April 3, 2025

Portfolio Changes: Centrus Energy (LEU) – Move from Buy a Half to Sell

Tariffs Roil Markets

In a tough week for markets, Explorer stocks held their own. Banco Santander (SAN) shares are up 50% so far in 2025, significantly outperforming bank and European indexes. Luckin Coffee (LKNCY) was up 10% this week and Sea Limited (SE) shares have risen 25% rise so far this year. All our dominating stocks held firm this week.

It was interesting to be in Tokyo and meeting for lunch today with a former Japan Ministry of Finance official as new tariffs of 24% on Japan were announced.

Japan is just one of the countries on the expanded tariff list with the largest bilateral trade surpluses with the United States. The list has an overlap with some of the biggest foreign holders of U.S. Treasurys. Based on Treasury Department data, Japan held $1.06 trillion in U.S. Treasurys, China $759 billion, Luxembourg $424 billion (on behalf of European investment funds) and Canada $379 billion.

My Japanese host today was an old friend and always polite, but he was a bit perplexed about the harshness of the tariffs given that Japan only accounts for 4% of U.S. total imports. Not to mention that Japan is America’s most important ally and a big investor in America.

No doubt the Japanese government and corporate leaders are reassessing strategies to deal with the new situation and wonder if a new era has arrived.

It has become clear to me that Japan’s economy has been transformed over the last two decades. Slower economic growth numbers have masked Japan’s movement into an even more advanced stage. Trade is less important as investments and technology have become the country’s focal point.

This is highlighted by the big Japanese trading companies, or “soga shosas,” which are in the headlines recently due to investments in five of them by Warren Buffett’s Berkshire Hathaway. Traditionally, they have handled import/export activities and market intelligence for both major companies and smaller companies. Rather than trading, the focus of these giants is now on investing in and managing portfolio companies if they have a controlling stake.

I’m reviewing each of the five Japanese trading companies in Buffett’s basket and will try to pick the best one.

We will see how the tariff issues work out, but it seems that a neglected U.S. goal should be to expand markets for American goods and services since about 40% of S&P 500 firms’ revenues come from abroad.

This stock market may seem a bit difficult to navigate but take steps to keep some powder dry and keep in mind that maximum pessimism breeds maximum profits. The financial media likes to use phrases like “markets tumble” for declines of 2%, which is obviously quite an overstatement.

We need to stay the course with a solid ETF core while continuing to explore diversifying into new ideas from international markets. The Stoxx Europe 600 index has outpaced the S&P 500 by 12% so far this year, its largest quarterly lead since the start of 2015, according to Dow Jones Data. There is always a bull market somewhere and I always try to keep in mind the legendary Peter Lynch of Fidelity mantra that corporate profits have grown about 8% a year historically – so corporate profits and the stock market should double about every nine years.

Let me close with some news that caught my attention this week. First, new ETFs continue to roll out with a record 230 new ETF products launched in the first quarter of 2025.

Also, the share of total wealth in America held by the top 10% is just short of 70% while the share held by the bottom 50% is just 3%. We have got to find ways to broaden the ownership of stocks which would be good for the market and political stability.

Explorer Weekly Stock Commentary

Below is a brief update on each Explorer stock. Any changes in ratings will be highlighted. This section is all you need to read each week.

Explorer Disrupter Recommendations – need to watch more closely and have a 20% trailing stop-loss in place.

Agnico Eagle Mines (AEM) shares edged up this week, serving as a nice “shock absorber” in a tough market. Agnico offers us a global footprint with mines in Canada, Australia, Finland, and Mexico, with exploration and development activities in Canada, Australia, Europe, Latin America, and the U.S. Buy a Half

Banco Santander (SAN) shares are up 50% so far in 2025, significantly outperforming bank and European indexes. Santander’s market value recently passed €100 billion, making it the first bank in the European Union to cross that threshold in the last decade. Buy a Half

BYD (BYDDY) shares were impacted by trade tensions, losing 8% this week, but are still up 42% so far in 2025 as the company gains market share at home and abroad. BYD projects total vehicle sales for 2025 of 5.5 million and claims technology that can charge almost as fast as it takes to refuel a regular car for nearly 300 miles of driving range. Buy a Half

Centrus Energy (LEU) shares were off again this week and have lost momentum so to protect profits, I’m moving this stock to a sell. Move from Buy a Half to Sell

Cloudflare (NET) shares held firm this week in the wake of a recent double upgrade and a higher price target from a Bank of America analyst. The analyst cited Cloudflare’s ability to profit from both cybersecurity services and artificial intelligence services which broaden its moat and target market. Buy a Half

Dutch Bros (BROS) shares were down this week as the company announced it is working with a partner to launch retail products such as roast and k-cup coffee products. Management also confirmed this week a target store count of 2,000 by 2029. I’m leaving it at hold for the time being as it seems to be facing some resistance after a nice run. Hold a Half

