Friday Four Play: The “All Dressed Chips” Edition
Happy Friday, Great Ones. How’re ya now?
Notso’bad. I’m certainly doing better than automakers right now.
What’s so wrong with automakers, eh?
Automakers … where to start? Well … pitter-patter, let’s get at’er.
Great Ones, we’ve talked about the semiconductor shortage quite a bit this year. It’s a serious problem compounded by COVID-19 shutdowns and a shortage of materials … like, ya know, sand.
Great Stuff Picks is even primed to take advantage of the situation with a slew of semiconductor makers and equipment producers. Click here for a peek at last week’s portfolio update.
Needless to say, the shortage is impacting industries across the board, but few have been hit as hard as automakers. In my opinion, that’s what they get for putting touch screens where touch screens ought not go. (An issue that the Great Stuff team is surprisingly unanimous on…)
How bad is it really? This morning, Ford Motor (NYSE: F) announced that it will idle its Dearborn, Michigan plant due to the chip shortage. This plant makes the F-150 pickup truck and, for those who don’t know, the F-150 is one of Ford’s most popular and profitable vehicles.
There’s no way Ford shuts down F-150 production on a whim or minor inconvenience. Can confirm … this is serious.
But before you laugh and point fingers at Ford … this is industrywide. This morning, Chinese electric vehicle (EV) maker Nio (NYSE: NIO) said that it’s stopping production for five days at its Hefei plant next week. As a result, Nio lowered its first-quarter delivery expectations by 1,000 vehicles.
- General Motors’ (NYSE: GM) San Luis Potosi, Mexico plant has been down since February 8, and its Wentzville, Missouri plant will go quiet for two weeks starting March 29 due to the shortage.
- Honda Motor (NYSE: HMC) suspended production at plants in the U.S. and Canada due to the chip shortage.
- Tesla (Nasdaq: TSLA) warned in its February 10-K filing of a “shortfall of microchip supply,” and the impact is yet unknown.
And that’s just the highlights.
So, Mr. Great Stuff, how do we take advantage of this situation?
Are you daft, man? Why do you think I’ve been talking about chipmakers and sand for the past two months? I mean, I don’t even like sand. It’s coarse and rough and irritating and it gets everywhere.
So, my advice? Go check out my article on sand again — right here — or hit up the Great Stuff Picks portfolio for chipmakers and the companies that support them … like Applied Materials (Nasdaq: AMAT).
Or … here’s a thought: Rising semiconductor demand and materials demand must mean a rebounding U.S. economy, right? Why not broaden your horizons and shoot for the whole shebang? Remake the entire dang industrial might of the country while we’re at it!
Paul Mampilly identified this new trend he calls “ReMade in America.” The world’s biggest companies are making products right here in America, and they’re turning to one company to do it for them.
(Oh, and kudos to any Great Ones who pick up on the Letterkenny references. If someone moved my hometown to Alberta, Canada … you’d get Letterkenny.)
And now for something completely different, here’s your Friday Four Play:
No. 1: Nein Komp
Analysts amaze me. They can be the most tone-deaf, out-of-touch group on Wall Street sometimes. Take today’s Nike (NYSE: NKE) news, for example.
After staying neutral on Nike for two years, Jefferies Analyst Jonathan Komp upgraded the athletic cobbler from neutral to outperform this morning and set a $150 price target. According to Komp, Nike’s 9% decline this year provides “a more compelling entry” point.
A more compelling entry point than two years ago, when Komp went neutral on NKE? Let’s see … two years ago, NKE traded at about $85. Now it’s perched near $131. That’s nearly a 57% gain during the period that Komp was neutral.
But now’s a compelling entry? Now, when Nike faces a boycott in China after it called out Chinese civil rights conflicts with cotton produced in the Xinjian province? I seriously question Komp’s reasoning here.
He calls for a rebound from NKE’s 9% loss due to the Chinese situation. I’m telling you, this issue is far from over … far from rebound territory. Chinese athletic apparel makers are still rallying on the China/Nike spat.
