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The H.E.A.T. Formula is a radically different way to look at investing your portfolio.

‍H- Hedges, you should always have hedges and be agnostic as to being long or short. Bonds are not a hedge

‍E-Edges, you should always look for edges. Preferably these are edges with some sort of psychological underpinning, structural edges, or some sort of barrier to entry.

‍A-Asymmetric. Everything you do, be it trades or your overall portfolio, should be designed so that heads you win a lot, tails you lose a little.

‍T-Themes. You should always be invested in the top themes. Most everything else is just noise.

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The Watchlist 1/30/2025

In The News

Measuring Crypto's 'Golden Age,' NVDA Winner or Loser with DeepSeek?-Schwab Network

Wall Street's levered-ETF boom is close to becoming a billion-dollar moneymaker-Investment News/Bloomberg

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Market Recap

The DeepSeek story continues to shift from being viewed as Armageddon to a net positive as more companies could have access to cheap AI. MSFT and METAs decision to remain on course with AI spending was extremely important to the market yesterday. I still believe you need exposure across the spectrum, including, but not limited to:

• Semiconductors

• AI Power

• AI Infrastructure

• AI Agents

• AI Healthcare

• AI Adopters

PCE is today, which is the Fed’s preffered inflation measure, so a surprise could have an impact. So far, AAPL’s earnings seem to be helping the market this morning. NVDA is down again though.

In today’s newsletter I cover the GLP1s, how a UK spinoff could impact a couple of US companies, and what the potential tariffs could mean for Canada.

GLP-1

I own LLY and NVO. While I am a big believer that you should use diet and exercise to lose weight, I think the allure of just taking a shot will entice a lot of people. The WSJ just had an interesting article, and with RFKJ’s confirmation hearings, I wanted GPT to take another look.

Are Weight-Loss Drugs Like Gym Memberships? The Answer Is Worth Billions-WSJ

GPT’s take…..

1. Big-Picture GLP-1 Opportunity

Demand Drivers

• Chronic Condition: More medical professionals now treat obesity as a long-term disease, rather than a short-term “diet fix.” This underpins sustained demand over years, potentially decades.

• Efficacy & Popularity: GLP-1 agonists (like Wegovy, Mounjaro) produce weight-loss results often superior to older obesity treatments, boosting patient uptake and brand loyalty.

• Lifestyle & Resolution Effect: The WSJ article highlights a seasonal surge in sign-ups in January/early year—similar to gym memberships. That can cause near-term lumps in quarterly sales, but the overall trajectory can remain robust.

Coverage & Cost Challenges

• Insurance Coverage Gaps: High list prices (~$1,000+/month) can make the drugs inaccessible for many if insurers or employers exclude coverage.

• Employer Pushback: Some companies worry about rising healthcare costs and may drop or limit coverage. Over time, though, success stories and growing acceptance could pressure employers to include coverage for chronic weight management.

Politics / Regulation (RFK Jr., etc.)

• Even if a public figure is skeptical of “Big Pharma,” real-world constraints and bipartisan demand for solutions to obesity (which strains the healthcare system) make a near-term block on GLP-1 usage unlikely.

• The FDA has approved these drugs for chronic weight management; reversing that would be politically challenging and medically contentious.

Overall, the structural tailwinds (growing global obesity rates, medical community support) outweigh one-off political/regulatory headwinds.

2. Eli Lilly (LLY)

• Key GLP-1 Products:

  • Mounjaro (tirzepatide) for Type 2 Diabetes, with strong weight-loss data.

  • Zepbound (investigational or newly launched, depending on final approvals/indications).

• Recent “Misses”: As the WSJ article notes, Lilly faced two quarters of lower-than-expected GLP-1 sales growth. Seasonality appears to be a culprit—fewer new starts in the second half of the year.

• Long-Term Revenue Potential: Some analysts model $20–$25B in annual sales for Mounjaro & related combos by mid-decade. This places a massive premium on Lilly’s future earnings growth.

Pros for LLY

• Pipeline Depth: Beyond weight loss, Lilly has a robust pipeline in Alzheimer’s, diabetes, oncology, etc., providing diversified growth.

• Market Share Gains: Mounjaro has shown superior efficacy in certain trials, which can propel it to leadership in the obesity space if supply/logistics issues stay under control.

