Stock Pursuit

Three Important Solar Stocks - Low Valuations With Big Upside

noreply@blogger.com (Unknown) — Mon, 20 Oct 2025 00:09:00 +0000

The solar industry is booming again this year. The U.S. installed 14.5 GW of large-scale solar so far this year. Solar was 75% of grid capacity additions in the first half of this year. Residential solar is also growing 14% a year. On larger projects, solar was over half of all new generation added to the U.S. grid in 2025.

Over recent years, the cost of solar panel modules has decreased substantially due to improved photovoltaic technology and manufacturing scale. This makes them more feasible, and the trend will continue. According to nonprofit Sun Day campaign, solar has been the largest source of new generating capacity added each month for 21 consecutive months, since September 2023.

Look at this graph from the EIA, showing the tremendous lead from utility-scale solar

Solar farms are increasingly being built together with battery storage systems. Around half of all battery storage systems are a combined solar and battery system.

Looking at solar growth through the lense of data center expansion, the future looks bright. Large data centers are seeing a growing trend in 2025, where hybrid power sourcing is combining on-site generation with grid backup.

According to Deloitte and RMI, hyperscale operators have responded to four to seven year grid interconnection delays by building behind the meter natural gas turbines or solar plus battery microgrids.

The U.S. Department of Energy’s Industrial Efficiency and Decarbonization Office funded the 2024 United States Data Center Energy Usage Report by Lawrence Berkeley National Laboratory. Lawrence Berkeley Lab found that the carbon intensity of electricity used by data centers was 48% higher than the U.S. average. This is partly due to many of them being in states with dirtier energy sources, like coal.

They also showed that 4.4% of all the energy in the US now goes toward data centers. Clean energy is definitely needed in this area. The big tech data centers keep getting bigger and bigger. They all need power backup and solar will be a part of that.

Where The Growth Comes From

Data centers, by current forecasts, will grow 15-23% CAGR and by 2030, are projected to consume between 8% and 12% of total U.S. Electricity. S&P Global’s 451 Research adds that total grid power demand from data centers may triple by 2030. This is with the normalcy bias that AI Co-Pilots and Agents won't see faster adoption. I see data center power draw eventually being much higher than forecasts, especially after 2030. I'll get to that in a moment.

Data centers are just a piece of the power draw. Overall, U.S. Electric grid growth from now until 2030 is forecasted to grow at a base case of 2.5% to roughly 3% per year. The most growth is forecasted for battery storage, coming in at 116% growth through 2035. Solar is second at 64% growth.

There is a bit of a problem, because after decades of flat electricity usage, demand is surging, but the infrastructure is old. Furthermore, 67% of electric utilities’ spending in 2024 was on replacements ($63 billion), while only $32 billion was spent on new lines and substations. The need for alternatives, like solar, has never been greater.

I'm particularly bullish on the energy demand because I see a strong potential that the growth from Agentic AI and AI Co-Pilots and Bitcoin mining exceeds the estimates. AI inference is already projected to take a large share of total U.S. electricity in the near future. In a couple years, it is going to surpass AI training. The estimates going five years out vary widely, and no one really knows the exact timeline and impact, of course. The EIA and Deloitte has 2030 estimated at 945 TWH to 1065 TWH. Even if that is just the base-case we are still talking about an incredible power draw.

Gen AI is growing at over a 30% CAGR. The AI assistants and AI Co-Pilots market is currently expected to grow at a slightly higher CAGR than Gen AI at mid 30% to mid 40% through 2030 according to Stanford and Grandview. So, before we have even seen the pre-seed startups still building come yet it is already tremendous expectations. Even Gen AI isn't fully adopted yet with the consumer. Only about half of adults are using it. So, the upside to the growth the next 10-15 years is hard to fathom.

The Agents and Co-Pilots are what will truly be beneficial to businesses. This growth is going to takeoff. It's like going from a dial-up internet modems in the 90s to ethernet or DSL broadband. Nvidia CEO Jenson Huang expects every company to have an "AI Factory." AI factories industrialize the creation of intelligence by making AI generation repeatable, scalable, and measurable across sectors.

This BOFA graph below illustrates a scenario. I like it not for the exact number estimates but rather to show how the inference could start to skyrocket exponentially to a large percent of total power usage very soon.

90% of enterprises currently anticipate spending more on AI in the future. Some sources already have enterprise adoption at over 70%. My relative is building an AI Co-Pilot for auto technicians that improves their productivity and revenue. They have been using clunky software for years. So, I think normalcy bias is discounting how widespread and fast the newest software will roll-out and see speedy adoption.

Another potential big driver of energy demand is Bitcoin. Bitcoin, whether one likes it or is skeptical, has been an outperforming asset since its beginning. If the price appreciation continues its bullish trend it will draw significantly more power as time passes.

Nextracker NXT

Nextracker NXT sells solar trackers and energy yield management systems. Their business model is built around large-scale solar farms that power utilities, corporations, and regional grids. Nextracker is the industry leader, holding about 70% U.S. market share.

I looked through Nextracker's latest quarterly and historical data. I'm glad I decided to look at this one, because it is the number one holding in the solar ETF TAN.

It has rightfully owned the #1 spot, being the global market leader based on gigawatts shipped for ten straight years.

The only other U.S. based competitor I found with a big U.S. presence is Array Tech ARRY. The key difference between the two is their size. Nextracker is a $14 billion company, and ARRY is only a $1.5 billion company. Even so Array has installed an impressive 80GW worldwide.

Over the last five years, Nextracker's revenue has grown at a 22% compounded annual growth rate. This is extremely good growth for being a $13 billion company. Less than 7% of Fortune 500 companies with market caps of $10 billion or higher in 2024 to 2025 grew revenue 20% year over year.

Earnings for the full year are forecasted at $4.20 a share. With the stock at $87, that is only a 20 PE ratio. Trailing twelve month price to free cash flow is just 22 also.

This year, Nextracker bought two companies.They purchased Bentek, an industry pioneer and manufacturer of electrical infrastructure used in all types of solar power plants. Additionally, in May they acquired 100% of the interest in OnSight, a supplier of autonomous inspection robots and fire detection systems purpose-built for solar plants.

Even after these purchases, Nextracker still has $743 million in cash. They have also been creating a lot of shareholder value. Shareholder equity is ballooning. It grew from negative -$3 billion in 2023 to $1.8 billion as of the latest quarter.

Array Tech ARRY

Array Tech ARRY also benefits from the grid expansion. They make similar sun tracking systems like Nextracker.They say that three decades of field-tested design improvements have resulted in the ARRAY DuraTrack being the most durable, reliable tracking system. They serve utility-scale developers which fits perfectly for this theme.

I expect they will have solid growth going forward, however, Array had a sharp decline in revenue in 2024. Profitability has been inconsistent too. This has given them a much lower valuation vs Nextracker. Array's PE ratio, based on this years forecasted earnings of $.67 a share is just a 13 multiple.

Canadian Solar CSIQ

Canadian Solar CSIQ, in their last conference call, mentions having USA and Spain data center products being ready in the next few quarters. CSIQ's market cap is currently just under $1 billion. If they start getting hyperscaler contracts, those could really move the needle for them given the market cap is only $977 million.

They can grow sales and earnings as they showed from 2021 to 2023. The valuation has gotten historically low. It is trading so cheap now for just .16 times sales and 1.00 times enterprise value.

Final Thoughts

In the current U.S. equity market, there are a lot of industries sporting very high to outrageous valuation multiples based solely on future potential. The solar industry's prospects are more than just a promise of growth, it is a clear reality based on the trend and data. Nextracker and Array Tech will be a big part of the grid and data center expansion. Based on their valuation, they are very compelling stocks for the long-term. I like Nextracker the most because of the strong fundamentals. Array is more of a risk to reward play if they can improve the bottom line, there is a lot of promise.

Data Center Infrastructure Thematic

noreply@blogger.com (Unknown) — Sun, 25 May 2025 01:01:00 +0000

Data Center Thematics-Demand Driven From Artificial Intelligence AI

The data center thematic encompasses multiple industries including electric utility, electrical equipment and components, construction & engineering, semiconductors and last but not least energy.

Data center growth is projected at 11% going forward, largely driven by increasing artificial intelligence workloads. AI workloads currently account for 14% of global data center power usage, but this is expected to grow to 33% by 2030 atleast. The AI race among big tech and AI labs is as competitive as it has been this year. Every few months, atleast, there are new models being released that are better then the previous market leader.

Agentic AI is beginning to be commercialized by tech companies like OpenAI with their Operator. Google also released an agent throught their LLM Gemini. Anthropic introduced theirs also. So, the trend in AI growth is as clear as recent prior years. The AI demand is going to continue to need more data centers as time goes on.

There is also a turning point happening with mega data centers and the massive $500 billion Stargate joint data center project. The Texas data center site has buildings that are half a million square feet each. There are 10 buildings currently being built. They will expand to 20 other locations beyond the Abilene location. Construction is underway right now, and I believe this could be just the begininning of accelerating secular data center growth.

The Companies

Let's look at some of the major construction and engineering companies in this area and see what we can find. These large companies are getting atleast around a 1/3 of their revenue from data centers.

AECOM (ACM) is an engineering and construction company that currently has a record backlog and pipeline. They are beating earnings and raising guidance every quarter. They have growth in the highest margin markets. Free cash flow in the recent quarter was up 141%.

They've gotten data center contracts in the past internationally. In the U.S. last year they got the Databank data center in Culpeper, Virginia expected online in 2027.

Data center projects are higher margin than others for these kinds of companies. So, with my base case of accelerating data center growth, this is very advantageous.

While none of the large-cap stocks in this area are "cheap" with a trailing PE multiple of 23 for ACM, I see 12-15% EPS growth going forward. So, there is growth at a reasonable price (GARP) here with room for multiple expansion.

