The Long Term Investor

This is a positive step for the MSFT Activision deal. I suspect that it is now pretty well set to happen.

Microsoft submits new Activision Blizzard takeover deal to British regulator after initial block

https://www.cnbc.com/2023/08/22/microsoft-submits-new-activision-blizzard-takeover-deal-to-uk.html

"Key Points

• Microsoft on Tuesday submitted a new deal to U.K. regulators for the takeover of Activision Blizzard after the rejection of its initial proposal.
• On Tuesday, the U.K.’s Competition and Markets Authority confirmed it has blocked the original deal.
• Under the restructured deal, Microsoft will not acquire cloud rights for existing Activision PC and console games, or for new games released by Activision during the next 15 years, the CMA said."

 

I am seeing a very similar result to yesterday so far in my accounts.....except for NVDA.

Not including NVDA......my down stocks are the non-tech.....COST, HON, and NKE. ALL the rest of my stocks are green at the moment.

NOW......NVDA....currently in the red....compared to the big gain yesterday. A totally normal reaction to the big gain yesterday. The stock got up near an all time high yesterday so I expect that we are seeing a bit of profit taking by short and long term investors at the moment....as we wait for earnings after the close tomorrow.

 

I had hope for today after NVDA dragged the markets up yesterday.....but....they can not do it every day. I was in the RED today. I also got beat by the SP500 by 0.85%.

Only four stocks UP for me today....AAPL, GOOGL, MSFT, and HD. the rest down.

 

Well the long awaited day tomorrow.....NVDA earnings day.

BUT....lets not get so focused on this one day that we lose sight of the longer term.

What will really count is September to the end of December.....the third quarter earnings in there..... and than after that the next 2-10 years. It is going to take at least the next 2-4 earnings reports to see how this AI chip stuff is going to shake out over the longer term.

Looks like the primary issue will be the actual production of the chips......and....whether their manufacturers are able to pump out the chips to meet the demand. It will be very frustrating if they end up having to leave money on the table due to lack of production capacity to match up with demand. If this happens it might drive some customers to other sources and help to give some of their competitors a small opening.

 

The DULL and listless market today.....with interest rate and FED overhang.

S&P 500 closes lower, weighed by declines in bank and retail shares

https://www.cnbc.com/2023/08/21/sto...s-to-its-best-day-in-august-live-updates.html

(BOLD is my opinion OR what I consider important content)

"The S&P 500 fell Tuesday, weighed by concerns over rising Treasury yields ahead of a key speech later this week from Federal Reserve Chairman Jerome Powell, as well as declines in banking and retail shares.

The S&P 500 edged 0.3% lower to 4,387.55, while the Dow Jones Industrial Average slid 174.86 points, or 0.5% to 34,288.83. The tech-heavy Nasdaq Composite eked out a small gain to close at 13,505.87. Nvidia, which is slated to report earnings Wednesday, ended the session down 2.9% — erasing an earlier gain.

Several regional and larger banks fell after S&P Global cut credit ratings and revised its outlook for multiple U.S. banks on Monday, citing “tough” operating conditions. The financial sector ended Tuesday down 0.9%, making it the worst-performing sector of the S&P 500. KeyCorp and Comerica dropped 4.1% each. Big bank JPMorgan Chase
also fell 2.1%.

Dick’s Sporting Goods and Macy’s fell by 24% and 14%, respectively, on cautious full-year forecasts, also leading the SPDR S&P Retail ETF lower. Dow member Nike slid more than 1% for its ninth consecutive daily loss

Wall Street has been focused on the bond market after the benchmark 10-year Treasury yield hit its highest level since 2007. The 10-year yield eased slightly Tuesday to 4.33%.

“I think [the market] is kind of wavering right now as the 10-year yield is hovering right around those October highs,” Adam Turnquist, chief technical strategist at LPL Financial said. “We’re watching for an official breakout on the 10-year. ... I think if we start moving higher, that’s certainly a warning sign for maybe a little bit deeper pullback in equity markets.”

While Turnquist said he is not bearish on stocks, he thinks “we’re in the pullback phase of a bull market.” The strategist named the industrial sector as his top pick.

Crossmark Global Investments’ Victoria Fernandez similarly expects a continuing pullback in the market, which she said will be influenced by climbing yields and a more cautious consumer.

