The Cathie Wood circus keeps making new lows as digital doctor platform Teladoc (TDOC) recorded the biggest drop in shares since its IPO.
At one point, shares were down 45% and this was the day after buying another tranche of over $200 million worth of shares before the earnings came out.
TDOC was a pandemic darling and since then, the stock has done nothing but dive lower.
There is even an inverse ETF to jump on the anti-Cathie Wood bandwagon called Tuttle Capital Short Innovation ETF (SARK).
SARK is almost up 100% year to date showing that as market conditions distort, traders must distort with them.
To stay long tech growth is like throwing money off an apartment balcony.
The lack of understanding Cathie Woods exhibits about the stock market is hard to fathom.
Her go-to excuse is that others “aren’t doing the research.”
We were smack dab in a low-rate environment for a decade when even marginal tech companies would get the benefit of the doubt.
As the goalposts have moved and narrowed, Wood is still sticking to her 5-year time horizon and still explaining to investors that other analysts “aren’t doing their homework.”
This really is a case of the emperor having no clothes if I have ever seen it.
To add insult to injury, she has gone on public television to speak about how she believes the global economy is experiencing deflationary pressures.
No matter what changes to the trading environment, she sticks to her narrow story of deflation and her 5-year time horizon while her investors lose money.
If that’s not enough, she blames the market for not understanding her ARKK fund which is down more than 50% this year.
She claims that many people are “devaluing innovation” and just do not understand innovation like she does.
With an unrelenting belief in her growth strategy, miraculously, another $1.5 billion of inflows have juiced up her fund in 2022.
There are many out there that still think she is a great money manager after her one call of Tesla going up was correct.
Investors have chosen to back her further even with mounting losses and that has now backfired as ETF ARK Innovation ETF (ARKK) appears as if the market has not recognized how smart Cathie Wood is.
ARKK is Teladoc’s largest shareholder with a 12% stake worth.
It’s not just TDOC, but other investments like Roku (ROKU), Zoom Video Communications (ZM), and Shopify (SHOP) whose shares have experienced cataclysmic meltdowns of epic proportions.
Why did TDOC shares perform so poorly?
Higher advertising expenses in the mental health market, as well as an “elongated sales cycle” in chronic conditions as employers and providers of healthcare plans evaluate strategies.
TDOC’s services aren’t as good as first thought.
TDOC also took a $6.6 billion charge for impairment of goodwill, a non-cash charge the company excluded from its adjusted results.
The competition also has increased significantly and many of these first-move advantages are not holding up like they used to in tech.
The recent performance has been met with a bevy of analyst downgrades and tech growth as a sub-sector will have a hard time recovering until a lower interest rate sentiment comes back to sweep up the market.
Still, not a peep out of Cathie Wood on modifying her controversial strategies and that’s when we are staring down a barrel of multiple 50 basis point interest rate rises.
She was photographed partying in the Bahamas at some beach parties the day before the TDOC debacle, apparently, she isn’t bothered that much by her followers losing generation wealth.
If readers want to get back into tech growth after an easing of credit conditions, avoid buying ARKK and just buy a collection of strong tech growth yourself.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-04-29 11:02:142022-04-29 16:05:20Teladoc Implodes
Below please find subscribers’ Q&A for the April 20 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley.
Q: Should I take profits on the ProShares UltraShort 20+ Year Treasury ETF (TBT), or will it go lower?
A: Well, you’ve just made a 45% profit in 4 months; no one ever gets fired for taking a profit. And yes, it will go lower, but I think we’re due for a 5 -10% rally in the (TBT) and we’re seeing some of that today.
Q: Do you think the bottom is in now for the S&P 500 Index (SPX)?
A: No, I think the 50 basis point rate hikes will put the fear of God into the market and prompt another round of profit-taking in stocks. So will another ramp up or expansion in the Ukraine War, and so could another spike in Covid cases. And interest rates are getting high enough, with a ten-year US Treasury (TLT) at 2.95% and junk at 6.00% that they will start to bleed off money from stocks.
So there are plenty of risks in this market that I don’t need to chase thousand point rallies that fail the following week.
Q: What would cause a rally in the iShares 20 Plus Year Treasury Bond ETF (TLT)?