Jacobs Solutions (J) is a top data center construction and engineering firm. Just this month they got a contract with Nvidia to work with them on data center operations for the Omniverse Blueprint and Nvidia's AI factory digital twin blueprint.

They have a $22.16 billion backlog up a whopping 20% YoY. Jacobs has been buying back stock for years and share count has decreased year over year. I see them growing earnings 12-19% a year and the PE multiple is currently 22. Another GARP here.

Fluor (FLR) is another major steady player here, and they do hyperscale projects. The difference with them is they have a sizable oil and gas and chemicals segment. It's been a drag on growth for many years but is more stable the past five.

A different thing also is they have been a huge investor in Nuscale (SMR) that builds small modular nuclear reactors for power. At one time, in the past they had a $600 mil stake but have reduced this significantly just recently. They still have a sizable stake in the hundreds of millions and it's been dragging down their growth some. It's interesting because the market currently sees this as a negative as commercialization has been lacking but we all know the coming trend here with SMR's due to growing electricity demand.

Ten years ago energy used to be one of Fluors largest segments and it's been replaced with the urban solutions. With the recent White House order, just yesterday May 23, 2025 to advance national nuclear production and revitalize the U.S. nuclear industrial base, I see a likely scenario of the Nuscale stake vastly outpacing the oil and gas side.

Fluor TTM EPS is $2.57 and with the stock at $41 this is a 16 PE multiple. The lower PE seems to be a product of energy being about a 1/3rd of revenue and the margins here are very low and growth has been poor lately.

Bottom Line

I like all of these companies as long-term investments in the AI data center theme. I see market corrections as good opportunities to add. While other companies in the AI theme could offer more accelerative top line growth, I see these as safer stalwart type prospects.

There are many more data center investment opportunities I will post research on soon. So stay tuned. I recently did some analysis on data center REIT's Equinix (EQIX) and Digital Realty Trust (DLR). So, I think there could be the most long-term value in FLR valuation wise here vs others here assuming commercialization of SMR's picks up soon.

Rare Earth Investing Opportunity as China Strikes Back

noreply@blogger.com (Unknown) — Sun, 06 Apr 2025 21:47:00 +0000

This past Friday, Beijing, in response to the new U.S. tariffs, announced controls on exports of medium and heavy rare-earths.

I view these recent trade developments as a catalyst that further strengthens my favorite mining stocks investment theses.

The most recent Chinese export restrictions Friday include heavy rare-earth elements samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium to the U.S. This is just the most recent of many such export restrictions over recent years, even recent months.

Heavy rare earth mining company USA Rare Earth ticker USAR stock was up +16% Friday, despite the huge overall stock market sell-off. The relative strength is significant to me as very few stocks were positive Friday. The only major asset higher was U.S. Treasury bonds as investors sought safety.
While the public and Wallstreet are hyper-focused on the tariffs, capital markets and economic consequences I see the element export controls as providing actionable opportunity catalysts. I see further catalysts likely also as we now have a clear trend with how China is reacting to trade tensions with export controls.

These recent tariff retaliatory actions from China are important because China processes approximately 90% of the world's rare earth elements and supplies 78% of U.S. demand.

In December 2024, China banned exports of gallium, germanium, and antimony to the U.S., citing their dual-use applications in semiconductors and defense technologies.

In February 2025, licensing requirements were put on tungsten, tellurium, bismuth, indium, and molybdenum. These metals are critical for electronics. To me this strengthens, even further, the investment thesis in U.S. rare earths and critical mining operations.

In addition, just weeks ago President Donald Trump on March 20,2025 made an executive order titled “Immediate Measures to Increase America’s Mineral Production.”

This directive aims to boost domestic production of critical minerals and reduce reliance on foreign imports. It is using the Defense Production Act (DPA).

The DPA is invoked to accelerate domestic mineral production by prioritizing mining projects critical to national security and industrial needs.

Federal agencies, including the Department of Defense (DoD), Department of Energy (DOE), and Department of the Interior (DOI), are directed to identify and expedite priority mineral production projects.

The order broadens the definition of "critical minerals" to include uranium, copper, potash, gold, and any other materials deemed essential by the Chair of the National Energy Dominance Council.

I speculate many of these companies could possibly even be protected further with grants or further federal orders.

These rare elements are key to defense systems, renewable energy technologies, and advanced electronics. This supply shock could significantly drive up prices. This could benefit the mining companies profits.

China supplies 63% of the antimony we use here in the U.S. Antimony is crucial for things like military equipment, metal alloys, electronics etc.

I've mentioned many diversified rare earth miners I like already on my X/Twitter account. Some are tickers NB UAMY EMX TMRC CRML NAK in addition to the new ones in this post.

Rare Earth Moly

Another key element China has made export controls on is molybdenum. In February of this year China put a control on molybdenum and other metals like tungsten, tellurium, bismuth, and indium. Exporters now need approval from China's Ministry of Commerce and General Administration of Customs, creating bottlenecks in processing shipments.

China supplies roughly half of the molybdenum or moly the U.S. uses.

Moly is extremely crucial in metal steel making, as it strengthens steel and maintains it in many other ways, like helping steel strength and stability at elevated temperatures.

The largest suppliers of steel to the U.S. are Canada, Brazil, and Mexico, which collectively accounted for about 49% of U.S. steel imports. If trade tensions further escalate perhaps the U.S. will need to make more steel domestically. Regardless, moly is always needed.

The Northern Dynasty's (NAK) Alaska Pebble deposit contains an estimated 5.6 billion pounds of molybdenum, making it one of the largest undeveloped moly resources in the world. It has yet to be approved and is not certain to but these recent trade events may further increase the chances in my view.

Pebble also has one of the worlds largest undeveloped copper resource in the whole world. There are 80.6 billion pounds of copper in total, according to some estimates. Conservative measured and indicated estimates are 57 billion pounds of copper with which is still a gigantic number.

Perpetua Resources Corp ticker (PPTA) just got approval in January to go ahead with the moly Stibnite project.

Stibnite’s 148-million-pound antimony reserve is the only identified domestic source in the US and could supply 35% of the country’s antimony demand in its first six years.

Other notable companies include Miner MP Materials (MP) owns the Mountain Pass site, which is the only large rare earth mining site of scale in the Western Hemisphere. Another rare earth miner I added to the basket is Critical Metals CRML. They have an interest in the Tanbreez Rare Earth Project in Greenland. It's one of the largest rare earth deposits globally, with an estimated 4.7 billion metric tons of host rock. "They plan to invest $10 million in further exploration and drilling by the end of this year. Once this investment is completed, the company can increase its equity stake from 42% to 92.5% by issuing additional shares worth $116 million (according to Benzinga)." There are plenty of other publicly traded miners who mine moly, but they also mine other metals with economic slowdown sensitivity like copper. These stocks have extremely high beta and aren't going to generate alpha in a market sell-off, however, when volatility is lower they can be attractive.

One such company is Freeport-McMoran (FCX) is a big mining company and one of the largest producers of moly globally.

I have picked mine based on recent months technical strength. There are also a slew of junior miners that trade on the Toronto exchange but I'm focusing on ADRs here.

Iluka Resources ticker ILKAY, is constructing Australia’s first fully integrated rare earth refinery. It appears to produce only the dysprosium and terbium on the new China list.

The stock trades on very, very thin volume so one would need to be catious of this. It's in a long downtrend, and to me, needs to get better technicals and relative strength before I'd personally consider it.

My final thoughts are there are intermediate investing opportunities in these companies as catalyst trades with small position sizes. I don't like individual mining companies as long-term investments (1-2+ years) from watching many over the years.

Some cycles certain companies stocks perform well and some cycles they don't. In the case of gold and silver it's often more advantageous to hold vehicles like ETFs,futures or even the physical itself. Full Disclosure:I hold shares of NB UAMY NAK ( stock and calls and put hedges) I plan on purchasing USAR stock and MP soon.

FiscalNote (NOTE) AI SaaS Analytics

noreply@blogger.com (Unknown) — Mon, 10 Feb 2025 07:19:00 +0000

FiscalNote ticker symbol NOTE serves a global, diverse customer base that includes businesses (including over half of the Fortune 100), government agencies, law firms, professional services organizations, trade groups and non-profits. They serve all three branches of government including the White House and Dept. of Defense.

The company was founded in 2013 by Tim Hwang and his childhood friends Gerald Yao and Jonathan Chen. They secured initial investment from notable investors including Mark Cuban and Jerry Yang.

They are the market-leading AI platform for the regulatory, legislative policy and geopolitical intelligence sectors.

To put their software in simple terms FiscalNote is like a super-smart news alert system for laws and rules that: Watches government websites and documents 24/7. It summarizes complicated legal documents into simple language and alerts you when important changes happen.

Imagine you own a business and need to know about new laws that might affect you: FiscalNote software gives quick answers instead of reading thousands of pages of government documents. Saves money and time instead of hiring expensive lawyers to explain everything. FiscalNote's software sends you a simple alert about new rules and explains how they affect your business.

In the most recent conference call management calls the software "essentially the Bloomberg terminal for regulatory, legislative and strategic risk, drawing upon a deep reservoir of technical expertise, proprietary data and analytical tools." The Bloomberg terminal is the top tier terminal used by finance professionals.

One of the positives I see about the company is that it still has founders in leading positions. Tim Hwang is a co-founder and is the current Executive Chairman. Gerald Yao is another co-founder and is Chief Strategy Officer. Tim Hwang was the CEO since the start and just a month ago is replaced by Josh Resnik at CEO.

Financials

I looked over the yearly financial report for the 2023 year. They generated total revenues of $132.6 million and $113.8 million for the years ended December 31, 2023 and 2022, respectively. So revenue grew 16% which is good growth.

