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Here is the playback of our panel on Leveraged & Single Stock ETFs for the Market Minds Summit

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Our Next Webinar:

Topic: How to Determine the Best Potential Investment Themes.

When: Oct 24,2024 11:00 AM Pacific Time

Register in advance for this webinar:

https://zoom.us/webinar/register/WN_nicbiSSlTwqTDXqOmfd1cA

Why Things Like Factors, Asset Classes, Styles, and Market Cap Diversification are Stupid.

Why most thematic ETFs suck.

How to use first-order, second-order, and third-order thinking to pick stocks and ETFs with the best potential upside.

One below-the-radar theme that could end up being extremely relevant regardless of who wins the election.

For Investment Pros Only

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Yesterday's Episode of The Watchlist

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Themes

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AI Power

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Google considers sourcing from nuclear power plants, says CEO Pichai-Nikkei Asia

Google is considering how to bring electricity from nuclear power plants to its data centers, CEO Sundar Pichai said in an interview with Nikkei in Tokyo as the tech giant searches for ways to meet the huge energy demands of its artificial intelligence projects.

Google's initiative will likely reignite the development of carbon-free power sources. Toward that end, Pichai also said his company will increase its investment in solar and thermal power.

Key points from Jefferies.......

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Google is notably the only one of the 'big three' data center companies (Microsoft, Amazon, and Google) to not have signed an agreement with a US nuclear plant. Google recently announced a $3.3Bn data center development for South Carolina, supported by a five-year economic development rate estimated at ~$60/MWh ($0.06/kWh). While South Carolina does have the third-largest nuclear generation mix (~50%), it also has one of the highest coal mixes (20%), with nearly half of the state production from fossil fuels.The question is whether GOOG signs a US nuke deal like AMZN and GOOG.

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On CEG....

CEG: Reportedly pursuing DOE subsidized loan for TMI/Crane restart

A DOE loan would be a small positive for CEG but more significant for shareholders would be grants and other direct funding. Our initial TMI IRR framework used a 70% debt financing and a 5.0% interest rate (3.75% 10Yr plus125bp) and had a 38% IRR. Flexing the interest rate down to 4.2% leads to $9Mnannual interest savings at the 70% debt financing level. With Constellation's strong credit profile, the benefits are more limited than for clean energy peers. Fully shifting to 100% debt financing at 4.2% interest expense would yield a 60% IRR compared with the 38% IRR base case. This would increase project NPV to ~$3.1Bn from our initial ~$2.9Bn estimate. Full debt financing is our ultimate expectation and consistent with the mid-30% cash flow to debt.

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I added FLR yesterday off my watchlist. AI power infrastructure play on an undercut and rally at the 50 day.

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These AI Stocks Are Just as Hot as Nvidia. Don’t Get Burned.-Barron's

Companies need to generate enormous amounts of power to fuel AI services. That’s where Vistra, a leader in nuclear energy, comes in. Ditto for Constellation Energy CEG +4.52%, another utility stock. Its shares are up over 135% this year, making it the third-best performing stock in the S&P 500.

Regardless, it may be time for investors to pull back on the red-hot sector. Christians noted that utilities “may be poised for a downside reversal” and that “following similar overbought and relative performance conditions, the outlook for utilities was unfavorable…especially over short-and medium-term horizons.”

Wall Street analysts are also expecting the mania to fade a bit. According to research from FactSet, the median price targets for the individual stocks in the utilities ETF over the next 12 months are on average just 3.2% higher than late September levels.

Here's where asymmetrical risk comes in. Can these companies keep going up in a straight line? No. We suggest playing them, and everything, with fixed risk using options. When you buy the stock you don't know exactly what your risk is. Yes, it could go to zero, but let's assume that's not going to happen. You could use stops, but a stock could announce bad news after hours and open multiples below your stop. Instead, if you decide what a "unit" is for you and buy the options that's your max risk. Your upside is unlimited. There are some other ways you can use options to even better tailor risk/reward, I will cover those in the webinar above.

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AI Biotech/Healthcare

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The opportunities here are huge....

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The Health Tech Boss Putting AI in Every Single Product-Bloomberg

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Q: AI is clearly a very exciting part of health tech. How far through that journey toward AI-enabled care are we? How much further is there to go?

A: We are actually using AI in every single product that we have. I’m extremely excited about what more it can do.

We are using AI to improve. For example, we have smart speed AI that increases scan productivity by three times. Now that is immediate impact for the patient. He has less time in a scanner. The hospital system can scan many more patients.

Nurses are spending, on average, 20 minutes an hour on admin tasks that we now with generative AI can help reduce to five minutes. That’s something that I’m extremely excited about.

Q: What are the limiting factors to implementing AI more broadly? What stops it moving faster?

A: Like with any technology, it’s adoption at scale, and adoption at scale especially in health care is very local. Ultimately you need to embed AI in the local work flow. And that means you need to work through hospital by hospital.

Also, people need to see the benefits. They need to learn to work with the system. We need to be very careful that we apply AI in a responsible manner. We are talking about patients and people’s lives. So we need to make sure that the AI does the right thing.

We are still early days in terms of mass adoption. We are seeing it finding its way into the practice pretty quickly. But still we have ways to go.

Q: In the battle for the AI space, your hardware also works with third-party software. How sure are you that you’re in the right places in the supply chain to be where the money is being made?

A: Ultimately, the monetization happens where you truly add value and you show that value add.

When we look at the domain where we develop AI, it’s in the clinical and operational work flow. That’s a pretty unique space. You see many tech players not going there because they want to provide the cloud servers, they want to provide the backbone.

To have the in-depth clinical work flow knowledge to develop AI for that, you need to be very deep in the practice, which we are. So we have a unique position and collaboration with our customers there.

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AI

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As I have said before, dips in NVDA are a gift, especially if they create an undercut and rally at the 50 day moving average....

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Jensen was on CNBC where he stated that "Blackwell is in full production" and "demand for Blackwell is insane".

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Self Defense

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Some great moves recently from AXON.....

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and PLTR.....

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I still think self defense is a sneaky under the radar theme that works regardless of who wins in November.

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Defense Stocks

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Here's another potential theme. I am not really interested in US defense companies, they will just come down when tensions fizzle. European ones on the other hand could be interesting. We have an ETF on that coming out in a couple of weeks.

Aerospace and defense ETFs beat S&P 500 as Middle East fears intensify-MarketWatch

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Edges

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If a Soft Landing Is in the Cards, Why Aren’t Small-Cap Stocks Rallying?-WSJ

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So remember a couple of key points here. First the Russell 2000 is a crappy index full of weak regional banks and speculative biotechs. Second, small cap is too broad, that's like saying large cap. Third, the AI names that have been driving the market aren't small caps. You need to look at small caps from a thematic standpoint just like you look at large caps. I use IWM as a trading vehicle in short term mean reversion strategies. I would not hold this index long term. Remember, my big focus in small caps are the biotech's that make advances with AI. In the next year or two this is the area you need to be in.

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