Dumping losers to buy Tesla or Palantir seems simple. It isn’t.
The days always start the same way. “So Jeff,” I say, “Time to buy more DuPont ? What do you think of the GE Healthcare here? Any reason to buy more Stanley Black & Decker ? Will Best Buy’s dividend yield support its weight while we wait for an AI personal computer worth buying?” Discussions with Jeff Marks, director of portfolio analysis for the CNBC Investing Club, that might as well be from yesterday or the day before that. What to do with the losers? They occupy too much of your brain — and if you aren’t careful, you might as well let them pay cranial rent. It gets worse. When you are a real second guesser, a person who lets the market wear you down, you say, “OK, enough, let’s just go buy some Tesla .” Which is what I said Thursday to David Faber, my co-host of “Squawk on the Street,” when the electric vehicle stock was down $25 per share. I told him, not in hubris, but in total exasperation, that people should just go buy it, because it will be right back, tomorrow. It wasn’t. It was up more. Up $31. Why? Because it is Tesla stupid, it doesn’t need a reason. Tesla is an amalgam: a way to play Trumpian largesse, presuming there is some; a way to play full self-driving cars because the Elon Musk company has better tech than Alphabet ‘s Waymo by anyone’s admission in that industry; or a way to get credits for stuff we haven’t even thought about. Anything but actual EPS, earnings per share. Or Palantir. Let’s just go buy some Palantir . You know those buyers are going to come back, too. That was spoken in Thursday and the stock must have heard because it was up almost $5 and continuing its journey to $100 per share, the one we all know is going to happen but the one we have no basis in onboarding. Oh sure, let’s just trot out the old Rule of 40, the enterprise software addendum that allows us to buy companies with a combined growth rate and operating margin rate north of 40. Palantir had revenue growth rate of 27% and operating margin of 37%. If we stick some on the sheets it would violate everything we do for my Charitable Trust, the portfolio we use for the Club. It would be more like something we did at my old hedge fund where caprice was the doctrine. It’s where we bought things just to stop the idiotic ongoing remonstrations, we had for missing the “obvious.” For Palantir, a 64 on the Rule of 40, let us buy it as high as we want and feel good about it. Right? Or is there, somehow, more to the process. I can’t find anything that makes us want to buy this stock of a software data analytics company at ever higher prices since it reported earnings Nov. 4. Yes, Tesla, run by Musk, the charismatic master of the universe, gets all the love regardless of the tally of cars actually sold. Those sales reports seem pretty atavistic to me. They have relevance only with the low multiple players trapped by them and the unions: Ford and GM . Palantir gets what love is left because our enemies are powerful, and we need a second Pentagon, not the old fashioned stuffy one with lots of brass on people’s shoulders, but a brand new one run by “wise” guys who can run rings around the Chinese and save us a lot of money. The best things about these two stocks? They are being bought for what they are not yet. Tesla is being bought because it employs a training brain based on the DOJO supercomputer, the secret weapon of Tesla. By using artificial intelligence chips from Club name Nvidia , the EV giant can create neural networks based on vast amounts of video data. It is being bought because once its AI models are trained, these vehicles can make instant and correct real-time decisions. Then, there is the data engine that instantly refines and gets better and better. Waymo doesn’t have that. Waymo has people watching cameras. It is out of date already, or at least the Tesla buyers think so. Palantir, run by Alex Karp, a lesser-known master of the universe, makes so much sense to invest in because we really know nothing about it by design. That means we aren’t constrained by what we pay for it. “Confusion is purposeful,” I heard Karp say in an interview not that long ago about Palantir. The company is “shrouded,” and it is “transformative.” It offers hard analysis to supplant what he calls “poetry” or software designed to do nothing well except be sold. I encapsulate Palantir as a commercial software and defense analytics company with a procurement edge that does well because everyone else is idiotic and stupid. It’s got a ring of truth to it even as it is wildly politically incorrect. But there is value: Did Palantir’s software find Osama Bin Laden? It played a part? Did Planatir’s Warp Speed solve Covid-19? You betcha? Does his software help manufacturing get better? Sure. Would Palantir’s analytics enable our government to stop last week’s tragedy in New Orleans? Of course — if we were less politically correct and self-destructive because of liberal ideology. All the stuff that avoids traditional analysis but has become ubiquitous. Hidden in plain sight. Why this dissertation on the obviously brilliant minds of Tesla and Palantir that produce products as a byproduct of their own genius? Precisely because they are neither poetic nor prosaic. That they can’t be understood by mortals. They are a heck of lot more investable than Stanley Black & Decker or DuPont or GE Healthcare. Those are bound by the four walls of Wall Street convention. Does anyone really care whether Tesla beats and raises? Obviously not, or the stock would be down on the sales we learned about Friday. That’s when Tesla reported its first-ever drop in annual deliveries . Should