They get recurring revenues through the subscription-based model, which accounts for approximately 90% of total revenues.

In 2023 gross profit margin was 82% vs 80% in 2022. These are really good gross margins and they should be able to get a net profit with these kind of margins. I'm a little surprised this net profit isn't happening now, however I see a rising trend in earnings per share the last four quarters. If this trend continues ceteris paribus they should have profitability in a year or less.

I did see in the quarter ending in March in '24 they put up a cool $.39 a share in net income or $50.5 million in net income. This was good to see because it shows that they are capable of the feat.

In the last quarter revenue was down -13% qoq. A positive was the quarter represented a $2.7 million improvement in adjusted EBITDA year over year and marked the fifth straight quarter of adjusted EBITDA profitability for FiscalNote. I really want to see more revenue come in this year though.

On the Q3 '24 earnings call they forecasted $9 million in adjusted EBITDA marking the first full calendar year of adjusted EBITDA profitability.

Valuation

I see this stock as a potential growth stock. The way I like to look at big picture valuation on growth stocks is the price to sales ratio P/S. It shows how much you are paying for the sales. Right now it's a low valuation at just 1.4 X trailing twelve month sales.

I've been looking at a lot of cheap companies lately and none of them were even less than 1.5 X sales. The big sales growth isn't here right now and the market is pricing this in. I'm bullish on the industry growth so I see a good discount here just from a sales standpoint. I'm optimistic they can grow the top-line 10%.

Industry growth

The global ai-regulatory tech industry according to market.us is expected to be worth around $29.6 Billion by 2033, from $1.3 Billion in 2023, growing at a CAGR of 36.7% during the forecast period from 2024 to 2033. That is s very good CAGR.

Institutional holders

21% of NOTE's shares are held by Maso Capital Partners. They are a Hong Kong-based hedge fund established in 2012 by Manoj Jain and Sohit Khurana, both former managing directors at Och-Ziff's Asia fund. This holding percentage is 7 times more than the next largest holders being Morgan Stanley, Vanguard and Blackrock.

Maso has about 36 positions and their top holding is NOTE which is the largest position at 35%. Other top holdings are SOHU, YY, VNET Group and i-Shares Russell 2000.

Technical Analysis

Since the IPO, the stock has never gotten enough sustained buying to put in a major technical bottom and get lasting momentum. It's threatening this here but has to see $1.61 a share hold first.

Final Thoughts

For a company as small as this they have a strong business being subscription based and with a healthy diversity of clients. The big play here is as more companies start using AI they are poised to benefit and grow fast. The current valuation makes sense if this happens.

Also, having such big gross margin makes them likely to get over the net income hump. This will likely be a positive catalyst that boosts the stock.

Disclosure: I am long stock

Bullfrog AI (BFRG) AI Drug Discover

noreply@blogger.com (Unknown) — Wed, 16 Oct 2024 11:06:00 +0000

First off, I’d like to thank my recent new followers for following me on Substack. I started the Substack in early 2023 and I now have 311 followers. Thank you all for your support.

If you have read my articles on pharma companies or follow my X account here ,you know I have been researching stocks involved in the AI (Artificial Intelligence) theme.

I believe we are still early in the theme. Big techs continued and accelerating CapEx into infrastructure supports this as well as Oracle's ORCL two most recent quarters. Companies from agriculture to Walmart are now using AI to drive results.

I’ve been an early adopter of LLMs (Large Language Models) for research and as a search engine. I’ve almost entirely replaced my Google search use by about 80-90%. I have been very open-minded to the positive future uses of these neural nets.

If you are skeptical of AI or already have a strong negative opinion on it, that’s fine. You can rest assured, for the sake of the company analysis in this article, that machine learning and AI have already been around for over a decade in computational biology and the pharmacutical industry and it has only been positive. There are plenty of articles written explaining the uses of AI and machine learning if you are curious about the uses in the pharma industry. One such article is Revolutionizing clinical trials: the role of AI in accelerating medical breakthroughs

I just watched a recent interview with Nvidia (NVDA) CEO Jensen Huang. He mentioned the industries he sees most impacted by AI in the near future. One he mentioned was digital biology. Nvidia has already invested directly into clinical biotechnology company Recursion Pharmaceuticals (RXRX). Recursions mission statement is exactly like Bullfrog AI’s (BFRG).

Recursion was founded to harness the power of accelerating technological innovations to improve the efficiency of drug discovery and development. Bullfrog AI has the same technology focused approach to drug discovery.

I knew for sure I was onto something when one of the value stocks I covered on the Substack SomaLogic got bought out by Standard Biotools (LAB) only a few months after my write-up on it. SomaLogic is a protein biomarker discovery and clinical diagnostic company. They have the SomaScan Platform. It is a tool that helps scientists study proteins in a much faster and more detailed way. It lets researchers understand how proteins work and interact with each other.

Bullfrog AI Bullfrog AI (BFRG) calls itself “an emerging digital biopharma company. Using our proprietary AI/ML analytics platform, we aim to improve drug development and clinical trials through identification of high-value data niches and patient subgroups.”

One of the most interesting things about Bullfrog is they truly are on the cutting edge of technology. They have been working with Johns Hopkins Applied Physics Lab since atleast 2017 and also collaborating with George Washington University. Both Johns Hopkins Hospital and University are some of the most renowned institutions in the nation.

In 2017 Bullfrog AI was granted licenses to a data analysis tool from Johns Hopkins. In March of 2023 they were granted additional licenses to two machine learning tools from Johns Hopkins. Their names are Prometheus and Seagull.

They also have a relationship with the Lieber Institute for Brain Development (LIBD). The collaboration between BullFrog AI and LIBD, announced in September 2023, uses the bfLEAP™ platform to mine LIBD’s comprehensive brain data. This data includes transcriptomic, genomic, DNA methylation, cell-line, clinical, and imaging data from over 2,800 brain samples. Early results announced in January 2024 highlighted the ability to stratify brain expression data, revealing biological subtypes within psychiatric disorders.

Some recent developments came for Bullfrog AI just days ago with the prospects of Bullfrogs drug candidate BF-114. There was a publication of new research in the peer-reviewed journal Cell Reports supporting the potential of BF-114 (SPTBN1 siRNA), in treating a range of liver diseases, including metabolic dysfunction-associated steatotic liver disease (MASLD), metabolic dysfunction-associated steatohepatitis (MASH), and hepatocellular carcinoma (HCC). BF-114 is being developed for the treatment of obesity and liver diseases and this research appears to be promising.

They have acquired the rights to a series of preclinical and early clinical drug assets from universities and entered into a strategic collaboration with a world-renowned research institution to create a HSV1 viral therapeutic platform to engineer immunotherapies for colorectal cancer.

They have signed exclusive worldwide license agreements with Johns Hopkins University for a cancer drug that targets glioblastoma (brain cancer), pancreatic cancer, and other cancers. They have also signed an exclusive worldwide license with George Washington University for another cancer drug that targets hepatocellular carcinoma (liver cancer), and other liver diseases.

Business Strategy

One of their business goals is to “rescue” drugs that have failed in phase 3 clinical trials by using their technology to analyze all available data with the goal of designing a precision medicine clinical trial that will have a better chance of being successful. They see this servicable market as a $47 billion market.

The Company has a unique strategy designed to reduce risk and increase the frequency of cash flow. The first part of the strategy is to generate revenues through strategic relationships with biopharma companies. These relationships will be structured as a combination of fees and intellectual property based on the specific scope of the engagement.

In the future, the second part of our strategy involves acquiring the rights to clinical stage drugs, using our bfLEAP technology to design a precision medicine trial, conduct the trial with a partner, and sell the asset. This approach may also apply to earlier phases in the drug development process such as discovery and preclinical.

The company has two main platforms.

The bfLEAP™- an AI/ML platform for analysis of preclinical and/or clinical data. This is how the company describes bfLEAP in their annual report.

"The analytics industry and application of AI in healthcare is growing rapidly. Competition exists along the entire continuum of the drug development process from discovery to commercialization and beyond.

We believe the weakness of the industry is the quality of the data and we believe bfLEAP provides several competitive advantages, that will position the Company for success.

"First, bfLEAP is highly scalable and can process data from small to extremely large complex data sets without the need for additional code being developed. Second, it is adept at processing and analyzing incomplete data and making predictions that we do not believe other technologies are capable of doing.

Finally, bfLEAP has the ability to extract the most important features for analysis out of extremely large complex data sets using unsupervised machine learning algorithms, thereby greatly simplifying complex problems. Since data quality is a problem that exists in the healthcare industry, we see these as major differentiators." -company annual 10-K

The ability to make predictions, find relationships and patterns and anomalies in extremely large complex data sets has been demonstrated by the Applied Physics Lab in other applications and sectors. Finally, the algorithms used by bfLEAP are proprietary and protected, having been developed at Johns Hopkins University Applied Physics Lab.

We believe most of the competitors rely on open-source algorithms and we also believe that we have already demonstrated our superiority via the August 2021 publication in DeepAI.org."

siRNA -for targeting Beta2-spectrin in the treatment of human diseases developed at George Washington University and licensed by the company.

Valuation Bullfrog AI has a market capitalization of $21.2 million. NCAV (net current asset value) is $5.3 mil. The company didn’t have any revenue in the most recent quarter and revenue has been very sporatic. They generated their first revenues in late 2022 from services provided to a pharmaceutical customer. In the third quarter of 2023 they completed their first commercial service contract and recognized revenue in the amount of $65,000.

For the full year in 2022 the company used $911,000 in cash. They said they expect that to increase going forward. As of the last quarter they have $7 million in cash and a very strong current ratio of 9. There is an accumulated deficit of $11.6 million.

