February 20, 2025

Portfolio Changes: None

Recursion Pharmaceuticals (RXRX) Soars 42% and Dutch Bros (BROS) Jumps 32%

This week I’m in Cebu, Philippines. While in a shopping mall I spent a couple of hours analyzing a fascinating situation whereby Samsung, Apple and Huawei stores were right next to each other.

I’m not technically proficient enough to tell you which company and product offer the best value, but Huawei’s lower end smartphone was only $450 and seemed to offer everything anyone would need. Its high-end leader was just slightly cheaper relative to Apple’s most recent model, with all the bells and whistles. The store was very polished and in no way seemed to be of lesser quality to Apple or Samsung.

As you might expect, Samsung’s offerings were in the middle and seem to get the most foot traffic of the three.

These three giants will likely fight it out for some time.

I recently saw a great comment from the CEO of JP Morgan Asset Management to the effect that intelligent diversification is the “free lunch of Investing,” meaning that it offers the likelihood of higher returns with lower volatility and risk.

Keep incrementally taking profits and rebalancing. The value of the total U.S. stock market is now about 200% of GDP and international stocks are trading at a discount of 40% to the S&P 500 index on a forward price-to-earnings basis.

Tariffs are still at the top of Wall Street’s concerns and must be keeping Apple executives up at night since the company says it assembles its iPhone and computers and watches with the help of “thousands of businesses and millions of people in more than 50 countries and regions.”

We recently pulled back from Japan as a weak currency did not make companies more competitive or boost the economy, though Japanese stocks did rally last year. For most Japanese households, the weakened yen has done little more than drive up the costs of critical imported products such as food and energy.

Imports account for around 90% of Japan’s total energy supply and data released this week showed that household spending shrank slightly in 2024 after expanding in the previous three years. Wage gains having failed to keep up with inflation.

In the past, Japan welcomed a weak yen to spur exports but now many Japanese companies have moved more of their production and sales to subsidiaries outside of the country.

Competition from China is also weighing on Japan’s exports and, much like America, its ability to hold on to manufacturing at home. China’s manufactured exports have grown more than 10 times as fast as its manufactured imports over the last five years, or by over $150 billion a year.

The below chart from the Financial Times illustrates just how dominant China is in some key sectors.

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 were steady this week and are up 27% so far in 2025 as the company reported adjusted earnings of $1.26 per share for fourth-quarter 2024, up from 58 cents in the year-ago quarter. Revenue was $2.22 billion, up nearly 26.6% year over year. Agnico Eagle Mines is reportedly on track to become the world’s second-largest gold producer. Agnico has mines in Canada, Australia, Finland, and Mexico, with exploration and development activities focused on Canada, Australia, Europe, Latin America, and the U.S. Buy a Half

American Superconductor (AMSC) shares are up 27% so far in 2025, boosted by recently reported quarterly revenue that grew 56% year over year. The company produces advanced grid interconnection systems, high-temperature superconductor cables and wind turbine design in important growth markets such as maritime, Maglev technology, and AI data centers. Buy a Half

Banco Santander (SAN) shares are up 32% so far this year as Santander’s chair Ana Botin announced plans to invest over $2 billion in Mexico during the next three years. Santander is a diversified global quality bank with exposure in Europe and emerging markets trading at a value price. Buy a Half

BYD (BYDDY) shares surged in the fourth quarter of 2024 and are up 37% in 2025 as the stock has broken out amid its move to roll autonomous driving technology across its lineup including EVs priced as low as $10,000. BYD has said it plans to invest about $14 billion in AI and automotive intelligence technology spearheaded by an army of more than 5,000 engineers. Buy a Half

Centrus Energy (LEU) shares pulled back 7% this past week, no doubt due to profit taking as the stock is up 59% in 2025. The company reported 2024 full-year revenue of $442 million, gross profit of $112 million, and net income of $73 million. It is a key processor and producer of enriched uranium and Goldman Sachs predicts that AI data center energy consumption will likely surge through 2030. Buy a Half

Cloudflare (NET) shares pulled back 7% this week after last week’s 20% gain following news that the Trump administration plans to implement new tariffs that would apply to foreign semiconductors and thus raise costs. Hold a Half

Dutch Bros (BROS) shares soared 32% this week and has zoomed 62% in 2025 as its expansion story takes hold. The company opened 151 new stores in 2024, of which 128 were company owned, including 32 total stores and 25 company-owned locations in the fourth quarter. It ended the year with 982 locations, of which 670 were company owned. Meanwhile, it plans to open at least 160 new locations in 2025. Feel free to take partial profits. Hold a Half

Luckin Coffee (LKNCY) was up marginally as the company expects to report earnings today, February 20. Luckin is not only much cheaper than Starbucks, but also 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. During its last quarter, it opened an incredible 1,382 new stores, bringing total stores to 21,300. Buy a Half

Recursion Pharmaceuticals (RXRX) shares jumped 42% this week after Nvidia held onto all 7.7 million or so of its Recursion Pharmaceuticals shares as a vote of confidence in the company. Recursion uses AI extensively as part of its drug discovery process, and built the largest supercomputer in the biopharmaceutical industry with Nvidia’s help. Buy a Half

Sea Limited (SE) shares were up 7.7% this past week and now trade near 10 times book value so you should take some profits off the table if you have not already done so. The company’s three engines are e-commerce Shopee platform, digital financial services (SeaMoney), and the digital entertainment wing (Garena). Hold a Half

Explorer Dominator Blue-Chip Recommendations – More Buy and Hold

International Business Machines (IBM) shares advanced 3.8% this week as the company’s slow top-line growth benefits from offering a suite of infrastructure hardware, hybrid-cloud solutions, and a suite of enterprise software applications. IBM’s Watsonx.ai platform has been crucial in helping large organizations blend AI and machine learning into their business processes. Buy a Half

Visa (V) shares edged up this week and I have been looking at American Express (AXP) as a substitute given the regulatory antitrust cloud over the company that could impact its impressive moat. Visa is more efficient in converting revenue into profit with an industry-leading operating margin of 66%, compared to American Express’ 21.2% while American Express posts higher net income growth. Buy a Half

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

ConocoPhillips (COP), Franco-Nevada (FNV), Moog Inc. (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 22.1%. 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

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 next year. BYD expects solid-state batteries for high-end models by 2027, but not fully reaching lower-end models until 2030-2032.

Centrus Energy (LEU), based in Bethesda, Maryland, supplies nuclear fuel and services for the nuclear power industry in the United States, Japan, and Europe. Centrus Energy is building an enrichment facility in Ohio and would be very likely to benefit especially if federal funding moves forward to support this and other nuclear projects. I believe Centrus stock will benefit from increasing demand for its services, and that downside risk is low while upside potential is significant.

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.

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 160 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).

Recursion Pharmaceuticals (RXRX) is using artificial intelligence (AI) software to increase the tempo of drug development. Recursion Pharmaceuticals was founded in 2013 and received its first green light to begin a clinical trial with REC-994, an experimental drug it discovered with help from its AI-driven discovery platform in 2018. Unfortunately, REC-994 for cerebral cavernous malformation failed to improve outcomes for patients with the rare neurovascular condition in a phase 1 study and another also failed to meet expectations. The journey continues and any progress on clinical validation of its platform could send the stock soaring.

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.

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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