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☕ An Nvidia trade idea for income-oriented investors and traders

Aug 06, 2024

Good morning! 👋

Let’s review...

... 3rd highest volatility spike in 40 years, a 15% downdraft and emotions running high.

Buy the hole or run for the hills?

No doubt in my mind.

Buy.

So I did and hope you did, too.

History shows beyond any shadow of a doubt that the path to profits comes from making decisions that often seem counterintuitive and can be decidedly uncomfortable when emotions are running high.

This isn’t rocket science.

You've only got to get two things right as an investor:

Buy world class companies making “must have” products and services that capture huge structural shifts in where the world is going that conventional financial models are already missing; and,
Control risk using simple, powerful effective tactics that help you sidestep the mess being pushed in your face by feckless regulators, hedge funds, Wall Street insiders and others in the name of “innovation.”

If you’ve got this covered and are getting the results you want, fabulous. Most investors do not. On the other hand, if you’d like to up your game with a simple, easy, and effective approach that’s already helping thousands of investors move beyond Wall Street’s shenanigans, I will be here if you need me .

Meanwhile, here’s my playbook.

1 – Palantir rocks it

Team Karp just reported a fabulous quarter and raised guidance. (Read)

Palantir has returned 45.42% over the past year and 178.26% over the past 5 years. The SPX has turned in 17.23% and 56.06% respectively according to Koyfin.

Unbelievably, many traditional Wall Street analysts just can't get off their high horse. 🤦‍♂️

Image courtesy of Arny Trezzi, Palantir Bullets

You can do the math as well as I can.

Anybody who’s listening to ‘em is missing out on one of the most significant investing opportunities in a generation.

Start thinking for yourself.

Watch this clip from the most recent Palantir earnings call and see if you don’t agree.

Keith’s Investing Tip: Wall Street’s sell side analysts are not in the business of making you money. They’re in the business of selling opinions that make the firms they work for money. The sooner you come to terms with how the game is played, the sooner your portfolio can thank you.

2 – CrowdStrike tells Delta to pound sand

I can’t say I’m surprised.

Delta is whining about its reputation and has lawyered up.

CrowdStrike says that the airline refused help. (Read)

The real issue – and the one Delta doesn’t want to acknowledge – is that its resiliency planning likely wasn’t up to snuff. As I noted the moment the outage surfaced, Delta is responsible for Delta’s IT.

I bet we will learn one of two things shortly.

Either...

Delta’s IT department recommended resiliency planning to the C-Suite but the C-Suite turned it down; or,
The C-Suite was led to believe by Delta’s IT department that everything was up to snuff... until it wasn’t.

Other businesses got back to business in hours, including airlines. We got back to business in under an hour.

Perfectly happy to own CRWD.

Delta, nah.

3 – Google guilty

Ruh-roh.

A Federal judge has ruled that Google violated antitrust law with regard to having a “search” monopoly. (Read)

I’ve long encouraged investors to avoid Google so there’s not much in the way of an investing impact to my way of thinking.

What catches my attention is twofold.

First, the verdict opens the door to a subsequent and potentially substantial discussion over how Google monetized search.

I am particularly interested in how Google productized us – meaning you and me – without our permission because that could truly be a watershed moment in terms of how information is used and disseminated.

And second, Apple could finally move away from Google but take a multi-billion dollar hit before quickly finding a way around that problem that the public doesn’t yet see coming.

Continue to short/avoid Alphabet which is still a “one trick pony” as I have repeatedly noted during various TV interviews and in our research.

Apple has returned 40.37% over the past year while Google Alphabet has returned 15.94%.

Seems I might have been on to something and, possibly, still am.

4 – An NVDA trade idea for income-oriented investors and traders

Would you buy NVDA at $65?

I would.

If you’ve got the moxy, the skills and the cash to back it up, consider selling the 20SEP24 NVDA $65 Puts which last traded at $1.30 as I type.

45 days to expiration, a delta of 0.07 and a probability of profit of 94.7%.

I like the odds.

My return on risk is 2.1% or 16.7% annually.

If NVDA closes above $65 on September 20th (when these options expire) I get to keep the money and repeat the process. If it closes below $65 on September 20th, I snap up 100 shares of NVDA for $65 and my basis is $63.66 per share.

Note: This trade strategy is known as Selling a Cash Secured Put. Please do NOT try it if you have no idea what I am talking about or lack the cash needed to purchase 100 shares for every 1 put you sell, in this case $6500 per.

5 – Caterpillar beats but no thanks

I was glad to see Caterpillar beat estimates because I love the company. (Read)

However, I still remain concerned about uncertainty in global markets where a strong dollar and emerging Chinese competitors are a challenge. Sales in North America were up just 1% and construction equipment related sales were flat.

Hmmm.