I looked up the company address listed in their annual report at 325 Ellington Blvd, Unit 317, Gaithersburg, MD 20878. It's at what appears to be a retail shopping building. There is a UPS store on one side of it and a ZAGG on the other and a sit-down restaurant at the end of the building. There isn't a business marking on their front. Maybe the Google image is old or they just moved. I don't know.

What explains this is they also say all of the company's employees work virtually and they own no properties. Unless I am mistaken of what I am looking at on Google Maps this is unusual to me though. I was expecting to see an office building.

Technical Analysis The technicals are holding as it is on a major support level that goes way back. This last consolidation looks like a bullish flag on that level. The stock is incredibly volatile.

Full Disclosure: I am long shares of BFRG

Jones Soda JSDA Turning Around

noreply@blogger.com (Unknown) — Thu, 13 Jun 2024 02:52:00 +0000

I've covered a lot of small and micro-cap value stocks over the years. Some would be deep values for many years and never manage to attain steady growth and profitability. I try and keep track of ones that I always felt had a chance if management improved the business. One stock that has been depressed for many years is Jones Soda (JSDA). It trades on the OTC exchange, however, it is different than the majority of stocks trading OTC or pink sheet. The major exchanges in the U.S. are the Nasdaq, New York Stock Exchange and Amex.

Companies listed on the OTC/pink sheets can often be shell corporations and companies just frankly not worth owning. The listing requirements are different than the major exchanges. Jones Soda is a real company with substantial operations. They are headquartered in Seattle, WA but sell nationwide in grocery stores. I have seen their soda products on the shelf in my local grocery store here in North Carolina.

The company has always sold bottled soda drinks. They now have a fountain soda business for restaurants and customers. The more interesting developments lately have been their move into cannabis infused drinks in 2022 and craft alcohol mixers. The cannabis is under the Mary Jones brand in California and Washington. These products include 10mg and 100mg cannabis-infused soda.

There has been a push on the national level to get closer to decriminalizing marijuana just in the past year. A new federal rule announced in May will reclassify marijuana as a less-dangerous, Schedule III drug.

The trend also has been for more states to legalize marijuana and cannabis. The Florida Supreme Court made a ballot initiative earlier this year to legalize recreational marijuana in Florida. It could be on the ballot in November.

Cannabis is legal in some form, for either recreational or medical use, in more than 40 states. The fact Jones Soda is only selling their cannabis drinks in two states and Canada leaves a lot of opportunity for growth.

They say in the annual report they are planning to expand into other states. The cannabis drinks are a highly competitive market but the outlook is sure a lot better than the soda product line which they have had for years. The U.S. is 81% of their sales and Canada 19%. As of March this year they had 27 employees,15 are employed in sales and marketing.

Valuations

The company has a market cap of $40 million as of today June 12th. Trailing twelve month sales are $17 million.

The company is trading for roughly 2.3 times sales. Sales in the most recent quarter were up 29% year over year. This is a fair price for a company like this. Small companies can really grow sales fast. I think this valuation is more undervalued considering the new markets they are now in.

Gross margin improved by a nice 8% from proactive pricing adjustments, supply chain optimization, and increased sales of Mary Jones brand revenue which generally have higher margins. The company hasn't had positive free cash flow or positive earnings for a long time if ever. I see the entry into the cannabis and craft mixer drinks as a big turning point that will bring much more positive developments than prior years.

They also made some great new hires in key roles. A new CEO David Knight is joining at the end of this month! The current CEO is retiring. Mr. Knight worked at Pepsi as a vice president of marketing Gatorade and was vice president of marketing at Quaker Oats.

In March Eric Bittner joined Jones as its new Chief Operating Officer, bringing 20 years of leadership in the beverage industry to lead the company's operations. He most recently led turnarounds at Roar Organic's and Fever Tree, where he served as the SVP of North American Manufacturing. Additionally, he has held supply chain leadership positions at Keurig Dr. Pepper, Niagara Bottling, and PepsiCo.

Mary Money was named Director of New Product Development and Commercialization at Jones. Money is a highly experienced R&D scientist, with over 30 years of experience in Food and Beverage. She has worked for PepsiCo and ConAgra Foods. These are some amazing hires for a company this size and they look very lucky to have grabbed these from Pepsico together.

Final Thoughts

Usually when I look at companies this small they are at a deep value to assets on the balance sheet. Jones, however is not a deep value but the balance sheet sports a 2.36 current ratio which is an adequate ratio. Current ratio of 2 or higher shows a high likelihood of a company in general being able to pay it's short-term bills. The Company believes its cash on hand, projected cash generated from product sales and funds received from the committed revolving credit facility are sufficient to fund the Company's operations for a period of at least 12 months. The company in my opinion is in one of the best positions it's been in as long as I've known about it.

Technically, the price action has gotten momentum and the stock is up significantly this year and after their most recent quarter. It's currently in a bullish triangle pattern. I'd like to see the stock hit $.41 a share to make sure the momentum is still going to continue before buying the next couple months.

I don't currently own any shares. I may buy JSDA shares in the future. Stocks trading for less than $1 a share can be incredibly volatile and the prices can drop significantly without news or any events. If I buy it I will use limit buy orders and not a market order.

EV Charging Stocks Short Thesis

noreply@blogger.com (Unknown) — Wed, 22 Nov 2023 02:15:00 +0000

I've been looking at a lot of potential sectors and stocks for short opportunities the past few months. I've been trading in and out of EV charging companies put options on stocks like Chargepoint CHPT, Blink BLNK and EVgo EVGO. The big picture on it is the EV market sentiment has readjusted to reality and peak EV hype is down now.

Another major factor is Tesla has a position in the EV charging space with their own charging stations and continue to get more major car manufacturers to sign on. This I believe was a big blow to these much smaller EV charging stocks that I mentioned. I don't see how these companies will compete with Tesla chargers if Tesla decides to try and corner the market. The stock prices continue to fall monthly making equity raises less and less helpful. Evgo EVGO was able to raise some capital recently. The cash burn is significant with them and BLNK. I recently added more BLNK puts and now have put options of various strikes as far out as January 21st.

The cracks are now starting to emerge in the industry as Chargepoint's CHPT CEO and CFO both announced their resignation on the same day as revenue forecast was slashed! Here is an article. Apparently, Chargepoint is "the leader" in this space which is sure something telling.

I got this graph from another account on Twitter that highlights cash burn at Chargepoint and EVgo. The recent overall stock market rally has caused minor rallies in BLNK and EVGO stocks that I see as better prices for long dated puts. There has been a turn in the press and I'm seeing negative press on these chargers. The Wallstreet Journal had an article a week ago on how the stations are not working.

Disclosure: I am long put options in CHPT BLNK EVGO and will continue to add more.

Global Equity Indices Now All Weaking

noreply@blogger.com (Unknown) — Tue, 10 Oct 2023 06:41:00 +0000

I've been tracking a few countries that have had very resiliant stock markets in the second half of this year. We all know the U.S. equity market has had a major pull-back. Well, up until a month or so ago for Vietnam or just this week in some there has been relative strength. Others include Turkey and UAE even with a declining U.S. market. Vietnam finally had a technical correction in the end of September and UAE and Turkey yesterday. Turkey is still near it's highs on the year however.

Vietnam is still one of my favorite long-term investment prospects with their superior GDP growth and forecasts. Below are the respective charts of these countries equity indices. First is the iShares MSCI Emerging Markets ETF (EEM) that is near lows on the year.

The Vietnam (VNM) pull-back was pretty forcefull off the highs in September.

UAE just had a big red day coinciding with the geopolitical events and conflict. I expect to see more short-term downside here.

Lastly, beginning to weaken Turkey (TUR). I see an opportunity for a short on this market with uptrend levels being broken and the fact it hasn't had a significant pull-back yet. Also, there is the proximity to the conflict that just started in the region that may be bringing some uncertainty to the market there.

I see a short setup or a long put options setup in Teva Pharma (TEVA) based in Israel. I noticed the IZRL ETF that is the Israel Pharma ETF took a large downside move and has downside momentum going off a big gap down.

There is also a very good short setup in (TKC) Turkcell a Turkey company that has just come off a clear bear flag and is making new lows.

Defensive Opportunities In A Continued Risk Off Quarter

noreply@blogger.com (Unknown) — Mon, 21 Aug 2023 01:53:00 +0000

I continue to see a risk off environment in equities that has spilled over to emerging markets. The consensus from American conglomerates on China demand and now Chinese data itself is pointing to significant economic contraction in China. The markets in Turkey (TUR), Vietnam (VNM) are holding strong. Vietnam continues to be my favorite opportunity in emerging markets over the long-term.

Last week Bitcoin saw increased selling and volatility. This just adds to the risk off sentiment as Bitcoin, one of the best performing assets this year is joining in on the selling. Below is the breakdown of the trend support currently in the works on Bitcoin. I alerted on the recent top for Bitcoin here on the blog in early 2022.

In light of this overall market weakness I see opportunity in pharmaceuticals with ETF's like VanEck Pharmaceutical ETF (PPH) and I-Shares Pharma ETF (IHE). The ETF's have recently broken out to new 52 week highs and shown relative strength in the market. I'm particularly bullish on the sector because breakthroughs in AI machine learning should improve drug development costs and increase speed of discovery and research.

I've done extensive research on the newest AI via large LLM's(large language models) and the promise of smaller ones. Drugs and biotech are some of the industries they will transform initially. They are the perfect fit for industries where scanning large language databases is key and processing large amounts of data is needed.

The pharma ETF PPH is coming up on a key support level.

Merger Arb Opportunities

There are opportunites in merger arbitrage with Spirit Airlines (SAVE) and I-Robot (IRBT). Spirit is trying to get an all cash deal done with Jetblue for $33.50 a share. Amazon has been in the works and shareholder approved to buy I-Robot for all cash or $51 a share too.