A: Everyone in the world is short, for a start. And secondly, we’ve had a $36 point drop in the market in 4 ½ months—that is absolutely screaming for a short-covering rally. It would be typical of the market to get everybody in the world short one thing, and then ramp it right back up. You can bet hedge funds are just gunning for that trade. So those are two big reasons. Another big reason is getting a slowdown in the economy. Fear of interest rate rises and yield curve inversions are certainly going to scare people into thinking that.
Q: Where to buy Tesla (TSLA)?
A: We had a $1,200 all-time high at the end of last year, then sold off to $700—that was your ideal entry point, on that one day when the market was down $1,000 and they were throwing out Tesla stock like there was no tomorrow. We have since rallied back to the 1100s, so I'd say at this point, anything you could get under just above the $200-day moving average at $900 would be a gift because the sales are happening and they’re making tons of money. They’re so far ahead of the rest of the world on EV technology that no one will ever be able to catch up. A lot of the biggest companies like Ford (F) and (GM) are still unable to mass produce electric cars, even though they’re all talking about these wonderful models they're bringing out in 2024 and 2025. So, I think Tesla is just so far ahead in the market that no one will catch them. And the stock will have to reflect that by trading at a higher premium.
Q: I Bought the ProShares UltraShort 20+ Year Treasury ETF (TBT) at your advice at $14, it’s now at 425. Time to take the money and run?
A: Yes, so that you’re in position to rebuy the (TBT) at $22, or even $20.
Q: I bought some bank LEAPS such as Bank of America (BAC), JP Morgan (JPM), and Morgan Stanley (MS) just before earnings; they’re doing well so far.
A: That will definitely be one of my target sectors on any recovery; because the only reason the stock market recovers is because recession fears have been put away, and the only reason the banks have been going down is because of recession fears. Certainly, the yield curve inversion has been helping them lot, as are absolute higher interest rates. So yes, zero in on the banks, I’m holding back waiting for better entry points, but for those who are aggressive, there’s no problem with scaling in here.
Q: If Putin uses a tactical nuclear weapon in the Ukraine, what would be the outcome?
A: Well, I don't think he will, because you don’t want to use nukes on your neighbors because the wind tends to blow the radiation back into your own country. It also depends on when he does this; if Ukraine joins NATO, joins the EC, and NATO troops enter Ukraine, and then they use tactical nukes, France and England also have their own nuclear weapons. So, attacking a nuclear foe and risking bringing in the US, who could wipe out the whole country in minutes, would not be a good idea.
Q: Would you get into Chinese stocks here?
A: Not really; China seems to have changed its business model permanently by abandoning capitalism. The Mad Hedge Technology Letter is currently running a short position in Alibaba (BABA) which has proved highly successful. Although these things are stupidly cheap, they could get cheaper before they turn around. Also, there’s the threat of delisting on the stock exchanges facing them in a year or two, and the trade tensions which continue with China. China doesn’t seem friendly anymore or is interested in capitalism. You don't want to own stocks anywhere in that situation. And by the way, Russia has also banned all foreign stock listings. China could do the same—not good if you’re an owner of those stocks.
Q: How would you play Twitter (TWTR) now?
A: I think it’s a screaming short, myself. If the board doesn’t accept Elon’s offer, which seems to be the case with their poison pill adoption, there are no other buyers of Twitter; and Elon has already said he’s not going to pay up. So you take Elon Musk’s shareholding out of the picture, and you’re looking at about a 30% drop.
Q: Many of the biggest Covid beneficiaries are near or below their March 2020 lows, such as PayPal (PYPL), Shopify (SHOP), DocuSign (DOCU), Zoom (ZM), Peloton (PTON), Netflix (NFLX), etc. Are these buys soon or are there other new names joining them?
A: I think this will continue to be a laggard sector. I think any recovery will be led by big tech, and once big tech peaks out after a 6-month run, then you may get the smaller ones catching up—especially if they're still down 80% or 90%. So that’s a no-touch for me; too many better fish to fry.
Q: Do you think inflation is transitory or are we headed toward double digits over the long term?
