Pfizer might be the buy of the decade

Note from Keith: We apologize for the later than normal delivery today! We're shifting over our servers etc and the Internet hasn't caught up yet. 

***

Good morning! 

Media outlets are reporting that the CME’s FedWatch tool is pricing in the odds of a rate cut starting next spring, but we know better.

What’s happening right now is like a Keynesian Beauty Contest.

If you're not familiar with the term, a Keynesian Beauty Contest is an expression coined by economist John Maynard Keynes in the 1930s to explain stock market price fluctuations.

Unlike normal beauty contests wherein the contestants are judged based on their appearance/talent, a Keynesian contest is an undertaking wherein the judges are rewarded for selecting the most popular faces amongst all the judges without looking at the contestants.

Anyway, not to get too far in the weeds here… that’s the way the media is handling the situation. Every channel is filled with endless prognostication about will the Fed pivot, pause, cut or heck knows what else.

Turn off the volume, it’s a great substitute for Animal Planet.

The best thing you can do right now is to concentrate on companies making “must have” products and services the world cannot live without. And to heck with what the other “judges” – meaning market participants, traders, and clickbait artists – think about ‘em.

Here’s my playbook.

Tesla is recalling a whopping 2+ million cars to fix an autosteer problem. (Read)

There are two ways to look at the situation:

1. You can think that Tesla has made an egregious error and the company’s cars stink; or,

2. You can recognize that the company is taking ownership of the issue and that dang near every Tesla on the road today will be better for it.

I’m with #2.

New tech is always challenging.

People forget that Dell batteries exploded back in the day, and that early Apple Maps directions were so bad people were directed across railroad tracks or sent on miles long hikes to get around the block. I was personally directed to walk through Vancouver Harbor to get to my restaurant, in fact.

My point is that stuff rarely works as intended right out of the gate, especially when it comes to hi tech.

In this instance, the situation is super visible because what’s happening is related to Musk – who is a lightning rod – while also impacting a high-expectation area – self-driving cars.

The recall is being put in place because the software is not as effective as thought when it comes to making sure drivers are attentive when autopilot is engaged. Not because the car failed.

Seems to me there’s a personal responsibility angle here that’s being conveniently overlooked by those who would otherwise engage Tesla’s auto drive feature while expecting to do their daily email, put on makeup, drink coffee, or have a zoom meeting while “the car drives.”

Tesla stock has returned 2,291% over the past 10 years versus the S&P 500 which has tacked on 161% over the same time frame. That’s a 14X performance advantage for anybody who owned the stock versus an S&P 500 index fund.

Selling cash secured puts could harness any dip nicely if there is one.

[Space left blank intentionally]

Sorry, couldn’t resist! 

Shares are definitely in the doghouse but, honestly, that’s nothing new. Revenue has been falling and shares are down -47.93% over the past year as Covid-related demand wanes. (Read)

Yet, in the same breath, bullish options traders have had a field day this week now that the regulators have approved the company’s $43B Seagen acquisition; 95k+ call options crossed the tape Monday/Tuesday according to sources and my own eyeballs.

Doesn’t faze me one iota.

The markets tend to flow in long cycles with specific stocks and sectors falling in and out of favour over time. This is simply one of those times when companies like Pfizer have lost their luster.

Tech was here or, err, there last year.

MyPOV: History shows very clearly that the best time to buy companies like Pfizer is when others have kicked it to the curb. The short-term lottery mentality that has taken over exacerbates the perceived weakness and price action. People perceive that as a threat but it’s really an opportunity. That too is usually an engraved invitation to buy… but you won’t know it until some time from now.

Not to ruin your morning but keep in mind that the odds of a more serious, more deadly pandemic are 47-57%+ within the next decade with a higher risk for spillover events in areas like Sub-Saharan Africa or South Asia that are least prepared to contain ‘em.

Pfizer could be the buy of the decade at these levels.

Technology is both a blessing and a curse to my way of thinking.

Stories abound about people who have had their phones stolen and their lives upended when criminals gain access to the most intimate details of their lives.

Thankfully, I’ve never had it happen to me, but I have experienced very organized attempts to get at my data when travelling in mainland China or transiting Charles de Gaulle in Paris, for example.

Apple’s decided to address the problem head on.

The company’s new password security mode will add an extra layer of protection to your phone when you’re away from home or work by requiring faceID™ in addition to your password to wipe a phone, change the password, or turn off lost mode when the phone is in an unfamiliar location. (READ)

If you’re tempted to dismiss this, think again.

Shares are trading higher at $196.38 and closing in on the $200 target I set last year.

Hooyah!

HSBC analyst Mike Tyndall made headlines this morning by lowering Ferrari from a buy to a hold. And, of course, shares took it on the chin.

My guess is not for long.

Buried in the headlines is that fact that HSBC raised its target from $325 to $340 per share, a 4.62% increase. The report also said that “Ferrari is the best positioned luxury auto stock to face a weak market.”

MyPOV: Always do what Wall Street does, not what it says. This story makes me suspicious because demand for Ferrari products remains extremely high and consistent. Whether the stock is worth $340 a share, I have no idea. But I will tell you this… my car was every time I turned the engine over and I had the maintenance bills to prove it! 

People will spend $100 on dinner, $1,000 shopping and $100,000+ on a degree.

But they won’t invest $1,000 in the stock market??!!

Makes no sense.

Keep your eye on the prize and your emotions out of the equation.

As always, let’s MAKE it a great day – you got this!

Keith