“Everything I ever accomplished in business is due to what I learned in the Marine Corps, especially about leadership,” said FedEx founder and former Marine Captain Fred Smith.
Mad Hedge Technology Letter
June 5, 2023
Fiat Lux
Featured Trade:
(THE BEST CYBERSECURITY STOCK IN 2023)
(AI), (PANW)
The best Silicon Valley cyber security company right now is Palo Alto Networks (PANW).
It’s not really debatable at this point.
It’s not surprising to find out that it is also the largest artificial intelligence (AI)-based cybersecurity company.
AI is all the rage now with grand promises of huge profits in the future.
To get into the nitty-gritty of it – PANW operates across three core segments.
These divisions are cloud security, network security, and security operations and the task in hand right now is working to integrate AI-powered capabilities across them all.
When it comes to network security, PANW is the gold standard in multiple categories. Its VM firewall, designed to add an extra layer of protection to private and public clouds, is ranked No. 1 in the industry for market share.
Since the company is one of the largest providers of cybersecurity in the world, it collects a treasure trove of data, which means it's well-positioned to train AI models to help protect its customers.
It analyzes 750 million new data points per day, leading its AI and machine learning models to detect 1.5 million unique, never-before-seen attacks daily. The end result: Palo Alto's AI blocks 8.6 billion attacks on behalf of customers every 24 hours.
Some of the largest organizations in the world trust Palo Alto as their primary cybersecurity provider. In the last quarter, they took bookings from customers spending a minimum of $10 million annually soaring by 136% year over year.
Bookings from customers spending at least $1 million and at least $5 million grew by 29% and 62%, respectively. Overall, these numbers highlight the surge in demand for advanced cybersecurity tools even during this difficult economic period.
Market research firm IDC estimates that global cybersecurity spending could increase 12% in 2023 to $219 billion as compared to last year. IDC also expects that global cybersecurity spending could cross $300 billion by 2026.
So, Palo Alto is growing faster than its competition and once they harness the power of AI, the stock could take off like a scalded chimp.
According to market research firm BlueWeave Consulting, the application of AI in cybersecurity is expected to grow at an annual pace of 21% through 2029 and generate $79 billion in annual revenue. That would be 3.5 times the size of the AI-enabled cybersecurity market last year.
Tech really can’t do much wrong these days.
It’s a terrible time for unproven companies and the share price proves that of stocks such as Coinbase Global (COIN) or Robinhood (HOOD).
However, established firms like PANW are lapping it up
The stock hit a rough patch and sunk to $135 per share and is now accelerating to $230 per share.
For a tech stock that aggressively raised profitability estimates and has turned the corner from going from loss maker, every 3-5% dip is a great buying opportunity for this stock.
The tech sector is up 9% in the past 30 days and that type of overperformance is due to accelerating business models like PANW.
“I discovered Buddha but did not set out to unearth a world religion.” – Said CEO of Microsoft Satya Nadella
(WHAT ARE FAMILY OFFICES DOING WITH THEIR FUNDS)
June 5, 2023
Hello everyone.
Do you ever wonder what Family Offices are doing with their funds?
Are they being conservative or aggressive in their choices?
Are they in bonds, stocks, real estate, gold, or currency trades, or all the aforementioned?
From my research, it seems that Family Offices are making shifts in their portfolios. A UBS survey conducted earlier this year polled 230 global family offices. The poll showed that more than one-third of family offices appear to be increasing their exposure to bonds, particularly high-quality, short-duration bonds. (Think 90-day T-bills) In the survey, the average net worth of participating families was $2.2 billion, and the average family office managed $900 million.
Charles Otton, head of UBS’ global family and institutional wealth business has stated that “developed market fixed income and government bonds are strongly attractive to family offices as they look to 2023 in a very different rate environment.”
As we are all aware the Federal Reserve has raised interest rates 10 times since March 2022, taking the federal funds rate to a target range between 5% and 5.25%, the highest since August 2007. Government bonds rapidly became an attractive asset for investors seeking steady income in a volatile market, and to hedge the risk from stocks.
There is no doubt that government bonds are safe. Why wouldn’t you want some certainty of steady income over a volatile stock market? The behaviour of people is becoming defensive – they are wanting to protect themselves with a stable fixed income.
