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The H.E.A.T. Formula is a radically different way to look at investing your portfolio.

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H- Hedges, you should always have hedges and be agnostic as to being long or short. Bonds are not a hedge

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E-Edges, you should always look for edges. Preferably these are edges with some sort of psychological underpinning, structural edges, or some sort of barrier to entry.

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A-Asymmetric. Everything you do, be it trades or your overall portfolio, should be designed so that heads you win a lot, tails you lose a little.

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T-Themes. You should always be invested in the top themes. Most everything else is just noise.

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We will continue to build out our resources here to help. In the meantime we have a model Hedges and Edges ETF portfolio.

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Our Next Webinar will be January 23,2025 at 2pm EST.

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How to Make Money In Markets During 4 Years of Trump

-Three Major Investment Themes Nobody is Talking About

-Why Crypto is a Must Own and How to Trade it With Asymmetric Risk

-Three ETFs That You Want to Almost Always Be Short

-Dangers of Covered Call ETFs and a Better Approach

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Register Below:

https://attendee.gotowebinar.com/register/980141392770803292

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We are doing something new, we will be hosting The Watchlist every Thursday. Jeremy Vreeland (Bullish Bears) and I will be discussing stocks we are currently watching, buying, or shorting. We will also be discussing how to structure trades for asymmetrical returns and we will take your questions. Click below to register:

https://register.gotowebinar.com/register/1497212025166258773

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Some great results on Friday from my ChatGPT searches on the wildfires so I kept it going over the weekend with a couple of queries....

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Which publicly traded company builds high end single family homes in southern California?

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Bottom Line

If you’re specifically looking for a publicly traded homebuilder that specializes in high-end, luxury single-family homes in Southern California, Toll Brothers (NYSE: TOL) is the standout name. They have built their brand and reputation around upscale communities with premium finishes and amenities, making them one of the most recognized luxury builders in that market segment.

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My concern here is interest rates, which is why I think TOL has been getting crushed lately...

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Another query to consider....

What public companies are likely to get the most benefit from revenues coming from rebuilding due to the California wildfires. looking for companies that get the majority of revenue from California

Key Takeaways

• Truly “majority in California” public companies are relatively rare since most large builders and contractors diversify across multiple states.
• Five Point Holdings (FPH) stands out as almost entirely California-based in its master-planned communities.
• Granite Construction (GVA) and Tutor Perini (TPC), though not strictly 100% California, consistently have significant (and in some years near-majority) California revenue and major projects within the state.
• Tri Pointe (TPH) and KB Home (KBH) also earn a substantial fraction of revenue from California homebuilding.
• All of these companies could see incremental revenue if wildfire-damaged areas rebuild public infrastructure, commercial properties, and housing stock in California.

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I also noticed a couple of insurance companies that seemed to be selling off with the rest of them--ACIC and HRTG. So I asked GPT if they had exposure to CA....

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Given American Coastal Insurance Corporation’s known focus on Florida and other Southeastern coastal markets, along with no public indications that it underwrites significant (if any) property coverage in California, it is highly unlikely the company has notable exposure to California wildfires. If it does have any, it would probably be indirect or minimal through broader reinsurance arrangements.

Based on publicly available information:

1. No Clear Evidence That Heritage Has Major CA Wildfire Exposure
   • The bulk of Heritage’s property insurance business is concentrated in Florida and nearby states.
   • There is no prominent indication of material homeowners’ or commercial property underwriting in California’s wildfire-prone regions.
2. Minimal or Indirect Risk If Any
   • If Heritage writes little to no direct policies in California and doesn’t have a reinsurance arrangement covering CA wildfires, its exposure would be negligible.
   • To confirm definitively, one would check Heritage’s latest statutory filings (premium by state), reinsurance program details, or direct statements from company management.

Bottom Line:
Heritage Insurance Holdings, like many Florida-centric carriers, is primarily exposed to hurricane and windstorm risks rather than California wildfires. Public data suggests little to no direct underwriting presence in California, so its wildfire exposure is likely minimal or nonexistent unless otherwise specified in recent disclosures.

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So I took small positions in each.

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Meanwhile, we told you about these Friday morning....

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Mercury General Stock Craters. Why the Insurer Is Bearing the Brunt of the L.A. Fires.-Barron's

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Allstate Stock, Other Insurers Fall as Firefighters Begin Containing L.A. Fires. Record Losses Are Expected.-Barron's

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Finally, I asked GPT what it thought about shorting EIX....

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While ongoing wildfire risk in California makes EIX a potential short target for some traders, success depends heavily on unpredictable events, legal/regulatory outcomes, and the utility’s ability to mitigate and finance these risks. Proceeding with a short strategy would demand diligent research, timing, and risk controls, as the margin for error is substantial.

