Cabot Explorer 746

In a market facing inflation, a Taiwan potential takeover, rising oil prices, Explorer stocks had a good week, especially Cloudfare (NET), up twenty points for the week and Sea (SE) is back up to 350, up 7% yesterday. We need to remain confident and my pick today is a niche player in corporate aviation markets.

Cabot Explorer 746

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The Value of a Company’s & Country’s Brand
A company’s stock is definitely impacted by its brand. A young company and its stock are almost completely numbers driven. How fast is it growing?

How profitable is the company? But a more established company is measured by a combination of numbers and its brand.

A country’s brand is largely framed by the perception of its people, power, reliability and influence. This perception can be just as important as a country’s real economic and military power. In short, a country’s brand largely reflects a country’s character. Brand Finance, a leading brand consulting firm, actually calculates and annually publishes a ranking of country brand values. For 2020, the United States ranked first with a brand value of $23.7 trillion, followed by China at $18.8 trillion and then Japan at $4.3 trillion.

A brand relentlessly reflects reality. It usually takes a long time to establish a positive brand, but it can be squandered in a heartbeat. And a positive and powerful brand is a very valuable asset in the global marketplace of ideas, influence, capital, trade, business, diplomacy, and national security. A positive and strong brand also serves to unite a country in pride and purpose.

A brand must always be aligned with a country’s values and principles. A country at odds with its foundational principles is a country in confused decline. For a country, a brand that’s trustworthy and dependable with a consistent and fair legal system, an educated and talented workforce, political stability and dynamic financial markets can mean the difference between prosperity and peace—or misery and conflict.

New Explorer Recommendation
Bombardier Inc. (BDRBF)
Get ahead of the recovery in aviation. Bombardier is a global leader in aviation with a niche in private and corporate markets, and is making a splash at this week’s aviation show in Las Vegas. It provides world-class products in passenger comfort, energy efficiency, reliability and safety. Headquartered in Montréal, Canada, Bombardier is active in more than 12 countries. The company supports a worldwide fleet of more than 4,900 aircraft in service with a variety of multinational corporations, charter and fractional ownership providers, governments and private individuals.

Plane makers are likely to unveil new orders and models at the world’s largest business jet show in Las Vegas this week as they aim to cash in on rising markets in private travel, but executives warn of headwinds due to a capacity crunch. Bombardier received a significant order recently after launching its Challenger 3500 business jet, quickly reinforcing the supremacy of its platform in the super-mid-size market.

The new Challenger 3500 aircraft is ideally suited to meet a growing demand for business travel. An evolution of the best-selling Challenger 350 aircraft, the Challenger 3500 business jet boasts a redesigned interior.

Bombardier said it had received a firm order worth $534 million for 20 units of an upgraded variant of its Challenger 350 aircraft, marking its biggest business jet deal this year. The refreshed jet, named Challenger 3500, was launched earlier this month as Bombardier seeks to protect its dominant share of the market and is focused on paying down debt after facing a cash crunch in 2015. The company now has total cash of $3 billion and manageable debt of $8 billion.

The Challenger 3500 seats up to 10 passengers and comes with voice-controlled cabin systems for lighting and multimedia. It is also equipped with a smaller version of the chaise lounge seats found on the flagship Global 7500. The jet, expected to enter service in the second half of 2022, will list for $26.7 million, the same price as the 350. Momentum for the company is picking up and the stock is in a clear uptrend.

BUY A HALF POSITION

Model Portfolio

Portfolio Changes
International Business Machines (IBM) - MOVE FROM BUY A TO SELL
Palantir Technologies (PLTR) - MOVE BUY TO A HOLD

Updates
ChargePoint Holdings (CHPT) shares are in a bit of an uptrend, going from 18 to 20 over the last week. The stock is well below its 52-week high of 46 even though it reported that the most recent quarterly revenue grew 61% year over year. ChargePoint has developed an EV-charging network that offers drivers in North America and Europe more than 118,000 places to power up their EVs.

It is the leading North American Level 2 charging network, using 240-volt power. This lead is a huge advantage because of network effects as the company already has partnerships with more than roughly 60% of the Fortune 50 companies. So while competition is intense, I believe that the stock can be accumulated at its current levels with a medium-term outlook. BUY A HALF

Cloudflare (NET) shares have had a great rally, soaring from 135 to 156 in the last week. NET is still one my favorite stocks given its aggressive sales strategy, the fact that the company is protected by several moats and the co-founders are still heavily involved. This company provides network security, performance and reliability services to a growing portion of global web traffic. I’m going to keep this a hold though more aggressive investors can add to their position. HOLD A HALF

Else Nutrition Holdings (BABYF) shares finished flat at 2.00 yesterday. Else is a young, Israeli-based, plant-based food and nutritional company aimed at babies and toddlers.

