stocks.

1. Marathon Digital Holdings (ticker: MARA) - $5.1 bn market cap - HQ in USA - 20,000 BTC

2. CleanSpark (CLSK) - $3.4 bn - USA - 6,591 BTC

3. Riot Blockchain (RIOT) - $2.8 bn - USA - 9,084 BTC

4. Phoenix Group (PHX) - $2.8 bn - UAE - 508 BTC

Additionally to those four, there is another one named Hut 8 Mining Corp (HUT) with $1.2 bn market cap, headquartered in Canada and currently holding 9,116 BTC.

I noted one crystal clear anomaly when analyzing the bitcoin miners and found an excellent opportunity: Riot Blockchain. This crypto miner is by far one of the very largest bitcoin holders after Marathon.

I have little doubt that Riot will surpass Hut 8 this year: Riot is expected to achieve a hash rate (number of hashes (or guesses) per second on a blockchain network - essentially the speed of mining bitcoin) of 36 EH/s this year while Hut 8 stands at a comparatively low 22.3 EH/s.

In comparison, Marathon managed to achieve an all-time high mining power of 31.5 EH/s during the last quarter, so it should remain in a position of leader in terms of BTC holdings, with double of Riot’s BTC holdings.

While Marathon is the “obvious” play in the space because of its sector leadership, I am betting on Riot. Its efficiency of operations demonstrated by the hash rate, its spectacular growth and scaling of operations, as well as its large and growing BTC holdings make Riot an attractive stock.

The stock recently sold off impacted by general crypto price drops, and is currently at an attractive low when we look at it from a chart perspective.

I currently have it in my portfolio and plan to buy more of it. Check it out here.

Thank you for subscribing to my blog. Let me know YOUR favorite bitcoin miner in the comments section. 💚👇

Etcaetera

Cybersecurity is truly at the heart of everything already today! And when we see that even the top stock by market cap, Palo Alto Networks ($108 bn) is still below a low to no growth company like AT&T ($133 bn) - this makes you wonder how markets (and investors) allocate their capital.

I believe that the cybersecurity segment is an under appreciated sector with tremendous growth catalysts. It will rank among the outperforming segments not just this decade - but this century. With the increase use of internet on all continents, the rise of AI and the digitalization of all modern economies - the cybersecurity stocks will continue growing rapidly.

In my opinion the sector will multiply its size by at least 10x in our lifetime, and some of the stocks in the next 5-10 years.

Here is a quick dive on all top 5 cybersecurity stocks (all happen to be incorporated in the USA).

Palo Alto Networks ($7.8 bn LTM revenue)

• Revenue growth (average last 5 years): +24.9% p.a.

• Operating margin (last available): +11.3% LTM

• Valuation (forward price to earnings): 57x

• Estimated growth (next 3 years, 25-27): +16.8% p.a.

• Price target average (Wall Street): $345 (3% upside)

CrowdStrike ($3.3 bn revenue)

• Revenue growth : +66.2%

• Operating margin: +0.7%

• Valuation: 63x

• Estimated growth: +27.2%

• Price targets: $393 (caution advised: will likely be revised down after the recent fiasco)

Fortinet ($5.4 bn revenue)

• Revenue growth (average last 5 years): +24.2%

• Operating margin: 23.8%

• Valuation (forward price to earnings): 33x

• Estimated growth (next 3 years): +17.7%

• Price targets Wall Street: $71 (20% upside)

Zscaler ($2 bn revenue)

• Revenue growth (average last 5 years): +53.6%

• Operating margin: -6.8%

• Valuation (forward price to earnings): 61x

• Estimated growth (next 3 years): +25.3%

• Price targets Wall Street: $230 (22% upside)

Cloudflare ($1.4 bn revenue)

• Revenue growth (average last 5 years): +46.6%

• Operating margin: -13.9%

• Valuation (forward price to earnings): 125x

• Estimated growth (next 3 years): +29.6%

• Price targets Wall Street: $89 (13% upside)

I personally like Fortinet the most given its moderate valuation while the growth potential remains tremendous. I believe it is somewhat mispriced. My other pick is one that is perhaps not supported by metrics, but in the tech sector there is something more important than the traditional metrics to analyse a stock: the product (and sales pipeline). That puts Cloudflare very high on top of my cybersecurity picks because I believe that it has a superior product. The latter is rather subjective but “gut feelings” are something real in investing, as long as it is supported by research and company knowledge.

The key takeaway here is the spectacular growth rates of all these companies. It is difficult to say one is better than the other when all are growing rapidly.

You might as well consider the First Trust NASDAQ Cybersecurity ETF (ticker: CIBR), which is the ETF with exposure to the cybersecurity segment.

Thank you for reading and don’t hesitate to present your favorite in the comments section below! 💚🙏

Etcaetera

• Texas Pacific Land is a real estate company with a unique business model, holding strategic lands and receiving royalties on various economic activities.

