AI Tech Stocks Portfolio Updated Buying Levels and Zones as Financial Crisis 2.0 Continues Brewing
Companies / AI Dec 21, 2021 - 03:37 PM GMTBy: Nadeem_Walayat
Dear Reader
China's property market is collapsing but the only data we have at present is anecdotal from the property developer canaries in the coal mine which have been under extreme distress for several months, with now dozens defaulting on their debts triggering fire sales of housing stock to raise revenues as they desperately fight to stay alive in the face of impending debt and interest payments, playing their part in the brewing Financial Crisis 2.0.
Financial Crisis 2.0 Checklist
- China housing market in distress - CHECK
- China's economy slowing - CHECK
- US Economy slowing - CHECK
- Brewing STAGFLATION - Slowing economy coupled with rising prices - CHECK
- Black Swan Event - Crisis at the ports - CHECK
- Economic Models busted - Workers refusing to return to work not factored into Economic models - CHECK
- REVERSE REPO MARKET - Banks desperate to swap deposit liabilities for T-bills collateral so as to lower capital requirements which has drained the capital markets of over $1 trillion - CHECK
- STOCK MARKET BUBBLE - Valuations have lost touch with reality - CHECK
- FED TAPERING into a Weakening Economy - Huge Risk of a valuation reset - CHECK
- IMPEMDING DOOM! - The relentless march of the Climate Change Mega-trend where all that the worlds leaders did at COP26 was Blah Blah Blah - CHECK!
So yes, Financial Crisis 2.0 continues to brew in the background and will likely come knocking on many investor portfolio door's during 2022 so don't be so eager to FOMO into stocks today to later wish one had missed out on the preceding 6-8 months of price action by Mid 2022. Where whatever one buys and holds today needs to factor in a potential for lower lows than what we saw in October and for some a lot lower lows than that! If one is happy with that then continue to FOMO all the way to new all time highs, for the time being.
Contents:
Financial Crisis 2.0 Checklist
The China Syndrome
Stock Market Begins it's Year End Seasonal Santa Rally
Stock Market Trend Forecast Current State
INVESTING LESSON - BUYING VALUE
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock
INVESTING LESSON - Give your Portfolio Some Breathing Space
INVESTING LESSON - Give your Portfolio Some Breathing Space
How Stagflation Effects Stocks
INTEL Bargain - 15.5% Discount Sale
Why Intel stock price dropped 15%?
FACEBOOK - 10% DIscount
IBM - 20% Discount
Amazon - 5% Discount
APPLE 4% Discount
AMD $136 on Route to $200
TSMC - $117
Microsoft $336
Google $2980, PE 28.7, EC 30.
Nvidia Leaves planet Earth - $299, PE of 106
Heads Up on NEW Potential Tech Stocks
AI Stocks Portfolio Updated Buying Levels
AI Stocks Buying Plan B
FREE TRADE the Perfect Stocks and Shares ISA?
FREE SHARE FROM FREETRADE
High Risk Stocks Brief
Crypto's 20% Discount Event
Bitcoin Trend
Palladium Brief
This article is part 1 of 2 of my extensive analysis on the state of the AI tech stocks that highlighted several stocks trading at bargain basement levels - AI Tech Stocks Portfolio Updated Buying Levels and Zones as Financial Crisis 2.0 Continues Brewing
The whole of which was first been made available to Patrons who support my work. So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $4 per month. https://www.patreon.com/Nadeem_Walayat.
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CI18 Trigger Feb 2020
Existing Stock Market Trend Forecast
Stock Market VIX
Stock Market December Trend
OMICRON THE STRAW THAT BROKE THE CAMELS BACK!
MUTED SANTA RALLY
The Alibaba Stock Market
ARKK Garbage
Stocks Bear Market of 2022 May Have Started EARLY!
Facebook $301 Buying level achieved.
Recession 2022
Quantum AI Tech Stocks Portfolio
Crypto FLASH CRASH Early Christmas Present
And access to my latest analysis that updates the current status of my High Risk Bio and Tech Stocks portfolio.
High Risk Bio and Tech Stocks Portfolio Q4 2021 Update
Contents:
Exponential AI Mega-trend
INVESTING PRIORITY
Why Most Investors LOST Money by Investing in ARK FUNDS
ETF BUBBLE Primed to EXPLODE!
