Tom Yeung here with this week’s Sunday Digest.
Many of you will know that I am a relatively conservative investor. I pay close attention to a company’s long-term profitability, and to me, cash flow is king. There’s nothing wrong with earning 10% dividends from a high-quality stock.
But sometimes, growth is so obvious that it’s hard to ignore. In February, I noted that Nvidia Corp. (NVDA) should be worth a split-adjusted $160 by 2027. It’s since doubled in price from $72 to $144.
And the excitement surrounding Dogecoin (DOGE-USD) in 2021 was so bananas that I suggested throwing in $500 just to see where the $0.10 crypto would go. (The answer was $0.64.)
Some have even made careers from these high-volatility bets. Jonathan Rose, our options expert colleague at Masters in Trading, has generated profits of 16%… 48%… 156%… 545%… even 1,306%… all within six-and-a-half-hour periods. He does this by trading options that are expiring today, rather than those expiring a year or more from now. These “zero-day options” are some of the fastest-growing segments of financial markets today.
And the astonishing thing is that he trades these moonshots while limiting his downside risk.
Jonathan just kicked off a four-day free Strategy Summit… and it’s not too late to join in. Tomorrow’s session, at 11 a.m. ET, includes LIVE market analysis.
And in the live grand finale session on Tuesday, he’ll reveal his entire five-step strategy to finding those one-day winners. These sessions are free to attend.
To access them all – including the grand finale session on Tuesday – simply register here.
The Equity Stub
Some firms are risky because they’re a tiny equity stub built on top of a mountain of debt. If a company has just $1 of equity for every $4 of debt, every 10% increase in enterprise value will raise stock prices by 50%.
That’s the situation Sabre Corp. (SABR) now finds itself in.
The highly indebted firm is one of the world’s three operators of the Global Distribution System (GDS), the computerized network that links airline and hotel reservations all together. It’s how websites like Google Flights and Kayak can “see” flight availability in real time. Even airlines use the GDS system to help book stranded passengers onto rival carriers.
On the positive side for Sabre, there’s no good alternative to the GDS system. The International Air Transport Association (IATA) rolled out a rival product a decade ago, but their decentralized system turned out to be far too slow. (It needed to contact every airline each time someone tried to book a flight.) That’s allowed GDS companies to operate with enormous profit margins with virtually no competition.
However, in the mid-2000s, private equity firms decided they could do even better. By leveraging up companies like Sabre with debt, they thought they could earn high returns on the GDS business, pay back low interest rates, and profit from the difference.
It worked for a while… and then the Covid-19 pandemic came.
Virtually overnight, Sabre’s shares went from the $20-$30 range into the single digits. It continues to trade at $3.60 today, with a now-smaller profit pool being eaten up by ruinously high interest payments.
That’s where my first “moonshot” bet comes in.
We know that travel is coming back. According to the IATA, air travel flipped back above its pre-Covid levels earlier this year and is set to surge another 8% in 2025. Figures from Sabre also show an increase of booking revenues, with total sales up almost threefold since 2020.
The company is now on track to covering its $500 million annual interest payments. Analysts expect Sabre will generate $86 million in net income next year (after interest), compared to a $57 million loss in 2024.
This opens the door to even greater gains down the road. Sabre could use its newfound profitability to repay maturing debts and refinance others on better terms. We also know that flipping from negative profits to positive is a historically bullish sign, and Sabre is on track to do exactly that.
Three Turnarounds
Meanwhile, other moonshots are attractive because they present turnaround opportunities for 2025. Here are three companies with that kind of potential…
1. Stratasys Ltd. (SSYS) is a Minnesota-based a leader in 3D printing. Over the past five years, it has snapped up other top players like RPS for stereolithography, XAAR for powder-based printing, and others to grow its technological lead.
Stratasys’s flagship F3300 printer is now one of the fastest machines in its price class, and analysts expect 2024 to be a down year before a significant return to growth. Net profits are expected to surge tenfold to $26 million next year.
The threat of 20% across-the-board tariffs could send that figure even higher. If President Donald Trump does implement steep import barriers, many American manufacturers would suddenly find themselves forced to buy domestically produced parts. Stratasys remains far more profitable than its chief rival, 3D Systems Corp, (DDD), and we know from history that it pays to buy the best when turnarounds are underway.
2. Evolv Technologies Holdings Inc. (EVLV) saw shares plummet 50% this fall after the security company announced an internal investigation into its accounting practices. Several high-profile managers had inappropriately logged revenues, resulting in $4 million to $6 million of sales being recorded too early.
This now presents a compelling opportunity to invest in one of America’s top moonshot bets.
