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An undervalued divvy payer with 38.9% upside if I’m right

Feb 03, 2023

Good morning!

Payrolls ruined JPow’s party, but don’t let ‘em ruin yours!

OBAers: The February issue will be published later today, so keep an eye on your email. I’ve got 2 new recommendations that are ideally suited for current market conditions. One is decidedly growth oriented, but with an income kicker. The other is all about preserving wealth as Powell’s follies continue. There’s also a double to tell you about as one of our recommendations just hit 106.35% off its October lows. Upgrade to Paid to read more.

Meanwhile... let’s get after it!

Here’s my playbook.

Apple’s crystal ball is more promising than it looks

The headline cowboys are at it again, calling Apple’s earnings disappointing after the company reported the company’s biggest quarterly revenue decline since 2016, including drops in iPhone, Mac, and wearables. (Read)

Look deeper. China’s COVID lockdowns were a drag, but the drop of -5.49% that has everybody so worked up was actually an improvement over the December quarter because there was an extra week on the calendar.

There are 2 standouts. First, $20.77B reported for services revenues. Last year’s number was $19.82B. And second, at 38.4%, Apple’s margins are substantially higher than they were pre-pandemic. Think about this for a second. That means the company makes $0.38 on every $1, whereas a company like Ford that everybody fawns over has a gross margin of 12–15%... and falling.

Invest accordingly!

Amazon’s past its Prime 🤦♂️

I told the fabulous Ashley Webster Monday that I thought Amazon was past its prime and that Google was in serious trouble. (Watch)

It would appear I was right on both counts.

Amazon offered “soft” guidance after reporting the slowest growth in its history as a public company. (Read)
Alphabet/Google just reported a decline in ad spending on YouTube, among other things. (Read)

I’ll still pass on both stocks.

The world is shifting out from under their business models, and there are bigger fish to fry.

Could Ford “pull a Harley?”

I have a few shares of Ford hanging around, and I just can’t bring myself to sell ‘em even though I’m upside down and the company is in serious 💩. (Read)

Call me a softy or just a gearhead with a conscience, but there’s a part of me that hopes CEO Jim Farley can kick it into gear. Like many shareholders, he wants Ford to be more efficient… far more efficient.

I’ve got a funny feeling the company may “pull a Harley” and spin off an EV unit or fleet operations—perhaps both—in an attempt to escape legacy costs. I know I’d be thinking about that possibility if I ran the joint.

Meanwhile, I hope I’m smart enough to buy more Tesla.

Payrolls just ruined Powell’s party +517k

Fed Chair JPow and his minions must be frustrated as they look at this morning’s nonfarm payroll report… +517,000 in January versus +187,000 expected. The Street will undoubtedly interpret this as a sign that the Fed will keep hiking rates for longer. And, in fact, already is. (Read)

Sigh.

OBA Implication: The best companies are hiring—and will be for a long time to come—because they are focused on emerging stronger from the current fiscal mess. Powell, on the other hand, wants you to lose your job and your retirement because he thinks it’ll lower inflation. Investing in optimism is always the better course of action… and more profitable over time, too!

Undervalued divvy with 38.9% upside

I wrote to you about a punt I took recently with OPEN and my plans to create a “Free Trade” if and when the stock doubled. That happened, so now I’m looking to “rinse and repeat” the process only this time with an income booster.

My choice is Global Ship Lease (GSL), which is trading at $18.90 as I type in the wee hours ahead of the bell. Shares are down 27% over the past 12 months, and the yield is 7.97%, according to Yahoo!Finance.

Technically, it’s trading at a 0.76X book value in an industry where the competition typically trades at a premium of 1.25–1.50... so that’s attractive given that projected book value is probably about $23–$25 a share based on my back-of-the-envelope calculations.

I don’t see a double anytime soon, but the yield could be an appealing consolation prize if the stock returns to $25. Assuming it holds, of course.

I had an order in the water at $18.90 but actually got filled at $18.66 at the open. 😊 I plan on exiting at $25 if the markets perform as expected. If not, I’ll be a bag holder and enjoy taking my bride to dinner with the income I hope to receive.

Life is too short not to have at least a little bit of fun, IMHO.

NOTE: Please do NOT blindly follow along under any circumstances. This is simply a speculative, fun trade idea because I enjoy a speculative punt every now and then—and have the risk tolerance to deal with it. It’s your money and your responsibility.