INVEST AND FORGET
BREWING FINANCIAL CRISIS 2.0 - RECESSION 2022
FED TAPER CON TRICK
CP LIE - INFLATION vs DEFLATION
UK Inflation Fraud - Real Inflation is 15%+
The 2% Inflation SCAM, Millions of Workers take the Red Pill
Why Inflation is Soaring
Flip Side High Inflation Winners
Warren Buffetts $130 billion Master Plan
STOCK MARKET CRASH INDICATOR
The Quantum Entangled Stock Market
Unloved Biotech Sector
High Risk Stocks Portfolio
COINBASE $247, Risk 1, P/E 19, +0%
TAKEDA $13.7 - Risk 1, PE 10, -19%
Western Digital $56.7, Risk 2, PE 13, -2%
ABBV $132, Risk 2, PE Ratio 11, 4% Dividend, +24%
CORSAIR $21.7 - Risk 3, PE 11, -26%
Neurocrine Bioscience (NBIX) $84, PE 18, Risk 3
ALI BLAH BLAH BABA (9988) $120, PE 17.2, Risk 3
TENCENT TCEHY (0700) $57, PE 19, Risk 4, -9%
RBLX $95. Risk 6, +7%
CRISPR $74, PE 15.3, RIsk 6, -39%
AVIR P/E 30.5 , Risk 9, -71%
APM $1.88, -37%
ACCUMULATING
AI Stocks Portfolio
Limit Orders
Best Stock Investing Platforms
CRYPTO BRIEF
OMICRON a Fuss About NOTHING
Also access to my extensive analysis on how to capitalise on the metaverse. Best Stocks To Profit From the $1+ Trillion Emerging Metaverse Mega-trend
Contents:
VR and Gaming Becomes the Metaverse
A Video Message from Your Metaverse Analyst
PRIMARY META-VERSE STOCKS
QUANTUM AI METAVERSE STOCKS
METAVERSE STOCKS UNIVERSE
Google Glass a Big Fat FAIL
META (Facebook) Dominating VR
APPLE AR Headset Coming 2022
ROBLOX - High Risk
TENCENT- Chinese High Risk GAMING
XXXXXX - CAD - $254 RISK - 3 OUT OF 10
XXXXXX - RISK 3 OUT OF 10.
XXXXXX NEW LIFE FOR AGEING GAMING GIANT? RISK 2 OUT OF 10
XXXXXX - DIGITIZING THE REAL WORLD - RISK 8 OUT OF 10
INTEL Black Friday Sale!
IBM The REAL Quantum Metaverse STOCK!
NVIDIA THE KING OF THE METAVERSE!
XXXXX
AI Stocks Portfolio Current State
AI Stocks - What's Cheap
AI Stocks - What's far value
AI Stocks - What's expensive?
Stock Market Trend Forecast Current State
Current State of Cathy Wood ARKK Garbage
RIVIAN IPO Illustrates We are in the Mother of all Stock Bubbles
DECENTRALAND
SANDBOX
How to Get Rich in the MetaVerse
Bitcoin Trend Analysis
Crypto Current Portfolio
Covid19 Winter Storm Fuel for Financial Crisis 2.0
OMICRON - The 'Oh Dear' Worst Ever Covid Strain?
Consequences for the Stock Markets?
Financial Crisis 2.0 Current State - TAPERING
Financial Crisis 2.0 Stock Market Bubble Investing Strategy
Why You Should Not Fear a 50% Draw down in Your Stocks Portfolio
What's driving asset price inflation?
Inflation Forecasting a Recession In 2022
UK Inflation Hits 30 year High of 6%
UK Energy Customers Falling into Energy Firms Fixed Rate Tariffs Trap
Fin tech Stock - NEW STOCK
Also access to my recent analysis that maps out what I expect to happen during the next big crypto bull market is only just beginning for most crypto's
Bitcoin NEW All time High is TRIGGER for Future Alt Coins Price Explosion
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Note: The information provided in this article is solely to enable you to make your own investment decisions and does not constitute a personal investment recommendation or personalised advice.
The China Syndrome
The Chinese housing market collapse has begun the pain of which will spread through all capital markets amounting to a new Global pandemic, this time the chinese virus is economic and not biological. FINANCIAL CRISIS 2.0 is under way. I got a whiff of electricity in the air many months ago! All the way back to Mid June! Long before Evergrande started disappearing into a debt black hole. The apparent collapse in Chinese house prices has yet to feed through to the official indices, so the magnitude of the crisis unknown at this point in time.
However, momentum in the price of newly built chinese homes is fast slowing from a May 2021 peak of 4.9% and is likely to go negative before years end, with the bubble cities already likely leading the downtrend by probably already turning negative on the year, but actual hard data remains pending.
I know it's very early to say this but we could be looking at the start of a lost economic decade for China.
More on the state of the housing markets in my forthcoming mega-piece that continues to factor in the consequences of what is taking place in China, but the bottom line is the Chinese housing market is going to CRASH! We'll the crash has already begun. Those who ignored the canary in the coal mine warnings of the likes of Evergrande are now starting to pay a heavy price, and the chinese crash WILL impact housing markets across the world as distressed chinese speculators repatriate funds thus pricking many property market bubbles that have been on stimi cheques induced bull runs.
Stock Market Begins it's Year End Seasonal Santa Rally
If one looks at the general stock market indices such as the Dow, S&P and Nasdaq then the correction is done and dusted, However look under the hood and one sees huge volatility in the tech sector, huge price drops of stocks crashing by over 10% in a single day and for some by as much as 1/3rd (Peloton). So where many tech stocks are concerned a significant correction HAS TRANSPIRED despite the indices largely giving a head and shoulders shrug by continuing to revert to new all time highs.
