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☕ DOJ Lawsuit Wipes Out Visa’s Gains Faster Than a Tap-to-Pay Transaction

Sep 25, 2024

Good morning! 👋

The path of least resistance remains higher even though the markets have split as I type.

I’ll take it.

The Fed’s outta the way, inflation is falling, and earnings continue to rise – all of which is great for savvy investors and, of course, our money.

Here’s my playbook.

1 – Southwest goes into slash and burn mode

I am continually amazed by folks who insist that airlines are a great investment. And even more amazed that companies like Southwest Airlines continue to exist for as long as they have.

The company announced today that it’s cutting service and staffing in Atlanta. That’ll apparently be followed by a “special meeting” as soon as next week. (Read)

If I had to guess, I’d say Elliott Management – which positions itself as a so-called activist investor – wants to clean slate management and the board of directors. Then, take things in another direction.

Southwest execs, meanwhile, are doing everything they can to resist but that strikes me as proof positive that Elliott could be on the right track.

If that’s true and my read on the situation is correct, LUV could be worth a speculative punt.

Not an investment.

Hmmm.

2 - If you can’t beat ‘em... sue ‘em

Competition was simple when I began my career.

You made a better product, sold it at a price the customer loved and continued to innovate so you could stay in front.

Now, evidently, you just sue.

That’s what Google’s doing, having filed an EU antitrust complaint accusing Microsoft of stifling cloud competition. (Read)

Cry me a river.

I’ve told you for a long time that Microsoft is kicking Google’s asteroids, and I hope you’ve paid attention. Continue to buy the former and avoid the latter.

Alphabet +167% in 5 years

Microsoft +213% in 5 years

Keith’s Investing Tip: Lawsuits like this are often a sign that weaker players haven’t got game. So, either find a stronger player (which in this case is Microsoft) or make peace with the fact that you own a company that’s not the top dog. Buy the best, ignore the rest!

While we’re on the subject of lawsuits...

3 - DOJ Lawsuit Wipes Out Visa’s Gains Faster Than a Tap-to-Pay Transaction

The US DOJ has filed an antitrust lawsuit accusing Visa of monopolizing the US debit card market since 2012. (Read)

About time, imho.

One of the DOJ’s charges is that the company has hampered small business development by charging excessive fees beyond what a free market would otherwise bear to the tune of $7B.

Still, like most things these days, I suspect the DOJ loses or settles.

Should you buy Visa?

That depends.

Visa’s returned 15.36% over the past 12 months while the S&P 500 has turned in 32.82%.

My $0.02 is that there are bigger fish to fry and better opportunities, not the least of which come from companies carrying all the data Visa needs to do its thing. Learn more.

If you’ve got this covered, excellent!

4 – Nvidia insider sales are not a big deal

CEO Jensen Huang sold a swatch of Nvidia shares worth $713 million recently and, predictably, investors who don’t understand how insider selling works pitched a hissy-fit. (Read)

What many don't realize (and would be wise to learn) is that there are two different kinds of insider selling: the planned stuff in well-run companies as part of pre-filed notices and the spur of the moment stuff in POS companies often by questionable executives in search of a quick buck or who know something’s gone awry.

Huang’s sale was the former, which is why Nvidia’s dip is the financial version of popping into a favorite shop and discovering your favorite pastry is on sale.

Btw, 96% of Huang’s pay is stock options, tied directly to Nvidia’s performance so he has every incentive to stay in the game – literally, financially and figuratively.

Executives have liquidity events just like the rest of us. Selling to pay for education, de-risking, paying for aging parental care, legacy education for children, tax mitigation... are all valid and common reasons. Again, especially if they’re part of a pre-filed plan.

I hope I own enough shares!

MyPOV: AI will contribute an estimated $19T to the world’s economy by 2030 according to IDC. But I think that figure is an order of magnitude low. As I’ve noted on TV several times recently, every $1 in AI related spending may result in $5-$10 in follow-on spending. That will very likely be $20-$25 within the next five years.

AI is still, “the single largest investing opportunity in recorded human history long.” (Watch)

5 – Meta pop... or drop?

The Meta Connect conference kicks off at 1pm EST and is focused on AR, VR and AI (Read).

The company is billing it as two groundbreaking days of virtual exploration, but I suspect Wall Street is more interested in AI updates than Project Orion (Meta’s next gen AR glasses with display and full hand tracking) or Meta Quest 3S (which is their version of a certain fruity competitor’s offering).

I still don’t like the fact that Meta derives 90%+ of revenue from advertising at a time when consumers I talk to worldwide are a) increasingly hating the fact that they get bombarded every time they log on and b) finally figuring out that their most intimate personal information has been productized for billions without their knowledge.

Still, El Zucko has his fans and Wall Street has a vested interest in defending the stock.

Might be good for a quick pop.

Honestly though, I’d be more interested in a quick drop later today or early tomorrow when traders draw in enough of the FOMO crowd to make a rug pull worth their while.

Putskies!