Oil and Gas Energy

Apart from pharma I have seen relative strength in energy stocks. I have particularly been looking at oil and gas stocks as natural gas has pretty much been written off. I'm not particularly bullish on natural gas but the contrarian trade now is nat gas as harsh winter weather is likely not priced in. The best gas ETF is US 12 month Fund (UNL) at it holds long dated contracts and thus has less decay than ETF (UNG). Nobody is bullish on natural gas prices as the technicals have shown a bottom formation forming.

Some of the energy stocks I added to my watchlists were VAALCO (EGY),Helix Energy (HLX), Nextier Oilfield (NEX), KLX Energy (KLXE).

Solar Weakness Continues

Another industry that caught my attention was Solar. It caught my attention as a short opportunity as the weakness in solar continues as evidenced by the Invesco ETF (TAN). I noticed short selling technical setups in stocks like JKS and MAXN too.

I'm bullish on the prospects of breakthrough technology like quantum computing with the help of AI. The quantum computer ETF is Defiance Quantum ETF (QTUM). I also particulary like the quantum computing stock Rigetti Computing (RGTI) as they have one on the cloud.

I continue to believe the investment of our lifetimes going forward will be in artificial intelligence. The best plays on this are the actively managed Roundhill ETF (CHAT) and long established Global X AI ETF (BOTZ) and Robo Global ETF (ROBO).

One good speculative investment opportunity I saw was in the Nigeria country specific Nigeria ETF (NGE). Nigeria NGE has a trailing twelve month 16% dividend yield. 0.83% expense ratio. Politics might be a partial driver of the 28% YTD performance of Nigerian stocks.

"The Tinubu admin also formed a committee on fiscal policy and tax reforms headed by Taiwo Oyedele, signalling the possibility of critical tax reforms"... " Banking and oil gas stocks have been very strong drivers of market performance. Oil and Gas stocks have been on the rise since they took out fuel subsidy from the sector. Added with banking, they are the top two sectors.”

On specific stocks on the long side I see a buy setup in Payments Holdings (PAY) as it saw large buying volume after earnings and is consolidating in a flag now. It needs to hit 14.05 for a long trade. The company has strong revenue and earnings growth. They recently revised quarterly earnings forecasts to the upside. Next years earnings guidance has been raised to $.24 EPS vs previous $.14.

Full disclosure: I have been actively trading the PPH ETF, RGTI. I have puts on JKS, long BOTZ, CHAT. May long NGE in future.

Spok Holdings (SPOK): Healthcare IT Company With a 9% Dividend Yield

noreply@blogger.com (Unknown) — Sun, 06 Aug 2023 00:39:00 +0000

Spok (SPOK) provides healthcare communication solutions in the United States, Europe, Canada, Australia, Asia, and the Middle East. They offer subscriptions to one and two-way messaging services, voicemail, and equipment loss or maintenance protection services. They serve over 2,200 health care facilities and 83% of their revenue is re-occurring in nature. The current market cap is $271 million with the stock price at $13.60 a share.

Valuation and Metrics

The trailing twelve month PE ratio is 8. Price to sales ratio is around 2. I find this to be a compelling valuation in the current market. Free cash flow has been positive since 2019, except for 2021 which was driven by unusually large capex.

The company has been profitable since the second quarter of 2022. In 2019 to 2021 net income was negative. I didn't look at any years before 2019. Return on equity has been trending upward the past few years. The current ROE is 13% for Q2 2023.

Strong Dividend History

From 2018 to 2021 the company payed $.50 in dividends per share. In 2022 the dividend was raised to $1.25 per share.

In the years prior to 2018 the company made a total of $467 million in dividend payments.

The current quarterly payments are $.3125 per share. With the stock at $13.60 a share the dividend yield is 9% well above the risk free rate.

In addition to shareholder friendly dividends the company also has a history of returning value through share repurchases. In 2018 and 2019 they spent a combined $40 million on sharebuybacks.

Industry Long-term Outlook

The prospects for health IT is strong.

Gobal healthcare information system market size was valued at USD 406.4 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 13.3% from 2023 to 2030. Rise in healthcare expenditure and advancements in its IT infrastructure are some of the primary drivers boosting the market. High demand for remote patient monitoring is also significantly driving its adoption rate.

source: https://www.grandviewresearch.com/industry-analysis/healthcare-information-system-market

Other sources share similar growth rates. While the company has not experienced rapidly growing sales the industry growth does provide good defensive stability. The nature of the business doesn't require large debt loads and margins are healthy and stable. This lends to the prospect of meeting future dividend payments.

Technical Analysis

The stock price has been uptrending since the summer of 2022. It formed a base and recently broke out to a new 52 week high on earnings.

It has good short-term technicals with a clean bull flag on the daily chart highlighted in red.

If you like this keep it simple analysis be sure to subscribe to my free Substack where I do analysis on deep value stocks trading below net tangible and net current asset value.

Full disclosure: I have no position at the time of writing. I many take a long position in the future.

More Fast Growing Technology Companies

noreply@blogger.com (Unknown) — Mon, 31 Jul 2023 00:23:00 +0000

Yalla Group (YALA) is a middle eastern social networking and entertainment platform primarily in the Middle East and North Africa region. It's a $872 million company and a fast grower. The previous 5 year sales compound annual growth rate was 24%. The trailing twelve month gross margin was 62%. Trailing twelve month net profit margin is roughly 18%.

They have been free cash flow positive for the last four years. In 2022 free cash flow came in at a robust $103 million. 2021 had $142 mil in free cash flow, 2020 saw $64 mil.

Yalla is trading at 12 times earnings with forward growth forecasted significantly higher.

The price action is resembling the overall Chinese stock market. It just broke over a resistance level.

The technicals combined with valuation, fundamentals and recent strength in China make this a good long watch.

Nerdy, Inc. (NRDY) an $811 million company in the online education industry that utilizes AI. The companies CEO is the founder. Revenue is forecasted to grow 29%. Earnings are estimated to turn to profitablity next year.

On the balance sheet current ratio is 3. The largest mutual fund holder is Franklin Strategic Series-Franklin Small Cap Growth Fund. Goldman Sachs, Vanguard Group and Blackrock all hold over 2% of the stock each.

Undervalued Tech Stocks

noreply@blogger.com (Unknown) — Tue, 13 Jun 2023 10:29:00 +0000

The Nasdaq 100 is up 30% so far this year. It's not easy to find large-cap growing tech companies that haven't already seen significant stock accumulation.

I have been scanning the sector regularly to find attractive longer term opportunities. I remember the early 2000's very well and how accelerating revenue growth in E-commerce propelled so many stocks higher and higher.

The demand for computer power to fuel the growth of AI and large language models is here. Whether you believe it is all hype or the next paradigm of computers like me as personal computers were in the 80s and internet was in the 90s AI is getting investment.

Everyone complains that Nvidia(NVDA) is too expensive at 30 times sales. Here is some historical context on what large companies can do in a bull market.

In the 2003-2007 market Baidu (BIDU) had a price to sales ratio of 30 in spring 2010 and share price of $60. It still ran to $145 at its peak in 12' with a P/S of 44! that's a 100% return after it was at 30 times earnings. I'm not saying Nvidia will grow like that but another 25% return doesn't seem impossible.

In 2015 Alibaba BABA had a price to sales of 16 and the stock still went from $80 to $200 in 2018.

I've been looking at a lot of robotics companies, semi's, silicon miners and IT infrastructer stocks large and small. I've been tweeting about many such stocks for a couple months on Twitter. One such stock, STRC I made a substack article on. Subscribe to my Substack here to catch all my newest deep value net-net ideas.

One recent dive I did was Nauticus Robotics (KITT). It is in the ocean sensory robotics business.

-4.8 Current ratio

-+230% to +440% forward revenue growth,

-36% rev growth this current year

-EPS loss narrowing 6 quarters straight

-no dilution

-risk, only 2 customers

Another interesting thing I stumbled on was that Boston Dynamics a world leader in robotics is owned by Hyundai Motor (HYMTF). They bought the company in 2020 for $1 billion. I'm sure the current market value is much higher now in this AI frenzy.

ARB IOT Group ticker symbol (ARBB) an Asia based smart home technology company IPO'd in April of this year. There appears to be no analysts on it so it was hard to find guidance. I did see some very good growth. There was 2,200% revenue growth in a six month period in 2022. Quarterly earnings growth was 158% per Finviz.com. The balance sheet has a 3.9 current ratio. I need to do some more research but it appears it may be below net current asset value too. The float is only 1.2 million.

Another lower float one I found was IBEX (IBEX). Earnings guidance has been steadily raised over the past few months. Earnings are expected to grow 11% next year. The forward PE ratio is 9.6.

Some of my favorite datacenter stocks are Bel Fuse (BELFB), MongoDB (MDB), Vertiv Holdings (VRT) and a cloud company I like is Zscaler (ZS).

I currently own Nvidia through ETFs and am long KITT and STRC. I may buy or sell any of these stocks in the future. Here is an AI generated image of a modern datacenter.

AI Wars Are Beginning In Tech: How To Invest In Artificial Intelligence

noreply@blogger.com (Unknown) — Fri, 21 Apr 2023 09:35:00 +0000

Hello loyal readers! Grab a cup of hot coffee or fresh tea. I have a good one for you today!

My goal is to find the best investment opportunities in artificial intelligence and robotics. After researching the technology in-depth I strongly believe this is the best growth industry opportunity to invest in since the 1990's internet boom. We are still early too! I will continue to put my ideas on the blog here, my Substack and my Twitter/X account going forward.

Microsoft recently made a large investment in OpenAI and has already incorporated AI chat technology into it's search engine Bing. We are continuing to see investment as Inflection AI just secured a massive $1.3 billion funding from major investors including Bill Gates.