The over valued western markets are going to be hit hard by increasing waves of economic contraction from a Chinese economy sliding into a recession of sorts, triggering the CCP to go on a money printing spree so as to keep its slave population docile, the consequences of which will be INFLATIONARY, as the CCP attempts to stimulate the slowing economy by throwing waves of money at it resulting in a STAGFLATIONARY outcome..
Stock Market Trend Forecast Current State
A reminder of my expectations for the stock market from Mid September into Mid 2022.
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast Sept 2021 to May 2022
(Charts courtesy of stockcharts.com)
The Dow correction ended a couple of weeks earlier than expected, however was both inline with my expectations in terms of price as well as delivering several tech stocks buying opportunities into late October such as that for Intel, IBM and pushing Facebook to a low of $308, tantalisingly close to it's longstanding buying level of $301. I expect the Dow to continue trading higher into the end of December to target between $37k to $40k with price action to date suggesting a trend to to nearer to $40k than 37k as the more more probable outcome.
INVESTING LESSON - BUYING VALUE
Remember folks when investing one is not trying to buy the bottoms, one is trying to buy VALUE! There are many metrics for measuring value but for most investors the easiest way to measure value is the P/E Ratio, it is simple and easy to determine and virtually every investment site features the P/E ratios for stocks. Though from my experience many of the sites posted P/E ratios tend to out of date or inaccurate i.e. I calc virtually all of the PE ratios myself by dividing the share price by the earnings per share for the last 4 quarters and that is how one gets the P/E ratio i.e. how many YEARS it would take for the corporation to EARN it's share price.
Now there are many more metrics than that which can be just as important such as whether the corporation printing it's own shares Powell style, Brrrr, so shareholder dilution is another metric I watch among 15 that go towards generating the EC ratio, a quick way to see how expensive or cheap a stock is.
Sitting here on my investing perch I can tell many don't get this fundamental fact about investing that it is valuation (whatever the metric one uses) which is the most important element to investing and NOT the PRICE for improving valuation means one can remain invested in a stock that doubles, quadruples or X10's for a decade, as the valuation keeps pace with the price. Conversely a stock price that has run away from it's valuation is a ticking time bomb that could lose 98% of it's value has happened to MOST tech stocks during the dot com bust.
The only way to survive investing in the long-run is to BUY under valuation and SELL over valuation. However, I am getting the impression that most investors seek to do the opposite because a stock becoming better value invariable involves a drop in it's price (Intel). Whilst a stock becoming over valued invariably results in the stock price rising to ridiculous heights. So an inexperienced investors looking at the two entities see's the stock that is falling as bad whilst the stock that is soaring as good to FOMO into/
Instead in this example buying Intel at $50 is infinitely lower risk than buying say Nvidia at $300 on virtually every metric!
Intel's PE according to my calculations is 8.6 and it's EC ratio is 10. Nvidia is 106.4 and 373. What am I going to buy Intel or Nvidia?
Yes, I know Nvidia is experiencing exceptional earnings growth with its last 4 quarters of earnings totaling $2.81, so take the current stock price of $300 and divide that by $2.81 and one gets a P/E of 106. In fact the EPS has fallen from 3.5 to 2.8 because Nvidia is a rampant share printer brrrr. Lets say Nvidia increases its profits by 30% per annum for the next 2 years that would Put Nvidia's PE at about 52 in 2 years time IF they do not print more shares and IF the stock price does not go up. Now during that time period what if Nvidia misses it's earnings expectations? Would the stock price crash by 10% like Intel did? No, 20%? 30%? 40%? More like 50%!
And that is the risk one is running with the likes of Nvidia trading on a PE of 106. Where if investors think that the growth is not going to materialise then the stock price will not just crash but collapse!
And then we have Intel, which was trading on a PE of about 11 that crashed by 10% to a PE of 9. What's gong to happen when it puts in a very good quarter? It's going to DOUBLE in price! Trade on an earnings multiple north of 20.
So what does one accumulate?
A stock that is skating on thin ice, where one bit of bad news and it's game over for all those invested on a P/E of 100 for many years.
Or a stock that is trading as though it has ZERO chance of delivering good earnings growth and yields 3% and is quietly buying back its own shares because it knows they are CHEAP! Usually companies buy their own shares because they know how cheap they are! NVIDIA BRRRR PRINTS shares because it knows the FOMO fools will buy as much as it can print!
The best time to Buy Nvidia in recent years was during most of 2019 as the following chart with the P/E over laid illustrates Which is why I was so bullish on the stock at that time just as I am bullish on Intel today.
Those invested in Nvidia are going to feel the burn when Nvidia misses an earnings report, they will wake up one morning and see that their Nvidia stock holding just got nuked!
Nvidia's next earnings report is on 17th November where it will once more be a case of Nvidia investors playing russian roulette, maybe they will get lucky and dodge another bullet?
Both are great corporations that are at the core of the unfolding AI mega-trend , just one is under valued and the other is very over valued.
