February 5, 2025

Note: Due to my travel schedule this week, you are receiving your Cabot Explorer update a day earlier than normal. Your next issue will arrive as scheduled, on Thursday, February 13.

Portfolio Changes: None

Explorer Stocks Off to Good Start in 2025

While Nvidia (NVDA) has pulled back more than 20% over the past two weeks, our conservative AI play IBM (IBM) has tacked on 40 points over the same period- hitting an all-time high early this week.

Cloudflare (NET) shares were up again this week and are now up 28% in 2025 to reach 140.

Dutch Bros (BROS) shares rose 8.5% this week and have surged 23% so far in 2025.

Sea Limited (SE) shares are demonstrating strong momentum, up 102% in the last six months.

For those who missed the news over the weekend, President Trump imposed 25% tariffs on Mexico and Canada and 10% tariffs on China but then temporarily reversed course on our neighbors but stayed the course with China.

China announced retaliatory tariffs.

Financial markets did not take the news lightly as gold rose along with energy prices.

A big chunk of U.S. imports come from Mexico and Canada, making up nearly 30% of the $3 trillion of goods imported last year. It matters because Mexico is the nation’s largest source of fruit and vegetables, accounting for about 40% of consumption.

About 25% of the lumber used in the U.S. comes from Canada and if the 25% tariff is put back, it would raise total tariffs on Canadian lumber to 39%.

Then there is the auto industry, which is really a North American industry. Last year, Canada supplied almost 13% of U.S. auto parts imports and Mexico more than 40%.

The uncertainty is unsettling, but markets are taking most of it in stride so far.

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 up 6.2% this week as the company has announced that it has acquired 110,424,431 common shares of O3 Mining, representing approximately 94.1% of the outstanding common shares.

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. The company will report its earnings in one week. Buy a Half

Airbus (EADSF) shares were steady this week as Airbus and rival Leonardo discuss possible alliances in the satellite industry which would allow Europe to better face up to global competition. Airbus delivered 766 jets in 2024, and the company confirmed that it seeks a target of manufacturing 75 single-aisle aircraft a month in 2027. Buy a Half

American Superconductor (AMSC) shares were off 3% this week as we expect it to report earnings today. American Superconductor beat analysts’ revenue expectations last quarter, reporting revenues of $54.5 million, up 60.2% year on 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 were flat this week as the company announced a new CEO for its U.S. bank.

Santander has one of the biggest auto-lending businesses in the U.S. and seeks to build its own technology platform for consumer banking, including digital-only banking and consumer finance. It is a diversified global quality bank with exposure in Europe and emerging markets trading at a value price. Buy a Half

BYD (BYDDY) shares were up 4% this week as the company sold nearly 4.3 million vehicles globally in 2024, up significantly from the prior year’s 3 million. BYD launched several new models, including the Dolphin, which starts at roughly $19,000, and sold more EVs in Japan last year than Toyota. Buy a Half

Centrus Energy (LEU) shares were up about 2% this week as the company is expected to report quarterly earnings today. It is a key processor and producer of enriched uranium including the grade needed for SMR nuclear facilities to address the steadily increasing electricity demand in the United States. Goldman Sachs predicts that data center energy consumption will surge by 160% by 2030. Buy a Half

Cloudflare (NET) shares were up again this week and are now up 28% in 2025 to reach 140. The company will report its financial results for the fourth quarter today after the U.S. market closes. Hold a Half

Dutch Bros (BROS) shares rose 8.5% this week and have surged 23% so far in 2025 as the company announced it will report quarterly earnings on February 12^th. The key going forward is staying disciplined in opening new locations and not being too aggressive. Hold a Half

Recursion Pharmaceuticals (RXRX) shares gained ground in its first week as an Explorer recommendation.

Recursion is using artificial intelligence (AI) software to increase the tempo of drug development. Founded in 2013, it 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. Buy a Half

Sea Limited (SE) shares are demonstrating strong momentum up 102% in the last six months. The company is fueled by three engines: e-commerce Shopee platform, digital financial services (SeaMoney), and the digital entertainment wing (Garena). The stock is getting expensive, however, trading at more than eight times book value so I suggest again taking partial profits to lock in some gains. Hold a Half

Explorer Dominator Blue-Chip Recommendations – More Buy and Hold

International Business Machines (IBM) shares, representing our conservative AI play, have tacked on 40 points over the last two weeks, hitting an all-time high early this week. The company offers all the tools clients need to train and manage AI models that can be run on multiple public clouds. Buy a Half

Visa (V) shares were up 4 points this week as this dominating stock is regaining some momentum. Payment networks such as Visa are big beneficiaries of network effects since merchants only want to carry a certain number of payment options. This is a major reason why Visa commands a 70% market share for credit and debit cards in the U.S. 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 closed-end 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 earn 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

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.

Airbus (EADSF), along with Boeing, is one of only two manufacturers, that make the full-size commercial jets needed by the world’s airline industry. China’s COMAC is making gains but probably a decade away from being a competitive rival. Boeing’s troubles are Airbus’s opportunity. Airbus, incorporated in the Netherlands but based in Toulouse, France, is making planes as fast as it can and has a backlog of more than 8,600 orders to fill. Airbus last year beat Boeing for the fifth straight year in the orders and deliveries race, with 2,094 net orders and 735 delivered planes. I visited its facilities recently and while it shares some of Boeing’s supply chain challenges, Airbus has a clear edge right now. Airbus is benefiting from its decision to deliver the fuel efficient to launch A321neo, a single-aisle aircraft with 180 to 230 seats. Fuel is one of the airlines’ biggest costs. Airbus’s new A321XLR model will also enable airlines to use cheaper narrow-body jets on long-haul flights.

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 950 stores as of the end of the third quarter, including 38 that it opened in the quarter. It’s expanding at a steady pace, expecting up to 165 new stores in 2024, 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.

Watch List: MOOG (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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