If you are brand new to AI technology let me give you some quick background on it. Sam Altman and Illya Sutskever used computers to make a "neural network" that was modeled after the human brain. The computers use high powered "GPU's" graphics cards to process the information.

Deep learning has been going on since the early 2000's but it took major breakthroughs in compute to get us to ChatGPT-3 and 4. Previously, the computers were just not powerful enough. Scientists were also not sold on the concept of scaling up neural nets. This all changed in the last 5 years as computer tech advanced. The increased size of the neural nets combined with increased compute brought breakthroughs leading to ChatGPT.

These vast neural nets are called LLM's (large language models). They use NLP (natural language processing) to retrieve info and generate it. So instead of using code to communicate with the computer you can use words. These massive LLM's are being trained on the internet and thousands of books.

If you haven't checked out the future of chat search I recommend going to Bing.com and clicking the chat icon at the top and using the interactive chat bot which utilizes the ChatGPT technology from OpenAI ChatGPT.

Ask Microsoft Copilot to find your results like you would in Google or Safari. It is incredible and free. The difference vs traditional search is you can talk to it like a person and use more detail. Don't be afraid to test it's limits. It's a streamlined chat style search without the ads, unworthy results in Google's top 10, pop-ups, paywalls or wasted time scrolling multiple results pages.

Microsoft and OpenAI are adding things regularly. You can have it write stories, poems or even articles. They now have an AI image creator too. OpenAI is regularly adding features and plug-ins to ChatGPT-4 if you want to pay for the subscription.

I remember the early days of the internet well in the mid and late 90s. The first time I surfed the web it was with Yahoo search at my dads office because we didn't have it at home yet. I am getting the same vibe using AI powered search now.

AI Is Here To Stay

I think some people maybe even Wallstreet are jaded about AI tech from the over-hype of the recent metaverse and web3 and lack of real-world wide scale implementation. Trust me AI and LLM's(Large Language Models) is legitimate and is going to be revolutionary. How revolutionary? I believe AI technology is someday going to be more revolutionary to mankind than the internet, especially if AGI or something like ASI (artificial superintelligence) or any thing near a singularity is reached.

We still are not experts on what goes on in the brain. What exactly would it take to push AI to a level rivaling human creativity? Human innovation only comes from "learning" and experience after all. If we accelerate the learning as resesrchers are doing as I'm writing this how soon could major scientific breakthroughs occur?

It is already creative and solving problems. these models are still the early versions and are being improved. Eventually, from what I am hearing they could take an Albert Einstein, Sir Isaac Newton, and Nicola Tesla bot and have them theorize on advanced physics. This novice version we have with ChatGPT when you use AutoGPT can perform jokes and I'm hearing even a full comedy skit with a hook and final punchline like great comedians do.

Some people are afraid of advancing this technology that has given a massive technological breakthrough already for the average person. It can proof-read writing, fix spelling and grammar and make sentence structure more consice. It can write articles on any subject. It can write a business plan and do web development coding. Think of it like an assistant for your work or hobbies with the entire knowledge of the internet by your side.

There are crucial externalities like potential slowing investment and the overall economy that could slow down the growth of this technology. If things continue as they are going the research I got from using the Bing AI chatbot(now Copilot) paints a very prosperous picture for growth.

Future Growth

"According to Statista, the market for artificial intelligence (AI) is expected to show strong growth in the coming decade. Its value of nearly 100 billion U.S. dollars is expected to grow twentyfold by 2030, up to nearly two trillion U.S. dollars. These figures are regularly being updated by big banks and analysts as the demand for Nvidia GPUs remains robust.

In 2021, worldwide investment into AI companies increased by 115% since 2020, marking the largest year-on-year growth in AI investment for at least two decades. Total AI investment reached $77.5 billion in 2021. The global AI market, valued at 142.3 billion U.S. dollars as of 2023, continues to grow driven by the influx of investments it receives. This is a rapidly growing market, looking to expand from billions to trillions of U.S. dollars in market size in the coming years."

Best AI Stocks To Buy

Google is behind Microsoft right now with AI search. Bing chatbot came to market first. Bard finally came out but isn't competitive on financial searches. Anecdotally, I've seen mixed feedback for Bard. Googles (GOOGL) main revenue segment is search ad revenue. Google has already been struggling with declining growth in many segments and missing earnings estimates the last four quarters. This new consumer technology is a huge loss for them right now. They are losing some searches to Bing every day now. Granted ChatGPT and Bing haven't moved the needle the real threat is there now. Microsoft being first to market may turn out to be a huge advantage as Samsung has been publicly contemplating dropping Google from their devices.

I expect all major tech companies like IBM, Apple(AAPL), Nvidia (NVDA), Google(GOOGL), Microsoft (MSFT), Adobe (ADBE), Nvidia (NVDA), Meta Platforms (META), Amazon(AMZN) among others to develop advanced AI for the consumer. I see all of these companies benefiting.

Many hardware and robotics companies will do well too as the hardware needs to be updated to handle AI The two popular AI ETFs are Robo Global Robotics and Automation Index ticker (ROBO) and Global X Robotics & Artificial Intelligence (BOTZ).These ETFs provide exposure to companies that develop, deploy or benefit from AI. BOTZ is more concentrated and has fewer companies in the holdings. This means it is less diversified than ROBO. That isn't necessarily a bad thing though because it means it has potential to have more price gain or loss.

The newcomer in AI ETFs is Roundhill Generative AI Technology (CHAT) it is an actively-managed fund designed to provide exposure to companies involved in the theme of generative artificial intelligence, and related technologies.

Internet security as an industry will do well in the future as well. As it gets harder to distinquish a bot from a human security will need to be enhanced. Very soon, if not already voice security will become compromised as bots copy our voices perfectly.

Cyber Security ETFs

The safest way to play the future security growth is with ETF's such as First Trust NASDAQ Cybersecurity (CIBR),ETFMG Prime Cyber Security ETF (HACK) or Global X Cybersecurity ETF (BUG). These sport expense ratios well below 1%. BUG has the highest average daily volume. There are other ETF's but the daily volume is much lower. It is not uncommon for specialized ETF's to fail to deliver because of declining low volume.

Entertainment Will Boom

I suspect as many creative and coding jobs become replaced by machine learning the entertainment and movie industry will benefit greatly two-fold. Firstly, they will be bringing amazing new visual and creative masterpieces to movies and various forms of entertainment. GPT is already creating comedy sets by comedians that have passed. Large movie companies will improve their margins and have bigger profits.

Many people including myself believe a recession of varying magnitudes could arrive shortly. This is not necessarilly a bad thing for movies overall. During the Great Depression, with the advent of new and impressive film technology, people escaped their daily lives by paying for entertainment. Even though unemployment was high people would pay to see the new technological advances in film at the time.

The 1930s are considered the golden era of Hollywood cinema. During this time, the movie industry thrived. Technological advances such as color and sound made movies truly extravagant. The breakthrough of synchronized sound occurred at the end of the 1920s and that of full color motion picture film in the 1930s. Two companies I see potentially benefiting greatly are Warner Bros. Discovery, Inc. (WBD), and The Walt Disney Company (DIS). Both are publicly traded on the stock market.

Some Major Tech Companies

Microsoft is currently in the process of acquiring Activision Blizzard (ATVI) making Microsoft the third largest video game company. My hunch is they will be incorporating GPT into video games bringing a new level to interactive gaming. Duckduckgo.com search is even adding A.I. functionality.

Adobe (ADBE) has benefited greatly this year from incorporating AI into their Firefly image creator software. They are one of the leading image generators in terms of realism. They have beaten their earnings estimates every quarter this year and hit record revenue. I see them continuing to see much success.

I highly suspect having lived through the 90's that the long-term leader in this new tech will take time to emerge. I expect they will share market share significantly as I-phone people will use AI on their phones and Google people will use Bing or maybe Google or even another company not yet in our radar. The future will include deep learning A.I. advanced large language models (LLMs) are machine learning models that are very effective at performing language-related tasks such as translation, answering questions, chat and content summarization, as well as content and code making. They distill value from huge data sets and make that “learning” accessible out of the box.

I've also seen LLM's referred to as "life long learning machines" which is essentially what GPT does as it learns from your input and corrections. The feedback all companies can get from customers and clients from generative AI will be great for their marketing and profitablity. We are just in the beginning of seeing the benefits to large and mega companies. Imagine how big the impact will be when most small business owners are using AI in the future.

Final Thoughts

Finally, as far as stocks go I see the most obvious alpha in shorting the companies losing to this technology right now. I am long May Google puts so if the stock falls I see profit. I plan on continuing to long puts as the market is not aware of the changes happening with chatbot search.

It's hard to pick the sole long-term winner with new technology as every other technology breakthrough has shown. Few would have pegged Amazon a lowly book seller as becoming the giant it is as just one example. With this in mind, going the ETF route like ticker BOTZ or CHAT with diversification is the safest bet. Even a Nasdaq 100 fund or Invesco ETF like ticker symbol QQQ is heavily exposed to big tech which are all building AI.

I expect many industries will benefit from this technology becoming acessible to consumers. Right now Microsoft, Google's Bard and Snapchat are battling in the war for large LLM's. More newcomers are popping up rapidly. Now there is Perplexity for Android and conversational HeyPi an AI assistant. These are certainly exciting times.

I also write a free Substack on value stocks. Subscribe here for free value oriented stock ideas. I cover Ben Graham net current asset stocks, net tangible assets and net cash values.

Join Robinhood with my link and we'll both pick our own free stock 🤝

Quality High Yield Dividend ETF's and Stocks

noreply@blogger.com (Unknown) — Thu, 13 Apr 2023 04:02:00 +0000

How To Invest In Dividend Stocks For High Yield

With high inflation the search for yield protecting from inflation becomes more challenging. Everyone knows about bonds but I'd like to dive into some vehicles I believe have a good shot to beat the risk free rate.

