A look at the merger between Trump Media & Technology Group and TAE Technologies; Updates on iRobot and Lululemon Athletica; Multiple pieces of good news for Google and Waymo parent Alphabet; A beautiful tribute to Warren Buffett

After a week of e-mails focused on Tesla (TSLA), Waymo, and Carvana (CVNA), let's catch up on a bunch of other stocks I've written about previously...

1) Yesterday, Trump Media & Technology Group (DJT) announced a $6 billion all-stock merger with TAE Technologies, a fusion energy company (see the press release, video, and slide presentation). The stock soared 42% on the news, closing at $14.86.

I've warned my readers dozens of times about DJT (archive here) and its predecessor Digital World Acquisition, which had the ticker DWAC (archive here).

On October 22, 2021, when DWAC peaked at $175, I wrote, "This is one of the stupidest things I've ever seen and this stock is going to implode, likely within days."

Sure enough, the stock was cut in half within two days and continued falling from there.

However, after it fell to near its cash value of $13.12, I removed it from my "Dirty Dozen" list of stocks to avoid on April 14, 2023. I explained:

... DWAC is almost certain to liquidate and return $10 per share to shareholders.

In this case, anyone who's short the stock at today's price will pocket a gain of $3 per share, so why not stick around?

Because... I'm wary of picking up pennies in front of a steamroller, which I discussed at length in my January 20 e-mail.

No matter how likely the outcome, it doesn't make sense to risk losing tens of dollars (and possibly more than $100) per share to make $3...

Yesterday's announcement and DJT's huge surge demonstrate exactly the kind of risk I was talking about.

The stock is still a bad short today, as the tail risk here is immense (and in any case, I don't recommend most investors short stocks). With no connection to any financial or valuation metrics, it could trade anywhere.

In fact, I suspect it has more upside than downside, at least for a while (this is not a recommendation, by the way). TAE appears to have credible technology and backers, including Alphabet (GOOGL), Chevron (CVX), Goldman Sachs (GS), and Sumitomo (8053.T).

This new Wall Street Journal article about the deal also highlights the surge in interest and investment in fusion energy:

Even though scaling fusion technology is years away, the sector has seen a surge in interest. Global funding topped $7.1 billion across 50 startups, S&P Global said in a July research report. Venture-capital firms poured another $3.3 billion into nuclear fusion in 34 deals in the third quarter of this year, an almost 600% increase over the same period last year, according to PitchBook data.

While DJT is too speculative for me, I'm very bullish on the potential of fusion energy. This is a technology that could change society forever.

And I believe there's another stock that's a better, safer way to get exposure to fusion energy. You can get all the details in my presentation here.

As a last point about DJT, Bloomberg columnist Matt Levine had a funny, insightful take:

And so if the CEO of TMTG sat down with the CEO of a NUCLEAR FUSION COMPANY and got to talking about combining their businesses, a conversation like this would not make a ton of sense:

TMTG: We operate a social media site and we're getting into anti-woke exchange-traded funds. Our mission is to "end Big Tech's assault on free speech by opening up the Internet and giving people their voices back."

Nuclear fusion company: Cool that sounds fun. We are working on smashing atoms into each other to generate power.

TMTG: Huh, we should team up. Maybe our social media site can give you tips on how to smash atoms, or we can cross-sell your electricity to our anti-woke ETF customers.

Nuclear fusion company: What.

Whereas a conversation like this has an obvious logic:

Nuclear fusion company: We do fusion stuff, we've raised $1.3 billion of capital from investors like Google and Chevron, but we need more money to build fusion power plants.

TMTG: Oh people love giving us money, we should get together.

(In the same article, Levine also had a humorous take on the fraud that plunged subprime used-car lender Tricolor into bankruptcy. As I discussed in yesterday's e-mail, my short-seller friends think this bodes poorly for Carvana.)

2) I've also warned my readers a dozen times about iRobot (IRBT), maker of the Roomba robotic vacuum (archive here). The company filed for bankruptcy on Sunday.

I added it to my 25-stock "Short Squeeze Bubble Basket" at the peak of the meme-stock bubble on January 27, 2021 – and nailed the top almost to the hour.

