Microsoft, housing stocks, and a push for more electric vehicle adoption...

TradeSmith Snippets for December 12 Happy Monday; I'm glad you're here with us for the newest issue of TradeSmith Snippets. Today's action-packed edition will cover: The latest move from Microsoft Corp. (MSFT) to help win over the hearts of regulators and close its acquisition offer for Activision Blizzard Inc. (ATVI). What the numbers from a luxury homebuilder are really saying about the housing market. And one automaker's plan to nearly double the amount of electric vehicle (EV) charging stations around the country on its own. Of course, we aren't just going to rehash the news. We're going to give you actionable insights that can help you make savvier investing decisions. I'll let the team take it away from here. Enjoy your Monday — Keith Kaplan, CEO, TradeSmith RECOMMENDED LINK Have you heard of "SWaB"? More than 100 countries around the world are rolling out a system called "SWaB" that could have a bigger impact than the Internet in the days ahead. Here in the U.S., it's already being implemented in 38 states and counting. This year, massive investments are pouring into this innovation from some of the richest people in the world – like Elon Musk, Jeff Bezos, and Warren Buffett. Even the world's most powerful companies, like Apple, Microsoft, and Google, are spending billions to onboard it. That's because every single modern technology – 5G, artificial intelligence, blockchain technology, IoT, robotics, quantum computers, and EVs will have to switch over to SWaB to stay relevant. Get the details here Snippet No. 1: Microsoft Plays Nice Overview Microsoft reached a 10-year deal with Nintendo (NTDOY) to allow the popular video game franchise Call of Duty on Nintendo consoles if Microsoft's deal with Activision Blizzard Inc. (ATVI) closes. The Breakdown Microsoft appears to be playing the long game here and strategizing for a potential court case, as this move came before the Federal Trade Commission recently sued to block the acquisition. One of the concerns of rival video game console companies was that if Microsoft were to acquire ATVI, it would make new releases, like Call of Duty, only available on Microsoft's Xbox consoles. This 10-year deal, along with a similar deal extended to Sony Group Corp. (SONY) with its PlayStation consoles, could help ease any anti-competitive business practice concerns. The TradeSmith Takeaway Microsoft president Brad Smith wrote a Dec. 5 op-ed in the Wall Street Journal saying that Sony was the biggest objector to Microsoft acquiring ATVI: “Sony has emerged as the loudest objector. It's as excited about this deal as Blockbuster was about the rise of Netflix. The main supposed potential anticompetitive risk Sony raises is that Microsoft would stop making Call of Duty available on the PlayStation. But that would be economically irrational. A vital part of Activision Blizzard's Call of Duty revenue comes from PlayStation game sales. Given the popularity of cross-play, it would also be disastrous to the Call of Duty franchise and Xbox itself, alienating millions of gamers.” The 10-year deal and the opinion piece set up Sony and regulators to seem unreasonable if the deal does not go through. Smith went on: “Some regulators worry that any big-tech acquisition will harm consumers and workers. But Microsoft committed in February to govern its new cloud-based game store by the pro-competition principles outlined in the app-store legislation pending in Congress. And in May we negotiated a precedent-setting agreement with the Communications Workers of America allowing workers to organize easily at studios, including Activision Blizzard. Blocking our acquisition would make the gaming industry less competitive and gamers worse off. Think about how much better it is to stream a movie from your couch than drive to Blockbuster. We want to bring the same sort of innovation to the videogame industry.” In an issue from our popular series Special-Situation Central, we shared that there was an arbitrage opportunity that could net a double-digit profit if the deal closes. Microsoft will pay $95 per share for ATVI, and ATVI is trading at $74.76 as of this writing, offering a potential 27% profit. There is still risk in buying ATVI shares because there's always a chance that the deal won't go through, which is why ATVI is currently not trading closer to Microsoft's offer of $95 per share. But in terms of taking a calculated risk, our Health Indicator has ATVI in the Green Zone, and our Volatility Quotient (VQ) says it has a medium-risk score of 22.68%. So, even if the deal doesn't close, the $95 offer can be seen as a sign that ATVI is currently undervalued, and our tools say Activision Blizzard has standalone value. Snippet No. 2: Look Beyond Toll Brothers' Revenue and Earnings Per Share Overview Shares of luxury homebuilder Toll Brothers Inc. (TOL) climbed more than 7% on Dec. 7 following its latest quarterly earnings report on Dec. 6. The Breakdown Toll Brothers reported revenue