A: The transitory argument got thrown out the window the day Russia invaded Ukraine; they are one of the world’s largest producers of both energy and wheat. So that definitely set those markets on fire and really could end up adding an extra 5% in our inflation numbers before we peak out. I think we will see the highs sometime this year, could be as low as 4% by the end of this year. But we may have a double-digit print before we top out, and that could be next month. So, if you’re looking for another reason for stocks to sell out, that would be a good one.
Q: If the EU could limit oil purchases from Russia, then the war would be over in a month since Russia has no borrowing power or reserves.
A: The problem is whether they actually could limit oil purchases, which they can’t do immediately. If you could limit them in a year or cut them down by like 80%, we could come up with the other 20%, that is possible. Then, the war would end and Russia would starve; but Russia may starve anyway. Even with all the rubles in the world, they can’t buy anything overseas. Basically, Russia makes nothing, they only sell commodities and use those proceeds to buy consumer goods from abroad, which have all been completely cut off. They’re in for an economic disaster no matter what happens, and they have no way of avoiding it.
Q: What are your thoughts on supply chain problems?
A: I actually think they’re getting better; I watch the number of ships at anchor in San Francisco Bay, and it’s actually down by about half over the last 3 months. People are slowly starting to get things that they ordered nine months ago, used car prices are starting to roll over…so yes, it’s going to be a very slow process. It took one week to shut down the global economy, it’ll take three years to get it fully reopened. And of course, that’s extended by the Ukraine War. Plus, as long as there are supply chain problems and huge prices being paid for parts and labor, you’re not going to have a recession, it’s impossible.
Q: What’s your outlook on tech stocks?
A: I see them bottoming in the current quarter, and then going on to new all-time highs in the second half.
Q: What about covered calls?
A: It’s a really good idea, allowing you to get long a stock here, and reduce your average cost every month by writing calls against your position until they eventually get called away. Not too long ago, I wrote a piece on covered calls, so I could rerun that again to get people familiar with the concept.
Q: If Warren Buffet retires, what happens to Berkshire Hathaway (BRKB) stock?
A: It drops about 5% one day, then goes on to new highs. The concept of a 90-year-old passing away in his sleep one night is not exactly revolutionary or new. Replacements for Buffet have been lined up for so long that now the replacements are retiring. I think that’s pretty much baked in the price.
Q: Any plans to update the long-term portfolio?
A: Yes it’s on my list.
Q: Too late to buy Freeport McMoRan (FCX)?
A: Yes I’m afraid so. We’ve had a near double since September when it started moving. However, I would hold it if you already own it and add on any substantial selloff. Freeport McMoRan announced fabulous earnings today, and the stock promptly sold off 9%. It was a classic “buy the rumor, sell the news” type move. This is despite the fact that the United States Copper Fund ETF (CPER), in which (FCX) is a major holding, is up on the day. Please remember that I told you earlier that each Tesla needs 200 pounds of copper, that Tesla sales could double to 2 million this year, and that they could sell 4 million if they could make them. It sounds like a bullish argument of me, of which (FCX) is the world’s largest producer.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Stay Healthy
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Remove jacking up prices from the equation and streamers like Netflix (NFLX) and Disney (DIS) look quite mediocre and that’s what the 35% drop in NFLX shares are telling us.
NFLX Ahh factor has vanished.
It used to be that they knew they could raise prices whenever they wanted and that tool in their kit kept investors on board.
CNN+’s dismal foray into pay tv was another red flag when owner Warner Bros. Discovery (WBD) decided to pull all marketing spend because of the paltry viewing results.
There’s just too much competition out there and instead of creating more leeway, growth was pulled forward the past 2 years, and now the chickens are coming home to roost.
Shelter-at-home stocks like Peloton (PTON) and Zoom (ZM) are now surplus to requirements.
It was just not that long ago, that fresh streaming TV options launched at a frenzied pace.
With many subscription services available, streaming entertainment became ubiquitous in U.S. homes as consumers spent large quantities of time and money on streaming media.
As economies reopen following the end of the health situation, and consumers spend more time outside of their homes, there still are just other things to do like going outside.
The idea that there are still many years of streaming growth lie ahead for the streaming industry has turned out to be an utter fallacy.