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock
Youtube and the wider internet is full of Peloton fan boys, yes the product may be good but that does not mean the stock is in any fit shape to park ones hard earned wealth into, not unless one is gambling. Which is why whenever I was asked about Peloton and other similar over hyped growth stock my response tended to be that it is far too high risk for me. We'll now all those who don't do the maths got to feel the pain of what it is like to be invested in such stocks that dominate the likes of Cathy Woods ARK funds.
Form what I understand Peloton's results weren't that bad i.e. their forecast revenue was $809bn and they achieved $805 billion. whilst their reported loss per share came in at -$1.25 vs expectations of -$1.10. Should such numbers justify a 1/3rd collapse in the stock price? Apparently yes for the fundamental fact is that the stock was over priced and thus there was NO Margin for error! Not only that but it was a pandemic stock! People staying at home and working out on their bikes and treadmills, or at least planning to do so by buying and signing up to Peloton's monthly programmes. WELL the pandemic is largely OVER! So what did investors expect was going to happen? A quick look at what the peloton fan boys were saying shows that they had convinced themselves that the pandemic had changed the world and thus from now one everyone would be happy to workout on their own at home rather than at their local gyms and hence new highs were just around the corner! A lesson to all the Nvidia fan boys out there of what could be in store for them on November 17th.
And NO I would not buy Peloton AFTER it's stock price crash. That corporation is nowhere near making a profit and thus it's not worth it's current $17 billion market cap, let alone the $50 billion it was trading at earlier in the year. And there are plenty more pandemic plays out there in for an similar fate, Zoom comes to mind for one.
INVESTING LESSON - Give your Portfolio Some Breathing Space
Investing is accumulating positions in good corporations for the long-run and not trying to swing trade as some appear to be doing. My primary tools for monitoring my portfolio are Excel spread sheets that I only tend to update prior to posting an article that contains the list of AI tech stocks as I am used to not constantly looking at the state of my portfolio i.e. in years past I would update the prices usually once every couple of months or so given that it is a manual exercise.
Folks, you need to give both your portfolio and yourselves some breathing space, peace of mind as staring at the your stock tracker app's blinking red and green is going to drive you nuts! Don't use trackers, don't use app's. Just use a spread sheet and update your holdings manually once in a while then get on with the rest of your life, don't let your portfolio rule your life!
About 1/3rd of my holdings (excluding cash on account) are in legacy stocks which I update and review perhaps 2 or 3 times a year at which time I amend price alerts or place limit orders and add comments for future reference.
About 1/3rd of my portfolio is in High Risk stocks which if it were left upto me I would look at perhaps twice per year. but since it is a public portfolio I will update it on a quarterly basis.
That leaves about 1/3rd in AI stocks, that I update the status of about 4 or 5 times a month given that they feature in my posts.
And then I have my buy and sell lists, a list of stocks that I want to buy or sell with quantity and target price to trade at that tend to be accompanied by limit orders, or other instructions or price alerts if the current price is some distance way.
What I don't do is sit staring at an app every few minutes on the state of my portfolio which acts to distance oneself from ones holdings to some degree and so ones portfolio is not on ones mind.
The price of having a public portfolio is that when a price moves one gets flashed a message as was the case with AVIR's price plunge, in the past I would not have been aware at all what the stock is doing and it would have gone through several spikes up and down along the the way towards either triggering a price alert or some other corporate message popping up in my in box. Take it from me it is not good for you or your portfolio to monitor stocks on a daily basis that you don't intend on buying or selling any time soon.
Yes do keep a close eye on those stocks one wants to accumulate, but it is a big mistake to obsesses over every price gyration, in fact my selling of the tech stocks to the extent I did could in some part be down to monitoring the AI stocks too closely, where in years past I would have updated the list perhaps once every couple of months or so.. There is a big difference in perception of the stocks one holds when one is not focused on them all of the time. The best strategy really is to invest and forget. Today, in my mind without looking at any spreadsheet I know what every AI stock is trading at (not good). High risk stocks, 4 pop up in my mind CRSR, AVIR, Coinbase, and WDC, the rest are a blur, even the chinese tech giants are fast fading away into the background. Legacy portfolio I have to think for a good minute and up pops HSBC, banks are cheap, maybe it's time I should start looking into buying banks? huge cash flows ,huge earnings growth, and very low PE ratios, typically less than 12. And pay high dividends. Plus they get bailed out when they screw things up.
How Stagflation Effects Stocks
My long standing mantra has been that one of the primary reasons to remain invested in AI tech stocks is because they are leveredged to inflation, which on an average basis is true. However when gauging how each individual stock will react to inflation one needs to take key points into consideration such as the stocks valuation where an over valued stock trading on many multiples of the markets average of 20 is going to be finally balanced on a knife edge of future gains vs a bear market where it only takes a small shift in investor expectations to send that stock sharply lower.
Whilst the basic reason why AI stocks are leveraged to inflation is because inflation will inflate their revenues and costs and given that AI stocks are highly profitable then the gap between revenues and costs should expand due to inflation hence are leveraged to inflation.
