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Buy Signal for NDXT, an Unweighted US Technology Index

November 30, 2023

This is a long term chart based on 6m candlesticks but it has just given a powerful, and rare, buy signal. They come about every three years, at least on this chart. I have noticed that 6m candlestick moving average buy signals tend to coincide with Coppock buy signals, reinforcing the bull case.

What is exciting this time around is that we have a huge ‘something new’ in the form of Generative AI, which could be the killer app for the whole technology revolution. How WOW is that!

The excitement is so new that people have not really begun to react. AI is certainly a thing in the stock market but nowhere near what it could become. NDXT is unweighted so each stock counts the same which means, unlike the Nasdaq 100 index, it is not dominated by the mega caps and gives a picture of more broadly based strength.

My impression is that every man and his dog is launching an AI-based start-up in the US and maybe elsewhere as well. At some point this effect is going to hit the stock market. People think this is giving an artificial (pun intended) boost to Nvidia demand but if AI is the real deal why should it go away.

A chart breakout + ‘something’ new has explosive potential in the stock market so I suspect the scene is being set for fireworks.

The chart for the S&P 500 also looks amazing. What we have now is the biggest period of consolidation since 2008-10 and this has combined with, indeed was triggered by, the sharpest rise in long bond yields in history. If bond yields are now headed lower that looks exciting too.

Last but not least we have politics. We have this extraordinary Ayn Rand-style libertarian guy who has become president of Argentina. What a country to test out some real, red-blooded capitalism. If this chain-saw wielding guy means what he says and it is going to be red cards for most of the nation’s bureaucrats and monetary policy outsourced to the US Federal Reserve (who can hardly fail to improve on the efforts of the local central bank led by Mr Invisible and his deputies, the two Doormats) this could have global implications.

I have been saying for years that most bureaucrats and most regulations do more harm than good. If. more government could solve our problems we would be in Paradise, celebrating with champagne and blowing kisses to angels, but we are not so maybe it is time to try something different as in let’s give Adam Smith a chance.

Remember my advice, Rishi, go into the next election promising to scrap a major tax class every year and see Sir Keir squirm. Give us a taster by letting Inheritance Tax go with the next budget and when you have finished all those tax cuts maybe we won’t even need budgets any more. Think more W.E. Gladstone, less R.A.Butler. How will it be funded? By putting half a million government pen pushers to work in the private sector and taking an axe to benefits which are now received by over a third of the UK population. Back in the day people used to work to earn their daily crust and work is good for morale too.

I am going through my benchmarks and the first individual stock on the list is Apple so let us have a look at them.

This is a great chart for a stock which packs a $3 trillion punch. From 1980 to 2005 we have a MASSIVE 25 year consolidation. After that it is a succession of buy signals which have helped the shares rise over 800-fold since 2003.

Apple has established a huge global footprint (over 2bn active devices worldwide), the world’s most valuable brand, an increasingly powerful services business (annualised services revenue fast approaching $100bn a year) and all powered by a flood of cash and an innovation machine.

Do we really need to know what Apple is going to do next. What we can be sure of is that they will do something and it will be exciting. And now we have a chance to buy them as they head higher from nearly three years of sideways trading. Those opportunities don’t come along very often.

Apple is a BEAST of a company.

Today, Apple is reporting revenue of $89.5bn for the September quarter. We achieved an all-time revenue record in India, as well as September quarter records in several countries, including Brazil, Canada, France, Indonesia, Mexico, the Philippines, Saudi Arabia, Turkey, the UAE, Vietnam and more.

iPhone revenue came in ahead of our expectations, setting a September quarter record, as well as quarterly records in many markets, including China mainland, Latin America, the Middle-East, South Asia and an all-time record in India. In services, we set an all-time revenue record with double-digit growth and ahead of our expectations.

Tim Cook, CEO, Apple, Q4 2023, 2 November 2023

As usual for stocks in the IP portfolio innovation is key.

We’re continuing to innovate at a tremendous pace. And our industry-leading lineup of personal computers just got even better. The new MacBook Pro lineup brings our most advanced technology to our Pro users, while iMac, the world’s best-selling all-in-one, just got faster and more capable. And according to the latest data from Student Monitor, nearly two out of three college students chose a Mac. We couldn’t be more excited about the future.

Tim Cook, CEO, Apple, Q4 2023, 2 November 2023

In the process the company is building an incredible ecosystem.

Apple’s unique ecosystem of hardware, software, and services delivers an unparalleled user experience. During the quarter, we also had the chance to introduce a range of exciting new updates to our software that will allow users to get even more out of their devices. Whether it’s personalized contact posters and new face time features in iOS 17, new tools for users to make their experience their own in macOS Sonoma and iPadOS 17, or a bold new look in watchOS 10 that lets you see and do more, faster than ever, Apple is delivering an even better, richer experience that users are loving.

Tim Cook, CEO, Apple, Q4 2023, 2 November 2023

No wonder Berkshire Hathaway is turning into an Apple ETF. What better home could there be for their money.

These guys are making the future.

Apple is always looking forward, driven in equal measure by a sense of possibility and a deep belief in our purpose. We’re motivated by the meaningful difference we can make for our customers and keenly determined to push the limits of technology even further. And that’s why I’m so confident that Apple’s future is bright.

