☕ AMD could rally 50%

Good morning! 👋

All three indices are up in early going on the heels of a lighter than expected inflation report. 

Like that’s a surprise. 

We’ve talked about this many times… inflation will come down (which is what the Fed’s concerned about) even if prices don’t (which is what we – you and I – are concerned about because we feel it in our wallet). 

Here’s my playbook. 

1 – If you’re waiting for “all clear” don’t 

Recent selling scared the snot outta quite a few people and predictably many a) sold in a huff and b) went to the sidelines. 

I encouraged you to go shopping and, frankly, hope you did. 

It used to be that you could wait for “confirmation” or your favourite technical indicators to line up a re-entry but that’s not the case any longer. 

Today’s markets are highly computerized which means that the way to beat Wall Street at its own game is to pick fights they have no interest in engaging. 

Like, for example, slowing down your buying or buying smaller and more consistently using simple, effective tactics like Dollar Cost Averaging or my fave Value Cost Averaging, a related but more powerful version. 

It’s one thing if you’re a trader in which case you should have been making money hand over fist the last few weeks from all the volatility. Quite another if you’re an investor. 

Big volatility is an opportunity, either way. 

What you want to remember if you are an investor is that you make your money on down days but it just doesn’t become apparent until they’re in the rearview mirror.  

Keith’s Investing Tip: Best names only, btw. Anything else is a risk you don’t want and likely to turn your account into cannon fodder for Wall Street’s Merry Marauders.  

Meanwhile and if you’d like some help, I’ll be here. 

2 – AMD could rally 50% according to Loop Capital 🤔

Loop Capital kicked off coverage of Advanced Micro Devices (NASDAQ:AMD) this morning with a Buy rating and a shiny $175 price target saying the stock could rise 50%. (Read) 

Rationale? 

AMD's got big growth potential in accelerated computing and is making moves to snag more market share in the data center and PC segments. 

What’s more and despite trailing the SOX index in 2024, Loop Capital thinks AMD is a bargain compared to its rivals. The firm points to AMD's sweet spot at the "cross-section between the changing system hardware architecture of general-purpose compute and accelerated compute."  

Ummmmm, yeah. 🤦‍️ 

Trade Idea: Meanwhile and if you’re an options investor who fancies LEAPS calls, this could be an ideal case for using ‘em.  

I suggest you consider buying “deep” in the money calls – meaning that the strike price is below the current stock price. My Rule of Thumb is a delta of .80 or more meaning that if AMD rises $1, then theoretically the price of the LEAPs call option will rise $0.80. 

Keep in mind that options, unlike stocks, have expiration dates. If AMD shoots higher the day after your option expires – and becomes worthless – it does you no good whatsoever. I suggest you think at least a year out which, practically speaking means Feb 2025 or beyond as I type. 

If you have no idea what I am talking about, do NOT attempt to follow along with this trade idea. Options are a language all on their own. Worth learning, I submit… but specialized enough that you do NOT want to mess with risks you don’t fully understand! 

3 – Elon to buy TikTok? 

Rumours are flying that China is mulling over selling TikTok to Unka Elon. (Read) 

No way, you say?

Think again. 

I’ve spent a lot of time in China over the years and if there’s one thing I’ve learned it’s that reports like this one do not get out there by accident. 

My guess is Beijing wants to play nicey-nice with incoming President Elect Trump so it’s offering up TikTok as a way to do that.  

It’s not as half-baked as you’d think. 

Most Westerners are going to focus on some variant of “holy ___," Musk already owns X and this would allow him to __fill in your favorite conspiracy theory or anti-trust rhetoric. 

The real risk is China itself. 

Beijing knows that an outright ban would mean that it loses a vital intelligence resource and manipulation channel so finding a way to maintain that while appearing to distance itself would be absolutely consistent with China’s MO. 

Projecting one image while pursuing another goal allows China to avoid direct confrontation, conserves resources, and maintains a long-term focus on achieving its objectives be they diplomatic, economic or military – all of which are often intertwined. 

More to follow, undoubtedly. 

4 – Southwest Airlines stuck on the runway 

Southwest Airlines is apparently pausing corporate hiring, promotions, most summer internships, and certain employee events to reduce costs and improve margins. (Read) 

I remain in the “avoid airline investments” camp.  

Airlines are notoriously unprofitable, unpredictable, and tough on investors. Southwest, like many, appears stuck in a cycle of modest adjustments rather than true innovation. 

There are better opportunities out there with considerably higher profit potential, particularly when you’re talking “Zero to 1” rather than “n+1” (which is what airlines are). 

If anything, I’m tempted to buy putskies. 

5 – Klarna’s IPO just hit the big leagues 

Klarna, a Swedish fintech company, has formed a major partnership with U.S. payments firm Stripe that will allow Klarna’s “Buy Now, Pay Later” service to be available to merchants using Stripe’s payment tools in 26 countries. (Read)

And it’s happening before Klarna IPOs – meaning goes public.  

Worth buying? 
 
I wouldn’t, but not for reasons you might think. 

This isn’t about whether Klarna is a good company – although I question whether it has a true competitive moat.  

It’s about the nature of IPOs themselves which are at this point the biggest, most rigged game out there imho: 

Institutional investors get the best IPO shares at the juiciest prices while retail investors are left with scraps—or nothing at all. You’re kidding yourself if you think you’re in that club. 

IPOs used to be about real value and real businesses which meant investors could count on ‘em. These days companies tend to underprice IPOs to create a day-one stock surge, letting the big players lock in quick profits at the expense of retail investors who think they’re getting in on the ground floor. 

Even if your brokerage lets you into an IPO, retail allocations are tiny, and eligibility requirements often mean you’re locked out anyway. 

By the time the media’s singing an IPO’s praises, insiders, institutions and lawyers are already counting their profits. Retail investors tend to get stuck chasing inflated valuations. 

After the lock-up period, insiders unload their shares, flooding the market and tanking prices. Retail investors tend to be bag holders for a while. 

And finally, institutions have access to deeper research, better data, and often insider-level insights. Retail investors typically have access to after the fact public filings and are constantly chasing their tails. 

I suggest waiting a few quarters to see how Klarna performs as a public company before making any decisions. Then and only then, consider buying in if you like what you see. 

Bottom Line 

Investing is like gardening.  

You cannot enjoy the flowers if you don't plant 'em in the first place. 

You got this - I promise. 

As always, let’s MAKE it a great day! 

Keith 😀 

PS: I will be in Italy for the balance of the week talking tech, investing and markets. I’m also excited to spend some time with my bride who has never been there. I’ll post here and there but let’s plan on taking it lighter than usual. Ciao! 🇮🇹