Marc Lichtenfeld's book Get Rich with Dividends: A Proven System for Earning Double-Digit Returns really opened my eyes to the possible returns from the right dividend stocks. I had read of famous portfolio manager Peter Lynch's study on an all stock retirement portfolio beating any bond portfolio. I was just naturally inclined to view equities as riskier than bonds though.

I now conceptualize a diversified equity portfolio as equal or superior to bonds. Not that there is never a place for bonds but with smart stock selection I think there is edge in dividend stocks. I am going to touch on some interesting dividend ETF's and a stock with a stable history of dividends. I like to invest for quality and above average yield and steady returns.

The first high yield ETF we will look at also has the highest yield at a 19% dividend yield paid monthly. Cornerstone Strategic Value Fund (CLM) is a $1.6 billion closed end fund started in 1987 with diversified assets. By diversified I mean everything practically. From large-cap tech, healthcare, energy, MLP's, foreign equity, and other ETFs. Ten year total returns have been pretty much on par with the S&P 500 index. It underperformed the S&P by about 1%. CLM's management was smart to be overweight tech going into 2023.

Highland Global Allocation Fund (HGLB) is the next ETF with an 11% dividend yield payed monthly. 10 year returns were 5.3%. It is a discretionary fund designed to have low correlation to the U.S. equity market and they have done well with that objective. It holds an unconventional portfolio of equities and debt. One of it's largest holdings is communications company TerreStar Corp. via their stock and debt. They also have a variety of REIT's, MLP's, energy warrants, utilities, sovereign debt and preferred stock.

High Income Securities Fund (PCF) has a long track record having started in 1987 and sports an 11% dividend yield paid monthly. The share price has had very low volatility since it started and 10 year returns at 5%. It primarily invests in discounted closed end funds. It holds an extrememly diversified portfolio with 57% of assets in funds, 20% in preferred stocks and 16% in business develpment companies. It holds a whopping total of 45 closed end funds from global equity to corporate bonds. It also holds some RETI's and a steel company preferred Steel Partners. It has some minor allocattion in other sectors. Though the long-term returns are nothing overly impressive I like the share price stability over the years and consistent dividend.

Ternium S.A. (TX) is an $8 billion steel company that sells steel in many Latin American countries and the U.S. It has a 7% dividend yield and the stock has returned 13% over the last 10 years. Free cash flow has been stable and has even grown since 2019. Total shares outstanding has been unchanged at 1.9 million over the last 4 years. They have payed dividends since the 1990s and increased the dividend since the late 90s.

I believe these ideas can provide some high grade unconventional diversification to an income portfolio. I also highly recommend the Lichtenfeld for learning how to invest in high yield dividend stocks.

Gold and Miners Poised To Make a Big Run

noreply@blogger.com (Unknown) — Tue, 04 Apr 2023 01:27:00 +0000

Throughout history there have been many years and even decades when gold outperformed equities. The question I am going to ask is "is this time different?" I am particularly interested at looking at the 1970's when the U.S. had high inflation and low economic growth. The FED is tightening yet many economic indicators are slow to point to a full-blown recession. Inflation has been hard to tame for Jerome Powell thus far. Stagflation is a probable outcome in this economic scenario. There is also the increasing potential for geopolitical events as it relates to oil as there is tension between eastern and western nations.

So far, many parts of the economy have been unprecedently resilient to higher rates. Housing has been one of them as many people are buying from fear of missing out and moving to cheaper cities. The second period in history that saw gold outperfrom equities was 2000 to 2012. This was following a long secular expansion and tech bubble collapse. We now are at the end of a long expansion and crypto and Bitcoin bubble burst.

Gold also did well following the 2008 banking panic but I am particularly interested in the years when gold rose as stocks fell. These are the years in the 1970s and 2001 to 2003. So, I see a couple likely scenarios economically. The FED tightening causes a recession that is mild or severe. If it is mild I see a possibility of inflation sticking around like the 70s. If it is severe and there are major bank panics it will likely be resolved quickly as 1907 was with J.P. Morgan helping bail out Trust Company of America and the 2008 panic were. In 2008 much of the deflation came in less than one year as housing collapsed and banking products failed. The Government in 2008 was fairly quick to inject capital and launch QE in 2009. Gold benefited from that.

In 2009 I predicted the pivot point on gold and was bullish right before its historic run. I said, "This chart sends a powerful signal. It is saying that it is more than likely that gold the commodity will continue higher. Let me rephrase that. Very likely." I had noticed a triangle formation on the gold chart.

What Can We Learn From The Past?

Let's switch gears and go back to the 1970's. It was a period of much uncertainty politically and economically. The highlighted regions show two periods where stocks fell and gold rose. Even the entire decade had stocks losing to gold. Gold traded for $35 in 1971 and went to over $850 returning 2,300% in ten years.

Next let us view the 2001 recession and gold and stocks. We see yet again periods when gold rose as equity indices fell in 2001 to 2003. This was during the recession of 2001 when unemployment rose from 4% to 5.5%. Then Fed Chair Alan Greenspan kept interest rates historically low during his tenure.

Here is a longer-term chart of equities and gold.

The gold market is now signaling extreme strength as the daily chart is showing a very powerful consolidation pattern. It is a bullish triangle formation as you can see below. Gold miners are alreading breaking higher from this consolidation like Franco-Nevada (FNV). I am currently long the gold ETF GDX calls. Other liquid ETFs include VanEck Junior Gold Miners ETF GDXJ and SPDR Gold Trust GLD. GLD doesn't hold physcial reserves though. Sprott Physical Gold Trust PHYS is a gold etf that holds actual gold.

Final Thoughts

Everyone is scrambling to find cheap gold mining stocks. As gold is consolidating at levels near last years highs I see a good possiblity of different scenarios. Over many recent years gold has been a "risk on" trade. Meaning it usually will only rise when stocks and other assets do. There were a couple days during the most recent banking troubles, however, where gold and Bitcoin had positive days while equities fell. Currently, gold is surpassing Bitcoin in this potential "flight to safety."

I see it rising as it did in 2001 and 2009 if the FED ends up reacting to a recession with QE like 2009 or with another extreme loosening like in 2001. The odds are stacked that we are going to get a recession with historic FED tightening and yield curve inversion. The other scenario is a recession with elements of inflation sticking like the 1970 and even a weak U.S. Dollar.

Whether one sees it as a stagflationary safehaven or an inflation hedge on a declining stock market. I see gold as a historically wise investment vehicle at this time and for many years to come as we sort out this economic cycle. It may start making new highs very soon or it may take months before the momentum starts but I see gold moving higher over the next year. Increasing allocation to gold just makes sense.

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Full disclosure: I am long GDX call options currently and may take positions in stocks mentioned. I have no physcial gold holidings. I have approx. two dozen silver coins.

charts courtesy bullionvault.co.uk and stockcharts.com

Two Interesting Deep Values

noreply@blogger.com (Unknown) — Thu, 02 Mar 2023 02:47:00 +0000

Here we go with the two deep values! I recently ran a screen looking for a particular kind of deep value stock. I was looking for either sub net tangible asset value or net current asset value. I screened out Chinese, semi’s, and biotech as these in my opinion tend to be less reliable as investments in the micro and small-cap space.

One of the more interesting I found was Crimson Wine Group, Ltd. (CWGL). I’ve rarely seen beverage companies below net tangible or NCAV before. A couple good ones that come to mind from years ago were Caribou Coffee and Coffee Holding when they were briefly below net tangible asset value. Caribou Coffee was bought by private equity after I wrote about it. I’ve never seen a wine company near deep value level.

Crimson Wine is currently trading for 59% of net tangible asset value. It is a wine wholesaler and direct to customer. From the most recent SEC EDGAR filings we have net tangible asset value of $221.4 million and market cap of just $133 million. Net current asset value is not far away at $72 million. They haven’t diluted with any recent offerings the past couple years as shares outstanding has been stable and slightly down. Cash has been stable on the balance sheet also. Cash is slightly up over the past couple years.

The company has had a slightly profitable quarter in the last year. The share price has been up and down. The stock had a good run from fall of 2020 to summer 2021 and has been down since. I always like to see a stock price that has had some kind of history of share price appreciation. So many small and micro-cap companies never have any history of stock appreciation so it is always nice to see the market can indeed react to positive performance. The company had positive free cash flow for the trailing 12 months ending Q3 last year of $8 million.

The second stock is Save Foods, Inc. (SVFD). It develops and sells eco-friendly green treatments for the food industry to enhance food safety and shelf life of fresh produce. This one is a small micro-cap with a market cap of $5.3 million. Net current asset value is $6.63 million. They grew revenue a whopping 88% from 2020 to 2021 although there is not an annual net profit in the last three years. Cash has been stable the last three years, however, shares outstanding has been diluted. From the second to third quarter of 2022 share count went from 2.8 million to 4.5 million.

If you liked this article subscribe here to my free Substack here where I cover deep value ideas.

Disclosure: I currently have no position in either of these stocks.

Starting a Substack For Net Current Asset and Deep Value Stocks

noreply@blogger.com (Unknown) — Wed, 01 Mar 2023 04:00:00 +0000

I am starting a substack for strictly stock analysis of deep value net-net's and net tangible asset stocks. Here is my Substack. Here are a couple of the most recent deep values I came across from my screening. This is the first round of interesting sub NCAV or net tangible asset value stocks. Screen excludes Chinese, semis, biotech. In millions. These figures and for the ones going forward I will be getting the most recent numbers via the SEC.gov Edgar search database.