• The company has two main revenue streams, oil royalties and a high-growth water business, with a pristine balance sheet.

• While there are natural risks related to energy demand and management complacency, Texas Pacific Land remains an attractive long-term investment with high margins and growth potential.

I usually do not start with the history of a company to present my investment thesis, but Texas Pacific Land Corp. (TPL, Financial) is such an atypical enterprise that it is better to start from the beginning. Its historical background explains its current business model.

Founded in 1871, Texas and Pacific Railway Company was created through a federal charter to build a railway that would link East Texas to the Pacific Ocean in California, crossing Arizona and New Mexico. The company never completed the full line and had to file for bankruptcy in 1888. As a way to compensate the bondholders that invested in the railroad, the vast amounts of land (3.50 million acres in Texas) were put in a public trust for the benefit of these bondholders.

The trust was later named Texas Pacific Land Trust, which is now known as Texas Pacific Land Corp. A few decades later, the first oil well was drilled (1920) and again many decades later (2010), lands owned by the trust were going to be the subject of an oil production revolution: shale oil extraction. It is no coincidence that the stock price started to rise in 2010.

The company's business model is, simply put, the holding of strategic lands and receiving royalties on every economic activity that happens on these properties.

Texas Pacific Land is an attractive stock to buy and hold for any investor that has a long-term growth portfolio, but may not be as attractive for dividend investors. The company has a unique moat that allows it to virtually have no competition.

The stock is particularly attractive given its high margins and high growth rates, while at the same time allowing investors to have indirect exposure to several sectors at the same time, namely real estate, oil, renewable energy and infrastructure.

The current valuation might be a bit expensive, yet a pullback might not be necessary to justify a buy today. Indeed, it is likely the company's financial growth will itself reduce the multiples at which it is trading given the company's ability to support continued growth.

Read the full article here!

Read Full Article

What do you think about this stock? Let me know in the comments section! 💚🙏

Etcaetera

• The current market environment and Fed decisions may lead to a rebirth and outperformance of this dividend-based strategy.

• There are some key risks to bear, such as market efficiency, lump sum investing risk and diminishing returns.

• However, these key risks could be mitigated by adopting a more flexible approach to the portfolio strategy.

The Dogs of the Dow is a strategy where at the start of the year one buys the 10 stocks with the highest dividend yields of the Dow Jones Industrial Average, the U.S. price-weighted index composed of 30 large companies, and sells them at the end of the year. It is really that simple, and the reason the strategy became popular after Michael B. O'Higgins presented it and coined its name in his book, "Beating the Dow," back in 1991.

In this discussion, I will present the benefits of the strategy, show the historical performance and present my following investment thesis: the strategy is becoming highly attractive again in a high rate environment where the bull market has yet to broaden despite diminishing returns since the turn of the century.

Read Full Article

Bottom line

Despite diminishing returns relative to the Dow Jones index since the turn of the century, further exacerbated with the Global Financial Crisis of 2008, this simple strategy is highly attractive in the current market cycle we are now entering. In 2023, most of the stock market returns were fueled by a handful of stocks.

Given the interest rate cuts by the Fed expected later this year, it is likely the broader stock market will catch up. The best positioned stocks are likely to be the most undervalued ones, especially blue-chip companies that have quality financials and management in place. Given the attractive dividend yields, the markets will likely be tempted to invest in the Dogs of the Dow as they are trading at a relative discount.

I hope you enjoyed this article and do consider supporting my publication by subscribing. 💚🙏

Your Etcaetera
Akim

• Nvidia's share price reflects AI rush, supported by growth in all four business segments.

• Despite high growth, Nvidia's valuation may be stretched, with risks of slowing growth and customer concentration.

• Impressive pipeline of partnerships fuel optimism for continued growth, making Nvidia an attractive stock for growth-oriented portfolios.

The best way to describe the hype Nvidia Corp. (NVDA, Financial) represents in people's minds is through a recent quote from company's own founder and CEO, Jensen Huang:

“The next industrial revolution has begun — companies and countries are partnering with NVIDIA to shift the trillion-dollar traditional data centers to accelerated computing and build a new type of data center — AI factories — to produce a new commodity: artificial intelligence."

In a world where artificial intelligence has turned into a commodity and become the new gold, and where every business will be searching for its share of the treasure, Nvidia will be selling the shovels. And Huang made it clear: the new shovels are the data centers.

To illustrate this point further, Nvidia's stock price reflects the AI rush it has been benefiting from.

The tech company operates through four business segments, all of which support its growth: Data Center (the largest one), Gaming and AI PC (the second largest), Professional Visualization and Automotive and Robotics.

Deep diving at the financials and other aspects though, we can see a worrying growth slowdown. Read the full article here for free:

Read Full Article

The bottom line

Nvidia's astonishing ability to grow year after year and to find new sources and catalysts of growth makes the stock an attractive one to own in a growth-oriented portfolio. However, given the slowing growth and sales overconcentration risks, caution is advised.