NVDA’s Best Just Wasn’t Good Enough By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - Earnings are one thing, forecasts are another…
- Why we should keep watch for seasonal volatility…
- And consider a bigger position in gold…
- The first non-tech trillion-dollar milestone…
- A long-term portfolio for a Republican victory…
Nvidia investors made the worst of a good situation… Nvidia’s (NVDA) earnings report after the close on Wednesday may prove to be one of the most widely viewed events in stock-market history. It may well be the financial equivalent of the series finale of Seinfeld. You understand why. The company became the posterchild of the rip-roaring bull market that emerged from the painful 2022 bear, on the promise its semiconductors would power the AI revolution. Its earnings grew at an obscene, almost exponential pace as investors took this promise for fact. And each report would come not just with a surprise in how much it made, but an upward revision to how much it expects to make. The expectations grew at, somehow, an even faster pace. And inevitably, we’ve run into trouble. Shareholders didn’t get quite everything they wanted on Wednesday evening. NVDA did indeed beat on revenue ($30.04 billion against $28.73 billion expected) and earnings per share ($0.68 against $0.64 expected). Revenue was up more than 122% from the same time last year, an incredible feat for what was then an already large company. NVDA also announced a $50 billion share buyback. And it revised its revenue forecast to a number higher than analysts expected. Then the stock fell anyway – as much as -8.4% in post-market trading after the report. So what went so wrong? Frankly, it seems investors are simply spoiled by the past year’s fortunes. The problem was that, while NVDA’s numbers all beat analysts’ expectations, it didn’t completely embarrass them – which is what investors have come to expect. Now that NVDA is a year out from its initial profit explosion, the comparisons are no longer so mind-blowingly large. This chart from Reuters shows all we need to know: 
NVDA’s forecasting revenue growth of under 100% for next quarter is, seemingly, unacceptable. Even though the forecast ($35.2 billion) beat the average expectations of $31.9 billion, it didn’t beat the most aggressive expectations of $37.9 billion… and was thus a “disappointment.” If you ask us, Wall Street is begging for a reason to sell… And a big reason why is the coming seasonal downtrend. Today is the last trading day of August. Come market open Tuesday, we’ll be entering one of the worst periods for stock-market returns all year. And that’s got institutional investors itching to pull the trigger and sell. Let’s check in on the seasonality chart of the CBOE Volatility Index (VIX) – the market’s fear gauge. As we’ve covered tirelessly the past couple months, election years tend to see large surges in volatility between the end of August and the end of October. From next Tuesday through the peak, the VIX sees an average rise of 44.84%… and has been positive for seven out of the past eight election cycles: 
The reason why is simple: Investors hate uncertainty. And election years – especially this one, with the two sides about as opposed on policy as they’ve ever been – are rife with uncertainty. We’ll continue preaching caution here in TradeSmith Daily. Because we’re not about to argue with this data. But this doesn’t mean you should sell off your portfolio and batten down the hatches. If you’re in a position to, just consider trimming some big wins and holding a little bit more cash; that way, you’re in good position to take advantage of lower prices should they come. And while you’re at it, hold some gold next month… While September is a big month for volatility, it’s also a big month for shiny yellow rocks. Gold has already had a great year, posting new all-time highs and generally sticking to a nice uptrend. If history is any guide, that should continue through about Sept. 22, as we see on this seasonality chart of the SPDR Gold Shares ETF (GLD): 
Over the last five election cycles, gold has acted as a haven during the late-summer volatility. From Sept. 3 to the peak of seasonality on Sept. 22, gold shows an average return of 4.29% and is positive 75% of the time. Let’s look at the chart of the SPDR S&P 500 ETF (SPY) in comparison. Stocks, meanwhile, return an average of -1.46% through the full month of September… with the index being positive just 57% of the time: 
All in all, we could be looking at a flat to slightly negative month in stock prices and a better month for risk-off hedges like gold. Consider some repositioning today on any adverse strength. A quick congrats to the first non-tech trillion-dollar company… Berkshire Hathaway crossed a $1 trillion market cap on Thursday, the first company to do so outside of the tech sector. Ironically, it did this after dumping close to half of its shares in Apple (AAPL) … the first $1 trillion market cap company of the modern era. It’s well deserved, as Berkshire continues to be a monster wealth generator, putting up $29.8 billion in free cash flow at the end of 2024, a year-over-year quarterly growth of over 36%. And compared to the other six companies in the $1 Trillion Club, BRK.B stock is also the cheapest, and by a wide margin. Berkshire’s P/E ratio is just under 15; the next cheapest is Google (GOOGL), at 23.4. Our own algorithms give Berkshire a Business Quality Score of 99 out of 100, about as high as one can get. It also gets this with exceptionally low volatility, earning a VQ% of just 13.39%. The trillion-dollar milestone was a huge achievement when AAPL first hit it. And while it’s still uncommon… Berkshire’s break is a sign that this figure will be far more common in the future. The election is coming up… And according to the Freeport Society’s own Charles Sizemore, you need to prepare for an election shock few in the mainstream media are counting on. It doesn’t take much to read between the lines here. The media has, in short order, already crowned its victor in Vice President Kamala Harris. But Charles thinks the more likely outcome is for a 2016 repeat – where Donald Trump, despite polls showing otherwise, wrests back the White House to everyone’s surprise. Charles’ reasoning for why this could happen is simple, and useful to understand, as you can see in his free presentation right here. But making the right call on the election outcome is just one piece of the puzzle. To truly make the most of it, you need to prepare your financial life as well. Trump’s and Harris’ policy positions are different in a few key, investable ways. And while most investors are looking towards the latter becoming reality, Charles has developed a model portfolio for following Trump’s “Agenda 47.” Here’s his brand-new research that delves much more deeply into this concept. And be sure to tune in tomorrow, when I’ll share a brand-new interview with Charles where he talks about the state that will decide the election – he believes it’ll go to the Republicans. To your health and wealth,  Michael Salvatore
Editor, TradeSmith | 
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