Risks for LLY

• Valuation: Lilly’s stock has run up dramatically over the past year(s). High expectations mean even small short-term misses can produce outsized negative market reactions.

• Execution: If they continue to misjudge seasonality or get overly aggressive in guidance, the stock could face volatility each quarter.

LLY Rating: 8.5 / 10

• Very strong long-term fundamentals, but near-term lumps from seasonality and high valuation expectations keep me from assigning a perfect “10.”

• Nonetheless, if you’re investing with a multi-year horizon, it’s hard to deny Lilly’s potential in the weight-loss market.

3. Novo Nordisk (NVO)

• Leading GLP-1 Franchise:

  • Wegovy (weight loss) and Ozempic (diabetes) have become household names. Novo continues to expand supply and distribution globally.

• Global Presence: Novo Nordisk’s diabetes and obesity portfolio is entrenched worldwide, making it less vulnerable to solely U.S. insurance swings.

• Growth Trajectory: Wegovy has shown robust uptake, though supply constraints remain a challenge. The brand also experiences demand surges around the new year.

Pros for NVO

• Market Dominance: Novo has been in the GLP-1 space longer than Lilly and has strong brand recognition among prescribers/patients.

• Geographic Diversification: Europe and other markets may accelerate coverage for obesity medications, especially as healthcare systems tackle rising obesity costs.

Risks for NVO

• Capacity Constraints: Keeping up with surging demand can be tricky—any supply shortfalls might limit near-term revenue.

• Competition: Lilly’s Mounjaro is widely viewed as a fierce competitor with potentially superior efficacy in certain trials.

NVO Rating: 9 / 10

• Novo’s first-mover advantage, brand loyalty, and global footprint make it arguably slightly less risky than Lilly from a near-term standpoint. It’s already proven a robust appetite for Wegovy.

• Still, persistent supply issues and lofty valuations keep me from awarding a perfect “10.”

4. Reconciling Seasonality with the Long-Term Investment Thesis

• Quarterly Volatility: LLY’s recent misses highlight that GLP-1 usage can have cyclical patterns (like gym memberships). Investors who realize this may see buying opportunities when a quarter or two disappoint.

• Structural Growth: Despite short-term lumps, the notion of obesity as a chronic disease implies multi-year demand. Over the next 5–10 years, expansions in coverage and improvements in drug formulations/delivery could further boost adoption.

5. Final Takeaway

• Despite potential political chatter from figures like RFK Jr., the momentum behind GLP-1 weight-loss therapies appears too large—and widely supported—to be derailed by short-term rhetoric.

• Insurance coverage and seasonal sign-up cycles can cause near-term fluctuations, but both Lilly and Novo Nordisk remain at the forefront of a potentially massive market transformation in obesity treatment.

• Ratings:

  • LLY: 8.5 / 10 (excellent pipeline, some near-term lumps, high valuation expectations).

  • NVO: 9 / 10 (leading brand presence, global diversification, but watch for supply challenges).

Over a long horizon, both remain compelling if you believe demand for advanced weight-loss solutions will continue to outstrip diet/exercise alone—and that no administration (in the U.S. or abroad) will seriously hamper access to these game-changing treatments.

Smith’s Group Spinoff Bullish for EVLV and OSIS?

UK Engineering Firm Smiths Plans Breakup as Activist Circles-Bloomberg

This got me thinking that it could end up being bullish for other security screening companies. Specifically EVLV, which is a holding in GUNZ, and/or OSIS, which I own. Here’s GPTs take…..

1. What Smiths Group’s Breakup Implies

1. Focused, Standalone Screening Business

   1. Once separated from Smiths’ other operations, the baggage-screening unit becomes a “pure play” in security scanners, likely with its own board and management laser-focused on growth opportunities (e.g., expansion into new markets beyond airports, targeted R&D).

   2. Spinoffs often become more agile and can pursue partnerships, acquisitions, or new verticals without competing for capital or attention inside a larger conglomerate.

2. Shift in Competitive Dynamics

   1. Smiths’ newly carved-out entity could double down on capturing share in the global security market, or it might seek M&A opportunities if it wants more specialized technology.