Tim Cook, CEO, Apple, Q4 2023, 2 November 2023

Talk is cheap but Apple has done enough to be listened to with a certain respect. I can’t help feeling that Apple has come very close to being the famous licence to print money which Lord Thomson described commercial TV as way back in the day.

Strategy – Do What Eve Made Adam Do

The implication of the whole fig leaves episode is that after Eve persuaded Adam to take a bite from the Apple he wanted to see her naked whereas before he wasn’t bothered. Some people might think that made life more exciting and it gave her a powerful bargaining chip. The rest is History or maybe Her Story.

Meanwhile I am intrigued by signs of a spreading idealogical shift to the right away from the soft centre which has dominated politics for so long. As Mel Gibson enunciated it so well in the film Braveheart – Freedom!!!

Freedom!!!

If true this could have dramatic implications for global growth and the performance of stock markets, especially in the US. There is much wrong with Donald Trump for sure, who has the bien pensants shuddering, hands clasped in horror, but at least the guy is a capitalist and stock markets rather like guys like that.

This brings to mind MercadoLibre. If South America is finally to embrace red-blooded capitalism they could be major beneficiaries and the shares are already racing higher with a golden cross on the moving averages.

Looks Like a Massive ‘Something New’

MercadoLibre has what looks like an important ‘something new’.

During Q3, MercadoLibre we launched our loyalty program as MELI Mas [Mas is More in Spanish], an important step to enhance our loyalty value proposition with a simpler structure, more compelling shipping benefits and premium video and audio content. With MELI Mas we now have a brand in which we can invest to raise awareness and increase engagement with MELI’s ecosystem. MELI Mas gives users access to a world-class content bundle. Free shipping above R$29 and 12 months with free music from Deezer among other perks.

Our content bundle for MELI Mas users includes Disney Plus and Star Plus and special discounts to subscribe to HBO Max, Paramount Plus, and Lionsgate Plus. Through Deezer, users are able to access a complete library of audio content and music, a service that we think users will be able to enjoy on a day-to-day basis. Users see the MELI Mas offering throughout our apps and website, where the value proposition becomes clear as they shop with us, with the MELI Mas logo clearly highlighted, building the brand of the loyalty program. The shipping benefits are key to the program.

MELI Mas users get free shipping on millions of items above R$29, versus the standard free shipping threshold of R$79, if the product is in one of our fulfillment centres and chosen for delivery on the user’s MELI delivery day. As consumers look for products on MercadoLibre, they will see the MELI Mas logo on the products that are eligible and they can filter their search for MELI Mas items. As a new delivery option, loyalty users can choose a specific day of the week to receive all of their packages. This solution enables us to sell and deliver lower value items with the great experience that MELI is known for, while maintaining cost discipline in our P&L.

Users still have the option for same and next day delivery if they want their item delivered quickly, if they are willing to pay for shipping on items below the free shipping threshold, or for free for items above the threshold. To access all of these benefits, users can subscribe or earn their way in organically by engaging with MELI’s ecosystem. Subscribing is quick and easy, and users can choose between a credit card, automatic charge from their MercadoLibre account, or a monthly invoice. So the subscription is accessible for different types of users.

We’re able to offer buyers the full benefits bundle for just the equivalent of two to three paid shipping charges. For users who earn points by shopping with MercadoLibre to get the MELI Mas membership, our credit card offers double points, enabling users to reach the loyalty status more quickly. In August, we launched a big marketing campaign to raise awareness of the program. And initial results give us confidence that MELI Mas complements our value proposition, bringing extensive benefits to even more MercadoLibre users.

We’re confident in the program’s long-term potential because, as always, at MercadoLibre, the best is yet to come.

Richard Cathcart, CEO, MercadoLibre, Q3 2023, 1 November 2023

Meanwhile the business is powering ahead.

I am pleased to report a strong set of results in my first quarter of CFO with a strong successful third quarter across geographies, 2023 continues to show an attractive combination of growth and profitability with a record in income from operations, with strong momentum across geographies in both commerce and fintech MELI’s revenues growth accelerated. Mexico was particularly strong with revenues growing above 60pc year on year, while Brazil also posted a greater performance with around 40pc growth.

These two countries have again increased their contribution to our total revenues. This strong business growth combined with cost discipline led to opex and SG&A dilution as the business continues to scale. Income from operations more than doubled year on year for the fourth consecutive quarter with margins expanding once again. Brazil was the largest contributor to our profit growth, representing a significant portion of it.

During Q3, in the commerce business, we saw acceleration in GMV and items sold growth in the three main geographies where we operate with higher items provider. This higher user engagement come from continued experience improvements, especially on the logistics front where we reached 48pc of fulfillment penetration and offer better delivery promises, improving conversions and further development of categories to technology. As a result, we have a record of 50m buyers and market share gains, especially in Brazil and Mexico. Mercado Pago off-platform TPV [total payment volume] accelerated in all main countries.

Martin De Los Santos, CFO, MercadoLibre, Q3 2023, 1 November 2023

MercadoLibre is South America’s leading e-commerce business and inevitably is a major innovator. Product and technology spend is growing dramatically from US$278m for Q3 2022 to US$396m for Q3 2023. As such I am adding the shares to the IP portfolio.

Share Recommendations

Apple. AAPL Buy @ $189

MercadoLibre MELI. Buy @ $1610

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