Portfolio Changes:
Exscientia (EXAI) – MOVE FROM BUY TO SELL
Veeco (VECO) – MOVE FROM BUY TO HOLD
Growth Stocks Reset and Russia Invades Ukraine
The Russian invasion of Ukraine will surely roil markets today and raise uncertainty over the next week. U.S. markets are off about 10% since early January as tech and growth stocks in particular reset their valuations amidst higher expected interest rates and geopolitical risk in Ukraine and Asia. Losses are broad-based with 10 of the S&P 500’s 11 sectors down, with only the energy group bucking the trend. On the positive side, valuations are more attractive, the pandemic seems to be fading and China seems to be growing.
This brings me to the opportunity of new nuclear energy, which is on the way to beating Putin at his game. The advantages of nuclear energy over the alternatives are clear. Nuclear energy is virtually emissions-free energy, takes up very little land, consumes very little fuel, contributes to fuel diversification and the stability of the grid, creates skilled, well-paid jobs, and produces very little waste. It‘s the technology that solves both energy poverty and climate change. Then there is the advantage of much higher reliability.
Less dependence on Russian energy supplies would strengthen the NATO alliance. For example, the Ukraine situation would be much easier to handle if Germany had not made the decision to close all of its nuclear reactors by the end of 2022, making it so dependent on imports of Russia’s natural gas.
Politicians in America and Europe need to show some courage in supporting new nuclear energy technology that is far safer, cleaner, and less costly than earlier generations of technology.
Portfolio Updates
Exscientia (EXAI) shares were off sharply this week so despite the fact that I own the stock and like its prospects, we are going to have to remove it from the Explorer portfolio. Exscientia is using artificial intelligence to develop new medicines and boasts a growing pipeline of more than 25 projects in motion. MOVE FROM BUY TO SELL
Fisker (FSR) shares, after two weeks of gains, fell from 12.4 to 10.5 this week. This custom EV maker has a respected design pedigree, an asset light strategy, and is headed to begin production of its mass affluent Ocean SUV in late 2022. The company’s sequel to its Ocean SUV is the PEAR, which is short for personal electric automotive revolution. It’s a smaller vehicle than Fisker’s Ocean, set to make its debut on roads in 2024, and pricing starts at $29,900. This remains a speculative stock but I confirm a buy rating on Fisker for new investors. BUY A HALF
Ford (F) shares dipped from 18 to 16 this week and are trading at just four times forward earnings. The company announced this week that it has no plans to spin off its electric vehicle business. An investment in Ford is a bet on the company transforming itself into a rival to Tesla but it will take some time to make this transformation, led by former Apple and Tesla hand Doug Field. Ford’s investment in electrification helped push shares to a 140% gain in 2021. Ford is planning to increase its investment in electric vehicles by $20 billion, according to Bloomberg News, and remains an excellent, low-risk play on the EV revolution. BUY A HALF
Harley-Davidson (HOG) was flat in its first week as a recommendation.The stock roared to life this week after the motorcycle maker updated markets on its LiveWire electric motorcycle and reported a fourth-quarter profit that saw motorcycle revenue surge 54%.
Milwaukee-based Harley has renewed its American brand and focus on the U.S. market. Harley-Davidson’s revenue jumped 40% year over year to $1 billion, driven by a 39% rise in motorcycle shipments. Harley also announced it would be spinning off its LiveWire all-electric motorcycle business into a stand-alone publicly traded company and reported solid revenue growth in its general merchandise and parts & accessories divisions, up 46% and 13%, respectively. BUY A HALF
Marvell Technology Group (MRVL) shares have not performed all that well recently despite the semiconductor shortage. This week the stock tumbled from 72 to 64 after a couple of weeks of appreciation. Marvell shares were up 84% in 2021 but are off with the market to a challenging start so far in 2022. Still, it’s demonstrating some relative strength in a tough tech market so this semiconductor stock remains a buy. BUY A HALF
Novonix (NVNXF, NVX) shares have slid from 4.9 to 3.6 but we will stick with this idea since it is a leading provider of domestic synthetic graphite that is both higher quality and lower priced than Chinese graphite. We are considerably above our entry price and the company recently began trading on the Nasdaq but you need do nothing since the shareholder rights are the same.
This technology and advanced materials supplier is focused on synthetic graphite for the electric vehicle and storage battery industry, which are both high-growth markets. This is an aggressive idea but it remains undervalued and a buy. BUY A HALF
Oracle Corporation (ORCL) is another stock that some of you may have sold as it went through your stop-losses. However, I’m inclined to give it a bit more time since Oracle offers us cloud-computing high growth and margins coupled with an undervalued price relative to its peer group. In terms of valuation, Oracle is currently trading at a forward price-to-earnings ratio of 14.2. For comparison, its industry has an average ratio of 32, which means Oracle is trading at more than a 50% discount to the group. BUY A HALF
QuantumScape (QS) is meeting its technical milestones but suffering a bit along with its EV tech brothers. Its technology is on track to develop a battery that will charge to 80% of capacity in 15 minutes. Its tests have successfully done so for over 400 consecutive tests, and a successful single-layer battery unlocked a $400 MM investment from Volkswagen. A recent Fortune Business Insights report predicts that the global electric vehicle battery market could grow from about $27 billion in 2021 to more than $155 billion by 2028. QuantumScape’s stock price peaked in late December 2020 at an all-time-high of 133. The current price (13) provides us with an attractive entry price for this speculative stock. BUY A HALF
Sea Limited (SE) shares continue to slide, falling to 120, and I personally purchased some shares yesterday. It is difficult to determine where the bottom might be but I’m encouraged that the fundamental growth story seems intact. A key date is the next earnings report on March 1, and the stock will likely pivot on this news. This is a $100 billion company putting up triple-digit growth rates. Overall, revenue for the most recent quarter grew 122%. Orders on Shopee, which is their e-commerce platform, grew 123%. We have taken periodic partial profits along the way so this stock remains a buy. BUY A HALF
Veeco (VECO) shares pulled back two points after gaining two points last week. Veeco reported last week quarterly earnings of $0.43 per share, an earnings surprise of 19.4%. Revenue for 2021 was $583 million, 28% growth over 2020, driven by semiconductor and data storage. Veeco makes the equipment and technology essential for the chip fabrication game, a business with technological and high capital barriers to entry which leads to high margins and return on equity. Veeco is a quality idea but I’m moving this to a hold until markets settle down. MOVE FROM BUY TO HOLD
| Stock | Price Bought | Date Bought | Price 2/23/22 | Profit | Rating |
| Exscientia (EXAI) | 22 | 1/20/22 | 15 | -31% | Sell |
| Fisker (FSR) | 15 | 2/4/21 | 11 | -30% | Buy a Half |
| Ford (F) | 20 | 11/23/21 | 17 | -17% | Buy a Half |
| Harley-Davidson (HOG) | 42 | 2/18/22 | 41 | -4% | Buy a Half |
| Marvell Technology Group (MRVL) | 50 | 4/1/21 | 65 | 30% | Buy a Half |
| Novonix (NVNXF) | 2.24 | 8/6/21 | 4 | 60% | Buy a Half |
| Oracle Corporation (ORCL) | 94 | 11/11/21 | 72 | -23% | Buy a Half |
| QuantumScape (QS) | 16 | 2/3/22 | 14 | -12% | Buy a Half |
| Sea Limited (SE) | 15 | 2/8/19 | 121 | 711% | Buy a Half |
| Veeco Instruments Inc. (VECO) | 23 | 9/10/21 | 26 | 13% | Hold |