The stock hit an intraday high of $197.40 before closing at $161.16 that day (circled below). And it has been downhill ever since, as you can see in this 10-year chart:

On March 13, with the stock at $4.06, I wrote, "I wouldn't touch iRobot's stock here – the most likely outcome is bankruptcy and a zero." In that e-mail, I shared my "lessons from iRobot's implosion."

The stock bottomed at $1.50 on November 21, as the company was clearly headed for bankruptcy. But bizarrely, it more than tripled to close at $5 last Thursday.

In the five trading days since then, however, it crashed 87% to close yesterday at $0.67 – on its way to zero. I hope the Securities and Exchange Commission investigates who was pumping the stock...

Sadly, the demise of iRobot, after 35 years in business, wasn't inevitable. Amazon (AMZN) offered to buy it for $1.7 billion in 2022, but regulators blocked it – and now the company is owned by a Chinese competitor, as this editorial in yesterday's Wall Street Journal laments:

An obituary might describe it as a victim of government assassination...

After the deal collapsed, iRobot said it would cut 31% of its workforce and send overseas "non-core engineering functions to lower-cost regions." Even then, the Bedford, Mass.-based company continued to struggle against Chinese competitors. Amazon's backing might have helped it innovate into new robotics fields that Chinese firms hadn't penetrated.

(I have similar feelings about the judge who ruled in favor of the Justice Department and blocked JetBlue's (JBLU) acquisition of Spirit Airlines, which soon thereafter filed for bankruptcy. How was this good for Americans?)

3) The battered shares of athleisure apparel company Lululemon Athletica (LULU) rose 3.5% yesterday. That's after news of activist investor Elliott Investment Management acquiring a stake of more than $1 billion and pushing the company to hire a new CEO, as this WSJ article reports:

It is a tumultuous time for Lululemon, which announced last week that Chief Executive Officer Calvin McDonald will step down in January and that the business faces pressure to reverse many missteps from quality issues to "losing its cool."

Elliott has been working closely with veteran retail executive Jane Nielsen, a former chief financial officer and chief operating officer at Ralph Lauren, who they see as a potential Lululemon CEO candidate, the people familiar with the matter said. 

The activists' arrival, and CEO candidate, comes as Lululemon founder Chip Wilson had already been agitating for change and weighing in on the CEO search. Before McDonald's departure was announced, Wilson had been attacking Lululemon publicly for killing innovation and losing what made the brand "cool" in the first place.

I've written about Lululemon many times (archive here) after taking a two-part "first look" in August 2024 (here and here). But I stayed away from the stock because I (correctly) identified it as a value trap.

Take a look at this dreadful three-year chart:

Elliott is a well-respected activist. I've covered a number of stocks it has been involved with (archive here), including Match Group (MTCH), Salesforce (CRM), Southwest Airlines (LUV), PepsiCo (PEP), and Global Payments (GPN).

So, could Elliott's involvement be a buy signal for LULU? To answer this, I turned to a friend who's an expert on retailers. Before the news of the Elliott stake, he e-mailed me about the CEO's departure:

They aren't out of the woods yet. Having their CEO and 20-year veteran president of the Americas leave at the same time doesn't bode well for quick turn. 2026 and 2027 earnings estimates are likely too high. I wouldn't touch it as a long, but it's not a super compelling short at this valuation. If I had to take a position, it would be short before long because numbers need to come down and it is a captain-less ship going through tough times.

LULU is, however, always set up best in the fourth quarter as it is an easy gifting choice for the holidays.

Then, after the Elliott news, he added:

The floor on the stock is in now I think.

That said, I don't think Jane Nielsen is the right CEO to turn this around. In pushing for her, Elliott is displaying typical private equity/activist disconnectedness from how consumer companies actually function.

I will be interested to hear what Chip Wilson has to say about that suggestions...

Another friend, Steve L., has been bearish – and correct – about the stock. He wrote:

LULU shares rose 9.6% on the new CEO announcement, but the company's fundamentals remain challenged. I don't believe new leadership can effectively defend against intensifying competition, particularly as two major competitors continue opening stores near existing locations (capitalism 101).