Interestingly, the UBS survey also showed that family offices are also planning to migrate some funds to emerging markets. This is a play on the peak in the dollar and China’s economic reopening.
Another investment bank, Goldman Sachs, shared its findings in May, that 32% of family offices invest in digital assets.
This category includes cryptocurrencies, non-fungible tokens (NFTs), decentralized finance (DeFi), and blockchain-focused funds.
19% cited a belief in the power of blockchain technology.
8% cited the use of financial applications/DeFi.
9% cited portfolio diversification.
Please note, I am only showing the research here and am making no recommendations.
A recession is in the back of everyone’s mind. The aggressive moves by the Fed have put everybody on edge. Are we getting closer to a top in the market?
Duquesne Family Office’s Stanley Druckenmiller, for one, has been calling for a recession for a while. He believes the extraordinary quantitative easing and zero interest rates over the past decade have created an asset bubble, and markets are now in the final stage of it bursting.
I can see the market rallying a little further for now, but then I believe we are due a good correction.
Gold Update
It could be a volatile week with non-farm payrolls on Friday. Be careful.
Gold could rally up initially and then fall. There may be more downside before it starts to rally to new highs.
Oil Update
Could get down to around $62 and then rally.
Bond Update
If you are looking for somewhere safe to put some of your funds, both John Thomas and I would advise you to look at 90-day T-bills. Price on Wednesday was 5.35%.
I hope you all had a great weekend.
Cheers,
Jacquie
Global Market Comments
June 5, 2023
Fiat Lux
Featured Trades:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE IS THE NEXT BIG PLAY),
(FCX), (X), (CAT), (DE), (CLV), (UNG), (OXY), (RIO), (BHP), (TSLA)
CLICK HERE to download today's position sheet.
“The real back swan wasn’t the virus, it was the lockdown, which caused very serious damage to the economy, especially small companies,” said Jason Trennert of Strategas Research Services.
Mad Hedge Technology Letter
June 2, 2023
Fiat Lux
Featured Trade:
(SEPARATE THE WHEAT FROM THE CHAFF)
(AI), (NVDA)
Readers should be careful about being the last ones getting into this generative AI craze.
I’m not saying it is over, but the last ones in can sometimes be the first one’s out.
The data shows that retail traders are pouring into AI stocks in droves without the inside knowledge they really need to succeed.
The truth is that not every AI stock is worth investing in and as time goes by, we will see this play out.
The market is always right.
Some AI stocks will just be a flash in the pan, riding on the coattails of the real AI stocks in a fake-it-to-make-it fashion.
Others could get bought out and shut down which was an infamous Facebook strategy called “catch and kill.”
C3.ai could be one of those stocks that I am talking about.
The stock spiked on the pandemonium almost quadrupling in price from around $12 per share to over $45 in the first half of the year, but the stock has come back to reality trading around $31 per share at the time of this writing.
The recent underperformance is due a good quarterly earnings result, but they offered underwhelming guidance to investors. This could become a recurrent problem for these smaller AI stocks that must promise heaven and earth to entice the incremental investor.
C3.ai said it expects total revenue of up to $72.5 million in its upcoming quarter, compared to analyst estimates of $71.3 million.
The management is on record for saying that while it will be a bumpy road, they believe C3 is currently participating in an $800 billion AI transformational opportunity over the next decade.
C3.ai has struggled to sign new major customers and recently shifted to consumption pricing — paying for software based on use rather than in a flat subscription — to court companies that are hesitant to commit to big contracts. The company said it inked 43 agreements in the quarter, including 19 pilots, and touted that the average sales cycle shortens to 3.7 months from 5 months in the same period a year ago.
Still, many are searching for a scalp from C3.ai.
The short side is stacked with traders looking to profit off a big dive in the price of shares.
Short interest amounted to about 29% of shares available to the public as of May 24.
Activist investors have accused the company of chasing trends and employing poor accounting practices.
Former employees said C3.ai has routinely overstated the readiness of its technology in the past, and this issue has not been put to bed yet.
It could be that C3.ai isn’t ready for showtime.
Maybe they are a few years away, but overstating their capabilities to get in on the action could be the best way for management to get rich quickly.
As sometimes in corporate America, it is better to cash out and strike while the iron is hot while they can before they are exposed as an inferior version of what they claim to be.
“Almost everything is like a machine.” – Said Hedge fund Manager Ray Dalio
