It’s Friday… So it’s another mailbag edition of the Cut.
Today, you’ll hear from renowned speculator Dave Forest on how his trip across America in a Tesla Model S got held up just outside of Amarillo, Texas… and why it spells opportunity for investors.
You’ll also hear from our tech expert, Jeff Brown, on what a Chinese invasion of Taiwan would mean for the already crippling global chip shortage.
But first, I (Chris Lowe) want to address again any fear you may have over the war in Ukraine.
Like most folks watching it unfold on the news… I have many concerns about what’s happening.
But it’s my mission in this e-letter to help you grow your wealth by investing in the big ideas we share with you here at Legacy Research.
And I wouldn’t be doing my job if I didn’t remind you that disasters like this – although clearly tragic – aren’t reasons to panic sell your stocks.
It’s counterintuitive. But as I showed you yesterday, stocks tend to weather times of war well.
They can be extra volatile at first. Then as investors process what’s going on… they often do quite well.
It’s something colleague Teeka Tiwari has been pounding the table on for his readers. Teeka…
I believe we’ll see a short, sentiment-driven drop in the market because of Russia’s invasion. While there’s no way of knowing the time the weakness will last, history suggests it won’t be long.
According to BCA Research, the average fall for the S&P 500 after geopolitical conflicts is 10.7%. But on average, one month after these events, the S&P 500 recovers those losses. And one year later, it rises an average of 9.5%.
That’s going all the way back to 1956. So I’m not worried.
It’s why Teeka is constantly preaching to sit tight through times of trouble instead of panic selling like most rookie investors…
The key here is to remember you own great assets. The second thing to remember is don’t sell them.
And while these assets can take a temporary hit from outside events, don’t confuse short-term chaos with a long-term trend.
I’ll share more insight from Teeka tomorrow morning in a special dispatch. So watch for that.
Now, back to the market megatrends shaping our future… and one that’s been in the spotlight at the Cut lately – the electric vehicle (EV) revolution.
Dave has given his paid-up subscribers the chance at an average gain of 867% on five EV recommendations.
And he says the EV revolution will be the biggest profit opportunity of the century. But some readers see a fatal flaw…
Reader question: I live in the Midwest. I don’t know if car batteries are like cell phone batteries… But if they are, I won’t be buying an electric vehicle.
I carry my phone on the outside of my pocket. When I go outside for two to three hours in the cold weather, my phone shuts off – dead. When I take it inside and put it on the charger, it won’t charge until it warms up.
How will these vehicles work when it’s well below freezing?
– Jim S.
Reader question: I am an early adopter who bought a Tesla eight months ago. I live in Texas and constantly struggle to find charging stations.
My 2014 Tesla Model S gets about 250 miles on a full charge. Recently, I planned a trip to a small town named Olney, Texas, about 200 miles west of Dallas-Fort Worth.
As I reviewed the route, I saw I would be able to recharge on the way out near Wichita Falls. This would get me to my destination.
As I finalized my plans, it occurred to me that I’d have enough charge to get there, but there were no charging stations anywhere that would allow me to return.
Are you aware of any effort to build charging stations to overcome this problem?
– Jack W.
Dave’s response: I feel your pain! Last month I drove a Tesla across America with Strategic Trader analyst John Pangere. I wanted to see how good our charging infrastructure has become.
Dave (left) and John charging their Tesla behind a motel in Greenville, Alabama
I ran out of juice just outside Amarillo, Texas. We had to call a tow truck.
The cold was a major factor. It was 20℉, and the battery drained quicker than we expected. (It also made the two-hour wait for a tow very frosty.)
This is clearly a big consideration for EV owners.
For charging infrastructure, most of the country impressed me. West and East coasts, the coverage was great.
As you say, rural Texas is a different story. There are still plenty of holes in America’s charging network.
That’s a challenge… and an opportunity.
President Biden just approved $5 billion in additional funding for charging stations. It’ll roll out over five years. The goal is to have 500,000 charging stations by 2030 versus the 100,000 that are available today. There’s a massive spend coming as part of the infrastructure bills and beyond.
That’s why charging companies are one of my favorite ways to invest in what I call the universe of EV profits. My paid-up Strategic Trader readers have already had the opportunity to close out a gain of 2,805% on a trade related to EV charging-station maker Blink Charging (BLNK).
It’s just one of the companies upping America’s charging game. I recently added another charging play to the model portfolio that could do as well or better.
As I found out on my trip, there are massive opportunities in charging beyond the chargers themselves.
The new stock I’ve found provides chargers. But it also sells advertising. It builds screens into its chargers. If you’ve ever sat for 40 minutes inside your EV while juicing up, you know what kind of captive audience these ads can pull.
These are the kinds of unusual opportunities unfolding from the EV boom. And they’re completely under the radar for most investors.
