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When your chips are down…

Aug 09, 2022

Good morning!

‍Futures are down on Micron’s warning that it may fall short of prior guidance which doesn’t help matters much after Nvidia's weaker than expected revenue guidance rocked the sector yesterday.

Here’s my playbook.

Buy the cheese or sell the trap

The S&P 500 is coming off 3 consecutive up weeks. Many believe the rally is over. Others are convinced that it’s the start of a sustained rally.

Why that’s a BS argument: I own the world’s best companies, all of which have exceptionally strong and growing business cases.

If you’re really worried about NVDA then you may as well pack it up, grab a banjo and move to a desert island somewhere.

  • Roughly 90% of the data that has ever been created in the history of humanity has been created within the last few years.
  • Data has been a scorecard to date. By 2030 it will define relationships between people, things, and stuff. AI – artificial intelligence – will contribute $15-$20 trillion to the world’s economy by 2030, more than the combined current output of China and India combined. That’s 70% of global economic impact, according to PWC.
  • Data will rebalance social structure and politics forever.
  • If data is the size of an orange today, it will be the size of a soccer ball by 2030. By 2050, it will be the size of an entire football pitch.

Short-term selling is nothing more than a short-term nuisance under the circumstances. And, not coincidentally, an opportunity.

Deutsche Bank downgrades Palantir – let’s review

I get so tired of this game.

Sell side analysts are out for themselves. They exist to stir up business for the companies they work for. In the old days, the research really stood for something but these days analysts often try to stir up the muck just to make headlines and draw eyeballs which makes ‘em no different than click-bait artists.

Big firms often trade against their analysts, a fact you can find in the fine print of most offerings. It’s not uncommon for one side of the house to say “sell” when the other is buying. And vice versa.

Worst of all, reports like this create a lot of unneeded angst for individual investors who panic and, in doing so, get separated from their money.

Let’s review: The company reported 27 net new clients of which 8 are government (which is the largest qtr to qtr increase since going public), 16 new commercial US clients, 3 international commercial clients

Palantir has a land and expand contract strategy. Remaining performance obligations jumped 79% YoY to $1.2B which means there’s plenty of work to be done already in the pipeline.

US gov revenue +27% YoY even though you’d think it fell off the planet from the way everybody’s acting. Commercial revenue up 46% YoY

Revenues overall +26% with full-year revenue of nearly $2B

Why this matters: Retail sell side analysts follow the herd because it’s harder to go against the grain. This is an older article but provides some valuable context. (Read)

Institutional ownership continues to climb. Top owners include The Vanguard Group, BlackRock and SSgA Funds Management.

Always do what Wall Street does, not what it says.

Biden to sign the CHIPS and Science Act

The signing is set for the Rose Garden later today, perhaps by the time you read this. Critics charge it’s part of the left’s tone-deaf spending agenda – their words, not mine – but I think that’s moot.

Good! America desperately needs to re-shore US semiconductor research, development and manufacturing. Give away or not, that $52 billion in incentives and another $10 billion to expand regional tech hubs are also desperately needed.

Wine has outperformed the S&P 500 for 30 years

There’s a drought on in France and it’s threatening wine production. (Read) Experts expect production to rebound but I’m not so sure.

Why you should care: Tricky weather suggests higher wine prices ahead and even better investing performance.

There’s only one call to make in my book: https://oenogroup.com/

Buy your beef now or pay up late

Ranchers are reducing herd sizes to cope with higher feed costs, rising labour expenses, and widespread droughts in a move that will tighten beef supplies for years to come. (Read)

I took the opportunity to add shares of Tyson which got hammered on warnings over higher-priced beef.

Bottom Line

It only takes one stock to make a huge difference.

The trick comes in owning everything else first until you find it.

Let’s make it a GREAT day!

I’m with you every step of the way.



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