Date: February 21, 2024

Nvidia, Nvidia, Nvidia, Apple and Fox Business

First, I am very excited to join my friend and the most dapper man on TV, Charles Payne, on Fox Business’ Making Money likely between 2:05pm and 2:30pm today.

I am old enough to remember when the stock market was obsessed with GE’s earnings. It was a huge market mover. Everyone opined. Networks lined up to have CEO Jack Welch join them. Then GE fell out of favor. The market then became obsessed with Apple’s earnings. Everyone followed the stock. Steve Jobs was surly, aloof and difficult. But the networks still begged to get him on. Tim Cook is a softer and gentler ruler. While the market hasn’t totally moved on from Apple, it is no longer obsessed with Apple as the standard bearer.

And speaking of Apple, it has been behaving poorly. No one on earth can argue any different. The market has given us many opportunities to do some pruning and that’s what good portfolio managers have been doing. If you originally bought a 5% position in your portfolio and Apple rose so much that the stock became a 7.5% position then you should have sold some. How much depends on you. I like to sell a little and then some more and more, but ever go below my original 5% position unless something changed in the stock.

Anyone want to guess what stock is the new, shiny car that everyone wants and is obsessed over? Come on, guess. I’ll give you a minute.

The stock below isn’t it, but clearly there is some obsession and certainly a parabolic move. It’s Super Micro which was $100 last April and almost $1100 two days ago. Not a bad move. Granted, I have only been doing this for 35 years and I still have a lot to learn, but parabolic melt ups like this never, ever end well. Sorry. They don’t. They also don’t see moderated gains and gentler uptrend. Um, no.

In two days the stock went from almost $1100 to $700 intra-day. If you think that’s normal behavior, you’re in the wrong business. A month ago the stock traded less than 5 million shares a day. Over the past month the stock has been trading 15-20 million shares a day. This kind of behavior begs a peak in the stock without warning. Notice that I didn’t say it was THE peak, just “a” peak. I don’t know how important $1100 was just yet.

My point in all this is that if you’re trading stocks like this, remember that trees don’t grow to the sky. Be prudent. Manage your position. Take pieces off the table into strength. Don’t wait for the stock to collapse back to $400, get fed up and walk away.

Getting back to the topic at hand, I didn’t think I would get sidetracked for so long. Sorry. By now, I am sure you guessed that Nvidia is the latest market obsession. It’s ubiquitous. I remember when my middle guy told me about AMD’s newest chips that were way better than Intel’s. The stock was in the low teens and he wanted to buy it. I tried explaining that there was more to investing. He bought some. I shook my head. The stock went to almost $200. He was right and I was wrong.

During the pandemic, my youngest son was all abut Nvidia’s GPUs. I had to Google what a GPU was. He was buying and selling them online. I shook my head. I had no idea about these things. However, this time I didn’t scoff at the stock. I did some work and we bought it in Unloved Gems. We still own it today. However, along the way we sold pieces when the stock’s strength increased its weighting in the portfolio to too large a number. Regardless of whether the stock went up or down from there, that is sound and responsible portfolio management. We also bought more stock into pullbacks. In other words, we prune and plant highly volatile stocks where we get things right which is not always the case.

Nvidia reports earnings tonight. The market is expecting eye popping numbers. Every pundit has been discussing it. Given the breathtaking rally, it would be shocking if the report was not stupendous. However, the real story is the price of the stock. From $475 to almost $750 in 2024 alone. That’s hair raising. It is wild. It is crazy. It is not Dotcom’esque.

However, look at the volume on the bottom of the chart. It looks nothing like SMCI which was a parabolic melt up. The volume in Nvidia seems somewhat orderly. That won’t be the case tomorrow.

In the last two days, Nvidia is down about 10% going into earnings. Some would argue that people know something. Maybe. I would argue that after a meteoric rise, some traders want to book some gains and not be exposed on what is shaping up to be a volatile day on Thursday. Had Nvidia not pulled back into earnings, I would have said it’s a sale either before the number or on any gap up on the news.

Now I feel somewhat the opposite. I think for the super nimble and very aggressive, it is a buy for a quick trade regardless of the earnings and outcome. If I am wrong, then I stop out this week. If I am right then I sell into strength. The key is that you don’t buy more after the huge surge and then hold on for dear life regardless. That’s not prudent portfolio management.


Finally, stocks are in mild pullback mode, exactly what I have been writing about. Nothing big. Nothing serious. And there may even be one more rally to new highs. However, the bulk of Q1 strength should be in the books.

On Friday we bought levered S&P 500 and more TLT. We sold PCY and EMB. On Tuesday we bought FDEV. We sold AIG.


Paul Schatz, President, Heritage Capital