Don’t get me wrong: I agree with Nike here. I applaud its stance and would like to see Nike take it further. However, analysts are crazy if they think this won’t have lasting repercussions for Nike sales in China.
No. 2: In-A-Darden-Da-Vida
Don’t you know that I’m lovin’ … breadsticks?
Restaurant traffic is picking up after the pandemic cratered most of the sector, and Darden Restaurants (NYSE: DRI) is no longer left hanging in the Bahama Breeze of do-or-die delivery.
More garlic-gorgers went out to the Olive Garden parent’s chains than analysts previously expected amid the rolling reopening, leading Darden to drop a double beat in its latest report.
Per-share earnings hit $0.98 and topped expectations for $0.69, while revenue reached $1.73 billion to beat estimates for $1.63 billion.
The perennial “other” choice for indecisive nights out, Olive Garden makes up about half of Darden’s revenue but isn’t rebounding from the pandemic as quickly as LongHorn Steakhouse. Same-store sales for both brands are down 25.8% and 12.6%, respectively.
Maybe steak cravings are stronger than spaghetti hankerings. Maybe more people realized you can make fettuccine alfredo in like … four minutes at home. You tell me.
Either way, much like other restaurateurs, Darden is smitten with that reopening confidence. It expects sales to grow past $2.1 billion this next quarter as vaccinations ramp up and more people eat out.
Darden’s so confident with its post-pandemic bounce back that it’s dishing out wage hikes and a one-time bonus to employees, which is totally better than trying to nick a few extra garlic batons after your shift … or so I hear.
No. 3: WeWord Up
Just … no.
No. 4: Plant Those Airs & Act Real Cool
On a more palatable SPAC platter comes AeroFarms — a vertical-farming company going public through Spring Valley Acquisition (Nasdaq: SV). AeroFarms is trying to take “agriculture to new heights,” which already sells me.
The company uses a data-driven mix of hydroponics tech and LED lighting to create a “specific light recipe” for each type of produce it, well, produces.
It’s plants but … on a new level! Many levels — stacked high with leafy greens and mini aeroponics misters!
With vertical farming comes the usual “pie in the sky” optimism, and at this point, I half-enjoy how much corporate lingo these startups keep squeezing in: “Our proprietary agSTACK farm system is the next-generation architecture for scalable industrial internet of things for continuous monitoring and plant optimizing.”
So … smart plants. But not just smart plants.
If you ask AeroFarms, all that data, research and plant-connectivity is enough to squeeze up to 390 times productivity per acre of land when compared with traditional field farming. The Ol’ Farmer’s Almanac has nothing on these botanical bros.
Now, if the company could create local farming at a commercial scale year-round as it plans, this would revolutionize farming … to the extent that AeroFarms is able to grow with it.
Personally? I appreciate the innovation here, and it’s a helluva lot more interesting than yet another electric vehicle SPAC. The food supply chain is all kinds of funky — even before the pandemic — but this isn’t a food waste e-zine so…
Until AeroFarms really blossoms, or until the tech gets more widely available, vertical farming will probably remain in some niche corners of the general plant-producing populace.
Are you reeferring to … them weed growers? Will aeroponic chronic replace hydroponics?
I mean, AeroFarms is firmly in the food-growing biz … for right now, but I can see the potential to branch out. Honestly, if AeroFarms just focused on the tech side of its business and sold those capabilities out to individual vertical farms … it might be a better growth path forward than actually upkeeping said farms.
When You’re Here, You’re A Great One
Thanks for joining me ‘round the virtual dinner table for another week of stock shenanigans — I swear, the salad and breadsticks gotta be here soon…
Whatever you do this weekend — whether you’re sleuthing out new stocks to trade or airing out your vertical herb garden — have a Great one! And be sure to tell us all about it, won’t you? Send your thoughts, rants, raves and market magic our way!
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Until next time, stay Great!
Editor, Great Stuff