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No, Tesla’s not “broken”—here’s two ways to trade it today

Oct 19, 2023

Good morning! 👋

The markets have picked up a little steam this morning, but it’s too early to tell if the green I’m seeing will be with us all day. I could see prices going either way, frankly.

That’s neither here nor there, so don’t waste time trying to guess the unguessable.

The important thing is what we know to be true as investors…

…the world’s best companies are far more likely to put up great numbers than not.

Speaking of which, the fabulous Charles Payne asked me how I’d handicap the current earnings season yesterday ahead of both Tesla and Netflix. Then he very kindly brought up Palantir, which is up more than 300% off 52-week lows. (Watch)

I couldn’t have been more humbled, if for no other reason than this is an exceptionally tough business, and it’s always great when you hit one outta the park! 😊

On that note…

Here’s my playbook.

Could Netflix solve Disney’s ESPN problem?

Netflix returns to growth mode as profits beat expectations, ad-tier subscriptions rise, and the password-sharing crackdown continues. The company will be raising prices, like that’s a surprise—doh! (Read)

What catches my attention is that Netflix is leaning into sports TV, starting with “The Netflix Cup,” a golf outing that will include athletes from both the PGA and F1. Makes sense… customers hate cable TV but stick around for sports.

Nielsen reports that broadcast sports viewership was up 360% versus 222% last year while cable TV logged a 25% increase in sports viewership.

I would not be surprised in the least if Netflix solved Disney’s ESPN problem.

No, Tesla’s not “broken”

As I suspected would be the case this past Monday when Stuart Varney asked me how I planned to handle Tesla’s earnings (Watch), Tesla’s numbers came in soft.

Analysts are already cutting price targets, and the clickbait artists are in high gear. Not surprisingly, TSLA stock is down in the pre-market, too.

Excellent!

That means two things:

Anybody who wants to buy Tesla shares can do so less expensively than they could yesterday; and,
Volatility has jumped considerably, which means that you can Sell Cash-Secured Puts farther and deeper than you would’ve been able to do ahead of earnings. And, I might add, at a higher probability of profit, too.

U-rah!

At the risk of sounding like a broken record, there is always a path to profits!!

What will JPow say next and what to buy before he does

Fed Chair Jerome “J-Pow” Powell speaks later today, and the US 10-YR is flirting with 5%.

What can he say?

Not much.

We’ve been there, done that with “higher for longer,” and the same is true for “We’re watching closely.”

Talk about irony.

I was excoriated when I said Powell could raise rates till the cows come home and it would not make a difference as long as the government continues to spend money. That narrative is catching on… a year later and with no due credit to yours truly—but what the heck, it’s a free country.

The message Powell needs to give is, “We’re finished raising rates.”

Period.

I’m not holding my breath, though.

I expect more “We’re on hold” and another look in the rearview mirror.

My guess is that Powell will once again convey that he’s in charge while not making a single dang decision in the interest of those who are hurting. Then, he’ll opt for “wait and see” rather than doing something that actually helps repair the damage his policies have caused.

Sigh.

And if, by some strange coincidence, he does see the proverbial light?

I submit savvy investors would be well served buying Big Tech while it’s getting pummeled, including—you guessed it—Tesla.

Why?

Those companies have the highest upside capture rates, meaning they’ll very likely take off like a rocket if and when rates drop. Buying while you can get ‘em “on sale” makes all kinds of sense.

Get your drugs… by drone

The prescription drug industry has long been characterized by fat margins, impossibly slow service, and frustratingly challenging insurance company hurdles.

Amazon’s made no bones about cracking that nut.

Some of the more recent developments…

The company acquired One Medical for $18 a share in a $3.9B deal last July.
Amazon partnered with Maven Clinic to provide women’s healthcare in 50 countries outside the US and Canada.
And it’s expanding telehealth services, which, of course, is a direct shot across the bow for hospitals and healthcare providers that have operated with little or no competition and fat margins for years.

This morning, I’m seeing that the company is piloting prescription delivery by drone in College Station, TX. (Read)

Shares are stagnant at ~$130ish, but this makes me think there could finally be an Apple-like pivot in the work. I think buying $110 or so makes more sense, which is, not coincidentally, right around the support during the July 2022 doldrums.

Is it time to dip back into NextEra Energy?

The stock has been positively shellacked in recent months, falling 39.7% from a 52-week high of $88.61 to $53.49, where it’s trading as I type.

Now the price action makes me think there could be a turnaround building.

The negative story is super simple… the company borrowed money up to its eyeballs, which is why rising interest rates and bond yields have proven to be major “margin compressors” (a $5 Wall Street euphemism meaning that profit margins get crushed).

The positive story is tied to clean energy. Many people are surprised to learn that NEE is one of the largest solar and wind power generators in the world. Those things cost a ton of $ upfront but have the potential to lower electric generation costs and boost earnings over time.

Perhaps a nibble?

LEAPs or calls might also be worth a “think.”

What’s better than finding a great investment? Finding your next great stock, too.

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