For example let's take AI Numero Uno Google (Alphabet) :
Total Revenue for 2020 was $182.6bn, vs Total Operating Expenses $141.3bn, resulting in an operating income of $41.3bn. If nothing else changes then the impact of 10% real inflation on 2021 results will be to increase Revenues to $201bn, and Costs to $155.4bn, resulting in a operating income of $45.4bn, up 10% on 2020! And there in lies the leverage impact of inflation on good AI stocks and explains why stocks such as Google are trading at such high multiples! Because even if they did nothing different in terms of generating new revenues profits will still increase by 10% per annum regardless and the higher real inflation goes then so will their profits!
Conversely when we are dealing with a corporation that is not making a profit, i.e. the mis labeled 'growth stocks' the likes of which populate Cathy Woods ARK funds which in large part explains why her funds have performed so badly during 2021, then the effect of 10% real inflation on say one of her primary holdings Teladoc Health is this -
Total Revenue for 2020 was $1.1bn, vs Total Operating Expenses were $1.6bn, resulting in operating income of -$506mln. If nothing else changes then the impact of 10% real inflation on 2021 results will be to increase Revenues to $1.21bn, and Costs to $1.76bn, resulting in a operating income of -$550lm 10% worse than 2020 risking share holder dilution or worse.
And there in lies the problem with so called growth stocks and why I am reluctant to get sucked into the hype that surrounds loss making corporations, which even extends to where my high risk portfolio is concerned, I tend to veer towards corporations that are actually making a profit else expect to be in for a very bumpy ride aka Atea Pharma (ATEA) which is VERY HIGH RISK! We are in effect betting on one of their drugs under development coming good, as is for many of my biotech high risk stock plays. AVIR's revenue for 2020 were $48mln, vs operating expenses of $60mln, resulting in a loss of $11.4 mln, where the losses are financed via share dilution (printing more shares) and that is the risk of investing in such stocks, strike gold or oil before the losses dilute our holdings to zero and hence why it is very high risk.
Whereas AI stocks, i.e.all of the profit generating stocks on my list are LEVERAGED to inflation, the management can screw things up and the stocks will still report an increase in corporate earnings as a consequences of real inflation.
The fundamental rule for long-term investing is that the corporation needs to have a track record of delivering earnings growth, else it is high risk and thus one should tread carefully, and understand that it is high risk. Which is why I am reluctant to buy back into Amazon because the spread between Amazon revenues and costs is mighty thin just 6% vs Google's 29%. Conversely it's why I am far more eager to buy back into Apple then any of the stocks I sold out of that stands at a whopping 40% spread!
Meanwhile we all got to pile into Intel at sub $50 a share as the clowns on Wall Street made a huge mistake in giving us all a 15.5% discount on where the stock was trading pre earnings report, guess where Intel stands on this important metric? 43%! BETTER than that of Apples 40% and Google's 29%. Why I tripled my holding on a PE of just 9.5 against the others on typically near 30! Buying Intel today is a no brainier. It should be my largest holding! Obviously one needs to balance the risks of something unexpected happening so I am wary of Intel going much above 5% of my stocks portfolio, but still it is the best stock to buy right now and why I tripled my holding on it's break below $50.
So Intel, Apple, Facebook, TSMC and so on are great stocks that are LEVERAGED to inflation, Amazon not so good, whilst Nvidia has departed this world for another planet.
However note where high inflation is concerned with say a CPI rate of over say 7% (real would be double that) then it's a case of limiting the damage done, rather than having real terms double digit gains as has been the case for several years in which case valuations really do matter, as price earnings multiples will fall to levels we have not been used to for decades. So all those hodling Amazon, Nvidia and such like should bare that in mind.
Whilst the best stocks to be invested in during inflationary periods are the low P/E cash cows such as those that populate the energy sector. I hold just one oil stock BP, and have no plans to go down this route. And of course PHARMA stocks should do well in relative terms.
Halloween Delivers Tech Stocks Buying Opps
INTEL Bargain - 15.5% Discount Sale
The story for Integrated Electronics should have been for it's stock price to soar on CAPEX and Alder Lake processor success (of sorts). Instead the literal FOOLS took what was GOOD news to explain the 15% drop in Intel's stock price.
Fool.com - "The sudden price drop was triggered by the company's significant infrastructure investments"
Yeah, very aptly named fool. com. There are times what the market does something really stooopid by moving in the WRONG direction, this can either be to the upside (Nvidia) or the downside, and where Intel is concerned the markets just got this stock very badly wrong which gave us all 15.5% discount to where the stock was trading pre earnings as it fell from $56 to a low of $47.8, delivering a whopping 15.5% discount, breaching my long standing buying level of $48 and hugging the level for well over a week. And as I indicated earlier I started buying Intel as soon as it dipped below $50, at $49.9 and then again $48.3, tripling my Intel position to 4.5%.and since have continued to buy supplemental bits with likes of eTORRO at sub $50. Intel trades on an EC of 15 (super cheap), PE of 8.9, pays a 2.5% dividend AND buys back stock over time (12% over the past 3 years).
