Weekend Update #463 - December 26th, 2021
Stocks covered: $SQ, $SHOP, $SHOP.to, $AMZN, $MA, $V, $GPN, $ASML, $NVDA, $TSM, $TSAT, $TSAT.to, $FB
Dear Friends of Purple Chips,
Happy Holidays!
At Thursday, the Dow was at 36,000 as we head into Covid heavy holidays. In this video, we look at the following:
The PCE Index, a favorite Fed indicator;
Thoughts on Bitcoin;
Future investment themes;
Stocks we discuss:
Block SQ (NYSE)
Shopify SHOP (NYSE, TSX),
Amazon AMZN (NDAQ & NEO)
Mastercard MA (NYSE & NEO)
Visa V (NYSE) & VISA (NEO)
Global Payments GPN (NYSE),
ASML (NDAQ),
Nvidia NVDA (NDAQ),
Taiwan Semiconductor Mfg TSM (NYSE),
Telesat TSAT (NDAQ, TSX)
Meta Platforms FB(NYSE) & MVRS(NEO).
Please click on the icon below to view the video.
Transcript for Update 463:
On Thursday, the Dow Jones was around 36,000 as we head into more Covid related restrictions over the holidays.
In this week’s video we finish the year with a look to the future and try to give you what we think are investable themes that you can work with.
Speaking of that, I found this chart on Bitcoin that sums up why I don’t think the current iteration of Bitcoin will ever be a viable currency.
Slide 3 – Bitcoin
This chart breaks down the various uses of bitcoin and what really struck me was that payment processors were doing less business than they did 5 years ago. To me this is a sign that Bitcoin is just a speculative vehicle that has no tangible value. Of course, this doesn’t mean that Bitcoin can’t go higher, but like a balloon, it may go pop one of these days. I’ll talk more about Blockchain technology later in my commentary.
Slide 4 – Valuations
On Thursday, the low valuations were:
Fidelity National, Medtronic and AT&T.
On the TSX there was Stella Jones, TC Energy, Saputo and Fiera Capital.
Slide 5 – Spotlight – PCE
In the Spotlight this week, the Scotia analysts look at the Personal Consumption Expenditures number for November. This is an indicator that the Federal Reserve watches closely as a gauge of inflation. Pause your video to read these.
Slide 6 – Satellite Holdings
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Slide 7 – Core US
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Slide 8 – Core CAD
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Slide 9 – Crystal Ball
Every year at this time, we dust off the old crystal ball and look ahead and try to identify trends that can be used as themes for investment.
This was a weird year as COVID showed us that it’s not just a passing phenomenon, but rather something that we’ll have to adapt to for years to come. Because of COVID, there were massive amounts of money thrown at economies around the globe which caused uneven growth and is now forcing central banks to raise interest rates to manage inflation.
Looking ahead, there are more supply chain problems that will come as the economy adjusts to the uneven impact of COVID. This means that we’ll continue to see a polarized market that includes big winners and big losers.
Here are a few themes that we think will continue to do well in the future:
Slide 10 – Themes for investment in 2022
There’s a saying in the stock market that Cash is King, well in today’s economy an appropriate saying would be that cash is disappearing. The use of paper money and coins will keep declining. Online is the way to go and this means that companies that are alternates for cash and that facilitate an online presence will do well. Think of companies like Block (SQ-US - Formerly known as Square), Shopify, Amazon, Payment companies like Visa, Mastercard and Global Payments. These are just some of the names that could win in this space.
Slide 11 – Block
Here’s a chart of BLOCK. We’ll be adding this company to our list of Purple Chips in the next 2 weeks and for your information, It’s also at a very attractive valuation.
Slide 12 – Chip shortage
The chip shortage is not going away. The demand for chips is increasing because of smart appliances, electric vehicles and other things. This could last a few years and some of the winners in this space will be ASML-US, TSM-US and NVDA-US.
Slide 12 – ASML
Here’s a chart of ASML Holdings . ASML is a dutch company that makes the expensive machines that make Chips, and they have a monopoly on the business. I think this stock could continue to do well as it takes years to produce Semiconductor Fabrication plants and it costs billions of dollars.
Slide 13 – For the RADAR
Now I’d like to mention a few themes that are in the early stages. LEO satellites, WEB3 and the Metaverse. There’s still a lot to learn about these but I think these are worth putting on your RADAR.
LEO satellites are low earth orbit satellite constellations that will facilitate Internet access to remote areas around the globe. The companies that are key in this are are: Telesat Corporation (TSAT-US), Amazon which owns Blue Origin Space and Spacex which is a private Elon Musk venture.
Web3 is another theme to watch. It is basically the evolution of the Internet where no one party would be able to control it. WEB3 is about using Blockchain technology to make the Internet more robust and less controllable. Imagine Blockchain as a giant puzzle where no one has all the pieces but when you put the pieces together, they complete the puzzle. One of the players that has talked a lot about this is Block (Formerly know as Square). They changed their name to Block because they want to be key players in blockchain technology. For full disclosure - I won shares in this company.
The Metaverse is a little more abstract, its defined as a virtual-reality space in which users can interact with a computer-generated environment and other users. The experts say that this will be a growth area in the future but it’s still in the very early stages. One of the players in this are is Meta Platforms (formerly known as Facebook).
No onto other things.
Slide 14 – Notes
This is a quick reminder that there is no video on New years weekend.
Slide 15 – Quote
I’ll finish with this quote by me. We’re in a polarized market that will likely bring a few surprises in the year ahead. So the best advice is to “Expect the unexpected.” By this I mean that stocks can go higher and lower than you expect, so be prepared and Expect the Unexpected.
END –
That’s all for this week and this is the last video of the year, I’m John Schwinghamer, the author of Purple Chips, I wish you warm and happy thoughts of love, happiness and prosperity over the holidays!