Weekly Recap | February - W3
Macro doesn't change, Liquidity & inflation commentaries, Plenty of news around Hims & investing decisions, Tesla vs. BYD, Funds portfolios, Some crypto comments, Earnings price targets & Weekly plan.
Macro.
Guess what? Same old.
Inflation isn't tamed and both CPI & PPI came hot, which means it won't significantly come down next month either. Inflation is still strong on many daily life products but is also bouncing on energy. I'm part of those who believe that the 2% target will be dismissed & that we'll learn to live with stronger inflation from now on.
The thing which isn't very bullish for me is that the market completely disregarded that new, as if inflation not going down wasn't important. Nothing is apparently. Tariffs are whatever, inflation is whatever, labour market is whatever... A market which doesn't worry about anything isn't a healthy market. But an unhealthy market can keep running for long. It's just a sign of heat.
I also made the point that inflation is a monetary phenomenon before anything, and until the monetary mass stops growing, it won't slow down. It doesn't seem to be a priority as the Treasury continues to emit T-Bills like there's no tomorrow. Something which should change with Trump, but we'll have to wait a bit.
To go a bit deeper on why this is a problem, the difference is in how the money is distributed.
When the FED does QE, they simply grow the monetary supply on which banks can pick liquidity, growing their lending power. But it only affects the economy when lending is done, and only the sectors impacted by lending.
When the U.S. Treasury prints T-Bills, they have to pay the yield to every owner & have no control over where this money is spent. When yield is paid to Google, they can spend it. When yield is paid to John, he gets to buy eggs.
Any liquidity sent directly to the pockets of consumers without any control on how this liquidity is going to be spent is inflationary, if done in big proportions. That is what is happening & will continue to happen until those T-Bills are paid off, probably not until at least one more year, assuming the T-Bill emission stops tomorrow.
The second news this week is the retail sales data which came very low, down 0.8% MoM, the biggest drop since March 2023.
This made a huge fuss on the market & I believe is somehow the reason for the tough results for stocks like Lululemon & On Running. I'd ponder this by saying it is January, not the biggest spending month & is compared to a very strong December with some record spending.
It's really short-term data which isn't really valuable as it includes external factors & not only the wish for consumption. I just comment because it made lots of noise, but honestly, it's a bit whatever.
Watched Stocks & Portfolio.
Hims Advertising War, Kennedy & Investing Decisions.
As you know if you follow the portfolio, Hims is my biggest position so we'll take some time to detail their week - a busy one.
Advertising War.
Hims' ad went live at the Super Bowl & made a lot of noise, positively mostly. There was a huge spike in Google search for the website & the application jumped in the download leaderboard of both Android & Apple Stores. Those do not mean they converted anyone but it sure means it got people interested.
I assume it created so much interest that Novo Nordisk, the company which sells the branded semaglutide products, felt the need to answer with its own ad in the NY Times, and if you want my opinion, they completely failed.
Let's rewind. Hims' ad narrative focused on how Big Pharma couldn't be trusted, their products were meant to keep the population unhealthy so they could sell them overpriced drugs. Remember, Americans are only victims.
To this, Novo Nordisk felt the need to answer "don't trust them, we are the only ones who can give you aproved drugs"... Which confirms exactly what Hims was telling, that those said “aproved drugs” are the problem to start with. I'm no advertiser so this is just the take of a random guy, but I really don't understand how this ad is supposed to help.
It screams weakness & lack of understanding of their market to me. And it isn't shared at prime time. Pretty sure most of those who saw the Super Bowl ad won't see the New York Times' page.
What it does well is potentially bring some fear into consumers' minds as they are talking about non-FDA approved drugs, which is true. Their compounding labs are FDA approved but the final drugs aren't; they can sell them only while the FDA-approved drugs - Novo's, are on shortage.
Bottom line remains that there was a huge spike in interest for Hims. We'll need time to see if they converted, I assume we'll have some comments on the next earnings call.
Kennedy & the FDA.
Other subject, and as expected, D. Trump appointed Robert F. Kennedy Jr. as Secretary of the Department of Health and Human Services, overseeing 13 or so governmental agencies, including the FDA.
A reminder of Kennedy's political orientation.
I have seen tons of very optimistic takes on X stating that he'll be a net positive for Hims. I understand the arguments & I can share some. But I believe it is very hard, impossible, to anticipate how this will turn out as he also is against any drugs which could be avoided, through proper life hygiene for example.
We'll have to wait & see, although for sure, Hims won't be his first target and he'll focus on the big guys, which will potentially free market shares for the small ones. I believe it will be positive. But I'll be patient because we can't really know.
Investing Decisions.
As you probably know, Hims jumped more than 40% this week, certainly boosted by both news shared above.
As a result, I personally sold some calls I bought early January which yielded more than 500% returns - something I cannot share as SavvyTrader doesn't have the option, but I am holding 100% of my shares.
The reason is simple: I do not consider Hims expensive enough to be sold.
CAGR here is based on FY23 revenues & Hims guided to 65% of growth for FY24 - to $1.46B of revenues. As you can see, they'd need no growth during two years to reach my bear case & around 30% of growth in FY25 & FY26 to reach my base case.
I wouldn't call this extremely bullish considering actual growth & its potential after the Super Bowl ad, while GLP-1 is a much bigger product in terms of revenue.
My conservative assumption would require an 8x sales up to FY26 to return our 11% on CAGR while buying at today's price. I wouldn't take the trade. But I'm not a buyer anymore, I'm a holder. Is it extended enough to cut my position? Certainly not. To trim? That's arguable. I chose to hold & will accept the volatility.
