☕ Anybody but Alphabet!

Good morning! 👋  

Before we get rolling, a quick welcome to so many new faces and a big thanks to the incomparable Suze Orman who kindly suggested you check out the 5 with Fitz. 

I am thrilled you’re here – it's an honour! 

I’ve written the “5” for my own use for years to clarify my thinking. Frankly, I had no idea so many people would find ‘em helpful. My goal is super simple ... to share what I know about making money in the markets in an open, transparent, and actionable format suitable for beginners and pros alike. 

No hype, no gimmicks. All in plain English. 

Along with the occasionally irreverent take because well, life’s too short! 😊 

Speaking of which, let’s get to it. 

The US 10YR rate has fallen a skosh this morning which is why big leveraged traders got on the gas in the early going. Not a lot mind you, but enough to turn the S&P 500 and the Nasdaq green as I type. 

Whether or not that holds remains to be seen. 

Traders are looking to upcoming personal consumption data because they’re worried about what happens over the next few days but savvy investors are focused on great companies because we are far more interested in what happens over the next few years. 

Here’s my playbook. 

1 – Macy’s is becoming Sears  

No surprise. 

The once proud retailer is struggling to remain competitive. Sales are falling and there isn’t a strategy in the world that can help it get back on track at this point. Not even closing 150 stores as part of a plan to revitalize the brand. (Read) 

Macy’s stock is down –21.93% over the past 5 years while the S&P 500 has tacked on 81.45% if my back of the envelope math is correct. 

Avoid it like the plague. 

2 – Microsoft’s deal with Mistral makes me think a Universal Translator is in the works 

Microsoft still leads the pack when it comes to AI. Tying up with French AI maker Mistral helps Team Nadella move beyond ChatGPT and OpenAI. (Read) 

Keep in mind that the deal is just peanuts – some $16M or so – but is important for reasons most of the US press has somehow strangely missed. 

1. It’s convertible, meaning Microsoft will be able to convert to equity in Mistral’s next financing round; and, 
2. Mistral Large, which will be available through Microsoft’s Azure, can handle French, German, Spanish, and Italian (in addition to English) while also being proficient in coding and mathematics. 

EU watchdogs are, of course, all over the deal because they can’t stand the thought of US tech companies enhancing their reach but, chances are the markets won’t care. 

$500 a share. 

La proposition commerciale est exceptionnellement solide. J'imagine que Microsoft réfléchit également à un traducteur universel. 😊 

3 - Lowe’s proves my point 

This is something we’ve been talking about for a while now. 

Lowe’s will be a severely challenged stock as long as consumers want to repair the sink and not redo the bathroom. 

Very similar to Home Depot 

Steer clear or avoid. 

Ordinarily I’d say putskies – meaning buy puts (a bet that the stock will decline) - but Wall Street will defend the stock. There’s simply no need to take on that kind of risk when there’s such easy pickin’ in other areas. 

Like tech. 

4 – More evidence Microsoft rules the roost 

I’m often asked if Microsoft really is that strong, especialy when it comes to gaming. 

You tell me. 

Sony is reportedly handing walking papers to 8% of its PlayStation division. (Read) 

Nintendo is next. 

5 – Alphabet can’t spell success 

There’s a line of thought making the rounds right now. 

Alphabet (GOOG) is the cheapest of the so-called Magnificent 7 stocks and, according to some, an excellent buy because the company’s PE ratio (24.53X) is less than the S&P 500’s average PE ratio (27ish). 

Not. 

1. PE ratios have no predictive value whatsoever so it’s a mistake to count on ‘em the way most investors have been led to believe. Financial heresy, I know. 
2. Google is in last place when it comes to AI, advertising and nearly every other metric the Mag 7 represents. 

Think about it. 

Nvidia is pure growth. Microsoft is kicking Google’s AI tootsies. Apple is all about value and will rock the world in June when it introduces AI – if I’m right like I think I am. AWS has triple the cloud share. And Meta is a hybrid model. 

Alphabet "can't spell success," a point Suze made when we chatted this morning!

MyPOV: The markets are forward looking, meaning prices reflect future earnings and business. The fact that Alphabet’s PE ratio is “lower” than the S&P 500’s is not a sign that there’s value on offer like most investors will think but, rather, a sign that the markets think there are better ways to use your money. 

Me, too. 

Bottom Line  

Many investors find out the hard way that they've been speculating. Usually, too late. 

As always, let’s MAKE it a great day – you got this! 

Keith 😊