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☕ The most undervalued AI stock on the planet

Jul 02, 2024

Good morning! 👋

The markets are in a foul mood with all three major indices in the red ahead of the opening bell.

My guess is that they’ll “catch a bid” pretty quickly – meaning there will be some buying - especially if Powell gives ‘em something to think about. Perhaps even by the time you read this.

Play offense even if you have to think defensively to do it.

Here’s my playbook.

1 – What will JPow say?

Eurozone inflation has dropped to 2.5% according to the EU’s statistics agency. (Read)

Policy wonks the world over are watching because the data certainly suggest that a pause or at least a reduced interest rate outlook would be prudent.

The problem is that central bankers aren’t exactly known for their management acumen nor strategic prowess.

My guess is that US Fed Chair Jerome “JPow” Powell will urge caution or play more buzzword bingo when he speaks in Portugal later today. (Read)

Then we’ll see what the markets make of it.

MyPOV: Trying to anticipate the Fed is a fool’s errand. The path to profits is clearly defined by what’s likely to happen and which companies will get the job done. So focus on that, not what Powell and his cronies might say. Your portfolio will thank you.

2 – Tesla's the most undervalued AI play on the planet

Unka Elon’s Q2 deliveries report is out and the company beat estimates as price cuts boosted sales. (Read)

Good.

I believe Musk makes a meaningful pivot into AI very shortly and that this’ll probably be the last of the “bad” news for a while.

I hope you’ve been buying.

The stock has returned nearly 50% since April when shares were around $140 and I told you to get on board. It's now trading at $209 and change as I type.

To be fair TSLA is down nearly 40% YTD but, so what. Tesla stock has returned 1,308.71% over the past 5 years versus 101.38% from the SPY.

Be in to win or you won't... win!

3 – NYC’s next test

CNBC is reporting that Manhattan is now a “buyer’s market. (Read)

The official story is that high rents have finally brought buyers off the sidelines and that the gap between buyers and sellers is closing.

The situation reminds me very much of Japan in the 1990s.

The lesson that we learned back then was that you can’t give houses away or sell ‘em even at staggeringly low prices if buyers have walked away.

That’s the real question in my mind.

Have buyers walked away and are they done with Manhattan?

Too early to tell.

Keith’s Investing Tip: Real estate isn’t just about the property or even the income (if you’re an investor). It's a barometer for everything else in the area. Contrast that with medically related real estate or tech-related real estate, which is still chugging along and, in many cases, kicks off fabulous income. The ‘right” REITs are still a great place to invest. NYC housing, that’s debatable.

How much of a difference does this really make?

You tell me.

My favorite REIT choice and one the OBA Family knows well presently sports a 4.51% yield growing at roughly 6% a year over the past 5 years. Ka-ching.

Hopefully, you’ve got real estate covered. If not, you know where to find me.

4 – Salesforce’s comp battle hides a far more serious risk

Salesforce shareholders didn’t approve CEO Marc Benioff’s pay package and, in doing so, defied a board recommendation. (Read)

The problem here isn’t Benioff or even the pay, though.

This started with Musk’s pay package battle and the Delaware court that voided the $56B comp plan set in place in 2018.

I am hard pressed to think of a more dangerous undercurrent for investors. CEOs could well decide to chuck it or __ it if this is the environment they’ve got to deal with.

If that happens – and I am hearing behind the scenes grumbling about it already – then a slew of currently public companies could go private.

Investing Implication: This would reduce the number of quality investments available, further concentrate markets and increase risk. Talk about being careful what you wish for!

5 – When to say goodbye

I am often asked “what do I do with XYZ,” usually when folks have purchased something on a whim or as a result of clickbait masquerading as investing research. And usually when the stock in question has lost ‘em a lot of money. 🤦‍♂️

My answer is always the same.

Mistakes are tuition.

So it’s important that you don’t beat yourself up too badly; we all make ‘em from time to time, including me.

What you want to focus on is moving forward.

The first question to ask yourself is whether or not the reasons you bought something are still valid. If so, then there is every reason to wait it out. That’s why, for example, investing greats Warren Buffett and Ron Baron don’t flit from stock to stock and why I suggest you don’t either.

The second question to ask yourself is whether there is an alternative investing choice that can help you make up lost ground. If so, can you put that money into another company, fund or investment that potentially offers a faster path to profitability, more stability or even the opportunity to reinvest via dividends which is almost always a great idea. If so, then making a switch could be the better choice.

Keep it stupid simple.

Chances are you already know the answer. 😊