These are some tech companies impacted.
Disney (DIS)
The much-anticipated Disney+ streaming service was launched in late 2019, just in time for the health situation.
It added tens of millions of subscribers worldwide in its first year and quickly became the second-largest subscription streaming service after Netflix. Disney also owns the streaming services Hulu and ESPN+ in the U.S. but they still don’t turn a profit on many of these streaming assets yet.
It is unlikely that new content will reverse generating excessive losses.
Better Disney stick to the amusement parks.
Roku (ROKU)
Streaming TV has been a boon for the smart TV and streaming device maker.
Roku has become the largest TV platform in the U.S., distributing content via The Roku Channel and acting as a hub for households to manage all of their streaming subscriptions.
Roku distributes its smart TV software and streaming devices at minimal cost, making money instead on advertising and by managing subscriptions.
With peak eyeballs on streaming, don’t expect any explosive growth from Roku, in fact, they could go with a whimper and wait for a buyout.
This is a warning sign for any tech company that chooses to not produce their own in-house content and relying on others to draft the narrative of future health is awfully dangerous in a zero sum game.
fuboTV (FUBO)
Streaming service fuboTV, a relative newcomer to the streaming media industry, went public in 2020.
This small service has gained popularity as a live TV platform, and it’s a top option for those who want to watch live sporting events.
The smaller they come, the harder they fall.
Smaller streaming companies have little recourse when multiple exogenous forces impact the company.
fuboTV is nowhere near profitability and has lost close to half a billion dollars in each of the past 2 years.
Public companies are often harangued for going ex-growth the second they are tradable in New York, and this is the epitome of what I am talking about.
The stock has gone from $35 to $5 today in the past 5 months.
Don’t catch a falling knife here.
CuriosityStream (CURI)
CURI is another newbie to the dying streaming industry.
This streaming media company focuses on documentaries and science content and was founded by Discovery’s
CURI is competing against some well-entrenched rivals in the non-fiction TV space, including Discovery and Disney’s National Geographic (available on Disney+).
The young company keeps its content creation costs relatively low since it focuses on educational material and partners with universities, but who really wants to see this type of content anyway.
This company sounds boring and naïve.
CURI’s stock price has gone from $17 to $2 in the past 5 months.
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-04-20 15:02:112022-04-20 20:17:09Peak Eyeballs
(MARKET OUTLOOK FOR THE WEEK AHEAD, or BUYING AT THE SOUND OF THE CANON),
(SPY), (TLT), (TBT), (BRKB), (MSFT), (GOOGL),
(NFLX), (ZM), (DOCU), (ROKU), (VMEO)
That was the sage advice Nathan Rothschild, ancestor of my former London neighbor Jacob Rothschild, gave to friends about trading stocks during the Napoleonic Wars.
Of course, information moved rather slowly back in 1812, pre-internet. Rothschild relied on carrier pigeons to gain his unfair advantage.
You have me.
Somehow, you have descended into Dante’s seventh level of hell. You have to wake up every morning now, wondering if it will be Jay Powell or Vladimir Putin who is going to eviscerate your wealth, postpone your retirement, and otherwise generally ruin your day.
Every price in the market already knows we’re in a bear market except the major indexes.
The roll call of the dead looks like a WWI casualty report: (NFLX), (ZM), (DOCU), (ROKU), (VMEO). It’s like the bid offer spread has suddenly become 25%. Companies are either reporting great earnings and seeing their shares go through the roof. Or they are sorely disappointing and getting sent to perdition on a rocket ship.
The most fascinating thing to happen last week was a new low in the bond market, since you’re all short up the wazoo, courtesy of a certain newsletter. Ten-year US Treasury yields tickled 2.05%, a two-year high, then retreated to 1.92%. That means bonds have completed their $20 swan dive from their December high, a repeat of the 2021 price action.
Trading has gotten too easy, so I think bonds will stall out here for a while. I even added a small long. And please stop calling me to ask if you should sell short bonds down $20. It’s perfect 20/20 hindsight. You can’t imagine how many such calls I’ve already received.
