Stocks of the Week!

In this email:

• Your Grandads Car is Back in Fashion 👴🚗

• Triple the Money, Triple the Fun 💰💰💰

Your Grandad’s Car is Back in Fashion 👴🚗

EV companies have hit a bump in the road. Ford are going to be cruising past & waving at them from the window. 👋

Tesla led the EV crash site with a rough Q1 report. Negative free cash flow, layoffs galore including a huge cut in it’s charging infrastructure team 😨

Their report caused a bit of a market-quake. It’s coming from a market wide slump in demand for EVs in the US market 📉 Tesla are down 28% for the year & Ford are flat.

But there’s one major thing that Ford does better than your standard EV manufacturer - diversification

So how are we seeing diversification in Ford?🤨

Ford’s EV segment posted a $1.3 billion loss which is less than ideal👎If EVs were all they did we’d be panicking right now.

Q1 earnings as a whole reported a solid $39.89 billion in automotive revenues, up 2% YoY. Ford Pro was up 36% year on year & doubled its EBIT (earnings before interest & tax) to $3 billion 💰

And what is Ford pro?🤔

It’s their commercial segment. Pro’s performance is super important to them thriving & it looks like they’ve got it dialed in. It connects Ford with small businesses, enterprises, and government agencies, pushing commercial EV adoption in fleet sales, along with hybrids & traditional vehicles.

Hybrid sales soared 51%, and ICE vehicles (your traditional vehicles, stands for internal combustion engines) stayed stable.

That’s that diversification I was talking about 😏

And here’s a little more diversification for you…

Ford has partnered with Blue Bird (BLBD) to supply 7.3L engines for Blue Bird's propane and gasoline-powered school buses. It’s a move to align with the new US Government funding initiative for heavy duty electrics buses & vehicles 🚌 

That’ll give Ford a bigger presence in the commercial and educational transport sectors.

Ford's core business with Ford Blue (ICE Vehicles) is still a cash cow & doesn’t look to be slowly down any time soon. A diversified product range means it's not all-in on the volatile EV market. And Morgan Stanley analysts have come out to say Ford Pro’s growth might be undervalued. My favorite word 👀

Add to that a 6.4% dividend yield at the current valuation and I think that’s a pretty solid deal.

Using technical analysis, Ford has been very range bound. That’s perfect if you’re looking for a swing trade. And the good news is it’s been flirting with the lower bound at around $11.10

From the current price, I don’t think a 20% gain to $14.60 is unreasonable. If Ford keeps showing strength beyond that the next stop would be a 35% gain at around $16.20

Triple the Money, Triple the Fun 💰💰💰

Tech stocks have been doing what tech stocks do best.

Going up & to the right. 📈

But what if there was a way you could make three times as much money on them?

Introducing…. TQQQ!

It’s an ETF that tracks the Nasdaq but give you three times the returns.

So if the Nasdaq is up 1% in the day, TQQQ will be up 3%. The opposite is also true & you can lose money 3 times as fast.

Now this can be just as dangerous as it is fun & I’ll tell you exactly why in a second. First, let me tell you why I bought in last week🛒

The Nasdaq has been in a solid uptrend reaching new all time highs. I don’t think that steam is going to run out anytime soon. There were solid earnings all around & AI is still just a baby in the grand scheme of things.

So when the Nasdaq had a pull back last week, we got the validation of the uptrend continuing by the EMA breaking above the SMA on the 4 hour chart.

The SMA was retested and acted as a support.

That’s enough for me to open a small position. I’ll be holding until I feel the Nasdaq is overextended or the uptrend breaks.

“But if the Nasdaq has returned an average of 18% over the last ten years why don’t you just hold & average nearly 60% a year?!”

Well too much of anything this sweet causes decay & that’s exactly what happens to this ETF.

Because it re-balances at the end of every day it suffers from volatility decay so you’ll end up losing money even if the market trades sideways. The math looks a little something like this:

Day 1 - $100 - Market up 10% = $110

Day 2 - $110 Market Down 10% = $99

Day 3 - $99 Market up 10% = $108.90

Day 4 - $108.90 Market Down 10% = $98.01

You see how the market was flat but you’re still down 2%?

For that reason you’ll want to hold it for the short term with good entries on reliable support levels for maximum gains

In a great bull market you can get more than 3 times the gains if the market moves up consistently because of compounding.

And there are communities of people out there dedicated to dollar-cost-averaging these leveraged ETFs

There’s some solid case studies of outrageous returns if you do that but the wide consensus is - it’s a terrible idea ❌

That’s all! See you same time next week 👋 

P.S Hit reply & let me know what you thought of this weeks newsletter. All feedback is welcomed ❤️