January 10, 2025

Portfolio Changes: None

Markets were closed yesterday in honor of the late President Jimmy Carter.

No matter your politics, the service was well done and inspirational.

It was a solid opening this first week of 2025: new recommendation American Superconductor (AMSC) shares were up 10%, Centrus Energy (LEU) shares were up about 8%, Cloudflare (NET) shares were up 7.5%, and Dutch Bros (BROS) shares were up 7.3%.

Tomorrow morning, December employment data will be released. After a weak October report, job creation rebounded strongly in November, with 227,000 new jobs added and the unemployment rate ticking up slightly to 4.2%.

The statistic has come into focus as the U.S. government issues an incredible $119 billion worth of new debt this week as yields approach 5% for longer maturities – the highest yield since 2007. Even the shorter 10-year auction last week approached this 5% interest rate.

It is interesting to note that size, scale and growth are now very much in vogue and companies and countries that offer both attract investment capital and enjoy stock prices.

The top four big tech firms are expected have combined capital spending this year of over $250 billion.

Not all that long ago, it was very different.

Some of you might recall the book “Small Is Beautiful” (1973), in which the economist E.F. Schumacher argued for a less technological, low-growth society.

In this worldview, nuclear power was wrongheaded not simply because it entailed risks but because it might be too good at enabling Paul Ehrlich, the author of “The Population Bomb” (1968), later sounded a similar note: “Giving society cheap, abundant energy would be the equivalent of giving an idiot child a machine gun.”

The “cheap” energy Ehrlich was referring to was nuclear power.

The 1979 meltdown at Pennsylvania’s Three Mile Island plant, and the 1986 Chernobyl disaster in the U.S.S.R., cooled the enthusiasm for nuclear power and by the 2011 meltdowns at Japan’s Fukushima plant shut things down. Most developed nations began shutting plants down.

Then came layer upon layer of rules, going far beyond any recognizable safety benefits which pushed costs up sharply.

Germany retired its nuclear fleet at exactly the wrong time, offering a cautionary example of not having a diversified base of energy. The country now faces sky-high energy prices, falling industrial output and economic growth has weakened.

The case for safer nuclear is stronger than ever even though coal-fired electricity remains in a strong uptrend. China has 100-plus nuclear plants in pipeline and still consumes 30% more coal than the rest of the world combined, the IEA reported in December.

We will continue with this energy theme from a number of angles as America strengthens its role as an energy superpower.

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 1.7% in the past week and gold gained 26% in 2024, better than the performance of most major asset classes. Gold prices hit an all-time high of $2,748.23 in October driven by heightened geopolitical tensions, interest rate cuts and central bank purchases. Agnico’s most recent net profit was up 165% and gold is Agnico Eagle’s primary revenue source, accounting for roughly 99% of total revenue. Buy a Half

Airbus (EADSF) shares were up a bit this week as Airbus delivered 766 jets in 2024 and looked certain to maintain leadership of the jet-making industry for a sixth straight year. Deliveries are the backbone of plane maker finances because that is when most revenue is generated. Industry sources say Airbus is currently producing close to 60 single aisle jets a month, up from around 50 a year ago. Airbus has an edge in fuel-efficient, mid-sized aircraft but China’s COMAC heavily subsidized C919 is making some progress and will shortly fly commercially between Hong Kong and Shanghai. Buy a Half

American Superconductor (AMSC) shares were up 10% in the stock’s first week as an Explorer recommendation after reporting third-quarter revenues of $54.47 million, up 60.2% year on year. The company, founded in 1987, 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. It 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 – huge growth opportunities. This is an aggressive microcap idea so you may want to purchase incrementally. Buy a Half

Banco Santander (SAN) shares were up 4.5% the past week. This international bank currently has a forward P/E ratio of only 5.5 and is trading at just 62% of book value. Banco Santander has added almost 5 million new customers over the last 12 months and has a total of 171 million customers in Europe, Latin America, and North America. Buy a Half

BYD (BYDDY) shares were off a bit despite reporting that global deliveries of approximately 4.3 million passenger cars in 2024. Though Tesla’s main rival in China reported that 2.5 million of those were hybrids, BYD’s pure EV total came in around 1.76 million – just short of Tesla. Tesla stock is considerably more expensive based on revenue, earnings and cash flow. Buy a Half