Evolv is a Massachusetts-based firm that builds AI-powered scanning “gates” that detect hidden weapons. Hundreds of stadiums, schools, and event spaces already use Evolv’s products, and they are far faster than traditional metal detectors because users can simply walk through without taking metal items out of their pockets. Evolv uses millimeter-wave technologies similar to those currently used by airports.
The potential for new gun-friendly laws now creates a significant opportunity for growth. The Trump administration will likely challenge various states’ conceal-carry bans, and the greater prevalence of hidden weapons will increase demand for Evolv’s products.
The company is also currently testing its products with the Transportation Security Administration (TSA). If approved for commercial airport use, that could become an unexpected windfall.
3. UiPath Inc. (PATH). Shares of this AI firm have fallen 83% since going public in 2021 on fears of slowing growth and significant management turnover. The company’s success during the Covid-19 work-from-home boom failed to repeat during more “normal” periods.
However, analysts now forecast a return to accelerating growth in calendar 2025. Companies are being increasingly pressured to save money using AI, and UiPath’s products are recognized by experts as being top tier. Gartner calls UiPath the leading visionary of business automation.
The growth trend will likely accelerate through 2025 as AI begins to become “smarter” than the average person. OpenAI’s latest “o1-preview” model recently surpassed humans on the IQ test, and these innovations will create greater demands for UiPath’s suite of automation products. No matter how smart AI gets, enterprises will need firms like UiPath to help implement these tools.
Betting on Volatility
Finally, we all know that incoming president Donald Trump is a disruptor. The Washington outsider spent his first term shaking up the status quo. To the delight of his fans and the horror of his critics, Trump has promised more of the same for his second term.
That creates an incredible amount of uncertainty around highly regulated businesses, particularly healthcare.
Consider Pfizer Inc. (PFE), a company that our global macro specialist, Eric Fry, recently recommended his Fry’s Investment Report members sell. That came after Donald Trump put forward Robert F. Kennedy Jr. to head the Department of Health and Human Services (HHS).
As I noted earlier this week:
The drugmaker earns a quarter of its revenues from Covid-19 vaccines and therapies, making it one of the most vaccine-exposed companies in the pharma industry. RFK Jr. is a well-known vaccine skeptic, and Eric rightly doesn’t want to stick around to see what happens next.
On the other hand, even Trump’s greatest critics will acknowledge that many of his intended policies will be good for healthcare stocks. This includes repealing the Medicare negotiation provision of the Inflation Reduction Act, reducing Federal Trade Commission oversight of mergers and acquisitions among corporations, lowering corporate taxes, and more.
Either way, we know that Pfizer won’t trade in its $25 range forever. By 2026, it likely will have either shot the moon or crashed to Earth.
To benefit from this uncertainty, traders look into at-the-market 2026 Pfizer straddles – an options strategy that will pay off if PFE shares move outside of a $19.50-$30.50 range by January 2026. If PFE shares rise to $35 as they did during Trump’s first term, traders will see a 100% payoff. And if the stock dips to $15, then traders also get a 100% profit. (A straddle can also pay off before 2026 if volatility rises far enough.)
The best part is that these straddles are currently trading for cheap, thanks to low market volatility. The VIX Index has dropped a quarter since the election, bringing down the cost of 2026 straddles from the $7 to $9 range to just $5.50.
A Way for Even Faster Gains
Of course, not everyone will enjoy waiting around for the next year for Pfizer straddles to mature or 3D printing firms to turn around. Trump isn’t set to take office until January, and we won’t know the administration’s policies for several more months after that.
That’s why I think it’s essential to sign up for these free presentations by Jonathan Rose, where he outlines his strategy for profiting from zero-day options.
According to JPMorgan Chase, around $1 trillion zero-day options now exchange hands daily.
And when we start seeing that kind of money flow into a specific corner of the market – it should pique our interest. Because these areas tend to be where you find the most dramatic gains.
Of course, these big potential rewards come with equally big perils. And that’s why you need a proven game plan that manages the downside risk while leaving the door open for upside gains.
On Tuesday, November 26, Jonathan will complete his free masterclass with hosting his One-Day Winners Live Summit to show how his system works. You can click here now to reserve your spot.
During this masterclass, Jonathan will show you how you could’ve used these trades to TRIPLE your money from Donald Trump’s election victory… in less than seven hours.
Indeed, when it comes to options, our colleague Jonathan is the master of money flows. His 25-plus-year career trajectory, from floor trader to CBOE market maker to trading mentor, is a testament to the power of understanding these flows – including winners of 126%, 245%, even 463% or more, often in 30 days or less.
So, there’s no one I’d rather have you hear from when it comes to the exploding market for zero-day options.
Once again, on Tuesday, November 26, Jonathan is hosting his urgent summit on this brand-new moneymaking strategy. It is completely free to attend.
Just click here now to reserve your spot.
Regards,
Thomas Yeung
Markets Analyst, InvestorPlace