Palantir’s run at $100 be stopped by sellers? Who cares? Karp knows how to hit targets 250 yards away with a pistol while reading Goethe aloud and knowing how to stop October 7 and beat the Russians in Ukraine if only he were really allowed to while at the same time rationalizing the British healthcare system and crushing it while solving complex errors and misinformation that plague our hospitals. He’s all of that and more and he’s only one of the forces, spawned by the all-knowing venture capitalist Peter Thiel, the ridiculously investible Midas of our age. On the one hand, we have two stocks that are worth owning, but only on ethos not on earnings. On the other hand, we have stocks that are connected to companies that aren’t doing as well as they should. But even if they did better, they would still be nothing more than sellers of hard goods, not of obscurity and obfuscation. Why are owning Tesla and Palantir so profitable? Because they are stocks created for this moment, that’s why. Tesla is a reason why Nvidia is so important because it actually knows how to use the twin trends of accelerated computing and large language models. Plus, with soon-to-be president again Donald Trump , the interstate highway system becomes the preferred way to leapfrog Waymo, which barely boards enough takers to justify more than a loss-making asterisk in Club name Alphabet’s quarter. Palantir? Because in a frightening world where bad guys rule, Palantir is the clever, good genius that isn’t worried about whether you think it is moral or not because what does morality have to do with EPS especially when you are right. So, what do you do? I am constrained — some would say hidebound — by traditional analysis. I would want to run a fund that just had three things: Tesla, Palantir, and bitcoin . All three require nothing more than a belief that if you own them, you are a superior investor with a superior state of mind. It’s not alchemy so much as three instruments that know how to go higher because they have shareholders and owners who can recognize value and you can’t. You get to be an acolyte of genius because you can’t be genius yourself. You aren’t as smart as these operators and, in the case of bitcoin, promoters. It’s a perfectly circular bit of reasoning: They go up, you moron, because they are supposed to go up. And if you want to lose the sobriquet idiot just buy them, preferably all three. And, what the heck is the matter of being sui generis anyway? We come in and talk and write in terms of convention that can help explain to you why things should go up. The investors in Palantir and Tesla choose these two because how can you not? You buy bitcoin because without bitcoin you aren’t an investor. It’s all so ridiculously airtight as to defy everything else because everything else is pedestrian. You don’t want to be pedestrian because that makes you a pathetic parody of a real investor. So, is my whole rap hubris? Or a poverty of intellectual thinking? Nah, I just want to make money. And, the money can be made by buying Palantir and Tesla and some bitcoin and then trying to justify these moves by saying they are no more moves than the messianic trips to a proverbial Mecca or Mars or the neural networks of Musk or Karp or fellow traveler Michael “always right” Saylor from Microstrategy , which is a mockery of a software company that own tons of bitcoin. Excuse me for branching out from professionalism. If you believe in Palantir and Tesla, you know that professionalism is just another word for amateurism, and these two companies are the keys to show that you aren’t in either the professional or amateur ratholes that are simply different wings of the same intellectual prison of the mind. Is the antidote to owning Stanley Black & Decker or DuPont or GE Healthcare positions in Tesla and Palantir. Yes, theoretically. But really, no, because I still need something that says there’s value here other than hubris and my own intellectual shortfalls and inadequacies. Oh, the joy of not caring about anything other than the output of two eccentric geniuses right alongside what passed for rigor before they came along. Investing in modern day Einsteins and Edisons with some Oppenheimer thrown in. Forget EPS and the 10-year Treasury yield . The heck with the federal deficit. Just go buy Tesla and Palantir along with bitcoin to complete the mosaic of trust in nothing you can see or feel. Or be imprisoned by what everyone else is worried about. Hmmm. What would happen if we did it? We’d have to be something else. But maybe something else can be defended because it goes up. Investing in the solipsism of Musk and Karp? There are worse things to do. Especially because performance comes in all kinds of mysteries, the shrouded and the obvious, or, perhaps, both. (Jim Cramer’s Charitable Trust is long DD, GEHC, SWK, NVDA, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
The New York Stock Exchange welcomes Dewalt, on May 14, 2024, in celebration of its 100th anniversary. To honor the occasion, the CEO of parent company Stanley Black & Decker rings the opening bell.
NYSE
The days always start the same way.
“So Jeff,” I say, “Time to buy more DuPont? What do you think of the GE Healthcare here? Any reason to buy more Stanley Black & Decker? Will Best Buy’s dividend yield support its weight while we wait for an AI personal computer worth buying?”
Discussions with Jeff Marks, director of portfolio analysis for the CNBC Investing Club, that might as well be from yesterday or the day before that. What to do with the losers? They occupy too much of your brain — and if you aren’t careful, you might as well let them pay cranial rent.