February 8, 2024

Portfolio Changes: SK Telecom (SKM) – Move from Buy a Half to Sell

Super Micro Computer (SMCI) – Move from Buy a Half to Take Partial Profits and Hold the Balance

Time to Take Some Profits in Super Micro

U.S. stocks, buoyed by positive earnings, continued their move higher this week with the S&P 500 within striking distance of the 5,000 milestone.

Super Micro Computer (SMCI) shares performed even better, surging another 26% this week alone, and are now up over 100% in 2024. I suggest that you seriously consider taking some partial profits and letting the balance run. Super Micro is a leveraged play on Nvidia (NVDA) and other advanced chips for AI since it sells to the servers and systems that incorporate and support those premium chips in data centers.

Elsewhere, for the first time in more than two decades, “made in Mexico” is outpacing “made in China”, according to U.S. Census Bureau data. This is both a sign of lower demand by Americans for electronics and the surge in investment in Mexican manufacturing.

Chinese stocks rallied after the country’s sovereign wealth fund said it will pump more money into the market and regulators hinted that they will further squash short selling. As China struggles, investors have pulled billions of dollars from China’s markets to the benefit of other international markets such as India and Japan. India’s underdeveloped stock market has a limited number of ADRs (American Depositary Receipts) that are expensive as I look for some overlooked value plays.

Boeing (BA) stock is under pressure after a series of mishaps and now the company faces a labor rift 10 years in the making, as its largest union seeks a 40% pay raise over the next four years. This stock is headed lower in my view. I’m looking at General Electric (GE) as perhaps a better alternative as it turns into a defense & aerospace company. Perhaps no company represented the weight of American industry, and later the creeping financial sector, more than General Electric, a proud company established in 1892. Over time it spread its tentacles across a myriad of industries and services but is now a shadow of its former self.

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 20% trailing stop-loss in place

10x Genomics (TXG) shares bounced from 42 to 46 this week as the company announced the launch of its next generation of leading single cell technology. It could deliver lower costs, better data, and increase sample recovery. The next earnings report expected on February 15. Buy a Half

Exscientia (EXAI) shares were largely unchanged on no news this week as this AI-driven biotechnology company and potential takeover candidate continues to partner with mega drug companies to launch new products. Buy a Half

Cloudflare (NET) shares jumped from 80 to 83 in their first week as an Explorer recommendation. Earnings are expected out tomorrow morning (February 9). Cloudflare is both an aggressive and dominator recommendation offering products and services in four cutting-edge fields: cloud computing, AI, cybersecurity, and edge computing. Buy a Half

Novo Nordisk (NVO) shares were up again this week, from 114 to 119, on increasing volume and institutional investor support coupled with a healthy fundamental backdrop. Novo Nordisk’s market value has moved beyond $500 billion, becoming only the second European company to achieve this milestone. Hold a Half

SK Telecom (SKM) shares are trading below book value with a solid dividend yield but have been trading sideways with no momentum, so we are moving this stock to a sell. Move from Buy a Half to Sell

PayPal (PYPL) shares were up only a couple of points this week as a positive quarterly report showed PayPal earnings for the fourth quarter rising 19% to $1.48 per share on an adjusted basis and 9% revenue growth, to $8 billion. This was offset by lower guidance for all of 2024. PayPal is a digital payments company with 430 million active accounts. Buy a Half

Super Micro Computer (SMCI) shares surged 26% this week alone and are now up over 100% in 2024. I suggest that you seriously consider taking some partial profits and letting the balance run. Super Micro is a leveraged play on Nvidia and other advanced chips for AI since it sells to the servers and systems that incorporate and support those premium chips in data centers. Move from Buy a Half to Take Partial Profits and Hold the Balance

Explorer Dominator Blue-Chip Recommendations - More Buy and Hold

ConocoPhillips (COP) shares were steady this week as we await a new earnings report today. I expect increased production at lower average prices but will give an update next week. Hold a Half