The stock price's buying zone is form $50.5 down to $46 with my long standing buying level of $48 towards the middle of this bargain basement range. Whilst technically Intel could trade all the way down to $44, the last low was $47.7, though with the current price at $51 it's probably gong to have to take a market panic event to materialise. All I know is I will buy more Intel should it drop below $49.50 and in fact I am contemplating another large buy (1.5%) if it trades to below $49.
So what is the smart money is doing?
First let me define who the smart money is because it's not me, you are any of the fund manager talking heads out there, the real smart money are the Intel senior management and what were they doing following the 10% discounting event tells you a lot about whether one is wise or not to be buying Intel.
These insiders are buying shares in Intel with their own cash, not $0 cost options garbage buys that we tend to usually see with the tech giants, which they then go on usually sell on the same day.
So folks we are in good company with our Intel buys. The 3 month buy / sell ratio is 140% (above 100% more buying them selling). As for when Intel management has tended sell that would be at $59 to $66, a net 16000 shares were bought over the past 3 months.
What am I doing?
I already bought at $49.9 and $48.3 and will likely buy more should Intel dip back below $50 and the more it falls the more I will buy upto a limit of about 6% of my stocks portfolio from current 4.5% to sit next to Google's 6.2% and I will likely leave a limit order at $44 for the time being.
Why Intel stock price dropped 15%?
After all the earnings report was good with Intel coming in at an EPS of $2.5 against market expectations of the same $2.5. So what spooked the markets is that which I have WANTED Intel to do for a while which is the INVEST their cash flow INTO building new chip fab plants so that they can compete against Samsung and TSMC. And that is what Intel CEO Gelsinger declared he would do over the next 2 years, he was going to plow a whopping $28 billion into building new chip fab plants, compare that to AMD CAPEX which is likely to to be less than $2 billion over the same time period!
What this implied was possible lower earnings, because Intel was investing it's cash flow. When Taiwan Semi conductors announced something similar their stock price rose, when Intel announced it the stock price crashes by 10%! That is the way of the markets!
Intel is DIRT cheap, for some reason the investing crowd is NOT discounting any rewards from the $28 billion investment, perhaps they think Intel will screw it all up again and result in a total loss much as many of their multi billion dollar projects to date such as high speed Optane memory have gone belliup in recent years. When others such as Google and Amazon do it they are rewarded with high multiples, when Intel does it the stock price crashes. The only thing that explains why it is so is because Amazon and Google don't pay a dividend so investors are focused on GROWTH. Whilst Intel does pay a high dividend and so investors are more focused on dividend cover. If earnings fall due to reinvesting profits then that means dividend cover will be lower and that is probably why Intel stock price fell because to most investors it is primarily a dividend stock, so the risk of reduction in the dividend has increased and so many fund managers re balanced their portfolios away from Intel.
But I don't think investors understand the name of the game that Intel is now playing, for Intel has read the writing on the wall and seen what TSMC have done so have effectively decided to BECOME TSMC! I.e. to produce chips not just for themselves but for anyone just as TSMC does thus prospects are for huge future revenues that implies Intel's valuation could match that of TSMC's, TRIPLE that of today's market valuation and even more so given that it is a US corporation critical to US strategic interests.
And then we have ALDERLAKE! Intel has FINALLY produced something new and not stuck at 14nm++++++++. The 12900k actually can compete against AMD's 5900x! And Intel implies it can compete against the 5950x in select benchmarks.
So what is Alderlake? It's basically a copy of Apples M1 design of large performance cores coupled with smaller efficiency cores so as to keep that important wattage down so they don't over heat and throttle down so that they can be better overclocked depending on ones cooling solution and thus is scoring well in the myriad of benchmark tests when set against the AMD's 5900x and 5950x processors.
Intel's flagship 12900k has 8 performance cores and 8 efficiency resulting in a 24 thread processor that the market will pit against AMD's 12 core 5900x processor, though Intel keeps insisting that it's a competitor for the AMD's 16 core 5950x. Whilst it might beat the 5950s in gaming, a pseudo 12 core processor is not going to beat a 16 core processor in productivity tasks. GAMING and High single thread operations is where Alderlake excels, but there is a price to pay for that which is in power consumption and heat. In terms of which Alder lake consumes DOUBLE the power of AMD's ZEN 3 processors so demands one spends a hefty amount on EXPENSIVE cooling solutions else the chip will throttle down.
But enough on the specs, the bottom line is that Alder Lake is a good generation of processors though if I had the choice I would still go with AMD's 5950x, especially as it's going to cost a lot of extra money for all of the extra hardware that goes along with Alder lake i.e. DDR5 memory..
The bottom line is that as investors we have got what we have all been waiting for that perfect buying opportunity. Intel trading below $50 for over a week to a BARGAIN, the lower it goes the greater the bargain. So I am prepared to load up the truck with Intel stock, even going so far as to holding a temporary trading position of an extra 1%. So please don't in a few weeks time ask me when Intel will trade back below $50 again, because this stock is on the fast track to tripling and more. Intel at $50 and below is CHEAP! I really should buy more whilst it remains so, my buying level remains at $48.