“I think we’re gonna see higher yields bite a little bit,” said Fernandez, the firm’s chief market strategist. “Now that we’re through earnings, it’s the macro story that’s going to be driving a lot of what we see in market volatility, and positive macro stories are really a double-edged sword because all that does is tell the Fed that their financial conditions are not tight enough.”

Investors are anticipating Powell’s speech at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming this Friday."

MY COMMENT

I really don't like how OBSESSIVE the markets and the media are over this very short term stuff in the modern investing environment. It is not good for the health of the markets.....constantly waiting for some near term future shoe to drop and totally discounting all good news.

 

It will be nice to have all the New York market people back in about a week and a half after Labor Day. They are all currently at the Hamptons and on vacation. It makes the markets dull and boring and at the same time subject to pressure on light volume.

 

You know.....NVDA....is now the largest holding in my account....by far. Earnings tomorrow are going to be important.....but....are not what I am counting on with this company. I am counting on them to perform with MASSIVE sales numbers for the next 4-10 years. So...I like this little article.

Supply chain shortages delay tech sector’s AI bonanza
Server production hampered by tight stocks of Nvidia processors and other components

https://www.ft.com/content/c7e9cfa9-3f68-47d3-92fc-7cf85bcb73b3

(BOLD is my opinion OR what I consider important content)

"Investors are set to assess whether enormous demand for artificial intelligence products can help offset a slump in global sales for computer hardware when Nvidia reports quarterly results on Wednesday.

The US group said in its previous earnings report that demand for its processors for training large language models, such as OpenAI’s ChatGPT, would drive up revenues by nearly two-thirds and help quadruple its earnings per share in the three months to the end of July.

The world’s most valuable chipmaker now plans to at least triple the production of its top H100 AI processor, according to three people close to Nvidia, with shipments of between 1.5mn and 2mn H100s in 2024 representing a massive jump from the 500,000 expected this year.

With AI processors already sold out into 2024, the massive thirst for Nvidia’s chips is hitting the broader market for computing equipment, as big buyers pour investment into AI at the expense of general-purpose servers.

Foxconn, the world’s largest contract electronics manufacturer by revenues, last week forecast very strong demand for AI servers for years to come, but also warned overall server revenues would fall this year.

Lenovo, the biggest computer maker by units shipped, last week reported an 8 per cent revenue drop for the second quarter, which it attributed to soft server demand from cloud service providers (CSPs) and shortages of AI processors (GPUs).

“[CSPs] are shifting their demand from the traditional computers to the AI servers. But unfortunately, the AI server supply is constrained by the GPU supply,” said Yang Yuanqing, Lenovo chief executive.

Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker by revenues and exclusive producer of Nvidia’s cutting-edge AI processors, predicted last month that demand for AI server chips would grow by almost 50 per cent annually for the next five years. However, it said this was not enough to offset downward pressures from the global tech slump caused by an economic downturn.

In the US, cloud service providers such as Microsoft, Amazon and Google, which account for the lion’s share of the global server market, are switching their focus to building up their AI infrastructure.

“The weak overall economic environment is challenging for the US CSPs,” said Angela Hsiang, vice-president at KGI, a Taipei-based brokerage. “Since in AI servers every component needs to be upgraded, the price is a lot higher. The CSPs are aggressively expanding in AI servers, but that was not on the cards when capital expenditure budgets were drafted, so that expansion is cannibalising other spending.”

Globally, CSP capital expenditure is expected to grow by just 8 per cent this year, down from almost 25 per cent growth in 2022, according to Counterpoint Research, as interest rates rise and businesses cut back.

Industry research firm TrendForce expects global server shipments to decrease by 6 per cent this year and forecasts a return to only modest growth of 2 per cent to 3 per cent in 2024. It points to a decision by Meta Platforms to slash server purchases by more than 10 per cent to channel investment towards AI hardware, and delays in Microsoft upgrades to its general purpose servers to free up funds for AI server expansion.

Besides the Nvidia chip shortages, analysts point to other bottlenecks in the supply chain that are delaying the AI harvest for the hardware sector.

“There is a capacity shortage both in advanced packaging and in high-bandwidth memory (HBM), both of which are limiting production output,” said Brady Wang, a Counterpoint analyst. TSMC plans to double its capacity for CoWoS, an advanced packaging technology needed to make Nvidia’s H100 processor, but warned the bottleneck would not be resolved until at least the end of 2024. The two main suppliers of HBM are South Korea’s SK Hynix and Samsung.