Now, a simple reminder. This is my decision & it is helped because of my option calls gains which almost refunded my entire initial position. But trimming is never bad after such returns. If you guys feel like this is enough & have made important gains, taking away the initial investment or anything that makes you sleep better isn't an issue. Volatility will certainly continue to be strong.
Gains aren't gains until realized.
BYD vs Tesla | God’s Eye vs FSD.
Lots of noise this week as BYD released its new autonomous driving system with great advertising, very misleading with some catch phrases like "free autonomous system for all of our cars". It of course got amplified on X because well… If people can hate on Tesla, they will.
The bear case is easy: Why would anyone buy a Tesla & subscribe to FSD when they could access $10,000 cars with an equivalent software for free? The problem is, this is factually wrong.
Let’s detail.
Quality of software. I'll admit that this is my blind spot. I couldn't find many real-world test drives for BYD’s God's Eye, so I won't say the tech is inferior to Tesla’s FSD but I won't call it better either, let's assume both are equivalent products - which I doubt.
God's Eye. Now, let's review what BYD actually offers & how it will work. With a comparison point: Google’s Waymo cars are equipped with 4 to 5 lidar units & we know they work really well, but not perfectly.
God's Eye comes with three different versions with different capacities: A, B & C. The A & B are said to be autonomous driving systems while version C is a simple driving assistant. All will be distributed for free to specific vehicles.
The version A comes with 3 lidar units & is only for the ultra-luxury brand Yangwang - above $200,000 per car.
The version B comes with only 1 lidar unit for Denza models and high-end BYD like the Han and Song models. In order, those cars' prices start at $45,000, $70,000 & $27,000. For comparison, Tesla’s Model 3 & Y start around $45,000.
The version C isn't an autonomous driving system but an ADAS system which already exists on many brands and is usable only on highways - Mercedes commercializes it already in Europe. This will be available to all cars.
In brief. Autonomous driving will be available only for high-quality models, not the cheap ones, and with only 1 lidar system - or 3 for the luxury model, so much less than Google’s Waymos which make me doubt the quality of autonomous driving. Plus, for God's Eye A & B:
"Both DiPilot 600 and 300 are capable of highway and urban autonomous driving, within China’s rules that a hand must be on the steering wheel at all times."
This actually says that both systems have to be used exactly like FSD unsupervised at the moment & only in China. God's Eye isn't available in Europe nor in the U.S. And exactly like Tesla struggles to get its FSD working under different circulation rules in China, BYD will struggle to adapt its system to the West.
So as of now... This is cool for Chinese but that's about it.
Is it really cheaper? The point above renders this comparison useless because we won't, in the West, have God’s Eye. It will need to be regulated & insured in our countries before being used & nothing says that it'll remain free for us by then.
Still, ignoring those important facts, it could be cheaper in the U.S. if you were to buy the Song brand & only this brand.
Everything else would end up being more expensive even with a free God's Eye as you'd pay $30,000 more for the car - that's 25 years for FSD at current price assuming nothing changes.
Quality. I want to stress this once more. This assumes that God's Eye is comparable in terms of tech to FSD. And that the Song brand is comparable in terms of EV. Which honestly...
Well, that's a personal opinion so I'll let you be the judge of that.
In conclusion, this made a lot of noise for nothing…
Funds Portfolios.
I don’t look at those much because besides confirming our bias, it isn’t very useful. Funds play a different game & manage money with much more constraints or rules than us, so we can’t really compare our actions to theirs.
I will just speak about it today because of Nebius, which ended up in two filings. Nvidia’s, first, which we knew as the company announced they invested in it, no surprises here, only confirmation. But the name also appeared in George Soros’ portfolio, and that’s much more surprising.
He & Druckenmiller are two of my favorite persons to watch & I am not surprised he’d bet on a company providing AI services, it goes with the actual narrative. But a small European company? This is a nice confirmation bias, because you don’t see many $10B caps in billionaires' portfolios.
Bitcoin & Countries.
This is half surprising, half not surprising. And very bullish.
It is surprising as Abu Dhabi isn’t a small city inside of a small country anymore. The sum isn’t significant for them, but it could be the first medium to big country being part of the race to accumulate Bitcoin.
It isn’t surprising because those countries have become very opportunistic & aren’t afraid to take risks anymore; they have been very positive about cryptocurrencies for some time now & this is a normal continuation.
But this is big. This sends a real signal.
Crypto Market.
I didn’t talk about the crypto market for some time now so I’ll just write a few lines to say that my view didn’t change. The ETFs continue to grow their net inflows, slowly for Bitcoin but we’ve seen an acceleration for Ethereum, and long-term buyers are still not selling massively.
I kept buying Solana & Ethereum, still am looking at some more speculative assets, and continue to be bullish for the next months. Not too hard with charts looking like this…
Will see where it goes. I still believe we have one more leg to go.
Earnings.
We are closing another week of earnings, I commented on the ones I was interested in and here’s the list of the stocks and their fair value to me - as in the price at which I would consider buying them.
I’ll son send another “Buying List” write up with a more complete detail on each position.
Weekly Program.
Quiet week coming. It’ll be interesting to have Baidu & Alibaba’s quarter & most importantly to see how the market reacts to them as the opinion around Chinese equities is changing. we’ll also have Nebius earnings on Thursday which isn’t displayed here.
You guys will have a detailed review of Alibaba’s quarter on Thursday & the Nebius detailed review on Friday, & comments on the rest on Saturday, as usual!
I got some other write-ups ready, might send one on Tuesday to give you guys some reading! Didn't decide yet, I’ll see depending on how the week goes!