You Haven't 'Missed' This AI Setup – Yet

Signs of tariff distortion... Business margins are getting tighter... The better news so far... The three most dangerous words in investing aren't what you think... Whitney Tilson's big lesson... You'll want to know this AI story...

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Before we get to the AI story...

Today, we'll present a big investing lesson from Stansberry's Investment Advisory lead editor Whitney Tilson, plus an opportunity he's excited about now. But first, I (Corey McLaughlin) also have some news of the day to share...

A barrage of new data showed more distortion in the economy that all stem from the tariff rollout of 2025...

First up, U.S. retail sales slowed in April to just a 0.1% month-over-month gain, according to a Commerce Department release this morning. That compares with a 1.7% rise from February to March.

While March's data showed people rushing to buy cars and other big purchases ahead of tariffs... April's numbers showed Americans pulling back on discretionary spending like travel. "Core" retail sales – which excludes automobiles, gas, and food – fell 0.2% last month.

Businesses' margins are shrinking...

This morning's April producer price index ("PPI") report – which measures prices paid by manufacturing, mining, and service businesses in nearly every industry – showed 2.4% year-over-year growth, which is 0.5 percentage points down from last month.

It was the biggest monthly decline in five years.

On the surface, it might seem like good news that prices have come down. But a little deeper look at this data shows that producers instead haven't yet raised their prices to keep up with rising costs.

More than two-thirds of the headline PPI numbers came from a 1.6% decrease in gross margins for "trade services," for wholesalers and retailers. Margins for "machinery and vehicle wholesaling" dropped by 6.1%.

So, margins for businesses shrank last month... And it's because of abruptly rising costs of goods and services. That's not great, and if this becomes a trend and widespread across industries, it's a big warning sign for the economy.

The better news...

One reason for April's slimmer profit margins was that businesses were eating their higher costs rather than passing them along to consumers, as we wrote about when covering the April consumer price index report earlier this week.

But higher prices for people on Main Street may very well happen moving ahead... That's what Walmart Chief Financial Officer John David Rainey said today on CNBC. Even with a reduction of tariffs on Chinese imports to 30% for 90 days, Rainey said (after releasing the company's quarterly earnings report, which beat analyst earnings estimates)...

The magnitude of these increases is more than any retailer can absorb. It's more than any supplier can absorb. And so I'm concerned that the consumer is going to start seeing higher prices. You'll begin to see that, likely towards the tail end of this month, and then certainly much more in June.

Higher consumer prices are even more likely if companies' costs keep rising. We hesitate to make too much of one month of numbers just yet, because they can be volatile. As the Bureau of Labor Statistics explains...

Two prices – selling prices and acquisition prices – are used to calculate margin prices. Both of these often change from month to month. Especially when these two prices move in opposite directions, the margin can change substantially in a single month.

Even small changes in price may represent a large portion of the margin in percentage terms.

But we're definitely keeping watch on whether tariff impacts stick around. For now, another big way companies could deal with tighter margins – laying off staff – hasn't picked up yet.

Today's initial jobless claims report, for the week ending May 10, showed around 229,000 newly unemployed Americans. That's in line with the four-week average and not even a one-year high. Continuing claims rose only slightly to 1.88 million.

Also in the news...

Over in Turkey today, Russian President Vladimir Putin was a no-show for possible peace talks with Ukraine... And his Ukrainian counterpart Volodymyr Zelenskyy elected not even to meet with lower-level Russian officials.

This impasse means we're no closer to resolving the war – and related questions involving global energy supply and inflation forces.

Moving on, we're turning things over to our Whitney Tilson...

In yesterday's edition, we told you about an exciting new free event that Whitney has coming up next week with his friend Jeff Brown, the founder of our corporate affiliate Brownstone Research.

I'll talk more about that to end today's edition... to give some context and share an example of the wisdom Whitney has learned over his investing career and, importantly, how you can benefit from it.

Whitney has a wealth of investing knowledge, as a former hedge-fund manager who was once called "The Prophet" by CNBC, before getting into the newsletter business several years ago. I was fortunate to work with him directly on the e-letter now called Whitney Tilson's Daily.

Today, we're sharing a version of an essay that appeared in that e-letter back in August 2023... and most recently in our Masters Series in February 2024. Enjoy...

The common cliché on Wall Street is that the four most dangerous words in investing are, 'This time is different'...

But I (Whitney Tilson) have found a three-word phrase that's uttered just as frequently... and is arguably even more dangerous:

"I missed it."

You've probably grumbled these words to yourself before, as you passed on a stock you were considering buying... and then watched as it marched to new high after new high.

The critical lesson here is that just because a stock has run up a lot doesn't necessarily mean it's too late to buy.

Today, I'll show you why this simple, three-word phrase can be so misleading...

In my decades as a value investor, I've seen it time and time again.

Value investors like me tend to look in the bargain bin for beaten-up stocks that are trading at 52-week (if not multiyear) lows. They get a sense of satisfaction from getting a better deal than the guy who bought it a month or a year ago.