FACEBOOK Stock - 10% DIscount
Facebook or rather META traded down from $340 to a low $308. Facebook is the second most important stock on my list to accumulate into for the long-run AI mega-trend after Google, so it is a stock that I would personally not want to be totally disinvested from and remain eager to expand my holdings from about 3% upto a similar size to that of Google's current 6%.
METAVERSE is nothing new! It is the inevitable track Facebook has been on since it bought Oculus in 2014 and started to release the Quest VR headsets and thus is one of the primary reasons why I own Facebook stock as it currently dominates the VR market at about 1/3rd of the market share with it's VR headsets up from about 15% 3 years ago, headsets which I personally use so I well understand the technology and why the metaverse is slowly becoming manifest with each generation of headset and associated gear.
The buying level for Facebook remains at $301. However to better understand the state of play I have indicated a buying zone that tends to change over time where the deeper Facebook trades into this zone then the better the buying opportunity being presented which currently ranges from $324 at the top down to $280 at the bottom, with my long standing buying level at the mid way point at $301.Whilst the company also announced they will be buying back about 5% of their outstanding shares.
Facebook's marginal lower low at $308 vs $310 prompted me to adjust the price I would buy Facebook at to between $308 and $316 as the stock was showing signs of relative strength that has continued into subsequent sessions. Noting that I am investor rather than a stock trader, i.e. I when I buy I am not looking to exit a few weeks later as some appear to be doing on the likes of etorro, that is not investing, that is spinning ones wheels and getting nowhere in the long-run.
Though things are never black and white and I remain fixated on getting as close to $301 as I possibly can because as the above chart illustrates Facebook is In a downtrend on numerous metrics such as having traded below it's 200 day moving average etc. So I am aiming to buy Facebook at below $316 with my target main position buy range of about $302 to $313 and retain a limit order at $292 in case of a spike lower. However, so far I have not had that big buying event and so have been forced to go for plan B which I cover later in this article.
As for Insider trading - Facebook, come rain or shine has that Zuckerberg dude selling facebook stock virtually EVERY trading day! Buy / Sell ratio is 79%, wait it's worse than that because all the buys were at $0 (options), a humongous 4.7 million shares sold over the past 3 months.
In fact I don't recall seeing anyone who works for Facebook actually buy the stock all year long! Again very telling! Which means I don't want to pay a high multiple for a stock that is being so heavily sold by insiders.
IBM - 20% Discount
IBM traded down form $142 to $118.3, complicated due to the split off of 20% of their business which was distributed on 3rd of November. Nevertheless those who bought IBM on the drop grabbed a bargain for they get 1 Kyndryl share for every 5 IBM shares held by close of 26th October. Kyndryl currently trades at $25, which equates to $5 per IBM share. So current price of IBM stock price is $123.6 plus $5 to arrive at $128.6 per IBM share. I had originally planned to sell Kyndryl, but given that the stock is trading down 50% form $50 I don't see much point of doing so right now so will hold for the time being.
IBM has the potential to multiply several times given what I expect from the unfolding Quantum AI mega-trend, the stock is a cash cow that is currently yielding 5%! And IBM buys back stock, maybe nowhere to the extent of Intel but it is better to hold a stock that buys stock back than one that keeps printing new stock (Amazon) but for now definitely remains as a sleeping giant, not a stock to over allocate into but as long as it continues to pay a good dividend is a good long-term hold.
Whilst insiders have been buying more than selling during 2021
Amazon - 5% Discount
Traded down from $3450 to a low of $3270 on a bad earnings report, it should have fallen a lot more, but investors seem content to buy a company trading on a PE of 68. There is a market disconnect here. so I am lowering my buying level for Amazon from $3020 to $2600, and even that is probably still too high for what it is..
Amazon insiders buy sell ratio is 4.3%, Bezos and his best buddies are constantly offloading stock. Whilst those few buys were at $0 (Options executions), a net 71,000 shares sold during past 3 months. Amazon stock price trading at $3520 is a gift form heaven for all those still holding to offload while you can! Don't ask me in a few months time, when will Amazon trade back above $3500.
APPLE 4% Discount
Apple's earnings report was okay, it's basically a giant corp that is experiencing slowing growth which will reflected in a gradual lowering of it's price earnings multiple over time from the present P/E of 26.9. The 4% discount from $152 to $146 was not enough to encourage me to even consider buying any Apple stock despite plans to do so.
Apple Insiders - No direct buys only options executions so you have to be wary of such statistics that paint a false picture of insider buying, most recent sells were at $146 and $148, 6.3 millions shares sold during the past 3 months. I am raising my buying level to $128, so I am in no rush to buy a large position but I am aiming to accumulate a little at $140 so that my position in Apple is not at zero.
AMD $136 on Route to $200
Positive response to its earnings report but it is over priced on a PE of 56.7, and an EC of 16. The big problem with AMD is they are a serial share printer i.e. existing investors are being diluted by 5-10% per annum. Hence why whilst I want to buy more AMD, I don't want to pay anywhere near 57X earnings for a corp that prints shares! However, in light of their earnings report I am raising the buying level from $92 to $101.8, which is where I will aim to buy more AMD stock for the long-run.
