March 6, 2025

Portfolio Changes: Recursion Pharmaceuticals (RXRX) – Moved from Buy a Half to Sell in an Alert this week

Update on Tariffs, Taxes and “Malaysiapore”

Before we get to an update on my journey through Asia, let me offer a few thoughts regarding recent market weakness and volatility, driven by rising economic and political uncertainty. Sea Limited (SE) bucked the trend with another strong quarter while American Superconductor (AMSC) shares had another tough week after a great run, down 15.8%.

The tariff on-and-off news is creating some turbulence as are the pivotal Congressional spending and tax negotiations.

There is not much we can do about this, but we can control how we react.

First, don’t overreact, continue to take some profits, tilt towards quality and international, and keep some cash on hand to potentially take advantage if prices pull back.

Regarding international stocks, you need to be selective.

For example, we have rightfully avoided India.

The sharp selloff in India equities since last September is largely the result of global funds pulling out nearly $14 billion due to concerns about slowing growth and high valuations.

Asian and European stocks look more attractive on a valuation basis and history shows that U.S. and foreign markets often take turns having “great” decades.

This week, I traveled from Singapore through Malaysia which is a remarkable middle-income country rich in resources and politically stable. The country is also benefiting from better cooperation with Singapore, highlighted by the expansive special economic zone in Malaysia right over the border with Singapore.

The region spans an area of 850 square miles, which is roughly three times Singapore’s size. Smart cards have been issued to facilitate the two-way traffic of Malaysians and Singaporeans to the region. It is estimated that on a regular workday many workers commute over the Johor-Singapore causeway to earn a better living.

This trend of economic integration is something I refer to as “Malaysiapore”.

And like two turbine engines powering a jet plane, Malaysia and Singapore underline the importance of Southeast Asia.

South of China and East of India – the expansive, high-growth, and strategically important ASEAN region of 645 million optimistic, youthful, tech-savvy consumers – offers a wealth of entrepreneurial talent and an abundance of commercial opportunities. Sea is an e-commerce leader in seven of these markets: Taiwan, Singapore, Thailand, Indonesia, Vietnam, the Philippines, and Malaysia that represent a consumer base roughly equal to the size of North America.

Therefore, a wave of capital from America, China, Europe, Japan, India, and South Korea is chasing significant opportunities in the region. Over the past few years, Southeast Asia has attracted more foreign direct investment than China. And China has become the largest investor in Southeast Asia as well as its largest trading partner, surpassing the European Union.

Investors have finally begun to appreciate that Malaysia offers many of the attributes of its southern neighbor. Although palm oil and other commodities are an important part of the Malaysian story, investors have begun to recognize that its economy is well diversified with over 50% of its GDP coming from services sector while agriculture represents less than 10%. It also has attractive demographics, with about 30% of its population under the age of 15 – more than double the proportion in Japan.

My next stop is Vietnam, the ultimate example of representing what I refer to as emerging “Motorcycle Markets”.

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 are up 27% so far this year and held steady this week. Since 2000, gold is up about 900% and gold is benefiting as an inflation and risk hedge. 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 had another tough week, down 15.8%. Part of the problem is uncertainty regarding contracts on the defense side of the business as the defense budget comes under pressure. We have taken some profits, and I will give this idea another week to see if this stock rebounds. 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 up again this week, and the stock jumped by 26% in February alone after the firm’s fourth-quarter results saw it grow its annual and quarterly profit by 11% and 14%, respectively. Santander is a diversified European-based global quality bank with significant exposure in emerging markets trading at a value price. Buy a Half

BYD (BYDDY) shares were off a bit this week though the stock is still up 25% in the last month as it easily raised $5.6 billion through a Hong Kong stock offering. Last week it signed a deal with DeepSeek to co-develop new autonomous technology. BYD has said it plans to invest about $14 billion in AI technology. The MSCI China Index has climbed 13% this year, while the S&P 500 is flat. Buy a Half