Luckin Coffee (LKNCY) shares were up 10% this past week and are performing well as a new Explorer recommendation. The company continues to add more stores in China and Singapore and is eyeing other overseas markets as well. This is a competitive market, but Luckin’s model of flexible formats and menus is working well. Buy a Half

Sea Limited (SE) shares were up this week and have followed a stellar 2024 with a 25% rise so far this year. All three of its market segments are performing well backed by $10.4 billion in cash and equivalents. Hold a Half

Subaru (FUJHY) shares were only down 2% this week despite the 25% auto import taxes imposed by the U.S. as the company is somewhat protected by making most of its vehicles in America. Based in Tokyo, Subaru holds a 10% market share in Japan and its stock sells for only five times trailing earnings and about 70% of book value. Buy a Half

Explorer Dominator Blue-Chip Recommendations – More Buy and Hold

DBS Bank (DBSDY) shares were steady this week on no news except progress to acquire a controlling stake in Panin Bank, Indonesia’s 12th largest lender. Headquartered in Singapore, it is the largest constituent of the Singapore Straits Times Index. Buy a Half

International Business Machines (IBM) shares were unchanged this week as IBM and Tokyo Electron (TEL) announced a five-year extension of their agreement for the joint research and development of advanced semiconductor technologies. IBM offers us exposure to growth opportunities in areas from cloud computing to quantum computing and is building a strong market position in artificial intelligence. Buy a Half

Visa (V) shares were steady this week as the company reportedly offered Apple around $100 million in a bid to replace Mastercard as the provider of its payments network as Goldman Sachs seeks to leave the partnership. Buy a Half

Watch List – Stocks we like but do not follow day-to-day

ConocoPhillips (COP), Franco-Nevada (FNV), MOOG (MOG-A)

Explorer ETF/Fund Positions

Aberdeen Asia-Pacific Income Fund (FAX) is a close ended fixed income mutual fund launched and managed by Aberdeen Standard Investments (Asia) Limited in Singapore. Buy a Half

Grayscale Bitcoin Trust (GBTC) offers investors a way to track very closely to the day-to-day or “spot” movement of bitcoin prices. For aggressive investors comfortable with volatility. Buy a Small Allocation

JPMorgan Equity Premium Income ETF (JEPI) offers double-digit yield coming from both option premiums and dividends using a value-focused strategy. Buy a Full

Morgan Stanley China A Share Fund (CAF) offers exposure to a basket of top Chinese-listed stocks. Buy a Half

Oberweis Micro-Cap Fund (OBMCX) fund stands out for several reasons. The fund’s sound investment process and strong management team earns it a rare Morningstar Medalist Rating of Gold. Over the past five years it has posted an impressive average annual return of 21.1%. Buy a Half

Sprott Platinum and Palladium ETF (SPPP) offers direct exposure to both platinum and palladium which are selling at a sizable discount to gold offering potential upside appreciation. Buy a Half

VanEck Junior Gold Miners ETF (GDXJ) is a basket of junior miners that has 84 positions with the top 10 accounting for 44% of total assets. Half of the stocks are Canadian, 21% Australia, and 7% from South Africa. BUY A HALF

WisdomTree Emerging Markets High Dividend Fund (DEM) offers a high dividend yield and some of the highest quality emerging market stocks. Buy a Half

Explorer Stocks Summary

Brief company summaries that will not change week to week.

Agnico Eagle Mines (AEM) follows a conservative strategy and with a history spanning more than 60 years, and now operates a sizable portfolio of 11 assets located in four countries. Management forecasted gold production of approximately 3.45 million ounces in 2024. The company estimates it has about 54 million gold ounces of proven and probable reserves. Furthermore, Agnico Eagle has paid a dividend for 41 consecutive years with a dividend compounded growth rate of 23% per year since 2005 and paid a dividend of $1.60 per share in 2024.

American Superconductor (AMSC) aims to modernize the electrical grid by helping it connect and distribute power. Its products allow and coordinate the power grid including transmission lines, substations and generators. For example, its mega-watt scale power control gear leads to safer and more resilient and efficient power grids. The company is already the leading supplier of high-performance superconductor cables and its top markets are strategically important growth markets such as: Maritime, Maglev technology, and AI data centers – a huge growth opportunity.

Banco Santander (SAN) was founded in Spain in 1857. The bank’s U.S. headquarters is in Boston, but its strength lies in Latin America and Europe where it has more than 8,000 branches with 171 million customers as well as 58 million digital accounts. About 55% of deposits and loans are in Europe with the balance in Latin America. In its most recent quarter, Santander’s revenue was up 8% while net profits increased 16%.

BYD (BYDDY), in both 2021 and 2022, more than tripled sales from the previous year. That’s hyper growth and including hybrids, BYD has already surged past Tesla in terms of sales. Most of BYD’s sales are still in China but it has a big international expansion underway, including in the U.S., Europe, and Asian markets. BYD is the world’s largest EV battery maker and with CATL and others, is working on sodium-ion batteries. Much less energy dense than lithium batteries, sodium batteries should be much cheaper. BYD will also launch a next-generation Blade battery in 2025, with longer range and faster charging. That, along with various other models, could help rev up BEV sales growth this year. BYD expects solid-state batteries for high-end models by 2027, but not fully reaching lower-end models until 2030-2032.