Trading at a market value of only $190 MM, this stock is speculative but Else bypasses all the hormones, pesticides, chemicals, dairy and soy issues since it is made from almonds, buckwheat and tapioca. Another reason for optimism is that institutional investors have a very small proportion of issued stock and management owns 41%. In addition, I’m impressed with the marketing and distribution efforts thus far. Finally, Else may expand the brand to cereal, post-toddler nutrition and nutritional drinks. It’s a good story so let’s begin by incrementally building a half position. BUY A HALF

Fisker Inc. (FSR) shares are still just short of 15 but the company is widely considered one of the EV outliers. Fisker offers investors a custom “asset light” and “Apple of autos” strategy relative to EV maker leaders like Tesla. Its Ocean EV has a sub-$40,000 retail price point, making it a more affordable EV option, though we do have to accept that the company’s first product will be launched in the latter part of 2022. This is an aggressive stock but I confirm a buy rating on Fisker. BUY A HALF

Glaukos (GKOS) shares made a bit of a move from 45 to 47 even as Covid continues to keep some patients from handling their eye issues. Based in Laguna Hills, California, Glaukos is a medical technology company focused on innovative therapies for the treatment of glaucoma, corneal disorders and retinal diseases. Glaukos’ revolutionary product is the iStent, a tiny L-shaped titanium implant. In addition, it has the most comprehensive pipeline in ophthalmology. And new product launches will expand its market opportunities, including acquisitions and expansion into international markets. The balance sheet is solid with more than $400 million in cash. BUY A FULL

International Business Machines (IBM) shares were uninspiring this week. IBM has a new CEO and ambitious plans and has completed a slew of acquisitions at an aggregate cost of $723 million. All are hybrid cloud and AI-focused. Big Blue will split into two companies by the end of the year and the stock’s valuation is at half the level of the S&P 500’s on a price-to-earning basis. This is a conservative income play that could find a home in any global portfolio, but today we’re going to remove it to make room for other, more inspired ideas. MOVE FROM BUY A HALF TO SELL

Marvell Technology Group (MRVL) shares have not done much for us over the past month. Credit Suisse recently upgraded the stock, calling Marvell “one of the most strategic assets“ in semiconductors. Marvell’s semiconductor products are state-of-the-art and in high demand, allowing businesses and consumers to take advantage of 5G capabilities. I recommend buying at current prices if you have not already done so. BUY A HALF

Novonix (NVNXF) shares were flat this week after peaking at a price of 5 in late September. Novonix’s mission is to support the global deployment of lithium-ion battery technologies for a cleaner energy future. The company is an Australian technology and advanced materials supplier focused on synthetic graphite for the electric vehicle and storage battery industry. Novonix is a non-Chinese synthetic graphite producer, making it effectively immune to any potential disruptions caused by either Chinese politics or its international trade disputes.

Novonix is a technology-first company that traces its corporate lineage directly to a Tesla-sponsored battery research lab at Dalhousie University in Nova Scotia and has quite a bit of technical brainpower behind it. This is an aggressive idea but this stock is a play on an important clean technology. BUY A HALF

Palantir Technologies (PLTR) shares were up in a volatile market but well down from the annual high. The “big data” market opportunity is massive and could lead to growth in the years ahead. Palantir’s revenue rose 47% to $1.1 billion in 2020, and it expects its revenue to rise more than 30% annually from 2021 to 2025. Palantir’s stock currently trades at 34 times this year’s sales. The company expects that growth to be driven by its two core platforms: Gotham, which serves government clients; and Foundry, which provides lighter versions of those services for enterprise clients. Its third platform, Apollo, provides cloud-based updates to both platforms. The stock is a bit expensive, seems trade-range bound and Peter Thiel has become a cult figure, so I’m moving this to a hold. MOVE FROM BUY A HALF TO HOLD

Sea Limited (SE) shares have surged to just short of 350, up 7% yesterday. IBD lauded the company as its stock of the day on Wednesday. The company expects that its e-commerce revenue will grow by 121% this year. I would be an incremental buyer of this stock, but long-time holders should definitely take partial profits from time to time. I have been a bit cautious on this stock but I’m getting close to a full buy. BUY A HALF

Veeco (VECO) shares held firm this week, approaching 24 in a volatile tech market the past two weeks. This is an American high-quality provider of state-of-the-art semiconductor fabrication equipment. The company delivers the leading edge technology to U.S.-based and international high-end class chipmakers, some of which are 100% reliant on Veeco technology.

Some analysts expect sales to pick up nicely in 2021, with revenue growth close to 30% and with up to 50% earnings growth, to $1.29 for 2021 and then to grow further in 2022. Veeco represents a backdoor play on semiconductors. I recommend that you acquire shares if you have not already done so. BUY A HALF

Virgin Galactic (SPCE) shares were up slightly last week but we need to look forward. The stock is up more than 3x from our original buy. I’m still bullish on Virgin Galactic. I am a bit concerned about insider selling and timing going forward, so I believe a hold rating is appropriate for the time being. HOLD A HALF

The next Cabot Explorer issue will be published on October 28, 2021.
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