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☕ How to buy Nvidia even if you think it's expensive

Jun 04, 2024

Good morning! 👋

The markets are lolling around today in early going.

Makes perfect sense:

Earnings season has largely come and gone
April inflation data is known
The Fed has – for once – kept everybody away from the microphone

What you want to be doing right now is taking advantage of the quiet. Or at least the downdraft.

98% of companies have reported, 78% of which have reported positive EPS surprises and 61% of which have reported positive revenue surprises according to FactSet.

Incredibly, investors still aren’t that “long” yet – meaning there continues to be a tremendous amount of money on the sidelines. A good chunk of which, I might add, is getting increasingly nervous about missing the rally.

Remember, we are playing to win.

Getting ahead of the FOMO crowd is not only smart but, history shows, potentially super profitable.

Here’s my playbook.

1 – Intel plays catch up

I was wondering if this would happen.

Intel has unveiled new AI chips in an effort to recapture market share that it’s lost to, well, everybody. AMD, NVDA, TSM and more. (Read)

I’ve said several times that CEO Pat Gelsinger is the right person at the right time for the company. But the question is whether this move is enough to be “right” for the stock.

I have my doubts.

Trade Idea: Testing $25 seems likely in which case tactics like LowBall Orders or Selling Cash-Secured Puts could work nicely. I’d rather own NVDA but that’s another story.

2 – Tesla reportedly diverted AI chips to X and xAI

CNBC is reporting that Tesla CEO Elon Musk diverted chips from Tesla to X and xAI. (Read)

It’d be easy to throw him under a bus or a self-driving car (figuratively speaking) but there is undoubtedly more to this than meets the eye.

Still, I’d be lying if I said this didn’t bug me.

I’ll be digging in.

OBAers: This story – if true - reinforces my contention that we need to have two horses in the proverbial EV stable.

3 – Breakthrough turbo chargers could change the rules

I don’t tend to spend a lot of time on small cap stocks because they just don’t offer the kind of liquidity, depth, and upside potential I like to see these days.

Still, something catches my attention every now and then.

Garrett Motion makes turbochargers for diesel and gasoline engines which, if you’re a gearhead like I am, you know can dramatically increase fuel efficiency AND make whatever has ‘em on board a whole lot more fun to drive.

What catches my imagination in this case is that the technology has all kinds of applications in fuel cell, electric and hybrid powertrains, particularly where higher rev applications (200,000+ rpm) are required.

I also find it intriguing that the company appears to have solved or at least bypassed many of the challenges with cooling and air supply.

MyPOV: Could be interesting and at $8-$9 a share, a speculative punt.

4 – How to buy NVDA even if you think it’s expensive

Millions of investors have stayed away from Nvidia because they believe it’s too expensive.

That’s a mistake.

Fractional shares allow investors to buy fractions of shares in companies that they would otherwise not be able to buy. For instance, if Nvidia is trading at $1,000 but you have only $500 to invest, you can buy 0.50 shares.

The benefits can be substantial.

Buying fractional shares can help you get on board with companies that would otherwise be out of reach, ensure that you invest any leftover cash balance that you’d rather put to work and, in many cases, even receive fractional dividends, too.

What I find most appealing of all, though, is something many investors don’t think about but probably should.

Fractional shares can be an ultra-efficient way to invest over time because they are tailor made for strategies like Dollar Cost Averaging or its lesser-known cousin, Value Cost Averaging.

There is one fly in the ointment but it’s relatively small in the scheme of things, at least imho.

You may not be able to transfer fractional shares from one broker to another without selling ‘em before the transfer takes place.

I expect ongoing computerization to change that but for now it seems to me that there's an argument to be made that brokerage houses offering fractional shares are using this as a client retention mechanism even though it’s not billed that way.

What I would have given to have had something similar back in the day!

5 – Tech foils tool snatchers

One of the really interesting things about technology is how fast unintended uses surface.

For example, Play-Doh is best known as an excellent non-toxic modelling clay for kids... but was invented as a wallpaper cleaner in the 1930s.

Post-it Notes are best known for reminders, but the glue used to hold the paper together was considered a failure within 3M which had been attempting to develop a super strong adhesive.

Now Apple’s Air Tags have been used to break a multi-million-dollar criminal tool ring in Howard County, Maryland. (Read)

Personally, my family and I use ‘em every time we travel to keep an eye on our luggage.

You?