Happy Sunday.
The Dow, S&P 500, and Nasdaq 100 ETFs all ended the week at all-time-highs!
What a wild ride it has been seeing a +38% rally in the S&P 500 since the October 2022 lows. So glad to have shared NUMEROUS winning ideas along the way to our paid subscribers. For example…
Monday.com (MNDY), Uber Technologies (UBER), Palo Alto Networks (PANW), Crowdstrike (CRWD), Datadog (DDOG), Salesforce (CRM), and countless others.
To celebrate… we’re offering a 20% discount code for new paid subs!
As always thanks so much to each and every reader. We are a two-man team here and your support means a lot!
Portfolio Updates:
*Quick reminder — every value amount and percentage change you see is year-to-date.
The Dividend Growth Portfolio has remained largely untouched this week, as most of my fresh capital was deployed earlier this month into both my Roth IRA and Cryptocurrency portfolios.
With that being said, It’s interesting to see the “Long Risky” section of my portfolio outperforming the others. This outperformance was mainly driven by continued momentum in cybersecurity — as you can see below.
As you all know from multiple posts I’ve shared since late-2021, I’ve long cybersecurity. I think it’s a secular growth trend that will only expand in the years to come.
Before we flip over to the cryptocurrency portfolio, I’m (somewhat) thrilled to announce that I’ve finally switched my ASML Holdings (ASML) position for Nvidia (NVDA).
For those of you who have been following along since 2022 know I (regrettably) chose ASML Holdings over Nvidia as I built my portfolio from scratch several quarters ago… leaving thousands in profit on the table. Hindsight is 20/20.
*The above dollar amounts and percentage gains are since Feb. 2023
I didn’t deploy new capital into the above portfolio last week as it wasn’t available. However, I did roll my covered calls on Tesla forward by a week, netting me $509. I took this money and bought 33 more Chainlink (LINK) for ~$15 / each.
I’ll be sharing an update in the coming weeks on how my Tesla covered calls have been doing since September! If my math is correct, I’ve generated ~$5,000 in premium income against there shares in only a few months.
Considering I could buy 100 more shares of Tesla right now for ~$22K, I’m considering buying another 100-share lot — allowing me to consistently generate $1,500 — $2,000 in passive income each month.
Stay tuned!
Week in Review — Too Long, Didn’t Read:
TSMC to potentially deliver +80% FCF growth in 2024, Ally Financial adds +$95M in credit loss provisions, Travelers remains unpredictable, Reddit itself could become a “meme stock,” Spirit Airlines & JetBlue have a very weird relationship, Jamie Dimon says to calm down a bit, Retail sales generally impress, a breakdown of the WEF conference, and U.S. home construction eases.
Key Earnings Announcements:
TSMC to potentially deliver +80% FCF growth in 2024, Ally Financial adds +$95M in credit loss provisions, and Travelers remains unpredictable.
Taiwan Semiconductor (TSMC)
Key Metrics — reported in $NT
Revenue: $625.5 million, flat YoY
Operating Income: $260.2 million, compared to $325.0 million last year
Profit: $238.7 million, compared to $295.9 million last year
Earnings Release Callout
“Year-over-year, fourth quarter revenue was essentially flat while net income and diluted EPS both decreased 19.3%. Compared to third quarter 2023, fourth quarter results represented a 14.4% increase in revenue and a 13.1% increase in net income.
In US dollars, fourth quarter revenue was $19.62 billion, which decreased 1.5% year-over-year but increased 13.6% from the previous quarter. Gross margin for the quarter was 53.0%, operating margin was 41.6%, and net profit margin was 38.2%.”
My Takeaway
TSM’s stock price rose +12% this week after the above earnings were announced — but why? On the surface, everything seems to be getting worse, no?
This is a great reminder that the stock market is forward-looking. After sharing the above earnings, TSMC management guided to +25% revenue growth in 2024, ahead of Wall Street’s expectations.
The catalyst for the growth is, of course, AI — with management indicating demand continues to rise with AI-specific revenue as a percent of total revenue to be in the “high-teens” by 2027. With that being said, capital expenditures in 2024 should land somewhere between $28-32B — allowing TSMC to grow their free cash flow by +80% this year.
I’m going to do more research into this name, as it’s obvious they’re fundamentally rebounding as a company from 2021-lows. Stay tuned!
Ally Financial (ALLY)
Key Metrics
Revenue: $2.1 billion, compared to $2.2 billion last year
Operating Income: $64.0 million, compared to $445.0 million last year
Profits: $76.0 million, compared to $278.0 million last year
Earnings Release Callout
“At Ally Bank, we recognized our 15th consecutive year of retail deposit growth, now serving over three million deposit customers following record customer growth in 2023.
Dealer financial services continues to capitalize on its competitive advantage, decisioning a record 13.8 million consumer applications which enabled $40 billion of consumer auto originations.”
My Takeaway
Shares of Ally Financial traded +10% higher on Friday after management reiterated their expectations for net interest margin (NIM) to reach 4% by the end of 2025 ($6 EPS annualized run rate) if rates remain high. However, if rate cuts come to fruition in 2024, Ally’s management team expects to reach 4% NIM a few quarters faster.
Above is a chart I found that illustrates the company’s forward guidance in relation to Wall Street’s expectations. By the looks of it, 2024 will be a “transition” year for the company — setting up 2025 to be great.
As you all know, bank stocks are not my specialty and I don’t own any of them. However, I do like to keep tabs on their “provision for credit losses” line item — which essentially is an internal savings account the company has to ensure liquidity if their debt isn’t repaid.
During 2023, the company set aside $2.0 billion — up from $1.4 billion in 2022. They company set aside an additional $95 million between Q3 and Q4 of 2023.
Travelers Companies (TRV)