Centrus Energy (LEU) shares were up about 8% this week as the global demand for uranium is accelerating, driven by advancements in artificial intelligence (AI) and the electrification of industries. According to research from Goldman Sachs, data center energy consumption is expected to surge by 160% by 2030. Centrus has secured a contract from the U.S Department of Energy (DOE) to expand commercial production of Low-Enriched Uranium (LEU). Centrus enriches that natural uranium to about 3% to 5% to make low enriched uranium. Buy a Half

Cloudflare (NET) shares were up 7.5% this past week as the company will report its financial results for the fourth quarter after the U.S. market closes on Thursday, February 6. I like everything about this stock except its high valuation, which is why I moved this stock to a hold. About 20% of all web traffic flows through Cloudflare’s products and 95% of internet users access its services every day as it blocks an amazing 170 billion threats a day. Hold a Half

Dutch Bros (BROS) shares were up 7.3% this week and are getting more attention as a compelling growth story. Its 2023 bottom line of $0.30 per share is expected to reach $0.45 for 2024, on a path to earnings of $0.55 per share in 2025. Dutch Bros seems to have found a way of connecting with its customers is what people want. Dutch Bros has expanded beyond coffee to lemonades, teas, smoothies, and energy drinks, and it’s starting to test food offerings in select shops. Hold a Half

Sea Limited (SE) shares rose 4% this week and over the last year its outperformance has been driven by consistent top-line growth, supported by the strength of its core segments, which include e-commerce (Shopee), digital financial services (SeaMoney) and digital entertainment (Garena). The stock is getting expensive trading at more than eight times book value so I’m keeping it a hold. Hold a Half

Explorer Dominator Blue-Chip Recommendations – More Buy and Hold

Alphabet (GOOG) shares were up 2.6% this week after the company announced that it is further streamlining the teams building its AI services, platforms, and tools. The company aims to leverage its dominant position in search to the company’s focus for on AI. This includes its models for language AI (Gemini 1.5) and video AI where it has a clear lead. Alphabet will report quarterly financial results on January 27. Buy a Half

International Business Machines (IBM) shares were up a bit this week and 45% in the last year. IBM has recently built on the AI theme by announcing a series of key AI partnerships with Amazon. IBM offers us conservative exposure to a blend of cloud computing, data analytics, cybersecurity, and artificial intelligence (AI). Buy a Half

Visa (V) shares struggled a bit in 2024 as the U.S. government seeks to make the case that Visa is a near monopoly on the debit card side of the business. Nevertheless, Visa has a wide moat in digital payments connecting 4 billion account holders to more than 130 million merchants and 14,500 financial institutions. We will see if it regains momentum in 2025. Buy a Half

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

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. GBTC was up 114% in 2024 as Bitcoin prices soared. Buy a Small Allocation

iShares MSCI India Small-Cap ETF (SMIN) is an $856 million fund that holds a basket of about 500 small-cap India stocks. It is nicely diversified with the top 10 stocks accounting for just 12% of assets. The lead sector is industrials at 25%, followed by finance at 15%, consumer goods at 14%, basic materials at 13% and healthcare at 10%. 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) 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 18.9%. 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’s Japan Hedged Equity ETF (DXJ) offers exposure to a broad basket of dividend-rich Japanese stocks hedging for yen currency fluctuations. Buy a Full

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 forecasts 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 is 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 Boeing’s supply chain challenges, Airbus has a clear edge right now. Airbus is benefiting from its decision 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.

Alphabet (GOOG) is becoming a play in artificial intelligence (AI) or even better, dominating AI, by having two things: lots of data and lots of computing power (and the energy to run it). Perhaps the biggest challenge for companies hoping to capitalize on that idea has been a lack of data – the kind that Google is sitting on through decades of running the internet’s dominant search engine. But the parent of Google, Alphabet, is much more than this as evidenced by the just announced a breakthrough in quantum computing with Willow, a chip that’s faster than the world’s most powerful supercomputer. This highlights the firepower of the company and long-run potential to dominate new emerging technologies. Alphabet also owns the world’s most-visited video platform (YouTube), the world’s third-largest cloud (Google Cloud), and a host of interests in other technologies, like autonomous driving, quantum computing, and smartphone software.

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. In the second quarter, it welcomed over 4 million new customers compared to the previous year. 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 and has 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 28 consecutive years of dividend increases.

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.

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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