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☕ I’ve never seen a stronger “anti-buy list” in my life

Nov 22, 2024

Good morning! 👋

The markets are green as I type which, if this holds, puts us on track for another weekly gain.

The action feels tentative to me, but I’ll take it.

In fact, I welcome it.

Why?

Because I learned a long time ago that you never want to underestimate a “dull” market.

Opportunity – and the big profit potential that inevitably comes with it – has a habit of surfacing when most investors least expect it. 😀

Here’s my playbook.

1 – Google now, Meta later

I have made no bones about the risks posed by both companies to the individual investors who own ‘em because of mounting regulatory and legal challenges.

Seems I was on to something.

The DOJ announced that it’s “urging” Google to divest Chrome so as to improve search competition and, if that fails, to sell Android. (Read)

That’s a lot like getting “voluntold” to do something in the military.

This is a far bigger deal than most investors realize… and misguided as heck.

You can’t legislate competition.

As much as I hate the fact that Google has monetized billions of consumers and made gobs of money by doing so, the free market is free because consumers can choose.

People will move to a better alternative if and when it shows up.

In fact, there’s a good argument that’s already happening... ChatGPT, Grok, Llama and Siri just to name a few. Unfortunately, my dog is smarter than Alexa at this point, so Amazon isn’t even in the hunt.

Meanwhile, I’m glad to have avoided Google shares for so long given that GOOG has returned 21.27% over the past 12 months while the S&P 500 has turned in 30.88%. Ouch!

Sometimes what you don’t buy is just as important as what you do!

Trade Idea: Wall Street has a vested interest in defending shares. In fact, there’s already one article in Barron’s this morning suggesting that the stock could rise by 50% because it will survive both AI and breakup calls. I am not so certain that’s true. If anything, public ire has risen significantly which makes me think continuing to avoid the stock is the better game in town. Putskies if you’re aggressive.

Meta’s another logical target, btw, given the control they have over social media/messaging through Facebook, WhatsApp, and Instagram. El Zucko hasn’t exactly been a saint but, to be fair, he does seem to be adulting lately.

Speaking of which…

2 – Amazon to invest another $4B in Anthropic

Amazon’s announced that the company will be plowing another $4B into Anthropic, the AI startup founded by former OpenAI execs. (Read)

Most people see this as a battle for search or even AI.

That’s not true.

It’s the biggest race of all time and it’s very much winner take all… my research suggests that the generative AI market will top $1T within the decade all by itself.

Hopefully you know what to do and are ahead of this. If not, I’ve got a few ideas and will be here if you decide you’d like to learn more.

I bring this up not because I would like to sell you something (although I’d love to earn your trust), but because there’s a good argument to be made that one of the biggest players in this space is still tremendously undervalued and another is super cheap despite the fact most investors mistakenly believe it to be expensive.

Every business on the planet will adapt, adopt or die when it comes to AI.

Any investor who doesn’t recognize the opportunity risks falling so far behind that they will never catch up.

It’s just that simple.

3 – Thirsty for more (Pepsi)?

I’m a big fan of dividends because they’re a great way to boost returns, help mitigate risk and generate income over time. Plus, dividend stocks tend to fall less, stabilize fastest and recover more dynamically if the you know what hits the fan.

Pepsi has always been a favorite of mine for a variety of reasons.

Today it’s trading at $160.50, or 12.49% lower than its 52-week high of $183.41.

The listed yield is 3.75% which isn’t anything to write home about, but I do like the fact that Pepsi’s got 52 years of consecutive dividend increases on the books… the last decade of which is growing an annualized rate of 7.92%.

There is one big question though.

Will consumers ditch sugary drinks and energy/snacks or return to ‘em over the next few years?

I could make the argument that obesity will win the day and shift the balance towards healthier choices. Case in point, Pepsi has apparently just purchased the remaining 50% of a hummus company. (Read)

Presumably, it’s not blue. 🤷‍♂️

4 – This just in from the “Dirty Tricks Department”

At least 50 retailers, including Gap, Macy’s, and Nordstrom, have reportedly increased APRs on store credit cards to record highs in anticipation of rate cuts. (Read)

I’ve never seen a stronger “anti-buy list” in my life.

Two thoughts come to mind.

First, the move reeks of desperation. New account openings for store cards – as opposed to bank cards - have declined in recent years, with many younger shoppers opting for alternatives like "buy now, pay later." The overwhelming majority of companies making this move are trying to protect profit margins rather than do the right thing by consumers – that’s never great for investors.

And second, management ought to take a hard look at their product lines because if they’re stocking more expensive stuff at the expense of consumers who’d rather buy less expensive products, their days are numbered no matter how you cut it.

Look at how Walmart (which has a handle on this) and the list in the article (which I submit doesn’t).

Keith’s Investing Tip: People think they’ve got to spread their money around to avoid losing and that’s been true for a long time. These days, taking concentrated risks that line you up with where the world is going is the better bet literally and figuratively. Walmart, for example, has returned 37.01% since June 2024 when I brought it to the OBA Family’s attention versus the S&P 500 which has tacked on 11.40%... a 3.25X to 1 performance advantage for anybody who chose to buy the stock rather than the index.