It's a great strategy if – and this is a big if – you can correctly identify companies whose fundamentals turn around. The key here is to avoid value traps: the companies that never turn around, and thus their businesses (and stocks) keep declining and declining...

But what about stocks that never really fall out of favor such that they end up in the bargain bin? We value investors often miss them.

Take Alphabet (GOOGL), for example...

In August 2004, the company went public at a split-adjusted $2.51 per share. By October, the price had already more than doubled. A year after that, it had doubled again. And two years after that – in October 2007 – shares were trading at $18. Today, they're up to around $165.

Sure, it would be great to have bought shares right at the IPO. You'd be sitting on gains of roughly 5,520% today (as of February 2024). But even if you didn't buy on day one, you didn't miss it.

Heck, if you had sucked your thumb for a year, watched the stock go up 300%, and bought shares in October 2005, you still could have doubled your money in only two years...

If you made this mistake, well, join the crowd. I watched Alphabet's shares continue to go higher and higher.

It would be one thing if I had done the work on it and concluded that it was outside my circle of competence (it wasn't) or was too expensive (it wasn't).

But that wasn't the case. I simply didn't do the work. Why? It's not because I was lazy. Rather, every time I looked at the stock, it was usually trading at or near an all-time high, so I kept telling myself, "I missed it" and moved on.

If I had just bought what I knew was a great business at any of those points, I'd be sitting on a multi-bagger today...

Let me give you another example...

My friend Chris Stavrou, who ran a small hedge fund called Stavrou Partners for decades, bought shares of Warren Buffett's Berkshire Hathaway (BRK-A) back when he was a stockbroker in the 1970s.

Chris started buying it for his clients around $400 a share, even after it had risen more than 2,000% over the previous decade because he didn't fall into the "I missed it" trap.

A decade later, he opened up his own hedge fund. By then, Berkshire was trading at an all-time high of $1,800 per share.

So did he say to himself, "Wow, this stock has moved up a lot – I think I'll wait for a pullback" or "Drat, I missed it"?

No. He saw that it was a great company run by a brilliant investor and the stock was still attractive at $1,800. So he bought it for his nascent fund...

Today, BRK-A shares are each valued at well over $500,000! (Editor's note: And now, they're past $750,000.)

So learn this lesson well: Whether a stock is trading at a 10-year low or a 10-year high tells you absolutely nothing about whether it's cheap or expensive. Some stocks trading at multiyear lows are horrible value traps that are headed to zero. And some stocks trading at multiyear highs are going to be spectacular winners going forward.

The lesson here is, don't fall into the 'I missed it' trap...

Ignore where the stock price has been, do the work, and make a rational decision based on your assessment of where the stock is likely to go in the future.

Though I sold it much too soon, I was smart enough to buy Apple (AAPL) when it traded for a split-adjusted $0.35 per share back in October 2000...

In the years that followed, Apple rolled out the iPod music player, iPhone smartphone, iPad tablet, Apple Watch smart device, AirPods headphones, and more.

It's no wonder Apple has been one of the best-performing stocks of all time. It was a rare chance to buy a world-class stock before it rose nearly 47,000%... enough to turn every $2,000 stake into almost $1 million.

Today, investors face another massive opportunity...

Corey here again... to tell you that next week, on Wednesday, May 21, Whitney is sitting down with his friend and Silicon Valley legend Jeff Brown to share another promising setup for anyone who thinks "I missed it"... when it comes to artificial intelligence.

AI has driven big market gains going on two years now... But according to Jeff – who recommended Nvidia (NVDA) before it rose more than 18,000% – we're going to see the next giant development in AI soon go mainstream... And it's one that will completely reshuffle the markets and economy in a way not seen since the dot-com era.

It all has to do with an AI "super chip" from a little-known California company that he says you must add to your buy list... along with a set of five more obscure stocks that could replace the Magnificent Seven as the market leaders.

The catalyst for this shift is coming up on June 2... That's why Whitney and Jeff, founder of our corporate affiliate Brownstone Research, are joining forces to share how this breakthrough could transform the AI industry... and double your money on five different investments as it happens.

Together, they're calling this "the investment opportunity of the decade," but Whitney and Jeff urge you to get positioned now... Regardless of where stocks as a whole go next, you're going to want to understand this "super chip" AI story before it goes mainstream – and causes the past decade's leading stocks to crash even further this year.

Click here to register for this totally free event now.

Just for signing up, you'll get access to a special report that includes one free AI stock pick. Then when you tune in on Wednesday, you'll hear two more free recommendations along with more details on this story and what Whitney and Jeff recommend you do to position your portfolio.

In short, if you think you've missed making money in the AI trend, they say that's not the case. Again, you can sign up for Whitney and Jeff's event here.

New 52-week highs (as of 5/14/25): Alpha Architect 1-3 Month Box Fund (BOXX), EQT (EQT), iShares MSCI Italy Fund (EWI), iShares MSCI Spain Fund (EWP), and iShares U.S. Aerospace & Defense Fund (ITA).

A quiet mailbag today. As always, send your comments and questions to feedback@stansberryresearch.com.

All the best,

Corey McLaughlin with Whitney Tilson
Baltimore, Maryland
May 15, 2025