Our old friend, the barbarous relic, returned from the dead last week too. All it needed was for bitcoin to die a horrible death for gold to recover its bid. A prospective war in the Ukraine helped take it to a one-year high.
However, I think it’s safe to say that has lost its value as an inflation hedge for good. If a move in the CPI from 2% to 7.5% can’t elicit a pulse in the yellow metal now, it never will.
The US dollar was another puzzler last week. While the fixed income markets went from discounting three rate hikes this year to six, the greenback flatlined. It was supposed to go up, as currencies with rapidly rising interest rates usually do.
Maybe the buck just forgot how to go down. Or maybe this is the beginning of the end, when sheer over-issuance destroys the value of the US dollar. Some $30 trillion in the national debt will do that to a currency.
I know you will find this difficult to believe, but there are some outstanding money-making opportunities setting up later in the year. The crappier conditions look now, the better they will become later. But you are going to have to practice some extreme patience to get to the other side.
I hope this helps.
Goldman Sachs Chops 2022 Market Forecast, taking the S&P 500 goal from $5,100 down to $4,900. A tighter interest rate picture is to blame, with the year yields topping 2.05% on Friday. Higher interest rates devalue future corporate earnings and kill the shares of non-earning companies.
Oil Hits Seven-Year High, to $94.44 a barrel, up 3.3% on the day. Putin’s strategy of talking oil prices up with Ukrainian invasion threats is working like a charm. That’s what this is all about. Texas tea accounts for 70% of Russian government revenues.
Fed to Front-Load Rate Rises, says St. Louis Fed president Bullard. The drumbeat for a more hawkish central bank continues. Bonds were knocked for two points.
Wholesale Prices Rocket 1% in January and are up a nosebleed 9.7% YOY. Inflation has clearly not peaked yet. Look for stocks to get punished once the current short-covering rally runs out of gas.
Retail Sales Soar by 3.8%, in January indicating that the economy is stronger than it appears. The rapid shift to an online economy is accelerating. Inflation is the turbocharger. When stocks overshoot on the downside load the boat.
Weekly Jobless Claims Jump, to 248,000. The weird thing is that the economic data says the opposite, that the economy is strengthening. Expect flip-flopping data and markets all year.
US GDP Jumped by 6.9% in Q4, well above estimates. Consumers are spending like drunken sailors. Eventually, the stock market will notice this, but not before we see lower lows first.
Gold Catches a Bid, off the back of the unrelenting Ukraine crisis. This may continue as a drip for months. Watch it collapse when peace is declared.
Existing Home Sales Jump 6.7%, to 6.5 million units, far better than expected. Inventory is down to yet another record low of 16.5%, an incredibly short 1.6-month supply. The Median Home Price has risen to $350,300, with the bulk of sales on the high end. Million-dollar plus homes are up 39% YOY.
Bond Yields Dive to a 1.93% Yield after failing at 2.05%. There is another nice (TLT) put spread setting up here. Let’s see if war breaks out over the weekend. The threats continue.
My Ten-Year View
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!
With seven options positions expiring at max profit on Friday, my February month-to-date performance rocketed to a blistering 10.37%. My 2022 year-to-date performance has exploded to an unbelievable 24.90%. The Dow Average is down -7.9% so far in 2022. It is the great outperformance on an index since Mad Hedge Fund Trader started 14 years ago.
With 30 trade alerts issued so far in 2022, there was too much going on to describe here. Check your inboxes.
That brings my 13-year total return to 537.46%, some 2.00 times the S&P 500 (SPX) over the same period. My average annualized return has ratcheted up to 44.17% for the first time. How long it will keep rising I have no idea, but as long as it is, I’m not complaining. When you’re hot, you have to be maximum aggressive. That’s me to a tee.
We need to keep an eye on the number of US Coronavirus cases at 78.5 million, down 67% from the January peak, and deaths close to 936,000, off 20% in two weeks, which you can find here.
On Monday, February 21 markets are closed for Presidents Day.
On Tuesday, February 22 at 8:30 AM, the S&P Case Shiller National Home Price Index for December is announced.
On Wednesday, February 23 at 1:30 PM, API Crude Oil Stocks are released.
On Thursday, February 24 at 8:30 AM, Weekly Jobless Claims are published. The second estimate for Q4 GDP is also disclosed.