   2. Conversely, if the new entity becomes an acquisition target, it might ultimately merge with another player, altering the competitive landscape.

3. Activist Pressure

   1. Smiths has been under pressure from activist shareholders (Engine Capital), which typically push for “value-unlocking” transactions like spinoffs or divestitures.

   2. This corporate shakeup might prompt other large conglomerates in the security industry to re-evaluate whether they, too, should streamline or spin off related business lines.

2. Potential Bullish Catalysts for EVLV and OSIS

A. Market Expansion Beyond Airports

• Traditional Baggage Scanning: The lion’s share of scanning device sales historically targets airports and border checkpoints.

• New Verticals: There’s growing demand for advanced scanning or detection solutions in:

  • Public venues (stadiums, entertainment complexes)

  • Corporate offices and data centers

  • Government buildings

  • Schools and campuses

• Momentum: EVLV, for instance, focuses heavily on frictionless threat detection for large crowds (like stadiums and arenas), while OSIS has broad security and inspection solutions across cargo, ports, medical imaging, and more.

B. More Agile Competitors / Partnerships

• Smiths’ Spinoff could ignite M&A chatter:

  • A newly standalone baggage-screening unit might look to partner with or acquire specialized companies like EVLV if it needs frictionless or AI-enhanced scanning solutions.

  • Conversely, OSIS or EVLV might see an opportunity to acquire or license technology from the new Smiths spinco if that helps expand their product offerings.

• Increasing Awareness of Security Tech: A high-profile spinoff can attract investor and customer attention to the entire sector—further legitimizing innovative screening solutions from EVLV and OSIS.

C. Tailwinds from Global Security Spend

• With terrorist threats, continued pandemic-era screening expansions, and large-scale events (concerts, sports, etc.), demand for advanced screening is on the rise.

• Governments worldwide are still updating legacy systems across transit hubs. As a “pure-play” competitor, the new Smiths spin-off could help raise overall industry profiles, benefitting other specialists like OSIS and EVLV.

3. Key Considerations & Possible Risks

1. Competitive Intensity

   1. A newly independent Smiths baggage unit may become more competitive in R&D and sales. That could pressure margins or pricing for existing players if they face a well-funded spinco looking to grab market share.

2. Valuation & Growth Execution

   1. EVLV is known as a higher-growth, more “tech-forward” name—investors expect robust growth. If they can land new verticals swiftly, that’s bullish; if not, a bigger competitor might overshadow them.

   2. OSIS is more established, diversified across security and medical imaging, which offers resilience but also less “pure” upside if screening expansion accelerates outside airports.

3. Macro Environment

   1. Large-scale security contracts can be susceptible to government budget cycles and broader economic conditions. For example, a potential global downturn might slow new installations, even if the long-term security trend remains positive.

4. Overall Assessment

Bullish Implications:

• A dedicated spin-off from Smiths signals that the security-screening space is attractive and sufficiently robust to merit standing on its own.

• This can bring new capital, heightened visibility, and possibly collaborations or M&A in the sector.

• EVLV and OSIS, each with distinct niches, may benefit from rising demand for “next-gen” scanning, especially if screening truly expands aggressively beyond airports.

Balanced With Competition:

• A spin-off can create a leaner, more aggressive rival in baggage and cargo screening. This might challenge incumbents if Smiths invests heavily in product development or undercuts on pricing.

Bottom Line:

• For Evolv Technology (EVLV): The emphasis on frictionless, AI-driven screening for large events could see tailwinds if the entire sector gets more attention and capital. Partnerships with a newly independent baggage unit or broader market recognition are positives.

• For OSI Systems (OSIS): As an established multi-segment scanning player, the overall growth in security demand is favorable. However, they might face price competition or a new competitor flush with spinoff proceeds.

Conclusion

Smiths Group’s breakup underscores that baggage-screening is poised for deeper specialization and potential expansion beyond airports. While it could strengthen an independent Smiths spinco as a direct competitor, it also shines a brighter spotlight on security technology—a net positive for companies like EVLV and OSIS, assuming they continue innovating and capturing new verticals. In short, the spinoff news could prove bullish for these peers, provided they execute well and leverage the rising market awareness in the security space.