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This is a big deal.......

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There's a reason we did a politically neutral ETF when we did (ESGX)

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Evaluate the recent American Airlines retirement plan case.  What impact could that have on stocks that don’t focus on ESG or DEI

In summary, this case could lead to a short-term boost for stocks not focused on ESG or DEI due to heightened investor caution regarding legal and financial risks associated with ESG investments. However, the long-term impact would depend on how investment strategies, regulatory environments, and public opinion evolve regarding ESG principles.

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One of our main themes for this year is the Fed being clueless. Bond traders have been thinking no rate cuts for a while, now everyone else is catching on....

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Hiring Blew Past Expectations With 256,000 Jobs Added in December-WSJ

Economists at Bank of America said the report was likely to seal the end of the Fed’s easing cycle. While they saw the most likely outcome as an extended pause, they said Friday’s data put a rate increase back on the table, particularly if inflation picks up.

Interestingly Gold and Silver are percolating....

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I will be looking at gold and silver and the miners this week. I asked GPT for the sector winners and losers, may start to go deeper here...

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Summary & Investment Implications

1. Financials, Value, Cyclicals
   • Winners in a scenario where rates stay elevated but the economy avoids a near-term downturn. Banks, industrials, energy, select consumer discretionary can do well, riding the wave of economic strength and better net interest margins.
2. Rate-Sensitive / Defensive Sectors
   • Losers as higher yields make them less attractive and financing costlier. REITs, utilities, and high-duration growth (especially unprofitable tech) likely face downward valuation pressure.
3. Why This Matters
   • The abrupt shift in expectations (Fed pivot from “cut soon” to “stay or hike longer”) can redirect capital quickly: money exits bond-proxy equities and speculative growth stocks, flows into financials, value, and cyclical names that benefit from a healthy labor market.
4. Caveat:
   • If the Fed’s higher rates eventually trigger a recession, these “winners” could underperform down the line. For now, however, the narrative is higher rates + strong jobs = stable or strong economy, which suits certain sectors far more than others.

Bottom Line:

• Biggest Winners in a “Fed done lowering rates” + “economy strong” world are Banks/Financials, Value/Cyclical (Industrials, Energy, Materials).
• Biggest Losers are Bond Proxies (REITs, Utilities) and High-Duration Growth (especially unprofitable tech), facing higher discount rates and less investor appetite.

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We pointed this one out last week.......

Power Giant Strikes While the Iron Is Hot-WSJ

Constellation CEG 25.16% Energy, the owner of America’s biggest nuclear power fleet, is buying the owner of the largest natural-gas-fired power fleet. The deal is a win-win for both parties and highlights just how much fortunes have shifted for once-ignored power stocks.

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Robotics is another big theme Jensen talked about last week......

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Nvidia Scientist Says AI Robots Will Fight Wildfires Someday-Barron's

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Just starting to delve into this theme, I asked GPT...

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Bottom Line

• Industrial automation giants (Fanuc, ABB, KUKA, Yaskawa, Rockwell) remain major beneficiaries of robotics advances in manufacturing.
• Logistics & e-commerce (Amazon, JD.com, Ocado, AutoStore) see gains from warehouse and fulfillment automation.
• Healthcare & surgical (Intuitive Surgical, Stryker, Medtronic) leverage robotics for precision procedures and long-term expansion in hospitals.
• Agriculture & construction (Deere, Caterpillar) harness robotics and autonomy to boost productivity in large equipment markets.
• Consumer robotics (iRobot, Sony) is smaller but can grow rapidly with AI-driven product innovation.

Advances in artificial intelligence, sensor technology, and ease-of-use will continue broadening robotics adoption, creating multi-year growth tailwinds for the companies that dominate their respective markets.

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Yep....

The 60/40 Portfolio Isn’t Doing Its Job. It May Be Time to Ditch Bonds.-Barron's

“We may actually be in a period where the two main assets in a balanced fund are positively correlated,” Rizzuto says. “It’s only with hindsight that we can say anything with certainty.”

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Before you go: Here are ways I can help

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1. ETFs: We offer innovative ETFs that cover all aspects of The H.E.A.T. Formula, Hedges, Edges, and Themes.
2. Consulting: I'm happy to jump on the phone with financial advisors at no charge. I've built a wealth management firm and helped other advisors grow their practices through the use of substantially differentiated investment strategies. If you want to talk just send me an email at mtuttle@tuttlecap.com
3. Monthly investing webinars
4. Weekly trading strategy podcast
5. Weekly investing podcast-Coming Soon
6. Wealth Management-Coming Soon

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