The High P/E Stock Puke HAS Started—BUT Has a LONG Way to Go

End of Year Tax Loss Selling Hits High Gear


Dear Subscriber,

Whilst the Nvidia stock puke is basically over (UP $5 today--YES NVDA is a buy under $155 for sure--$AMD under $20--we will add a second investment in NVDA here too) trust me the tax loss selling and profit keeping selling is NOT over for the rest of the High P/E stocks. Look at the VIX volatility index chart above--we have not it the 30+ puke point aka the Big Flush the market needs to reset. LOOK AT THE "Cloud Kings" get decimated--remember in September we said, "We LOVE the best-of-breed enterprise SaaS players--Twilio, Mongo, Tableau, Splunk, VeeV--but they HAVE to get schmeissed in price by 25-40% to be attractive investments longer term---the price you pay matters when these stocks are priced to perfection!"  Well, they ARE getting schmeissed--there is more the come before we nibble.

Action to Take: PROTECT our 32% Xilinx Profit--take profits. In a world of destroyed semiconductors, we own the ONE semiconductor fighting upstream--Xilinx. We held on during the flash crash of October--which I will now forever call the "Tech Tantrum" in honor of Fed Chairman Powell on October 2nd saying "We will undoubtedly move past the neutral Fed Funds rate" which kicked off the first leg of this now cyclical bear market in a secular bull market.

We will own it again. But Xilinx is the LAST CHIP standing--it will too get thrown out by portfolio managers desperate to salvage what is left of their shitty year. It did for a minute get to 10% of our $100 target--so I AM following our rules!

Here is the standard trading range for Xilinx--I expect it to blow through its support when we get the Big Whoosh down that we have, to repeat, NOT had yet. We will buy again-- it is NOT too expensive and it's Data Center business is ramping with its low cost/high power chips.


Action to Take: BUY Macquarie Infrastructure (MIC) <39.50 with 50% upside and 11% Yield!

I have been waiting to buy this for months. MIC blew up 2 quarters ago when they cut their dividend to fund a $300 million conversion of energy infrastructure into a MUCH higher yielding structure. I will get into all the details in a coming "It's the Yield, Baby" update on ALL our winning high yield investments--which we will be adding a few other plays as well as we get the high P/E stock meltdown/re-pricing to reality worked through.

But here are the MIC bullet points

  • MIC at its current valuation offers a compelling opportunity to access high-quality low-risk assets at a steep discount while locking in a well-covered double-digit yield and 50%+ upside

  • The investment grade balance sheet has recently been fortified with $450 million in asset sales and bears a minimal risk of suffering a downgrade.

  • Insiders are buying heavily, interests are increasingly aligned with shareholders.

  • The near 11% dividend is covered by 150%--meaning it is ONLY going higher. 

  • Big Catalyst--the ongoing $300 million investment in restructuring its energy infrastructure to higher yield assets that kicks in starting Q1 2019

  • Income investors have the opportunity to buy today at prices lower by 18% than recent insiders buys.

  • The stock provides 50% potential returns over the next 12 to 24 months as it returns to normal valuation pre-yield cut


Macquarie Infrastructure Trust is sponsored by the largest infrastructure investor in the world with $trillions under management for global pension plan--Macquarie Funds out of Sydney Austrailia. This was a $70 stock until the dividend break--what we have now is the LAST of the tax loss capture selling.


THESE are the kind of turnaround plays that have already been shorn that will do very well in 2019 and 2020 when we expect the mild U.S. recession coming off a Q4 GDP around 1.5-1.75% IF the Fed continues 1 more rate hike in December and 2-3 more in 2019 to "Get a little past neutral".

Hang tough--collect your BIG dividends and let's hope we get a big swoosh the next week.


Updates/AlertsTobin Smith