SPC Weekender: Satellites, AI and More
And the stock-market "backseat driver" that can destroy your wealth ..
In this weekend’s edition of Stock Picker’s Corner (SPC):
Using stoicism to become a better investor.
Satellites may (literally) be “out of sight” … but they shouldn’t be out of mind when it comes to the investments you’re considering.
And the gap widens between AI “wannabes” and “winners.”
🤔The Stoic Investor
As an investor, there’s always that gnawing, back-of-mind fear that we’re not doing enough … on a daily basis.
That inner voice is tough to ignore … is easily triggered … and can lead to emotion-driven mistakes.
That fear gets supercharged by events that everyone around us is worried about … and talking about.
Like worries about whether the Federal Reserve cuts rates and to what extent.
Like worries of inflation reigniting when things like the Dockworkers strike started.
And like worries on how to invest before and immediately after the U.S. Presidential Election.
That inner voice, pressuring us to do something … anything … is fear; an emotion that Dr. Chuck Chakrapani of The Stoic Gym calls a “backseat driver.”
“There are things in life we should be afraid of, and there are other things we should not be afraid of. But our backseat driver randomly cries out, ‘You are going to get into an accident. Change lanes!’ and we obey that. Our backseat driver then cries out, ‘You can avoid getting stuck if you go fast. Go fast,’ and we obey that. We are afraid to challenge our backseat driver’s fearful reactions to things.”
And Dr. Chakrapani says that fear is driven by a need for control: “We lose the fearlessness that comes from controlling what is under our control and become fearful of things that we cannot possibly control. We let our backseat driver control us.”
There will always be events outside of our control, but here’s what’s under our control:
Making income-generating investments to prepare for retirement or to boost an income stream during retirement to offset higher costs of living.
Diversifying our portfolios with investments like silver to make sure we’re not overly concentrated in one sector or asset class.
Finding the best storylines that lead to the best stocks. Storylines like the Artificial Intelligence (AI) Era, the New Cold War, and Biotech Blockbusters, just to name a few. You can find all of the storylines Chief Stock Picker Bill Patalon follows in this two-part series: Part 1 and Part 2.
And being a student of history. As unprecedented as a lot of events may first seem, remember that Mark Twain says although history doesn’t exactly repeat itself, it often rhymes. That means there are reference points that offer “guide posts” and “playbooks “ on what to expect from similar events and situations that can improve our decision-making processes. One of the most concise formats for understanding U.S. financial history comes from Mark Higgins, author of Investing in U.S. Financial History: Understanding the Past to Forecast the Future. Bill recently interviewed Mark, which you can access here.
🛰️Out of This World AI Pick-and-Shovel Plays
As part of the AI Era storyline, we’ve been covering the growing need of satellites — to boost cell coverage, to allow autonomous vehicles to safely navigate roads, and to let the military automatically detect threats like drones moving into restricted air spaces.
One of the companies we talked about on Sept. 5 was Globalstar Inc. GSAT 0.00%↑.
As you may have already seen or heard, Apple announced a 20% stake in Globalstar and provided the satellite company with a $1.1 billion prepayment to improve its satellite infrastructure, which sent shares soaring 31% from $1.05 on Oct. 31 to $1.38 on Nov. 1.
Shares have marched even higher since then, now hovering around $1.93.
When a prestigious company like Apple is not only pouring $1 billion into a company and an industry that we highlighted … but outright buying a stake in the company … it’s a proof point that the SPC community is following the right storylines.
However, Globalstar is a high-risk investment, as shares were down as much as 50% on the year before that news broke. As such, it should be viewed as a speculative stock.
Instead, I want to direct your attention to another satellite company that’s projected to have nearly four times the sales of Globalstar next year: Iridium Communications Inc. IRDM 0.00%↑.
For a quick rundown, Iridium:
✔️Has a massive five-year annual earnings growth rate projection of nearly 140%.
✔️Offers stability through its reliable customer base that includes Caterpillar Inc. CAT -0.61%↓, Honeywell International Inc. HON -1.33%↓, and Garmin Ltd. GRMN 0.71%↑.
✔️Pays a dividend of 56 cents (yield of 1.91%) — not massive, but a cash stream that can feed into a “total return.”
✔️And announced a $500 million buyback in September, bringing its total authorized buybacks to $1.5 billion
You can find out more about Iridium here.
🔵“The AI Haves and Have-Nots”
When ChatGPT launched to the public in November 2022, it was a mad dash for businesses to rebrand as “AI companies” or to tout some kind of involvement with AI.
But after Palantir Technologies Inc.’s PLTR 0.00%↑ latest earnings, we’re starting to see the winners surge even further ahead of the wannabes.
“The AI revolution is underway now,” Palantir’s chief revenue and legal officer Ryan Taylor said on an investor call. He added: “The chasm between the AI haves and have-nots is rapidly widening and the whole world is watching.”
Palantir:
✔️Reported earnings per share (EPS) of 10 cents vs. expectations of 9 cents.
✔️Reported revenue of $726 million vs. expectations of $701 million.
✔️And boosted full-year revenue guidance to $2.805 billion to $2.809 billion, up from the $2.742 billion to $2.750 billion it expected in August.
In his letter to investors, CEO Alex Karp didn’t hold back as to why he believes his company is at the front of the “AI pack.”
“We built this company to arm and defend our most significant institutions, not tinker at the margins creating idle, decadent diversions. It is because of, not in spite of, this ambition, this sense of purpose, and this desire to participate in a story larger than ourselves, that we have arrived at this moment.”
In addition to its earning report release this week, Wendy’s Co. WEN 0.00%↑ announced its supply chain co-op has been working with Palantir to improve ordering by spotting shortages before they happen. The goal is to let Palantir’s software spot and address the issues on its own under certain parameters.
This move aligns with Wedbush Senior Equity Research Analyst Dan Ives’ description of Palantir as the “launching pad of AI use cases.”
Bill’s original investment case for Palantir is available here.
That’s it for this week.
Take care,
