ThePeachPit Equity Model Portfolio experienced a 2.46% gain from the previous week and is up 10.69% since initiation on February 28, 2024. Premium subscribers receive full access to all company tickers, weightings, and weekly adjustments to these factors. I will be adding a high conviction list of company stocks in the coming weeks for investors seeking to selectively manage a smaller list of names for active trading purposes or to be used as additions to their independent portfolio holdings. I will make it a point to keep this list down to 5-10 stocks that I view as holding the most value to gain in their respective micro/macro environment.
Inflation figures are out, and the data suggests what I have been portraying in ThePeachPit for the last year or so. The Producer Price Index came in hotter than expected with an increase of 0.5% MoM in April 2024. This was primarily driven by services, gasoline prices, and commodities, both hard and soft. CPI came in softer than expected at 0.3% MoM, with the annualized inflation rate easing to 3.4% in April 2024. Estimates for CPI called for a 0.4% MoM increase, so this is seen as a slight win. Gasoline, shelter, and energy drove the increase for the month while food at home declined by 0.2%. Food away from home remains pressured, increasing to 0.3% MoM. On a high note, new and used vehicles appear to be in decline as the annual growth rate for both are down -0.4% and -6.9%, respectively, on an annual basis. Transportation services is up 11.2% y/y while food away from home remains heightened at 4.1% from the previous year.
My expectations going forward are paired with my investment thesis on AI-related infrastructure. As enterprises seek to lower operating costs by optimizing and automating the production process, I anticipate that firms will begin absorbing some of the inflationary costs as opposed to passing them through to the consumers. This should ease some of the CPI-related pressures despite the increase in PPI. If this plays out, we may be in line for some easing on interest rates in the coming year. To reiterate, I do not expect the Fed to cut interest rates in 2024.
Be sure to watch the latest episode of the Growth & Gains Podcast where we discuss my views on inflation and the market going forward.
The Bull & Bear Case
This week is the big one, the mother of all earnings. Nvidia (NASDAQ: NVDA) will be reporting q1’25 earnings on Wednesday, May 22. Though my forecast for growth doesn’t quite align with Wall Street consensus, the overall target remains directionally similar. I’m anticipating a similar sequential growth trajectory as seen in recent quarters with a major upshift coming in the back half of the fiscal year. This expectation is built around the idea that Nvidia will have increased capacity later in the calendar year 2024 and will have ramped up production throughout CY25 through Taiwan Semiconductor (TSM). We’ll see how this all plays out as analysts and investors will be listening in on earnings guidance for the coming quarters in hopes of continued strength in GPU sales. I still believe that Nvidia’s guidance will set the tone for the direction of the broader indices and will determine if this bull market continues.
Be sure to get caught up on my recent guidance on NVDA.
Nvidia Faces Macro Headwinds And Micro Tailwinds
Thank you, Seeking Alpha, for name dropping my earnings preview for Nvidia!
Eyes On Nvidia, Microsoft, Wayfair, IBM, And Meme Madness
In the long-anticipated batter to acquire US Steel (NYSE: X), Cleveland Cliffs (NYSE: CLF) CEO Lourenco Goncalves continues to criticize Nippon Steel’s attempt at closing the acquisition in his May 14, 2024 remarks, as reported by Reuters, suggesting that the deal has “zero chance” of winning government approval as the deal is heavily opposed by the United Steel Workers Union. As many of you are well aware, I have remained consistent with my investment thesis relating to the acquisition; I do not believe Nippon will close the acquisition of USS. Additionally, when the deal collapses, I anticipate USS stock to tumble back to historical valuations and that Cleveland Cliffs will approach USS at a lower acquisition price. After all, why should a foreign entity have the ability to take US tax dollars to line their own pockets? If US citizens are footing the bill for tax credits and grants, shouldn’t companies that benefit from these hard-earned dollars at the very least be based in the US and benefit US citizens?
Cleveland-Cliffs Is A Long-Term Growth Strategy
U.S. Steel May Have To Face The Music
American Steel: The Metal Gods of the Steel Industry (Cleveland Cliffs: NYSE: CLF - $15.12)
USS and Them: Merger Talks Between Cleveland Cliffs (NYSE: CLF) and US Steel (X)
Dell Technologies (NYSE: DELL)
DELL appears to have returned to a bit of a bull run in the last week or so as institutional funds make their way into the company’s stock. DELL has remained on my high conviction list since mid-March and remains as a high conviction BUY as the firm realizes baseline strength in its traditional CPU-based servers as well as growth streams from their next-generation AI infrastructure. The stock appears to be hitting higher highs and higher lows, meaning that the range the stock trades at continues to strengthen positively.
For those looking to play into NVDA earnings without going with NVDA directly, DELL may be a strong candidate to realize the firm’s results indirectly as Dell is one of the developers of server infrastructure used for those AI Factories. I will likely spend some time this week revising my estimates for Dell going into their q1’25 earnings results at the end of May after Nvidia’s call.
Are EVs Dead?
In early May, Elon Musk announced that Tesla (NASDAQ: TSLA) will be reducing its supercharging team as consumer interest in EVs wanes. Though this is absolutely a bad sign for the EV maker, investors believe that this is an opportunity for smaller independent charging station producers, such as EVgo (NASDAQ: EVGO) and ChargePoint (CHPT). This has to be the dumbest rationale for being bullish on smaller competitors as the narrative for WANING EV DEMAND doesn’t change. Contrary to others’ beliefs, I remain bearish on these two names as consumers continue to prefer driving ICE and hybrid vehicles as sales figures have shown across automotive OEMs. Maybe it’s my own bias having just bought a gas-guzzling truck, but I do not anticipate a large-scale adoption of EVs to occur until a cost-competitive vehicle can profitably be manufactured.
Overall, I remain bearish on the EV industry as a whole as I do not anticipate broader adoption for consumer vehicles to take hold until more effective battery technology is utilized. One of the biggest challenges faced for EVs is that fast charging quickens the decay of the battery, resulting in a shorter decline curve and shorter battery life.
Lastly, meme stocks have made a comeback in a big way. For those that foresaw the second coming may have experienced outstanding returns in GameStop (NYSE: GME) and AMC Entertainment (NYSE: AMC) before the names came crashing back down to earth. Aside from a series of unrelated tweets from user Roaring Kitty, the story for each name remains the same as each company faces an uphill battle towards growth and profitability. I personally have never touched the meme-driven stock approach and recommend readers to do the same. Unless you’re a well-seasoned trader that knows how to play these moves, you are likely to lose as many retail traders have in the past.
ThePeachPit Model Portfolio Vol. XII
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