Inventory is up 11% year over year, forcing a choice between slowing store growth (lower revenue) or increased markdowns (margin pressure). U.S. performance is likely to remain pressured as competition intensifies and markdowns persist, consistent with third-quarter results and fourth-quarter guidance. Refocusing on the core customer may help margins longer term but likely comes at the expense of near-term sales growth.

Thank you for sharing your insights, my friends.

I agree with them and will continue to stay on the sidelines here.

4) There has been all sorts of good news recently for one of my favorite stocks, Alphabet – parent of Google and autonomous-driving company Waymo.

In a post on social platform X, my friend Marcelo Lima (whom I debated in last Thursday's e-mail) highlighted that Google has further improved its Gemini AI, which is incorporated in its search engine:

Meanwhile, as this X post from tech enthusiast Sawyer Marritt highlights, Waymo's fully autonomous vehicles drove an additional 31 million miles between June and September and its safety record remains exceptional:

And as this X post shows from Freda Duan of Altimeter Capital shows, Waymo is cutting the price it's paying to buy its autonomous vehicles in half:

Lastly, Waymo is looking to raise $15 billion at a valuation exceeding $100 billion, up from $45 billion only 14 months ago, according to this Bloomberg article.

5) My friend and investing legend Seth Klarman of the Baupost Group published a beautiful tribute to Warren Buffett in the latest issue of The Atlantic.

I'll share a few highlights, but I encourage you to read it in its entirety. He begins:

Warren Buffett has long been known and admired around the world for doing something that is, at its essence, mundane. He is not a brilliant artist or a great inventor or a record-setting athlete. Instead, his brilliance – a low-key, midwestern type of brilliance – found expression in the prosaic art of investing: buying this stock and avoiding that one. Buffett himself has called this task "simple, but not easy." While millions upon millions of people buy and sell investments every day, no one has a record of doing it better than he has, as consistently as he has, and for as long as he has.

Buffett's imminent retirement at the age of 95 is a moment to reflect on the qualities that have made him the most successful investor of all time. These qualities – relentless curiosity, analytical consistency, focused effort, and humility, along with high integrity, a personality unchanged by wealth or success, and a sunny optimism about the United States – have made him an American role model. He has also epitomized respect for old-fashioned American values – free markets, a democratic system of governance, patriotism, and plain old common sense – that today have lost some of their currency. Now, in a world alarmingly short of proper role models, Buffett is departing the scene. His voice and example will be deeply missed.

And he concludes:

Buffett's commercial successes built his fortune, but I admire him most for the way he lived his life. He headed one of the world's most successful and admired companies for more than half a century, and he did it not by caring about being admired but by steadily focusing on doing the right thing for the business and its shareholders. And in Buffett's case, at least, doing the right thing led to him being even more admired.

In a field associated with enormous affluence and one-upmanship, Buffett stayed grounded: running his businesses, buying and selling investments, commenting on societal values, proselytizing for philanthropy, and periodically enjoying a burger and a Cherry Coke. Few who reach Buffett's echelon live their lives this way. All of us –fellow investors and business executives, but also the wider public – are fortunate to have lived in the time of Buffett, to have soaked in his wisdom, and to have been inspired by his example. Buffett will be particularly missed at a time when many of the most successful people in the business community seem single-mindedly focused on making money, without reflecting much on the way they make it or what they will do with it. Just because you can doesn't mean you should.

New generations of investors will come along, including some shooting stars who will flame out and others who will endure. But judged over the fullness of a career and by the complete record of his accomplishments and the values underlying them, Warren Buffett has truly been, and will remain, one of a kind.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.

P.P.S. We drove a few hours north yesterday to spend two days with my parents' friend, John, who lives on a ranch/working farm called Ol Maisor. Today, John took us on a tour of the farm (upper right photo below). Then we went on a game drive where saw (starting clockwise under the farm photo) Marabou storks feasting on an ostrich carcass, an oryx, a giraffe, zebras, impalas, an elephant, and five lions. I posted a video of the lions here and the elephant here.