of $3.71 billion, which exceeded expectations of $3.21 billion, and it reported earnings per share (EPS) of $5.63, beating expectations of $3.96. It also delivered 3,756 homes, more than the company's original forecast of 3,250 to 3,500 homes. But digging a little deeper reveals other stats that paint a truer picture of the trouble that's been brewing in the housing market. New contracts fell by 60% from the same period last year, and the dollar value of new orders declined by 56%. Even more alarming is that 20.8% of new contracts for the quarter were cancelled, the company's highest cancellation percentage since 2009. The TradeSmith Takeaway With the average 30-year mortgage rate at 6.52% as of this writing and high inflation eating away at hard-earned dollars, folks have been forced to sit on the sidelines and delay becoming new homeowners. Plus, with concerns that a recession will arrive in 2023, people won't be racing out to make big purchases. So, even though the TOL stock price climbed 7% after beating earnings expectations, the 60% drop in new contracts and the highest contract cancellation rate since the Great Recession speaks volumes about the trouble in the housing market. Our Health Indicator confirms that you shouldn't rush in and buy shares of TOL, squarely placing the company in the Red Zone. Our VQ also labels the stock as high risk at 39.89%. Of course, we don't want to just leave you with a stock to avoid. Senior Analyst Mike Burnick believes that we are headed toward a period of stagflation, where inflation remains high and economic growth slows. Fortunately, he's seen this before and has a road map for how to profit. It involves buying small-cap stocks. And we have three potential buys available to check out here. RECOMMENDED LINK Vegas comes to Wall Street (New method will blow your mind) Nevada earned $14.6 billion last year from one secret... Tilting the odds ever so slightly to favor the casinos, not the gamblers. The house edge can be as low as 0.5% — a seemingly insignificant amount — but enough to earn them billions over time. Now, Keith Kaplan has taken this concept and developed a new way for YOU to become the house. A trading trick that puts the odds on your side... It's a new way to trade and potentially make all the money you need — with an astounding 89.47% win-rate. For the first time ever, you'll have the edge, and it could be worth thousands to you every single month. To see this in action, click here now. Snippet No. 3: The Charger Takeover Overview General Motors Co. (GM) plans to install 40,000 EV chargers across the United States. The Breakdown GM plans to place these chargers in places where people may leave vehicles parked for several hours, such as shopping centers, sports arenas, and parks. Most non-GM electric vehicle owners will also be able to use the chargers, including Tesla Inc. (TSLA) drivers. There are currently 43,000 charging stations across the United States, so GM's plans would almost double the amount of charging stations around the country. The TradeSmith Takeaway GM is going all-in on EVs, announcing in June that it is investing $6.6 billion in Michigan through 2024 to increase electric pickup-truck production and to build a new EV battery cell plant. GM also wants to increase its North American production capacity to 1 million EVs by 2025. EV sales in the United States passed a 5% tipping point in July, which signals we're on the precipice of the mass adoption of electric vehicles. While this means that there will be car manufacturers that can make you money, GM is not that company, as it's currently in our Red Zone. But what our team has focused on more are the profit opportunities that will propel mainstream adoption — the companies building the infrastructure needed to get more EVs on the road… like charging stations. We have a full report on two such companies here. Take care, Team TradeSmith P.S. Traditional investing is dead. Really, the market is down more than 24%, inflation is at a 40-year high, and more than 65% of all stocks have lost value. You need an edge… That's why TradeSmith CEO Keith Kaplan created what he believes is the No. 1 moneymaking strategy for today's market. Click here for a quick over-the-shoulder demo of what could be the ultimate income solution. Best of TradeSmith The chart below represents the best-performing open positions over the last two years, as recommended by our software. More Investable Information at Your Fingertips TradeSmith's 2023 Guide to Beating Inflation Bitcoin Is Far from Dead (Here's Proof) This Could Be the Amazon of Gene-Editing Stocks Electric Vehicles Passed This 5% Tipping Point – Here Are 2 Investments to Make 866.385.2076 | support@tradesmith.com ©TradeSmith, LLC. All Rights Reserved. You may not reproduce, modify, copy, sell, publish, distribute, display or otherwise use any portion of the content without the prior written consent of TradeSmith. TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. 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