International Business Machines (IBM) shares were unchanged after a nice run over the previous weeks as this company dominates multiple markets due to its size and broad markets, giving it enviable dynamism and stability. The company has 80,000 business partners and 5,200 clients which includes 95% of all Fortune 500 companies. Buy a Half

Visa (V) shares tacked on another four points this week as it continues to demonstrate its worth as a stock to “get rich slowly. As the world goes increasingly digital, Visa is pursuing a “network of networks” strategy including newer cloud computing-based payment networks. This stock remains a strong, dominating core holding. Buy a Half

Watch List – BYD (BYDDY)

Explorer ETF/Fund Positions

Global X Lithium & Battery Tech ETF (LIT) offers solid exposure to other beaten-down lithium names at a low cost. With an expense ratio of 0.75%. Buy a Half

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) is a contrarian value play on China’s beaten-down market. 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

WisdomTree China ex-State-Owned Enterprises Fund (CXSE) is a way to gain China exposure without any state-owned enterprises (SOEs). Buy a Half

Explorer Stocks Summary

Brief company summaries that will not change week to week.

10x Genomics (TXG) is a leader in the emerging field of “spatial biology,” a cutting-edge life science for making new discoveries about human health and disease. Founded in 2012 and based in Pleasanton, California, 10x builds tools for scientific research to advance human health. Its instruments, reagents and software allow researchers to examine cells and molecules at a resolution and scale never imagined or experienced before. 10x helps researchers look at the roots of biology.

Watch List: BYD (BYDDY) switched to producing only all-electric battery vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). The company also manufactures and supplies EV batteries, including to Tesla, and makes its own chips. This is vertical integration that would make Henry Ford proud. BYD is in a strong position to be one of, if not the leader of the EV revolution in terms of size, scale, and growth.

Cloudflare (NET) is both an aggressive and dominator recommendation offering products and services in four cutting-edge fields: cloud computing, AI, cybersecurity, and edge computing. 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.

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.

Exscientia (EXAI) was founded in 2012 and based in Oxford, England, Exscientia is using AI to develop new medicines and is attracting high quality partners. Exscientia (EXAI) stock is trading way off its high in an uptrend at 5.86. It went public at 22 a share so the company has about $500 million in cash on the books – a big number for a company with a market capitalization of just $732 million. Finally, keep in mind that this is an attractive speculative stock which may have a bumpy ride. It is a young company that is yet profitable.

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 28 consecutive years of dividend increases.

Novo Nordisk (NVO) specializes in treatments for diabetes, hemophilia, and obesity. The company supplies half of the world’s insulin, and its diabetes care products are used by over 34 million people today. Novo highlights that more than 750 million people are currently living with obesity and that this is up a multiple of 3X since 1975. In summary, based on sizable and growing demand for this weight-loss drug, this well managed, highly profitable company with an excellent growth profile and potential to develop new products has limited risk.

PayPal (PYPL) is a digital payment giant. With 430 million active accounts generating over $1.5 trillion in payment volume annually, PayPal retains a strong leadership position in the e-commerce payment ecosystem. PayPal has been cutting costs and expanding margins and earnings growth. In addition, PayPal’s new CEO is spearheading an innovation drive doubling down on growth efforts and boosting crypto capabilities.

Super Micro Computer (SMCI), commonly known as supermicro, manufactures enterprise computer server hardware for cloud computing, artificial intelligence, data storage and telecommunications. Super Micro stock looks relatively inexpensive right now for the growth that it has been delivering. The company trades at just two times sales. Super Micro has two larger rivals, Dell (DELL) and Hewlett Packard (HPE), but it is forecast to grow five to 10 times faster. Furthermore, both Dell and HPE have relatively high debt whereas Super Micro has a net positive cash position. This is an aggressive pick in a sector experiencing extraordinary growth.

Visa (V) doesn’t extend credit but provides the plumbing for financial payments and communications throughout the world. Visa has the largest card network in the U.S., processing $14.8 trillion of payment volume in the last 12 months. 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. This leaves it much better poised to outperform the latter going forward.

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