Canada

I’ve been watching Canada for a few reasons. I think Trump’s election could create a great investment opportunity, I’m just not sure if it’s long or short yet. Jefferies came out with a negative piece this morning, the problem is we don’t know whether tariffs are a bluff or whether they will happen. The Wall Street Journal had a positive piece on Canadian oil companies:

Tariffs Won’t Sink Canadian Oil Companies-WSJ

I had GPT analyze the Jefferies report and give me some possible winners and losers. A long Canadian oil short MGA trade does look interesting. Will keep an eye on it….

1. Recap of the Jefferies View (Bearish on Canada)

• Tariffs Threat: Jefferies sees a high likelihood that some form of U.S. tariff is imposed on Canadian exports—maybe across-the-board at 25%, maybe a phased-in approach.

• Disconnect: Since the U.S. election, the Canadian dollar (CAD) has weakened ~4% vs. the USD, but the S&P/TSX Index is still up ~6%. Jefferies believes equities aren’t fully pricing in the downside of potential tariffs.

• Scenarios:

  • No Change (15% Probability) – “Best” near-term outcome, but the threat of tariffs remains a negotiation tool.

  • Gradual Ramp (50% Probability) – Tariffs start low but ramp up; Canada likely retaliates.

  • Full Speed Ahead (35% Probability) – A nuclear trade scenario with 25% tariffs in both directions.

• Economy at Risk: The Bank of Canada estimates that broad tariffs could shave off 2.5 percentage points of Canadian GDP growth, enough to tip Canada into recession.

• Policy Uncertainty: With an election or leadership shift on the horizon (Canadian federal election is scheduled for 2025), plus a potential second Trump term, the BoC is stuck between loosening policy to offset recessionary risks and dealing with potential inflation from tariffs.

• Bottom Line: Jefferies is bearish because they feel the TSX’s valuation does not reflect the possibility (or probability) of tariffs.

2. The “Conservative Sweep” Angle (and Javier Milei Analogy)

1. Potential Conservative Win in Canada

   1. Canada’s next general election (by October 2025) could see the Conservative Party, under Pierre Poilievre, form government if public sentiment shifts right—some polls already show them leading. A more “pro-business,” “energy-friendly” Canadian government might align somewhat better with a Trump White House on energy policy (e.g., pipelines, resource extraction).

   2. That said, U.S. tariffs can be unpredictable—Trump’s past stance on NAFTA/USMCA suggests no Canadian government is fully immune to trade friction.

2. Trump’s “Drill Baby Drill” Rhetoric

   1. A synergy might exist if both sides want to expand North American fossil-fuel production. For instance, a revived Keystone XL–style project or easier cross-border pipeline approvals. This could be bullish for Canadian energy names.

   2. However, historically, Trump has also threatened or imposed tariffs on Canadian metals, lumber, and other goods, so a pro-energy stance doesn’t necessarily eliminate other forms of protectionism.

3. Tariffs vs. Friendly Energy Policy—Which Dominates?

• Tariffs on Key Sectors: If 25% levies hit autos, metals, wood/paper, or agriculture, Canada’s economy could suffer more than any upside from energy alignment—especially near term.

• Energy Tailwind: If a new conservative Canadian government + a Trump White House aggressively push cross-border energy expansion, oil sands and pipeline companies might benefit.

• Retaliation Risk: Even a conservative Canadian leadership might retaliate if the U.S. slaps on broad tariffs, so it’s not guaranteed that “conservative–conservative” alignment solves all trade friction.

4. Ranking Canada: 1 to 10

Given Jefferies’ scenarios and the possibility of a new conservative government:

• Chance of a Conservative Win in Canada by 2025 is reasonable (~50/50 or better). That would likely tilt Canada’s policy more “pro-business,” especially around energy.

• Trump’s Tariff Threat is real. Even with a friendlier Canadian administration, Trump has historically used tariffs as a negotiating tool. Jefferies sees a combined 85% probability that some form of tariff emerges (50% gradual, 35% nuclear).

My Overall Score: 5.5 (on a scale from 1 to 10)

• I’m moderately cautious on Canada because the possibility of tariffs and a near-term slowdown are real.

• However, the longer-term synergy in energy could mitigate or reverse negativity if the Conservative Party prevails and the U.S. intensifies “drill baby drill.”