Cloudflare (NET) is both an aggressive and dominator recommendation offering products and services in four cutting-edge fields, though cloud computing is its bread and butter. Its global reach is breathtaking as 20% of all web traffic runs through Cloudflare’s network and over 95% of internet users from 180 countries worldwide access the company’s services each day. And it reaches these users within 50 milliseconds. The firm’s client list includes more than 30% of Fortune 1000 companies and the ability to efficiently move and connect data – from where it is located to where it is needed (edge computing) – is a massive business opportunity in which Cloudflare already excels.

Watch List: ConocoPhillips (COP) is a global energy industry giant and one of the largest independent exploration and production (E&P) companies in the world, as measured by production levels and proved reserves. The company, founded in 1917 and based in Houston, has operations in 13 countries, although almost half the company’s production is derived from U.S. sources.

DBS Bank (DBSDY) is one of the largest banks in Southeast Asia with a presence in 19 markets. It is headquartered in Singapore, with its main listing on the Singapore Stock Exchange, and is the largest constituent of the Singapore Straits Times Index. The Government of Singapore established DBS in July 1968 and its largest and controlling shareholder is Temasek Holdings, which is one of two large sovereign wealth funds controlled by the Government of Singapore. DBS has assets of roughly $750 billion and a growing presence in the three key Asian areas of growth, which it defines as Greater China, Southeast Asia, and South Asia, meaning India. It is the largest and strongest bank in Southeast Asia and the leading consumer bank in both Hong Kong and Singapore.

Dutch Bros (BROS) is an operator and franchisor of drive-through coffee stores, with 982 stores as of the end of 2024, including 32 that it opened in the fourth quarter. It’s expanding at a steady pace, expecting more than 150 new stores in 2025, and it envisions up to 4,000 stores over the next 10 to 15 years.

Watch List: Franco-Nevada (FNV) is a company with more than half of its revenue coming from gold, but it also offers exposure to platinum, silver, and oil and gas. Franco-Nevada’s focus on royalties and streaming reduces risk and enables it to sidestep the huge capital costs that impact traditional miners. It enjoys cash flow and profits as its mining partners finance and complete exploration and expansion projects. That cash flow enables it to invest in new deals, pay a dividend, and operate debt free. Franco-Nevada has increased its dividend each year since its IPO in 2008.

International Business Machines (IBM) is a blue-chip artificial intelligence (AI) and India play with a nice dividend yield. Known as “Big Blue,” IBM now primarily helps businesses and governments manage their information technology in the cloud era. The stock sells at a discount to the S&P 500 multiple and the information technology sector’s forward earnings multiple. IBM has paid a dividend every quarter since 1916 and has had 29 consecutive years of dividend increases.

Luckin Coffee (LKNCY) is a leading purveyor of coffee and specialty drinks in China. The price of a cup of Starbucks coffee is more than double that of Luckin coffee. In addition, Luckin is adept at adapting to local tastes and launching new products that broaden the market. For instance, it brings to market about 60 new products each year, offering a new drink every week. Its new coconut latte sells nearly $140 million worth annually. All this shows in the numbers as Luckin’s latest quarter revealed strong sales and store count growth.

Watch List: Moog, Inc. (MOG-A) supplies advanced primary flight controls on the most modern military aircraft. That includes the Lockheed Martin F-35 Lightning II and the Future Long Range Assault Aircraft program. The company’s major platforms include the 787, A350, Joint Strike Fighter (F-35 Lightning II). The company also supplies primary flight controls for the Boeing 787 and Airbus A350 widebody aircraft, as well as business and regional jets from Embraer (ERJ) and Gulfstream, owned by General Dynamics (GD).

Sea Limited (SE) has three core businesses: 1) digital gaming/entertainment, 2) e-commerce, and 3) digital payments and financial services, known as Garena, Shopee, and SeaMoney, respectively. Garena is a leading global online games developer and publisher. Shopee is the largest e-commerce platform in Southeast Asia and Taiwan. SeaMoney is a leading digital payments and financial services provider in Southeast Asia.

Subaru (FUJHY), based in Tokyo, holds a 10% market share in Japan, making it the third-largest automaker in the country. In America, the Subaru brand has a cult-like following and Subaru’s stock sells for only five times trailing earnings and about 70% of book value. It also sports a 3.8% dividend yield, has a market value of $13.3 billion and has a strong balance sheet with a net cash position of $7 billion.

Visa (V) doesn’t extend credit but provides the plumbing for financial payments and communications throughout the world. Visa’s financial infrastructure also underpins much of the world’s commerce. The duopoly between Visa and Mastercard is often referred to as one of the best businesses in the world, with insurmountable moats, low operating costs, and plenty of opportunities for unlocking additional value. Visa currently trades at a discount to its archrival MasterCard.

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