On Friday, February 25 at 7:00 AM, Personal Income & Spending for January is printed. At 2:00 PM, the Baker Hughes Oil Rig Count is out.
As for me, in the seventies, Air America was not too choosy about who flew their airplanes at the end of the Vietnam War. If you were willing to get behind the stick and didn’t ask too many questions, you were hired.
They didn’t bother with niceties like pilot licenses, medicals, or passports. On some of their missions, the survival rate was less than 50% and there was no retirement plan. The only way to ignore the ratatatat of bullets stitching your aluminum airframe was to turn the volume up on your headphones.
Felix (no last name) taught me to fly straight and level so he could find out where we were on the map. We went out and got drunk on cheap Mekong Whiskey after every mission just to settle our nerves. I still remember the hangovers.
When I moved to London to set up Morgan Stanley’s international trading desk in the eighties, the English had other ideas about who was allowed to fly airplanes. Julie Fisher at the London School of Flying got me my basic British pilot’s license.
If my radio went out, I learned to land by flare gun and navigate by sextant. She also taught me to land at night on a grass field guided by a single red lensed flashlight. For fun, we used to fly across the channel and land at Le Touquet, taxiing over the rails for the old V-1 launching pads.
A retired Battle of Britain Spitfire pilot named Captain John Schooling taught me advanced flying techniques and aerobatics in an old 1949 RAF Chipmunk. I learned barrel rolls, loops, chandelles, whip stalls, wingovers, and Immelmann turns, everything a WWII fighter pilot needed to know.
John was a famed RAF fighter ace. Once he got shot down by a Messerschmitt 109, parachuted to safety, took a taxi back to his field, jumped into his friend’s Spit, and shot down another German. Every lesson ended with a pint of beer at the pub at the end of the runway. John paid me the ultimate compliment, calling me “a natural stick and rudder man,” no pun intended.
John believed in tirelessly practicing engine-off landings. His favorite trick was to reach down and shut off the fuel, telling me that a Messerschmitt had just shot out my engine and to land the plane. When we got within 200 feet of a good landing, he turned the fuel back on and the engine coughed back to life. We practiced this more than 200 times.
When I moved back to the US in the early nineties, it was time to go full instrument in order to get my commercial and military certifications. Emmy Michaelson nursed me through that ordeal. After 50 hours flying blindfolded in a cockpit, you get very close with someone.
Then came flight test day. Emmy gave me the grim news that I had been assigned to “One Engine Larry” the most notorious FAA examiner in Northern California. Like many military flight instructors, Larry believed that no one should be allowed to fly unless they were perfect.
We headed out to the Marin County coast in an old twin-engine Beechcraft Duchess, me under my hood. Suddenly, Larry shut the fuel off, told me my engines failed, and that I had to land the plane. I found a cow pasture aligned with the wind and made a perfect approach. Then he asked, “How did you do that?” I told him. He said, “Do it again” and I did. Then he ordered me back to base. He signed me off on my multi-engine and instrument ratings as soon as we landed. Emmy was thrilled.
I now have to keep my many licenses valid by completing three takeoffs and landings every three months. I usually take my kids and make a day of it, letting them take turns flying the plane straight and level.
On my fourth landing, I warn my girls that I’m shutting the engine off at 2,000 feet. They cry “No dad, don’t.” I do it anyway, coasting in bang on the numbers every time.
A lifetime of flight instruction teaches you not only how to fly, but how to live as well. It makes you who you are. Thus, my insistence on absolute accuracy, precision, risk management, and probability analysis. I live my life by endless checklists, both short and long term. I am the ultimate planner and I have a never-ending obsession with the weather.
It passes down to your kids as well.
Julie became one of the first female British Airways pilots, got married, and had kids. John passed on to his greater reward many years ago. I don’t think there are any surviving Battle of Britain pilots left. Emmy was an early female hire as United pilot. She married another United pilot and was eventually promoted to full captain. I know because I ran into them in an elevator at San Francisco airport ten years ago, four captain’s bars adorning her uniform.
