Invest at your own risk; this is not financial advice! This is not a recommendation to buy or sell any securities discussed in the article.
Time flies, my friends. I feel like summer hasn’t really started, and lo and behold, Christmas is just three weeks away. Let’s recap the best buys from a year ago and follow it up with new interesting investment ideas.
Before we start with the recap, I would like to point your attention to this article in which I summarize the current state of AI. Even if you are not interested in AI per se, this is very important to understand where the world is going
Recap
You will find last year’s article here
Alphabet
Last December, I published my Best Buys as well, and the two companies Alphabet and ASML that I included did superbly. I was on board for sure, and I hope you participated in this great rally as well. If you did, please consider becoming a paid subscriber as a little token of thank-you.
Alphabet is finally being perceived as a/the winner in the global AI race, and the segments keep producing fantastic results. YouTube, Waymo, and Google Cloud are killing it, and so are the fundamentals.
The shares are up 86% in the last year. If someone ever tells you “there is no alpha in large-cap stocks”, just show them this chart. Mr. Market is indeed our friend, and when he offers us a fantastic opportunity such as this one, we take both our hands, grab a couple of buckets, and collect as many shares as we can.
ASML
And then there is ASML. Just four letters that stand for one of the most amazing companies out there. A moat that is wider than anything I can imagine. The AI arms race continues, and the hyperscalers can’t get enough chips. Most of these chips come from Taiwan Semiconductor (more on that later), and the by far most important supplier to TSMC is ASML.
As expected (at least for me and also readers of this publication), ASML did fantastic as well and is up almost 60% since I included it in the best buys.
Apart from these two picks, I also wrote about two companies that I sold last December.
Sprouts Farmers Market
This was my reason for selling Sprouts Farmers Market a year ago:
Personally, one of these cases for me was Sprouts Farmers Markets. I have sold a portion of my holding because the valuation reached a crazy point. The chart gives you a good indication of this run. I bought my shares back in 2020 and I am more than happy with the outcome.
When I published my article, SFM was trading at $150 and was getting close to $180 in late February. Since then, it crashed in a large fashion and is down 50% from the top and 43% from my selling point.
I am happy that I took my large gains and invested them in the two companies mentioned above.
Brookfield
My Brookfield sale had nothing to do with the quality of the company. For me, it is hard to dissect what the company is actually up to.
After the recent run, I decided to sell my shares at $59. Due to the nature of the business, it is very hard to value the business itself and I rather invest my time in companies where I have a better grasp of the business. I might come to regret this at some point in the future but there is only so much available and I believe I can use it in a more sensefull manner.
The stock has been slightly up since, and it is currently being talked about as a potential AI winner thanks to its large investment in power generation and power utilities. I stand by my previous judgment and will continue to look for investments that are less complex than Brookfield.
Best Buys today
Uncle Warren said it best. Stocks sometimes do sell at silly prices. It is our job to
a) find them and
b) act in a meaningful manner.
There is one that sticks out pretty easily. Just like Alphabet and ASML, it starts with the first letter of the Alphabet (no pun intended), and I'm sure you have an idea what I am talking about:
Adobe
You will find my Adobe deep dive here. Make sure to read it to learn more about this fantastic company:
Probably your eyeballs already glimmered at the header. Adobe is a fantastic company that is being perceived as a massive AI loser. Contrary to the public perception, the fundamentals are doing great, and Adobe is partnering with YouTube to bring Premiere Pro to creators. This is how Adobe announced the partnership
The P/E ratio keeps falling and is at its cheapest for the last 10 years. A falling P/E ratio can also indicate a dying company, so we must have a look at the fundamentals.
Does this look like a dying company to you? Revenue, net income, and FCF all reached record levels. Eventually, this contradiction will be resolved, one way or another.
In the meantime, Adobe’s management is using the opportunity and just like the original Ghostbuster uses a magic hoover to suck up shares. Without doing anything, my ownership of Adobe keeps going up. We do live in wonderful times, my friend.
Mark this screenshot of the stock price and come back to it in a couple of months. It is pretty crazy that we are about to reach 2018 levels in terms of the stock price.
Salesforce
This one will not come as a surprise to you if you read my most recent deep dive. Salesforce is still growing and is one of the few companies that actually have something in terms of AI up its sleeve. You will find my deep dive here:
Salesforce is a somewhat similar story to Adobe. The company keeps producing record results, while the stock price is lagging far behind.
Just like Adobe, Salesforce has been busy buying back its shares and is more than offsetting the dilution through newly issued shares. Salesforce also started paying a dividend. While it is still small, it will continue to grow and given today’s chepa price you will have a very decent dividend yield on your purchase price in a couple of years.
Salesforce is back at late 2020 levels, which is crazy, given how strong the business has developed since. I am sure that we will see $300 soon and $350 in the upcoming 12 months. That will give us a very decent return.
This is the end of the free section. If you want to
✅ read the full article and learn about the third best buy for December
✅ have access to all previous articles
or if you
✅ have profited from previous picks
✅ and want to support me for my time and effort
Then, please become a paid subscriber. To all existing paid subscribers: You rock! 🙏