The Chinese market faces an additional hurdle. Although Chinese CSPs such as Baidu and Tencent are allocating as high a proportion of their investment to AI servers as Google and Meta, their spending is held back by Washington’s export controls on Nvidia’s H100. The alternative for Chinese companies is the H800, a less powerful version of the chip that carries a significantly lower price tag.

A sales manager from Inspur Electronic Information Industry, a leading Chinese server provider, said customers were demanding quick delivery, but manufacturers were experiencing delays. “In the second quarter, we delivered Rmb10bn ($1.4bn) of AI servers and took another Rmb30bn of orders . . . the most troublesome thing is Nvidia’s GPU chips — we never know how much we can get,” he said.

But once the global economy improves and the shortages abate, companies in the server supply chain could reap massive benefits, corporate executives and analysts said. The KGI brokerage predicts that shipments of servers for training AI algorithms will triple next year, while Dell’Oro, a California-based tech research firm, expects the share of AI servers in the overall server market to rise from 7 per cent last year to about 20 per cent in 2027.

Because of the markedly higher cost of AI servers, “these deployments could constitute over 50 per cent of the total expenditure by 2027”, its analyst Baron Fung said in a recent report.

“For the supply chain, it’s just multiples of everything,” KGI’s Hsiang said. With eight GPUs in one AI server, the demand for baseboards, on which the GPU modules sit, is bound to soar compared with general servers, she said. AI servers also need larger racks on which to position the processor modules.

Recommended ExplainerSemiconductors Why China remains hungry for AI chips despite US restrictions A montage showing Nvidia’s Hopper H100 unit, the Chinese flag and the Nvidia logo The much higher power consumption of generative AI servers compared with general purpose ones also creates the need for different cooling systems and new specifications for power supplies.

Foxconn could be among the main beneficiaries of the shift because the group offers everything from the various components to final assembly. Its affiliate, Foxconn Industrial Internet, is already the exclusive provider of Nvidia’s GPU module.

For WiWynn, an affiliate of Foxconn competitor Wistron that specialises in servers, AI orders are already accounting for 50 per cent of revenues, more than double the proportion seen last year, according to Goldman Sachs.

Analysts also see a strong upside for providers of components. Taiwanese printed circuit board (PCB) maker Gold Circuit Electronics could see AI servers jump from less than 3 per cent of its revenues this year to as much as 38 per cent, Goldman Sachs said in a report in June — an expectation driven by the sevenfold increase in PCB content in AI servers over general purpose servers."

MY COMMENT

When I take all the above and consider it as a whole.....I see this as a processor market that is going to EXPLODE with pent up demand over the next 5 years....perhaps ten. I am sure that NVDA is already pouring massive amounts of money into the development of the next processor after the H100.

This AI build out is going to cause a boom for at least TEN years.

SO......I will NOT take profits or re-balance my portfolio. I intend to ride this NVDA marketplace advantage for as long as possible.

As an investor I need to be decisive and go with my opinions. It does not do me any good to have glowing opinions on NVDA but not back up those opinions with my money. So I am all in to ride this stock for the coming years.

 

I am in a self-imposed NVDA quiet period till earnings after the bell today.

I am simply TIRED of all the focus on this earnings report. My focus on this company is the next.......6-12 MONTHS.....not today. And after that the next 2-4 years. That is where the....."potential"..... money will be made for longer term investors.

 

The open today.

Stocks open higher ahead of Nvidia earnings

https://finance.yahoo.com/news/stoc...rnings-stock-market-news-today-133630667.html

(BOLD is my opinion OR what I consider important content)

"Stocks opened modestly higher on Wednesday as investors braced for results from chipmaker Nvidia (NVDA) after the market close.

Shortly after the opening bell on Wall Street the Nasdaq was up about 0.5%, the S&P 500 higher by 0.3%, while the Dow rose a more measured 0.1%.

Stocks lost momentum on Tuesday with the Dow losing about 0.5% as rising Treasury yields continue to weigh on equity markets.

Early Wednesday the yield on the 10-year Treasury note stood near 4.28%, about 7 basis points off the 16-year high reached earlier this week.

