☕ Pfizer jumps on activist bump – should you buy it?

Good morning! 👋 

The markets are down today which isn’t surprising for three reasons: 

1. Short-term interest rates – most notably the US10YR – are rising 
2. There’s been an Apple downgrade 
3. Profit taking 

Here’s the skinny. 

Wall Street’s big traders use gobs of leverage to ply their trade – pun absolutely intended – which is why they tend to buy as short-term rates go down and sell when rates go up. Usually starting with big tech because that’s where they can get the most bang for their buck and typically use the most leverage. 

Today they’re watching rates rise just like we are, which is a sign that risks are too.  

So, no mystery here – they're selling because the cost of “carry” - meaning what it costs them to have all that leverage – is rising.  

Selling helps reduce the cost of the money they’ve borrowed just like prepaying a mortgage while also ensuring they get under limits that would otherwise cause a margin call (yep, institutional investors have those, too). 

Today’s a double whammy, though, because Apple got a rare downgrade. 

Apple is one of the most widely held stocks on the planet which means that every hedge fund, indexer, pension fund, endowment etc has got to do a bit of shuffling to keep up with the early morning ripples (aka selling). 

And finally, Wall Street’s go-fast money is keen to take profits after a strong week which is entirely normal. 

Don’t let it throw you off track. 

We’re heading into the 5th consecutive quarter of growth at a time when inflation is coming down, the Fed will be cutting, and earnings are still rising. 

Here’s my playbook. 

1 – What to watch this earnings season 

There are going to be thousands of hours wasted this earnings season by people dissecting the most esoteric and minute details in every report that hits the wires. 

Stick to the big picture. 

What you want to watch out for is the same thing I’m watching out for: 

• Signs that a company is already benefitting from lower rates 

• Guidance 

I mentioned both in last night’s Sunday evening short. (Watch) 

2 – Why 4.48% in a T-Bill may not be all that, even if it makes ya feel better. 

The super savvy Stuart Varney noted this morning that 4.48% in T-bills doesn’t sound like a bad idea at the moment. 

I agree. 

But it is critically important that you balance that caution with the opportunity you’ll inevitably miss if you can’t bring yourself to invest in a 400%+ runner like Palantir. (Watch) 

Speaking of which... 

3 – Palantir’s next move means legacy software companies are at risk of pulling “an Intel” 

I am constantly amazed by how many investors still don’t get it. 

Palantir is not just a tech, it’s “the” tech. 

Take Warp Speed, the company’s recently announced operating system offering for example. 

The “Warp Speed” platform integrates virtually every facet of manufacturing operations including enterprise resource planning (ERP,) manufacturing execution systems (MES,) product lifecycle management (PLM,) and programmable logic controllers (PLC.) 

It’s a challenge to every other legacy system out there. 

The way I see it, Oracle, Siemens, SAP and a dozen other legacy software makers are now at risk of “pulling an Intel” - meaning being marginalized despite having once dominated the industries they created.  

Invest accordingly. (Watch) 

Long Palantir / short or avoid dang near everybody else! 

OBAers: I’ll have a few super attention-grabbing examples and additional thoughts in today’s update. 😊 

4 – Apple downgrade is a mistake

Jefferies downgraded Apple stock from Buy to Hold because it has concerns about the iPhone's current AI capabilities and believes significant hardware improvements won't be made until 2026 or 2027. The firm thinks that market expectations for the iPhone 16 and 17 models are unrealistically high and won't be met in the near term. (Read)  

Doh. 

Make no bones about it. 

Apple is about to take things up a notch and will dominate consumer-usable AI a few years from now. 

You know what to do. 

And if you don’t for some strange reason or would like some help, I’ll be here. 

MyPOV: People have argued with me about Apple for years, usually voicing the same tired, old cliches about falling iPhone sales, being overvalued, underwhelming, and unfulfilling that Jeffries is voicing today. The dang stock has returned 820% over the past decade. The S&P 500, by comparison, has turned in 202% - that's a 4 to 1 performance advantage! 

If you think that 2 billion paid Apple customers aren’t going to jump on this when the time comes, I’ve got a bridge to sell you. 

5 – Pfizer jumps on activist bump – should you buy it? 

Starboard Value has taken a $1 billion stake in Pfizer and wants to initiate a turnaround in the company (Read) 

Good! 

Normally, I won’t think twice about activist investing but, in this case, both former CEO Ian Read and former CFO Frank D’Amelio have both expressed interest in helping turn Pfizer around. And while I am firmly in support of Pfizer’s current direction with regard to innovation, I share Jeff Smith’s (Starboard Value) concerns with current leadership. 

Can they make it “worth it” for investors? 

I think there’s a good possibility they’ll get there, and the markets seem to agree with me on the news. 

Pfizer has jumped +4% on the Starboard bump. 

Bottom Line  

“Success is a process of continually seeking answers to new questions.”  

         - Sir John Templeton 

MyPOV and the lesson here is that you should continuously strive to expand your knowledge, adapt to the market, and embrace new challenges—because each question you ask brings you closer to success. 

No doubt, Sir John would agree. 

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

Keith 😊