Disney stock, crypto contagion, and autonomous vehicles...
TradeSmith Snippets for Dec. 2
Happy Friday, and welcome to the newest issue of TradeSmith Snippets.
We have another action-packed issue today, where we'll be covering:
What to make of Walt Disney Co. (DIS) after its old CEO became its new CEO.
A crypto lender's bankruptcy and what to remember each time someone says cryptocurrencies are dead.
Two companies in China joining forces to capitalize on the autonomous vehicle market, which is expected to grow in value by 683% over the next two years.
Bob Iger, who served as Disney's CEO from 2005 to 2020 and then as Executive Chairman until his retirement in 2021, has returned to Disney as the CEO, replacing Bob Chapek.
The Breakdown
Iger told employees during a town hall meeting that:
He plans to keep a hiring freeze in place.
The company should start "chasing profitability" instead of "chasing subs with aggressive marketing and aggressive spend on content."
His No. 1 priority is creativity.
From theme park guests being disappointed to the recent box office flop of Disney's animated film "Strange World," which cost $180 million to make and only brought in $24 million over a five-day period, many have questioned if Disney has lost its way.
Iger is being brought back to see if he can reignite the "magic."
The TradeSmith Takeaway
Looking to what's next, Disney's new CEO wants the company to focus on creativity and on making its streaming business profitable instead of focusing on just adding subscribers.
"It's not about how much we create; it's about how great the things are that we do create," Iger said.
What this means is that if Disney creates better films, it will naturally draw in people to go to the theaters and subscribe to — and stay subscribed to — its streaming service.
Iger has a successful track record at the House of Mouse, acquiring the content libraries of Marvel, Pixar, and LucasFilm, which gave Disney "Avengers: Endgame," "Toy Story," and "Return of the Jedi."
But with the stock price down nearly 40% since the start of the year, if Iger can perform a turnaround, it won't happen overnight.
And TradeSmith's proprietary tools are saying that this is a stock more suited to be on a watchlist until it can trigger an Entry Signal.
Company
Health Indicator
Volatility Quotient (VQ)
Risk
Walt Disney Co.
Red Zone
27.03%
Medium
Snippet No. 2: Crypto Contagion
Overview
Cryptocurrency lender BlockFi filed for bankruptcy on Nov. 28, citing "significant exposure" to the exchange FTX and FTX's sister hedge fund, Alameda.
The Breakdown
BlockFi made loans to customers using crypto assets as collateral, but with falling crypto prices in the summer, it had to turn to FTX CEO Sam Bankman-Fried for a $400 million lifeline.
BlockFi has more than 10,000 creditors, and one of its largest is owed $729 million.
The New Jersey-based cryptocurrency lender has roughly $257 million in cash on hand.
The TradeSmith Takeaway
This news has piled onto a rough year for crypto investors, with the price of Bitcoin (BTC) down 64% as of this writing.
While many like to write an obituary for crypto after events like this, Senior Crypto Analyst Joe Shew wants you to keep something in mind: Since 2010, news stories have declared that Bitcoin is dead 467 times, according to 99Bitcoins.com.
Bitcoin was declared dead at twenty-three cents in 2010.
It was declared dead at $281 in 2015.
It was declared dead at $8,700 in 2020.
And it was declared dead in 2022 at $16,000.
From all of that, one of Joe's most important insights is to watch what people are doing in the crypto space, not what they are saying.
Chinese tech giant Tencent Holdings Ltd. (TCEHY) and electric vehicle maker Nio Inc. (NIO) are joining forces to work on autonomous driving and high-definition mapping.
The Breakdown
Tencent will provide Nio with its cloud computing infrastructure for data storage, which will allow Nio to train cars for autonomous driving.
The companies will also work together on creating high-precision mapping systems for drivers.
This partnership can help Nio gain a competitive edge over its rivals.
For Tencent, which is primarily in the video game business and has previously invested in Nio, providing this technology infrastructure helps lessen its dependence on video game revenue.
The TradeSmith Takeaway
The global autonomous vehicle market was valued at $25.14 billion in 2021, and that number is expected to skyrocket 683% to $196.97 billion by 2030.
Having said that, our Health Indicator says TCEHY and NIO are not stocks to buy.
Company
Health Indicator
Volatility Quotient (VQ)
Risk
Nio Inc.
Red Zone
69.47%
Sky-High
Tencent Holdings Ltd.
Red Zone
37.01%
High
Fortunately, there are companies worth owning that are fueling the increase in car purchases in the electric vehicle and autonomous vehicle markets.
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One company is in our Green Zone, and although the other recently entered our Yellow Zone, the Relative Strength Index indicator suggests that the stock could be oversold and that now could be a good time to consider an investment.
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Best of TradeSmith
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TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results.
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