Dow Reaches Record, U.S. and China Meet in Alaska
In a bit of a reversal, tech stocks gyrated and industrial stocks jumped this past week. In particular, energy and financial stocks led the way as the Dow closed above 32,000 for the first time. Tech company stalwarts rebounded a bit yesterday but have been stung by the sharp pullback.
One of the most prominent names in SPACs, Chamath Palihapitiya, faced criticism this week after regulatory filings showed that he had sold his entire personal stake in Virgin Galactic (SPCE), an Explorer holding. His response was that he would maintain a stake in Virgin Galactic indirectly through an investment firm and plans to reallocate capital to climate change tech. This spin is not convincing.
China and America are talking again. Secretary of State Antony Blinken and National Security Advisor Jake Sullivan will meet on March 18 in Anchorage, Alaska with their Chinese counterparts after meetings with key Asian allies South Korea and Japan.
This is a positive development and also brings to mind that great value investments take a lot of courage and foresight. It was President Lincoln’s Secretary of State, William Henry Seward, who strived to build a global infrastructure for American commerce from which our commercial influence could be projected. Seward took up a Russian offer in 1867 from Russian minister in Washington to purchase Alaska for $7.2 million. The move was ridiculed at that time as “Seward’s Folly” … until gold was discovered. The true value of this massive real estate acquisition rivals the purchase of Manhattan.
Throughout his distinguished career, Seward argued and acted to support an energetic economic diplomacy to promote American interests in the Pacific – and that commerce was the key to global influence.
Finally, the year of the Ox in China is off to a rough start as its benchmark stock index has lost 14% after reaching a 13-year high. This has wiped out more than $1.3 trillion of value and hammered the holdings of retail investors who piled in at the peak.
Position Updates
Afterpay (APT.AX) shares tested 100 this week before rebounding to 111 at the close yesterday. This stock has been struggling a bit lately even though the company has been delivering solid numbers. Part of the problem may be new competitors that are emerging to capture the growth of the “buy now, pay later” trend. Afterpay’s balance sheet remains healthy with cash and equivalents of more than $1.7 billion. Because the stock has lost some momentum over the last month, I’m keeping it a hold for now. HOLD A HALF
Anglo American (NGLOY) is facing some resistance in the 20-21 area as the company reported earnings last week of $9.8 billion. Copper recently reached its highest price level since 2011 and prices of iron ore have also surged. The company is the largest producer of platinum, with about 40% of the world’s output, and it explores for diamonds, copper, platinum group metals, coal, iron, nickel and manganese ores. Anglo American plc was founded in 1917 and is headquartered in London. I recommend you buy a half position if you have not already done so. BUY A HALF
Atlas Corp. (ATCO) shares in their first week in the Explorer portfolio moved in line with the market to settle at 14.5. Shares were up 6.9% yesterday. The company charters a fleet of 118 containerships.
The pandemic has led to distorted trade flows and a worldwide container shortage crisis. Demand for these shipping containers is surging while supply is frozen, so shipping rates are skyrocketing. Making matters worse is that the global container fleet is shrinking and, you guessed it, containers are largely manufactured in China.
We can take advantage of this situation with Vancouver-based Atlas Corporation, which operates as an independent manager of containerships. Atlas posted in its last reported quarter operating margins of 40% with revenue increasing for the quarter, year over year, 36.6% and earnings growing 96.6%. I view ATCO as a trading position with a target price of 20. BUY A HALF
Cloudflare (NET) shares sank to 62 before recovering to 73 – close to where they began 2021. Given the growth potential of this sector and stock and the fact that we have taken some profits off the table, I’m going to keep this a hold and will watch the stock to see if it forms a base and then a new uptrend. Cyber is still a strong power trend and Cloudflare’s strategy and metrics prompt me to hang on to this stock, though everything has its limits. The next quarterly earnings report will be crucial in determining the direction of this stock. HOLD A HALF
Fisker Inc. (FSR) shares were up 10% yesterday as this stock has gone from 15 to 25 over the past month, up more than 60%. The company had no sales revenue in the last quarter and the news driving the stock is that Foxconn, the Taiwanese company that assembles iPhones, will be making a future Fisker model electric vehicle. Luxury auto veteran Henrik Fisker heads up Fisker and the company’s first product is the Ocean, a mid-priced SUV. I’m maintaining a hold rating on this stock. HOLD A HALF
Foley Trasimene Acquisition II (BFT) shares traded this past week in line with the market, largely unchanged. Foley Trasimene is merging with Paysafe Group and plans to eventually list on the New York Stock Exchange under the symbol PSFE. Founded in 1996, Paysafe, based in London, is a payments platform that connects businesses and consumers across 70 payment types in over 40 currencies globally. I still rate this stock a buy and recommend you purchase shares if you have not already done so. BUY A HALF
International Business Machines (IBM) shares, after dipping last Friday, made a strong, steady move to close at 128 yesterday. IBM is a conservative, quality play on the high growth markets of quantum computing software and cloud computing. The stock is trading roughly at 10 times projected earnings, which is less than half the average for the S&P 500 index, and offers a 5.3% current dividend yield. I encourage you to buy IBM as a great core holding if you have not yet done so. BUY A HALF
LogiQ (LGIQ) shares were up 10.7% yesterday on the announcement that it will buy Boulder, Colorado-based Rebel AI for $8.1 million, with the deal expected to close in the next few weeks. The stock finished the tech unfriendly week at 6.5. LogiQ is a New York-based leading global provider of e-commerce, mobile commerce, and fintech business enablement solutions in Southeast Asia, Europe and the United States. LogiQ’s stock is attractive for aggressive investors. BUY A HALF
Sea Limited (SE) shares are under some pressure since reaching a 2021 high of 278 in mid-February, posting a low of 206 this week, and then closing yesterday at 217 (it’s up to 228 in Thursday pre-market trading). The company recently reported fourth-quarter and full-year 2020 numbers with 101% year-over-year revenue growth. Revenue increased to $1.6 billion in the last three months of 2020 from $777.2 million a year earlier. We have taken profits several times over the remarkable rise of this stock so I’m keeping SE a hold. If the stock pulls back sharply with the market, I plan on moving this to a buy again. HOLD A HALF
Taiwan Semiconductor (TSM) shares have come back about 10% over the last two weeks, to 114. If you haven’t yet bought any shares, I think this is a good entry price as Taiwan Semiconductor is dominant in this sector and the company recently announced it will raise capital expenditures to $28 billion in 2021, a 47% year-over-year increase. With a microchip shortage making headlines every day, I maintain a strong buy rating on the stock. BUY A HALF
Virgin Galactic (SPCE) shares were relatively volatile this week but recovered nicely to close at 31 on Wednesday despite the news that Chamath Palihapitiya sold his entire personal stake in the company, and a previous announcement that the company’s next test flight will not take place until May 2021. If the next retest is successful, the company plans a second powered flight, a key step needed before revenue-generating commercial flights can begin. Shares have quadrupled since my recommendation and were up more than 100% in the first five weeks of 2021, when we recommended taking some profits, so we will hold the remaining shares for now. HOLD A HALF
