Straight to your inbox from Keith himself!

*Trusted by tens of thousands of savvy investors and traders around the world every day

☕ Still the undisputed “King of Banks”

Oct 29, 2024

Good morning! 👋

Futures were red ahead of the bell – meaning they went down - but the markets quickly went green – meaning higher after the bell - as traders await big tech earnings.

Or at least that’s the official story.

What’s really happening behind the scenes is very different.

Big traders are playing something called the “IV Rush.”

I just wrote to the OBA Family about it yesterday, in fact, noting…

“Pros follow IV like hungry lions follow a herd of gazelle because they know that the IV Rush typically results in higher options prices before earnings. And that, in turn, often leads to larger than expected moves (and more short-term profit potential) than typical, non-earnings-related trading activity.”

99% of investors do not understand the game being played at their expense.

Predictably, many buy into great earnings only to watch in horror as traders take prices lower following stellar earnings as was the case with Nvidia recently.

Others get scared out ahead of time only to watch stocks they want to own take off without ‘em as was the case with Tesla last week.

Those who know have a very different experience.

In a world of sheep, be the wolf!

Here’s my playbook.

1 – Pfizer beat is just what the doctor ordered

I am not surprised to see Pfizer top earnings estimates and raise guidance. (Read)

It’s been something we’ve been talking about for quite some time.

You know what to do and, not for nothing, I hope you’ve been doing it already.

Meanwhile, I’ll be here if you need me and want to take your game up a notch.

2 – Unka Ronald is lovin’ it, but not me

McDonald’s also beat top and bottom line while reversing last quarter’s same store sales decline. (Read)

The problem is that marketing increasingly depends on tricks like collectors' cups, limited-time items and deeper discounts on meals that have gone positively nuts in terms of pricing.

Foot traffic is down materially as are international sales which have fallen -2.1%. Sales in the Middle East and China were off -3.5%.

MCD has returned 20.05% over the past year which sounds great right up to the moment you realize that’s less than half of the S&P 500’s 41.49%.

No thanks.

Short, avoid or putskies.

$280 - $285?

3 – Oil plunges after Israel spares Iranian production

That’s an opening on two fronts:

Conventional big oil producers; and,
Transportation companies

My favourite choice – and one the OBA Family knows all about - has struggled this year in the face of global geopolitical challenges but remains at the top of the heap over longer time horizons, easily beating the S&P 500 and peers at the same time.

What’s more, the company’s TSY (true shareholder yield) is more than 2X the listed yield most investors are familiar with which means that it’s still a super compelling investment.

But my next choice – a new recommendation I’ll be sharing with the OBA Family this Friday in the November issue – is an undiscovered diamond in the rough given the impact Israel’s decision has had on oil prices. It’s also a viable, more immediate alternative to the nuclear AI energy clickbait making the rounds lately.

To be honest, I hate withholding names like this, so I apologize right up front. But revealing my choice now would not be fair to the OBA Family.

The point I want YOU to think about is that falling oil prices – like anything else we talk about regularly – create an opening for investors with a shopping list.

You do have one, right? 😀

4 – JPM to fraudsters: you owe us

JPM CEO Jamie Dimon is on about something and I can’t blame him one bit.

Recently Dimon said he’s had enough “of this sh*t” – his words, not mine - with regard to banking regulators while seeming to indicate that he and his bank will confront their overseers.

Yesterday, I saw that JPMorgan Chase is suing customers who exploited a viral "infinite money glitch" on TikTok. If you’re not familiar with what happened, that’s what they’re calling an ATM glitch that allowed individuals to withdraw funds before deposited checks bounced.

JPMorgan filed four lawsuits in federal courts in Los Angeles, Houston, and Miami, accusing two individuals and two businesses of keeping over $661,000 after depositing checks later found to be counterfeit or forged.

Law enforcement won’t be far behind.

MyPOV: JPM is still the undisputed king of banks and will be for a long time to come. Investors fear Dimon’s retirement, but I think that’s totally overblown. If I know Dimon like I think I do, he won’t vanish but will keep a comparatively tight hand on the reins as Chairman or something similar.

JPM’s returned 69.69% over the past 12 months while the S&P 500 has tacked on 41.13%.

A bank… nearly 70%... in a year.

Let that sink in.

Hooyah!

5 – Jim Farley’s got a new love, and it’s not a Ford

Ford reported Q3 results: (Read)

Earnings per share: 49 cents adjusted vs. 47 cents expected
Revenue: $46.2 billion vs. $41.9 billion expected, +5% YoY

The company’s "Pro" commercial and "Blue" traditional segments led the way, delivering $1.8B and $1.6B respectively. Ford’s EV business – aka the "Model e" division – lost $1.22B.

Then Team Blue guided to the downside, Wall Street speak for saying the next twelve months are pretty much going to stink.

Wall Street analysts remain concerned about softening demand, rising inventory levels and Ford’s ability to lower costs while boosting quality.

That’s off base.

My attention is focused on a Freudian slip, err, comments CEO Jim Farley made recently when on The Fully Charged Podcast saying, that he loves the Xiaomi SU7 EV having flown one from Shanghai to Chicago and spent the last six months driving it.

“I don’t want to give it up” were his exact words.

Think about that for a second.

Ford, yeah, those guys, flew a Chinese EV home and have been driving it for six months and it’s so good the CEO personally doesn’t want to give it up.

UPS may as well paint its trucks white. 🤦

Many people stubbornly want to bet on Ford. While that’s great because I love an underdog as much as the next person, doing so just doesn’t strike me as a super smart bet.

Ford will likely tread water for years.

Meanwhile, my favourite Chinese car maker - of the three I own - has doubled returns over the past year. And continues to build market share worldwide.

I’d say short Ford but at $10 a share there’s nothing in the trade. Concentrating on the upside in more vibrant makers (like the Chinese or Tesla) is the way to go and likely one heckuva lot more profitable, too.

Keith’s Investing Tip: Investing is a constant series of tradeoffs. Many aspiring investors make the mistake of falling in love with a stock “because” they love the company, the products, or something else about it. Successful investors, on the other hand, won’t hesitate to move on if there’s a better choice regardless of how they feel about the matter.