CWGL $221.4 NTAV, $72 NCAV with $133 market cap

SVFD $6.63 NCAV $5.3 market cap

AOUT $105.4 NCAV 115.5 NTAV $124 market cap

Market Direction

noreply@blogger.com (Unknown) — Sat, 18 Feb 2023 13:30:00 +0000

I'm watching the major indices very closely day to day. Fundamentally the economy is resiliant in the face of FED rate moves not seen in decades. History shows that when the yield curve is inverted as long as it is there is a recession. I believe we had a recession in Q1 and Q2 of last year as GDP went negative two quarters in a row. That is the time tested measure of a recession. The definition of a recession was tinkered with but to me we had a mild recession thus signaling the effect of the rate hikes.

I think many bears are ignoring that possiblity that the recovery was quick and rates were not high enough to bring a double dip recession. I don't know if we will get another this year but it seems it is going to take much higher rates to bring it about. The Covid stimulis and FED action was massive and it appears underated. It is very likely PE multiples are now high as they were in 2009 also because the market is forward looking. It very well could be that growth will continue even with rates at current levels.

One thing is for sure the economy is different now with secular labor and supply chain issues. Work from home is still common with many companies. Maybe all this has something to do with why the economy keeps spurting along. Housing has been resilent too with rates high. The bear thesis doesn't make sense if employment is still low and the housing market ok.

Technically, the market is uptrending currently and many support levels were found on the October low last year. I'm leaning more to major US indices going higher the next month or two but we shall see.

Coffee Holding JVA Stock Update A Net-Net

noreply@blogger.com (Unknown) — Tue, 03 Jan 2023 04:23:00 +0000

I've covered JVA on the blog for many years and shared my honest thoughts on the company. It's been so beaten down in this bear market it is now at .62% of net current asset value. In the past it would bottom out around net tangible asset value. This is one of those rarer cases where a profitable or recently former profitable company becomes a net current asset value stock.

If you are new to deep value the net current asset stocks get their attention because of famous investor Ben Graham who taught Warren Buffett. Net current asset value is a rought liquidation value of the whole company. Of course the true liquidatoin value is usually lower given the inventory and equipment and long-term assets are likely going to fetch less than on the books. They are usually priced so cheap for a reason too.

JVA is now merging with another company. Here is a piece of the SEC filing.

As a condition to the Merger, Pubco shall also acquire all of the issued and outstanding Delta securities from the Sellers in exchange for Pubco Ordinary Shares (the “Exchange” and, collectively with the Merger and the other transactions contemplated by the Merger Agreement, the “Transactions”).

As a result of Transactions, JVA and Delta will each become direct, wholly-owned subsidiaries of Pubco, with JVA stockholders receiving approximately $31.5 million (or 4.79%) worth of Pubco Ordinary Shares (the “Merger Consideration”) and Delta stockholders receiving approximately $625 million (or 95.21%) worth of Pubco Ordinary Shares (the “Exchange Consideration” and collectively with the Merger Consideration, the “Business Combination Consideration”), subject to certain adjustments, at an implied diluted value per share of $5.50.

The Business Combination Consideration may be adjusted if Delta closes certain acquisitions prior to the closing of the Transactions. The Merger Agreement also includes an earn-out to existing stockholders of Delta, consisting of $50 million of additional Pubco Ordinary Shares, which will be released to Delta stockholders if and when Delta achieves $70 million or greater of net income for fiscal year ending 2023. The company they are merging with is private so I don't know anything about them.

Disclosure: I have a position in JVA

Net Current Asset Stocks

noreply@blogger.com (Unknown) — Sat, 24 Dec 2022 01:37:00 +0000

As the market continues to be weak I am going to start looking for cheap stocks below net current asset value and net tangible asset value. I just ran a strict scan looking for super discounted assets. This is the first scan I have done in awhile for these as I never thought it would produce much in the most recent bull market. This scan is cherry picked from criteria of price-to-book value of .5 or less, long-term debt to equity less than .3 and return on equity over 1.

The most interesting ones are Vaccitech plc (VACC) with NCAV of $187 million and a market cap of $89 mil. VACC has postive earnings this year with $.22 last quarter and $.42 the quarter before that. Cash has been pretty stable the past year and currently it has $200 mil in cash.

We also have TD Holdings, Inc. (GLG) with $154 mil in NCAV and a market cap of $59 mil. Not as much cash as VACC as the large majority of the current assets are in account receivables. They had a couple recent slightly positive quarters of $.02 earnings per share and $.05. The stock has tried to bottom and has been sideways for months with support around $1.00 a share.

Stock Market Top Bull Trap Set

noreply@blogger.com (Unknown) — Thu, 15 Dec 2022 00:55:00 +0000

You may remember my blog post from late October where I outlined the scenario of a stock market bottom. I gave the exact levels it would need to break through to confirm and had a good read on the price action down there. The very bottom came on CPI day in October. It was also a bear trap. A bear trap is where the price action begins to go lower enticing sellers and short sellers to sell. What happens though is the momentum quickly shifts back to bullish as price fails to continue to go lower. We saw an epic bear trap on that October day. It was one of the largest reversals from a 52 week low in history.

You may or may not have noticed that on CPI day this week the market shot up early but fell after the CPI news. It was another trap!! And on CPI day again! Maybe it's a big coincidence or the CPI and inflation expectations are the main driver of equities during this time. Inflation is one of the biggest economic factors affecting consumers and businesses these days and not to mention the FED's decisions. We can see the two CPI days in this chart and how it is breaking the uptrend line. It tried to reclaim trend support on the CPI day which was yesterday and that is when we got the big failed signal. Failed signals are powerfull. It will take something special to continue higher from here. I'm not yet fully committed to this being the top but if we see a break of the yellow line around 389.50 on SPY it's game on for more lows.

We've got some obvious rounding top formation going on in small-caps.

I-Robot IRBT Merger Arbitrage

noreply@blogger.com (Unknown) — Sat, 26 Nov 2022 02:15:00 +0000

As it still stands I-Robot (IRBT) is being acquired by Amazon (AMZN) for $61 per share in an all cash deal. The announcement was back in early August of this year. I-Robot stockholders have officially approved the merger with Amazon.

To analyze the opportunity here let's begin with the deal itself. All cash deals always have a higher likelyhood of going through and this one is approved by shareholders. So we have one checkbox marked off. Next is the spread worth it? With IRBT stock currently at $52.57 a share and the deal price being $61 we currently have a whopping 16% return. The next hurdle is the possiblity of regulatory action denying the merger. There is a lot of speculation this deal won't make it past regulatory approval. I remember when there was a lot of speculation on the Fitbit merger being blocked as well and it ended up going through anyway.

I think it is worth averaging into IRBT stock in small increments over coming weeks. The stock is down a lot and could just rise with the overall market even it doesn't get bought. So, I see the risk/reward being nice here. Artificial intelligence is forecast to be one the fastest growing markets over coming years. With the likelyhood of significant innovation IRBT will no doubt be a great company going forward.

Stock Market Rally Continues

noreply@blogger.com (Unknown) — Wed, 23 Nov 2022 23:03:00 +0000

Since my recent posts about the market rally the major indices have held a steady uptrend. What I am seeing now is bonds especially in the ETF HYG actually "leading" equities higher. This happens from time to time in history. TLT and government bonds are leading too. I've been on Twitter a good bit and I am surprised more people are not paying attention to this. You heard it here. The bull momentum in many sectors is strong escpecially pivotal sectors like homebuilding and construction. This is seen in ETF's VNQ XHB.

I now see stocks continuing to move higher after the economic data is currently being shrugged off. A slow grind higher seems to be in the works. Even QQQ is acting bullish. I always stay open-minded and seperate fundamentals from trend when need be as we are seeing now. I learned in 2009 often major bottoms begin and continue on bad economic data and bad corporate news. Fighting an uptrend is futile. The market is always forward looking. Here are some charts to add a little clarity to the bullish sentiment.

Stock Market Bear Rally In the Works?

noreply@blogger.com (Unknown) — Sun, 23 Oct 2022 16:06:00 +0000

I have been looking at the major stock market indices closely lately for signs of a real rally. The Russell 2000 index of small-cap companies ticker IWM has shown rising support levels in an uptrend. There isn't confirmation of a new trend up yet but the setup is there. So many stocks are oversold near-term I see a bounce in the market as a likely scenario. If we don't bounce here there will just be a much bigger short-term rally in weeks to come. Here is the support area on the bottom yellow line for IWM. It's a pretty solid level that keeps getting support. There is also a downtrend breakout seen over the top diagonal yellow line. We are testing this level currently. It's roughly the same with SPY QQQ's.

You would think tech would need to be strong to see a market rally and it is making progress here. I put a bollinger band up on here and you can see when it breaks through either top or bottom the momentum continues awhile. I'd like to see it break over the red line also. That's been a key level. Let's see what it does next week.

The small-cap put to call ratio is showing historic signs of a bottom forming.

I noticed the energy sector is making multi-month highs. XLE has been very strong. My understanding is that crude oil is in a sweet spot for their margins. Still I wouldn't expect such a big move and if the market is going to rally a bit something has to lead right?

Possible Rally Setting up on Stock Market

noreply@blogger.com (Unknown) — Tue, 18 Oct 2022 02:58:00 +0000

I posted on my trading blog DynamiteStocks.com about a potential major low taking place right now on the major indices. Here is a chart of SPY the S&P 500 ETF. The breakdown failure was of epic proportions and a top 10 percentage reversal from 52 week lows in history. The red day yesterday is now wiped out too as the market ripped all after hours session. I am not looking to get into any multi-day short positions at this time as I think this rally could get legs. In 2008 at market lows there was a fairly similar bear trap. It is too early to tell if this is a long term bottom but it has the makings of what could be. I remain neutral day to day to see how it plays out but this has my attention. Failed signals can be powerful chart signals.