How are we doing, Trade Off friends?
Jon Erlichman here with another edition of Trade Secrets, our weekly newsletter for The Globe and Mail’s stock picking contest, Trade Off.
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The Leaderboard
I know I’m starting to sound like a broken record, but tech is still doing the heavy lifting at the top of our leaderboard. Nvidia Corp., the most widely held name across our top portfolios, reported earnings last week, giving the market plenty to react to.
On that note, let’s do a deep dive into the AI story.
Are we really still in the early innings?
Plenty of investors are asking the same question after such a strong run for AI stocks.
Have I missed the rally?
On the latest episode of my investing show, Ticker Take, I put that question to Dan Ives, the Wall Street analyst behind Wedbush Securities’ tech research and one of the most closely watched bulls on the AI trade. Ives just returned from a trip across Asia, and his answer was straightforward. In his view, we’re still in the third inning.
Why so early? Ives points to customer demand for AI chips running well ahead of supply. He also notes that the technology is being used by only a small slice of the enterprise world. The real spending cycle, he believes, is just getting going.
How does he pick the names that will benefit? He starts with the secular story, asking whether the business is in the right corner of the AI buildout. He then digs into the company itself, weighing leadership, execution and the ability to turn opportunity into real growth.
His lineup, sticking with the baseball theme, is Microsoft Corp. (MSFT), Alphabet Inc. (GOOG), Palantir Technologies Inc. (PLTR), Nvidia (NVDA), Taiwan Semiconductor Manufacturing Company Inc. (TSM), CrowdStrike Holdings, Inc. (CRWD), Palo Alto Networks, Inc. (PANW), AMD Micro Devices, Inc. (AMD) and Tesla, Inc. (TSLA). His reasoning ranges from chips, to software, to cybersecurity, to what he calls “physical AI.”
None of this is financial advice. But even if you believe the easy money in AI has been made, Ives offers a useful framework for thinking about how the next chapter of the story might play out.
IPO season heats up
Beyond AI, another story worth keeping an eye on is the return of the IPO market. After a quiet stretch, the pipeline is starting to fill up again, with names such as OpenAI and SpaceX generating plenty of buzz about potential listings down the road.
IPOs can be exciting, but they come with their own quirks. New stocks often see big swings in their early days of trading, and what looks like a sure thing on day one can look very different a few quarters later.
Trade Secret tips
A few reads from The Globe and Mail worth your time this week.
If the IPO chatter has you curious about getting involved, this is a great place to start. A clear breakdown of how new listings work and what investors should keep in mind.
For those of you looking beyond tech, here are some lesser-known companies where insiders have been putting their own money to work. Insider buying is far from a guarantee, but it’s a signal worth paying attention to.
And if the returns on money-market funds have started to feel a little underwhelming, this piece looks at a relatively safe alternative that could generate a bit more income.
Good luck with your picks. Talk to you next Tuesday.
Jon
Jon Erlichman is the founder of Ticker Take on YouTube and a contributor to BNN Bloomberg.
