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☕ Volatility is an opportunity, especially with stocks like these

May 29, 2024

Good morning! 👋

I’ve got my hands full with a few admin tasks I can’t put off any longer, so I’ll keep it super clean and neat.

I wrote to the OBA Family late yesterday afternoon advising everyone not to “be surprised if there’s some red on your screen come morning or later this week.”

Why?

Split action like we saw for much of yesterday’s session often precedes market shenanigans like we’re seeing in early going today.

Good!

Every weak dollar that gets scared out now means more profit potential later
Volatility is an opportunity, not something to fear

Here’s my playbook.

1 – The real reason most fail

Days like today are all about psychology.

The big money – much of which missed Nvidia’s run btw – wants to scare the weak money out so they can load up at lower prices. So, creating nasty price action that will, of course, be picked up by the media and recycled all day is straight outta their playbook.

That trips up a lot of folks who lack the longer-term framework needed to successfully navigate short-term market chaos.

Keith’s Investing Tip: This isn’t rocket science. Get your buy list ready. Have a plan. Execute. And, if you want to some help, I’ll be here.

2 – Nvidia's pulling back

So?

The stock has returned 192.55% over the past 12 months versus 27.97% from the SPY. And 636.85% over the past 5 years versus 32.08% from the SPY over the same time frame.

Worrying about a few percent in a day isn’t a big deal in the scheme of things.

Besides, there are all sorts of ways to handle this.

First, take profits consistently as a way of lowering incremental risk. Hopefully you’ve been doing that along the way.

Second, use the right tactics to control the buying process. We talk about several of my faves that can help boost your profit potential and lower your risk at the same time frequently in my paid research if that’s helpful. Upgrade.

And third, buy the best, ignore the rest which ought to be self-evident by now.

3 – Palantir’s latest

News this morning that Eaton and Palantir are deepening their relationship. (Read)

You know what to do.

$50.

4 – No wonder Buffett’s buying

Buffett made headlines recently announcing that he’s been secretly buying Chubb, an insurance company.

Makes sense.

Premiums are skyrocketing which, of course, further pinches consumers who are struggling to deal with inflation in every area of their lives.

Homeowners insurance, particularly.

According to LendingTree, the average US homeowners insurance premium has surged 37.8% over the past 5 years versus 24% for the CPI over the same time frame. (Read)

Florida and California are particularly hard hit with average premiums rising from a double whammy that includes inclement weather and insurance companies deciding not to do business there anymore.

But get this... rates jumped 62% in Arizona, 59.9% in Nebraska and 56.9% in Illinois.

Holy premiums, Batman!

I recommended investors take a hard look at Travelers a while back and it might be time to revisit that idea now that prices have backed off a bit.

There’s a small 2% dividend but under $200 could be interesting and $160ish darn compelling.

Hmmm.

5 – Contrary to popular opinion here, Europe & China want to make a deal

We’ve talked about how boneheaded US tariffs are on Chinese automakers (because they remove a competitive input to innovation) many times.

And how Chinese EV makers will use the situation to their advantage by making deals with countries worldwide that actually want their products and the money that comes with it.

Game on.

European execs and Chinese EV makers WANT to make a deal that could result in substantially lower or even no tariffs. (Read) And that, in turn, would be another nail in Detroit’s coffin.

My favourite Chinese EV maker, btw, has tacked on 368.59% over the past 5 years while Ford has generated 48.33%.

I think that’s but a taste of things to come and the profits that are still ahead. You know what to do and, if you’re an OBAer, exactly which companies to buy and why.