Retail stocks continued to be the center of most of this week's biggest moves early Wednesday, with Foot Locker (FL) falling as much as 30% after a disappointing quarter as the company cut its dividend and its outlook for the year.

Peloton (PTON) stock was also down more than 20% early Wednesday after costs for a seat post recall and higher subscriber churn weighed on the exercise bike maker."

MY COMMENT

Another slow day today......with nothing happening today. the primary event will be after the bell.....so any impact will be tomorrow and Friday. We have a good open going so far especially for the NASDAQ

 

I am going to have to give this company some thought some time over the next 6 months.

Nike Suffers Record Losing Streak on China, Inventory Woes

https://finance.yahoo.com/news/nike-eyes-record-losing-streak-183612776.html

(BOLD is my opinion OR what I consider important content)

"(Bloomberg) -- Nike Inc. posted a record streak of losses as concern over China’s sluggish consumer recovery builds and elevated merchandise stockpiles continue to weigh on profitability across the activewear industry.

The stock slid 1.4% to $101.46 on Tuesday, falling for a ninth straight session in its longest losing streak since the company’s initial public offering in December 1980. The latest drop came after retailer and Nike customer Dick’s Sporting Goods Inc. reported disappointing fiscal second-quarter results and cut its profit outlook for the year, due in part to more theft at its stores.

Nike’s weakness coincides with increasing signs of a soft consumer rebound in China, which is a key growth market for the sports-gear giant. China’s retail sales growth decelerated to 2.5% in July, worse than the median forecast of 4%.

“Investors are waking up to the fact that China’s growth is going to be slower,” said Matt Maley, chief market strategist at Miller Tabak + Co. They’re also realizing that China is not going to do as much as it has in the past to boost growth, he said.

The rout has wiped out nearly $13 billion of Nike’s market value, which currently stands at $155 billion. Even before the recent slump, Nike had failed to keep pace with the advance in the broader market. It’s now down 13% this year, while the S&P 500 Consumer Discretionary Index has surged 29%.

In its most recent quarterly results in late June, Nike reported earnings per share that fell just short of analysts’ expectations, signaling that the company is still working to sell off excess inventory with discounts. Its outlook for the current year also failed to win over Wall Street.

Wedbush analyst Tom Nikic said recent earnings reports from Under Armour Inc. and Champion owner Hanesbrands Inc. have likely stoked investor concern over persistently high inventory levels at athleticwear companies, and the negative impact promotions will have on their margins.

He anticipates Foot Locker Inc.’s earnings report on Wednesday will be an important signal for Nike, which is due to report its next results in late September. Foot Locker often provides details around the performance of its brands, he said. In 2022, the retailer purchased 65% of its athletic merchandise from Nike.

Nikic has an outperform rating on Nike shares, as do the majority of analysts tracked by Bloomberg. Nike has 25 buy ratings, 11 holds and five sells, and an average analyst price target of $127, which implies about 26% return potential over the next year."

MY COMMENT

I will have to give this company some thought over the next months. I just want to watch it for a while. I know a lot of people that will NEVER buy their products now because of their marketing programs over the past few years. A classic example of pissing off half of your potential customer base.

I really dont want to sell and get down to only EIGHT stocks......but I will let it simmer in my brain for a while. I really dont want to sell this stock this year and generate capital gains.

As I was typing this.....the same story came on the TV business news.

NKE results:

Six months (-19.23%)
YTD (-18.41%)
One year (-12.46%)
Three year (-13.73%)
Five years +17.51%

 

NOW I have myself thinking about NKE.

The stocks returns have been poor for a while now. Using my total Return Calculator....here is what I see.

10 years +13.65% annual return

9 years +12.53% annual return

8 years +9.56% annual return

7 years +9.72% annual return

6 years +13.35% annual return

5 years +6.27% annual return

4 years +6.23% annual return

3 years (-1.14%) annual return

2 years (-20.19%) annual return

1 year (-5.41%) annual return

So starting in 2018 at the five year mark the annual return has been dismal for this stock. In 2018/2019 the company embraced football failure Colin Kapernick........and went full on WOKE in their marketing. I have been looking at some of the GENERAL history of this sort of marketing at the company and it started in force in 2017/2018. A random coincidence or a meaningful data point? I dont know. I do know that the company has become more political and more woke over the years....especially starting in 2017/2018. They were always EDGY.......but.....I am not sure they have had success with this sort of marketing over the past 5-6 years.