What most folks don’t realize is that the EV superboom isn’t going to change just the kinds of cars and trucks we drive. It’ll change the world. We’ll see whole new industries rise. Just like the fast-food sector (worth $650 billion today) was born because of America’s highway buildout. It capitalized on hungry drivers looking for a quick bite. These drivers didn’t exist before.
I’m preparing a series of new briefings on the “EV universe” of profit opportunities. You don’t want to miss this trend. It’ll transform America. And make a lot of people rich.
The first of Dave’s EV briefings airs Wednesday, March 2, at 8 p.m. ET.
He’ll show attendees why EVs are the top growth sector for investors right now.
He’ll also reveal the full story behind his 867% average gain in the space.
And he’ll share details of a tiny company in a small subsector of the EV industry. He says its stock could deliver 49x the average annual S&P 500 gains in just 12 months. So make sure to reserve your free spot here.
Next, a question from a Jeff reader…
As you’ll know if you’ve been with us for some time, Jeff is a Silicon Valley insider and early-stage tech investor who spent much of his career in the semiconductor industry.
He worked as an executive at NXP Semiconductors (NXP) and Qualcomm (QCOM). And he spent about two decades based in Japan.
He’s also given his readers the chance to make several triple-digit gains on semiconductor stocks… including a 580% gain on Nvidia (NVDA) and a 201% gain on Taiwan Semiconductor Manufacturing Company (TSM).
TSM is the world’s largest chipmaker. It’s based in the city of Hsinchu in Taiwan.
So one nervous reader wants to know more about the risks of a Chinese invasion of Taiwan…
Reader question: Jeff, thank you for the wonderful insight and for sharing your passion for investing in life-changing technology trends. I am a Brownstone Unlimited [Jeff’s top tier of membership] subscriber and I’ve gained considerable knowledge as a result.
Given the geopolitical events unfolding and the U.S.’ weak foreign policy position, I see it as a matter of when, not if, China will take over Taiwan.
Do you agree, and should we position our portfolio for such an outcome? How would this affect the semiconductor landscape?
– Nicholas P.
Jeff’s response: Hi, Nicholas. Thanks for being a subscriber and for the kind words. You’ve definitely spotted a potential trouble zone.
The relationship between Taiwan and China is complex and has been a concern for decades. And the semiconductor shortage we’ve been facing has further highlighted these tensions.
This is important because many industries use semiconductors. They’re the “brains” of all electronics. The U.S. government has said they’re “essential to modern-day life.”
So any trouble in Taiwan would have significant ripple effects.
The U.S. makes only about 12% of the world’s chips onshore, despite leading in chip design and intellectual property.
Most chip manufacturing is in a handful of countries in Asia – China, Taiwan, South Korea, Japan, Singapore, Malaysia, and, to a lesser extent, Thailand – because of historically low labor costs.
TSM makes about 90 of the world’s most advanced semiconductors. It also makes around 60% of the less advanced chips our cars need.
In fact, TSM’s chips are in our smartphones, watches, laptops, game consoles, and much more. Without them, manufacturing these products wouldn’t be possible. (That’s why I recommended TSM in the Cut last week.)
Additionally, TSM and Samsung are currently the only foundries capable of making bleeding-edge five-nanometer chips. [A foundry makes chips to order for chipmakers that don’t have fabrication plants.] TSM is even gearing up to produce three-nanometer chips in volume in the second half of this year.
One research firm estimated that other countries would have to spend $30 billion a year for at least five years to have a chance to catch up to TSM.
Other Taiwan-based companies are key suppliers and manufacturers for the semiconductor industry as well. So Taiwan is critical to tech and manufacturing supply chains. If China took over Taiwan, it would devastate the global economy.
If companies like Apple (AAPL), Nvidia, Advanced Micro Devices (AMD), Qualcomm (QCOM) can’t get their chips from TSM, the market would collapse.
Taiwan would bring more wealth, economic growth, and outright power to China. It would have a chokehold to extract whatever it wanted from countries around the world.
And there’s never been a more strategic time for China to make a move. The current U.S. administration is weak on China at best.
TSM understands the risks, though.
It’s scrambling to diversify its manufacturing base outside of Taiwan as quickly as it can. That’s why it announced a major new manufacturing plant in Arizona and another in Japan.
We should expect more of the same.
As for my recommendations in this space, I’ll keep an eye out for any signs of an imminent move. But I don’t think China would cause any major disruptions in the event of a takeover or assertion of administrative control.
I was in Hong Kong when Britain handed it to mainland China in 1997. China took more than two decades to methodically take complete control and restrict freedoms in Hong Kong. This process continues to unfold today.
In other words, the world will have several years to recalibrate if China moves to take over Taiwan. Either way, we’ll adjust our investment strategies as the world shifts and evolves.
Have you got a burning question for Teeka, Dave, Jeff… or any of the other experts on the Legacy Research team?
Send them to [email protected]. I’ll make sure to send them along for a response.
Have a great weekend.
Regards,
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Chris Lowe
February 25, 2022