Whilst I caution all those considering selling AMD, as I tend to get asked in the comments from time to time as this stock could easily trade to over $200 as I stated my expectations of several months ago.
AMD Insiders - While many investors were lapping AMD up north of $100, the insiders were paying $1 to $2 bucks per share (options exercises again), with 1 million shares sold during the past 3 months. So AMD is a great company just that it is designed to profit insiders to a far greater extent than investors, still $200 is very probable. Just don't go over board because it is not cheap so the risks are high i.e. on a valuation reset to say a PE of 20, where Intel does not get touched whilst AMD would lose near 60% of it's value!
Best Stock Investing Platforms
In response to patron requests here are what I consider 2 good 'investing platforms' for the primary reason that both allow tiny position sizes, including fractional shares and do not charge a trading commission instead make their profits off the buying and selling spread.
ETORRO
NO fees, no commission for regular stock investing, platform is US dollar based so when someone from the UK deposits funds they get converted to a dollar balance, unless one deposits dollars directly via the likes of paypal. The platform is fairly straightforward to get to grips with and offers limit orders right off the bat.
The coverage of stocks is good, for instance one can invest in other than US stocks i.e. UK and Hong Kong listings.
The only negative as far as I am concerned is that there is no ISA, or other tax free wrapper, so my exposure to Etorro is limited for tax reasons.
Follow this link to get started.
FREE TRADE
This is the best for me and likely most UK investors for the primary reason that it is basically ETORRO within an ISA tax free wrapper.
As is the case with ETORRO, no commission when trading, fractional shares, and no minimum buy.
However, there is an 0.45% fx fee when buying US stocks of which is a lot lower than most other UK brokers such as ii.co.uk and AJ Bell.
Note that for the ISA one needs to PAY a monthly fee of £3 or £10 for ISA plus LIMIT orders. However, this £10 fee can be wholly offset by depositing at least £4k as Free trade pays 3% interest on balances upto £4k thus the £10 monthly fee is fully returned as interest. Also the interest is paid on the total cash balance regardless of whether funds are committed to limit orders or not.
Free Trade also give a free share worth between £3 and £200 when signing up and depositing your first £1.
HOW to Get the FREE SHARE FROM FREETRADE
To get the FREE SHARE then you must sign up using my referral link , then we both get 1 free share worth upto £200! However you must follow the link as just downloading the app from the app store won't work, you wont get a free share that way it has to be by way of referral.
Steps to Get a free Share
1. Click this link that takes you to he Free Trade Free Share web page
2. Follow instructions to download the Free Trade App
3. Deposit at least £1.
4. Get your free share worth between £3 and £200 within 7 to 10 days.
I use both of these platforms. Etorro for trading in and out of small positions, as that is what it encourages one to do. And FREE TRADE for accumulating positions for the long-run.
Also note that UK FSCS investor protection is upto £85k so I would not go over that limit with Free Trade.
The rest of this extensive analysis was first made available to Patrons who suport my work.
Contents:
Financial Crisis 2.0 Checklist
The China Syndrome
Stock Market Begins it's Year End Seasonal Santa Rally
Stock Market Trend Forecast Current State
INVESTING LESSON - BUYING VALUE
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock
INVESTING LESSON - Give your Portfolio Some Breathing Space
How Stagflation Effects Stocks
INTEL Bargain - 15.5% Discount Sale
Why Intel stock price dropped 15%?
FACEBOOK - 10% DIscount
IBM - 20% Discount
Amazon - 5% Discount
APPLE 4% Discount
AMD $136 on Route to $200
TSMC - $117
Microsoft $336
Google $2980, PE 28.7, EC 30.
Nvidia Leaves planet Earth - $299, PE of 106
Heads Up on NEW Potential Tech Stocks
AI Stocks Portfolio Updated Buying Levels
AI Stocks Buying Plan B
FREE TRADE the Perfect Stocks and Shares ISA?
FREE SHARE FROM FREETRADE
High Risk Stocks Brief
Crypto's 20% Discount Event
Bitcoin Trend
Palladium Brief
So for immediate first access to ALL of my analysis and trend forecasts then do consider becoming a Patron by supporting my work for just $4 per month. https://www.patreon.com/Nadeem_Walayat.
My analysis schedule includes:
- How to Get Rich! - 90% done - This is a good 6 month work in progress nearing completion.
- UK House Prices Trend Analysis, including an update for the US and a quick look at Canada and China - 65% done
- US Dollar and British Pound analysis
- Gold Price Trend Analysis - 10%
Again for immediate access to all my work do consider becoming a Patron by supporting my work for just $4 per month. https://www.patreon.com/Nadeem_Walayat.
Your analyst who's looking a lot like santa these days, white hair, beard and all!
HO HO HO Merry Christmas!
Nadeem Walayat
Copyright © 2005-2021 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 35 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.
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