I am going to take a good look at this stock today and see where I stand in terms of capital gains and taxes.

 

WELL.....I talked myself into selling NKE.

After looking at my account and doing some calculations.....I sold all shares. I moved the proceeds into additional shares of COST and HD. I did not want to add to any of the tech side of my portfolio since it is already outsized in my portfolio. SO....a lateral move for that money as it is still in the markets.

That company has been irritating and disappointing me for a while now and I guess it all just came to a head today. I am NOT boycotting anything.....but their results over the past five or more years has been dismal and I have had enough.

 

So.....I am now left with ONLY eight stocks. I like to sit between ten and fifteen stocks. BUT...there is nothing that I want to add right now.

"AS USUAL.........HERE is my current PORTFOLIO MODEL.

I am once again posting my PORTFOLIO MODEL. My initial criteria to start the process to consider a business are.......BIG CAP, AMERICAN, DIVIDEND PAYING, GREAT MANAGEMENT, ICONIC PRODUCT, WORLD WIDE LEADER IN THEIR FIELD, LONG TERM HORIZON, etc, etc, etc.

PORTFOLIO MODEL

"Here is my "PORTFOLIO MODEL" for all accounts managed which is the basis for MUCH of my discussion in this thread. I am re-posting this since I often talk in this thread about my portfolio model. My custom in the past on this sort of thread was to re-post my portfolio model every once in a while since I will tend to talk about it once in a while. I "manage" six portfolios for various family including a trust. ALL are set up in this fashion. If I was starting this portfolio today, lets say with $200,000. I would put half the money into the stock side of the portfolio, with an equal amount going into each stock. The other half of the money would go into the fund side of the portfolio, with an equal amount going into each fund. As is my long time custom, I would than let the portfolio run as it wished with NO re-balancing, in other words, I would let the winners run. Over the LONG TERM of investing in this style (at least in my actual portfolios), the stock side seems to reach and settle in at about 60% of the total portfolio and the fund side at about 40% of the total portfolio over time. That is a GOOD THING since it tells me that my stock picks are generally beating the funds over the longer term. AND....since the funds in the account generally meet or beat the SP500, that is a VERY good thing.

As mentioned in a post in this thread, I include the funds in the portfolio as a counter-balance to my investing BIAS and stock picking BIAS and to add a top active management fund that often beats the SP500 (Fidelity Contra Fund) and a SP500 Index Fund to get broad exposure to the best 500 companies in AMERICAN business and economy. The funds also give me broad diversification as a counter-balance to my very concentrated 10 stock portfolio.At the same time the funds double and triple up on my individual stock holdings............that I consider the BEST individual businesses in the WORLD.

STOCKS:

Alphabet Inc
Amazon
Apple
Costco
Home Depot
Honeywell
Microsoft
Nvidia


MUTUAL FUNDS:

SP500 Index Fund
Fidelity Contra Fund

CAUTION: This is a moderate aggressive to aggressive portfolio on the stock side with the small concentration of stocks and the mix of stocks that I hold and with the concentration of big name tech stocks. Especially for my age group. (73). So for anyone considering this sort of portfolio, be careful and consider your risk tolerance and where you are in your life and financial needs. I am able to do this sort of portfolio since my stock market account is NOT needed for my retirement income AND I have a fairly HIGH RISK TOLERANCE. In addition I am a fully invested, all the time, LONG TERM investor. (LONG TERM meaning many years, 5, 10, 20, years or more)"

MY COMMENT

This portfolio is HIGHLY CONCENTRATED on the big cap side of things. OBVIOUSLY between the funds and my ten stock holdings there is MUCH doubling and tripling up on the stocks. THAT is INTENTIONAL. I strongly subscribe to the view of Buffett and some others that TOO MUCH diversification kills returns. I do NOT believe in the current diversification FAD that most people seem to now follow.......or think they are following. I DO NOT do bonds and think the current level of bonds held by younger investors.....those under age 50.....is extremely foolish.I DO NOT do market timing or Technical Analysis."

 

Now I have to go into all the acccounts that I manage and do the same thing with NKE.

 

OK....got all the accounts cleaned up and in line with each other.....NKE is GONE in all of them and replaced with more shares of HD and COST.