Midweek Update: Risk to Reward
Where I see the opportunities: Chemicals & Metals & A few Individual Names
Hi all,
This won’t be an in-depth article…but it will be a 5-minute read where I hopefully give you a very good insight into where I think the market opportunities currently sit.
I’m writing this post the hyperscaler reports where only GOOGL is up after hours. META, AMZN, and MSFT are all down between 2.5-6%.
Oil is trending a bit higher again, airline stocks look like they’re heading down in the near term, and SPY looks like it needs a little cooling off.
This is not a bearish argument or anything saying we are near the top of the cycle. I don’t think we are. It’s just an honest assessment that we moved a lot in quite a short amount of time, and that often is a sign that a cooling off period is needed.
Look at my plays today for example. LMND reported very strongly…and closed down 14%. I think a large part of this move was algo driven but the story remains.
Before we get into the ideas for the week, I just wanted to highlight the database I’m currently building which is currently in beta testing and will be scheduled for full release in May.
This is a fully functional web-app / database / research website all in one go. You also get:
Daily market commentary
My personal portfolio and watchlist
Weekly thematic commentary
New Ideas
Weekly Videos
All for just $24 a month (or $240 a year).
I am nearing the end of my beta testing now. I do not have a specific release date but I’m working as quickly as I can to make sure this product is one of the best on the market. I hope for the release to be in early May.
Here’s where I think the opportunities lie right now:
Paid subs should know that I am getting quite bullish on certain critical metals. I have been buying scandium regularly for weeks now. I’m up ~22% on that. I’ve been buying copper now for months. I’m still flat on that position.
And more recently I started initiating buys into silver. You can see why I’ve been buying silver here (it also tells you the 3 silver stocks I've been buying).
If you’re not reading that article…let me do a very brief silver summary here:
Silver is no longer just a monetary metal and inflation hedge. That framing misses the bigger picture entirely.
The bull case for silver is that it sits at the heart of the AI trade and I think the metals/materials/chemicals are next in line for a bull market.
Silver has the highest electrical conductivity of any element on earth, making it a critical metal inside the connectors, switches, and advanced semiconductor packaging that power both data centers and edge AI devices like robotics and drones.
As the AI buildout then shifts from brute force training to inference at scale, efficiency and energy loss becomes the advantage. And that’s precisely where silvers properties become indispensable.
Critically, silvers cost as a percentage of the total AI buildout is completely immaterial, meaning even a significant percentage increase won’t slow demand.
On the supply side, the picture was already broken even before AI entered the equation. The market has been in a deficit for 4 consecutive years because silver essentially is only mined as a byproduct of other metals making it impossible for miners to simply ramp output.
Yet despite this backup, silver miners remain historically undervalued - PAAS for example has seen cash from operations frow 196% and margins expand from 2.2% to 31.7% yet trades at just 12x forward earnings as if the market expects silver prices to collapse. The gap between miner valuations and the underlying commodity price represents what looks like a significant opportunity to me.
Metals and mining are a big opportunity today I think.
The Other Big Opportunity is With The Chemicals:
Paid subs will know that I have not bought into a chemicals play yet, but I’ve been researching them heavily to understand exactly where each stock lies in the supply chain.
I’ll have a separate piece out on the chemicals layer soon (within the next week) so make sure you’re subscribed here so you get that for free.
The core argument behind chemicals is that the chemicals and purification systems are extremely in demand for the ongoing AI trade. It’s the “hidden layer” as I like to think about it.
As AI drives demand for more complex chip architecture (HBM memory, 3D packaging, 2nm logic etc), manufacturing tolerances tighten, and the risk of yield destroying contamination grows.
This is where companies like Entegris (ENTG) come in.
Ideas For the Rest of the Week:
Here’s some charts I’m monitoring closely outside of the thematics above.