Centrus Energy (LEU) shares have been weak over the last two weeks but are still up 27% in 2025. Part of this is a weaker market for AI-related stocks and some profit taking, which you have hopefully participated in to take some profits off the table. Centrus is a key processor and producer of enriched uranium and Goldman Sachs predicts that AI data center energy consumption will likely surge through 2030 and require modular nuclear energy to meet demand. Buy a Half

Cloudflare (NET) shares held steady in a tough week for tech stocks and are up 33% so far this year, demonstrating some relative strength and benefiting from its strong base and broad market position. Hold a Half

Dutch Bros (BROS) shares were off 6% this week but rose 27% in February as the company surpassed the 1,000-store mark. The company opened 151 new stores in 2024, of which 128 were company owned. Still concentrated on the West Coast, it now boasts outlets in 18 U.S. states and counting. Hold a Half

Luckin Coffee (LKNCY) shares were largely unchanged this week. The company celebrated the Chinese New Year with two signature drinks: the Apple Fizzy Americano and the Ceylon Yuan-Yang. During its last quarter, Luckin opened an incredible 1,382 new stores, bringing total stores to 21,300. Luckin Coffee has also planted a flag in Singapore, opening over 50 outlets in less than two years. Buy a Half

Recursion Pharmaceuticals (RXRX) shares are struggling after a sharp rise and given uncertain market conditions, I recommended earlier this week in an alert to sell this stock. Only the most aggressive investors should consider holding or investing in this stock. Sold

Sea Limited (SE) shares were up 15.7% this past week following the announcement that sales jumped 37% in the final three months of 2024 and posted a profit. Shares are now up 76% in the last six months and were up 162% in 2024. However, the stock now trades more than 10 times book value, so I advise taking some profits based on your risk profile. The company’s three engines are its e-commerce Shopee platform, the digital financial services (SeaMoney), and the digital entertainment wing (Garena). Shopee’s gross merchandise value grew 28% to $100.5 billion in 2024. Hold a Half

Explorer Dominator Blue-Chip Recommendations – More Buy and Hold

DBS Bank (DBSDY) stood firm in its first week as an Explorer recommendation. DBS is one of the largest banks in Southeast Asia with a presence in 19 markets. It is headquartered in Singapore, with its main listing on the Singapore Stock Exchange, and is the largest constituent of the Singapore Straits Times Index. Buy a Half

International Business Machines (IBM) outperformed tech stocks this week supported by continuous development of new partnerships in infrastructure hardware, hybrid-cloud solutions, and a suite of enterprise software applications that help organizations. Buy a Half

Visa (V) shares eked out a small gain this week as the San Francisco company, with 31,600 employees in 85 countries, is looking beyond consumer payment credit, debit and prepaid card services. Additional growth will come from commercial services, consulting services, fraud prevention options and cross-border payments worldwide. Visa is a great company with an industry-leading operating margin of 66% but the stock needs to regain some momentum. 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 20.7%. 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 16% while net profits increased by 11%.

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.

DBS Bank (DBSDY) is one of the largest banks in Southeast Asia with a presence in 19 markets. It is headquartered in Singapore, with its main listing on the Singapore Stock Exchange, and is the largest constituent of the Singapore Straits Times Index. The Government of Singapore established DBS in July 1968 and its largest and controlling shareholder is Temasek Holdings, which is one of two large sovereign wealth funds controlled by the Government of Singapore. DBS has assets of roughly $750 billion and a growing presence in the three key Asian areas of growth, which it defines as Greater China, Southeast Asia, and South Asia, meaning India. It is the largest and strongest bank in Southeast Asia and the leading consumer bank in both Hong Kong and Singapore.

Dutch Bros (BROS) is an operator and franchisor of drive-through coffee stores, and just opened its 1,000^th store in early 2025. It’s expanding at a steady pace, opening 151 new stores in 2024, with another 160 expected to open this year, 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).

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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