The Stock Market Circus Continues
Editor's note: Our offices will be closed next Thursday and Friday for the Thanksgiving holiday. Please look for your next issue of This Week on Wall Street on Friday, December 6.
Dear subscriber,
Trying to decipher the market these days feels a lot like pulling teeth.
Markets are always a blend of fundamentals, expectations, and rumors... But ever since the election, the things that have been driving assets have tilted toward the absurd.
Here's one example...
A company called Henry Schein (HSIC) surged 11% in just two business days – from November 14 to 18.
It's a dull company. It provides dental offices with tools, implants, X-ray machines, and other basic health care supplies.
And it didn't jump on an earnings report or some technical innovation...
Instead, on November 14, President-elect Donald Trump officially named Robert F. Kennedy Jr. as head of the U.S. Department of Health and Human Services ("HHS").
Why did that lead to such a surge in the stock?
Well, earlier this month, RFK Jr. posted on social media platform X that on Day One, he'd "advise all U.S. water systems to remove fluoride from public water." He argued that fluoride is an "industrial waste" linked to several health problems.
However, the removal of fluoride from public water systems would eventually lead to weaker teeth for Americans... which means more trips to the dentist.
If we cut fluoride today, I don't know exactly how long it'll be before people show up at the dentist with tooth problems. My guess is it will probably be a decade down the line. Still, shares of Henry Schein immediately jumped on the news...
According to Politico, the HHS can only make recommendations about fluoride in water, not blanket rules. And even if it could, such an initiative would take years to put in place.
Nevertheless, the market trades on weeks-old tweets about teeth these days...
And this isn't the only RFK Jr. trade we've seen. Health care stocks across the board are down, as RFK Jr. has vowed to take on the pharmaceutical industry.
Even shares of Coca-Cola (KO) are falling because he wants to improve America's diet, cutting out sugar and processed foods.
As you can see, this trend started ahead of RFK Jr.'s appointment. But given its persistence across various "junk food" stocks today, I'm confident he's the one in the driver's seat here...
Sure, Coca-Cola sells sugary sodas. But what investors seem to forget is that the company does just as well selling water like Dasani, Smartwater, and Topo Chico. Plus, Coca-Cola has proved adept at adjusting to consumer demands.
Now, not all the market oddities are RFK Jr. based...
To me, the biggest puzzle is MicroStrategy (MSTR) – and it has nothing to do with who will lead the HHS.
MicroStrategy has a real software business. But back in 2020, it started buying up bitcoin to hold on its corporate balance sheet.
As of November 10, it had amassed roughly 279,420 bitcoins, valued at nearly $28 billion.
That's all the company has become. The software business is now a rounding error on a pile of bitcoins.
But still, the market has sent MicroStrategy's valuation through the roof... Earlier this week, the company's market cap surpassed $100 billion.
Again, it's really just a pile of bitcoin... and its market cap is more than three times its actual value.
MicroStrategy fully understands this. It keeps selling shares and taking on debt to buy more bitcoin.
During the period between October 31 and November 10, the company sold $2.03 billion worth of its shares in the market. And it used that $2.03 billion to buy 27,200 bitcoins.
MicroStrategy's value rose by $40 billion, and we attribute about $9 billion of that to buying $2 billion worth of bitcoin...
This is just a perpetual motion machine for money... but at some point, it will have to stop. We just don't know when.
As I wrote last week, we're long-term bullish on crypto postelection.
But insanity like MicroStrategy frustrates those of us who favor a long-term, value approach to the market.
And things like the Defiance Daily Target 2X Long MSTR Fund (MSTX) give me the shivers...
MSTX is a leveraged fund that simply doubles the daily return of MicroStrategy. It's essentially a 6 times levered bitcoin fund. And it has attracted $1.6 billion in assets.
Isn't the volatility in bitcoin enough?
Beyond crypto and general expectations for lower tax rates, it's hard to make reasoned moves based on future government policy.
We don't know what tariffs... or China policy... or even government spending will look like.
When everyone is trying to understand what will change, we at Stansberry Research prefer to focus on what won't change and instead invest in the businesses with margins and the moats to protect them.
We don't feel the need to bet on whether or not people will have more cavities 10 years from now.
What Our Experts Are Reading and Sharing...
The Intercontinental Exchange (ICE) – owner of the New York Stock Exchange – started a cryptocurrency trading firm called Bakkt. Now, Trump Media and Technology (DJT) is in talks to buy it. It's getting harder and harder to picture strict crypto regulation coming down with such close ties between President-elect Trump, DJT, and crypto. Here's CNBC with more on the story.
You can trade airlines, but you should rarely invest in them. The airline business is a nightmare of high capital requirements, price wars, and sensitivity to economic cycles. And according to the Wall Street Journal, after a 32-year attempt at running a low-cost, no-frills airline, Spirit Airlines is filing for Chapter 11 bankruptcy.
Chip giant Nvidia (NVDA) is no stranger to these pages. I've written about its crazy valuation a few times now. And today, it's time for an update. Our colleague Corey McLaughlin recently covered the stock in the Stansberry Digest. In short: Nvidia's earnings beat published expectations... but not actual expectations. And shares sold off a bit as a result.
New Research in The Stansberry Investor Suite...
Speaking of things that won't change...
In the Stansberry Investor Suite this month, we're digging into what the Stansberry Score ranks the 38th best stock out of the more than 4,500 stocks we analyze.
This company has been operating since 1920.
And it has delivered investors a 12% annualized return going all the way back to 1980.
What's wild is that the business is essentially a huge fleet of traveling salesmen, hocking their wares out of 4,600 customized trucks puttering all around the country and abroad.
It sounds like something out of a bygone era, but this business generates more than $1 billion in free cash flow ("FCF") each year... for an FCF yield of nearly 6%. (The S&P 500 Index, by comparison, only generates an FCF yield of about 2.8%.)
I can't say much more about the company without giving it away... especially if you're a gearhead with a love for cars.
Stansberry Investor Suite subscribers can read the entire report here.
If you don't already subscribe to The Stansberry Investor Suite – and want to learn more about our new special package of research – click here.
Until next week,
Matt Weinschenk
Director of Research
What do you think about This Week on Wall Street? Send any and all feedback to thisweek@stansberryresearch.com. We read every e-mail you send in.