Flying is in my blood now and I’ll keep flying for life. I can now fly anything anywhere and am the backup pilot on several WWII aircraft including the B-17, B-24, and B-25 bombers and the P-51 Mustang fighter.
Over the years, I have also contributed to the restoration of a true Battle of Britain Spitfire, and this summer I’ll be taking the controls at the Red Hill Aerodrome for the first time.
Captain John Schooling would be proud.
Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
https://www.madhedgefundtrader.com/wp-content/uploads/2022/02/john-thomas-plane.png858864Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-02-22 10:02:492022-02-22 12:27:00The Market Outlook for the Week Ahead, or Buying at the Sound of the Canon
Nvidia (NVDA) is one of the best buy-the-dip tech candidates after the pullback from around $350.
This is one of the premier tech stocks of our generation and readers shouldn’t be fooled by the recent weakness.
NVDA simply has been dragged down with the rest of the best as technology still tries to find some footing after a rough January that was sideswiped by exogenous shocks out of NVDA’s control.
Tech growth stocks have been pigeonholed as one broad category, and even though NVDA boasts a sterling balance sheet that achieved $4.33 billion in profits in 2021, they are penalized with the general category of growth stock.
The rotation into energy and commodities has been swift, but make no mistake, this company is no Teladoc (TDOC) or Zoom Video (ZM), unequivocally not.
NVDA sits at the heart of every cutting-edge technology today by its production of high-quality CPUs and GPUs that are required for businesses as broad as data centers to the metaverse which includes gaming to automotive driving.
NVDAs stock accelerated too fast too soon which made them vulnerable to significant headline risk.
So headlines like war with Ukraine and Russia don’t really have much bearing over the trajectory of Nvidia’s business at all, but since index funds contain NVDA, NVDA gets heaped into the risk-off moves.
The stock further sold off after news leaked of the dead acquisition between British chip company ARM due to antitrust concerns.
At a broader level, semiconductor chips have possibly never been in such high demand, yet supply is painfully constrained.
The U.S. Commerce Department has recently emphasized the precarious nature of the global semiconductor supply chain in 2022.
However, the agency also expressed the possibility of new manufacturing capacity coming online as early as the second half of 2022, which may help somewhat in reducing the chip shortages.
With Intel, Taiwan Semiconductor Manufacturing, and Samsung having already planned huge investments in capacity expansion, we may see increased pricing pressures in the semiconductor industry in the next few years.
Even with new supply coming to market, the world and the semiconductor industry will fail to satisfy the world’s insatiable demand for chips which has forced many end products to delay finishing products for the foreseeable future.
How well is NVDA really doing?
In one word, fantastic.
Nvidia's revenues and free cash flow have more than doubled while gross margin and operating margin are up big.
This terrific growth has been mainly driven by increasing demand for the company's graphics cards and artificial intelligence (AI) processors in gaming and data center segments.
Nvidia currently accounts for almost 80% of the gaming GPU market. The company's GeForce RTX-powered laptops are being increasingly used not only in gaming but also in areas such as esports, digital content creation, and streaming.
Many of my key employees are using PC-based NVDA GPUs to support and service the company.
Nvidia saw its gaming revenues jump 72% year over year to $9 billion last quarter.
In the first nine months of fiscal 2021, the company's data center revenues soared by 53% year over year to $7.4 billion. Increasing revenue exposure to the data center segment is also helping improve the company's gross margin profile.
The next big business could be the car business.
The company offers a complete platform solution, which includes hardware, software, and infrastructure (servers, computing power, and data centers) required to support autonomous vehicles.
Many car shoppers are quickly realizing that cars are starting to appear like an iPad on wheels.
Lastly, Nvidia is also well placed to secure a big portion of the evolving metaverse opportunity, estimated to be around $30 trillion.
The company's high-throughput GPU chips, data center CPU, and next-generation Bluefield data processing unit will play a major role as the hardware technology needed to support the metaverse.
No matter what anyone says, it is hard to construct a case in which NVDA is one of the losers of future and tech.
Not only do they boast the metrics of a growth company, but their brand recognition almost falls into the top tier of tech companies.
The real tech people will tell you this stock is a long-term keeper and despite the high volatility, don’t let that dissuade you from betting big on NVDA.
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