• Currency Watch: A further weakening CAD could cushion some blow for exporters, but also signals less optimism for Canada’s broader economy.

5. Canadian Names to Watch (Trading in the U.S.)

Below are suggestions for both long and short ideas, depending on how you believe the tariff drama + potential leadership changes will unfold:

A. Possible Long Candidates

1. Canadian Natural Resources (CNQ)

   1. Trades on NYSE under “CNQ.”

   2. Large integrated oil & gas name, strong exposure to oil sands.

   3. If “drill baby drill” synergy emerges and cross-border pipelines open up, CNQ stands to benefit.

   4. Risk: If tariffs target energy or if oil prices slump, it’s exposed.

2. Suncor (SU)

   1. Also on NYSE as “SU.”

   2. Another major oil sands producer with integrated refining operations.

   3. Has historically done well when cross-border pipeline capacity improves and oil demand rises.

   4. Risk: Tariffs or demand slowdown could hurt.

3. Enbridge (ENB) or TC Energy (TRP)

   1. “ENB” and “TRP” on NYSE.

   2. Pipeline/infrastructure giants that might benefit from new cross-border pipeline approvals under a more aligned U.S.–Canada energy policy.

   3. Risk: If a full trade war emerges, any new pipeline approvals might be overshadowed by broader economic slowdown.

4. Canadian Banks (e.g., Royal Bank (RY), TD Bank (TD), Bank of Montreal (BMO))

   1. Typically stable dividends and large footprints.

   2. If Canada avoids the worst tariff scenario or if a new government fosters growth, banks’ earnings can hold up.

   3. Risk: If a trade war leads to recession, banks will see higher loan losses and slower lending growth.

B. Possible Short or Hedge Targets

1. Auto Parts: Magna International (MGA)

   1. Trades on NYSE as “MGA,” a Canadian-based global auto supplier.

   2. Particularly vulnerable to auto sector tariffs.

   3. If the U.S. slaps heavy tariffs on Canadian automotive components, Magna’s cross-border supply chain could be hit hard.

2. Forestry/Lumber: West Fraser Timber (WFG)

   1. Trades on NYSE as “WFG.”

   2. Lumber has historically been a flashpoint in U.S.–Canada trade disputes (softwood lumber).

   3. Tariffs could hammer exports and reduce margin outlook.

3. Manufacturers / Exporters

   1. Any Canadian manufacturing name reliant on the U.S. market that doesn’t have strong domestic or global diversification might be vulnerable.

   2. Example: Linamar (LIMAF) (less liquid in the U.S.), also reliant on auto components.

4. Canadian ETF: iShares MSCI Canada ETF (EWC)

   1. If you want a broader short or hedge on the TSX, EWC tracks large-/mid-cap Canadian equities.

   2. A big wave of tariffs or slower Canadian growth would likely weigh on the entire index.

6. Bottom Line

1. Jefferies’ Bearish Thesis: Reasonable in the near term—the S&P/TSX Index may not fully reflect the risk of broad tariffs.

2. Long-Term Unknowns:

   1. If Canada elects a conservative leader who is pro-energy, and if a second Trump term actually fosters cross-border energy deals, that could be bullish for Canadian oil & gas.

   2. But tariffs could still happen, especially on other sectors—forestry, autos, metals, and more—pushing Canada toward recession.

3. Investment Score: ~5.5. Canada is not an outright doom scenario, but also not a table-pounding buy at this stage. The risk of an all-out tariff scenario remains non-trivial, and a new prime minister in 2025 might not be enough to avert near-term friction.

If you’re a long-term investor who believes in the “conservative wave” scenario (like Argentina with Milei) and a friendlier Trump–Canada energy synergy, you could accumulate Canadian energy names. If you fear the worst-case trade war, consider hedging with short positions (e.g., auto/lumber names, or broad TSX exposure) until clarity emerges.

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6. Wealth Management-Coming SoonThe views and opinions expressed herein are those of the Chief Executive Officer and Portfolio Manager for Tuttle Capital Management (TCM) and are subject to change without notice. The data and information provided is derived from sources deemed to be reliable but we cannot guarantee its accuracy. Investing in securities is subject to risk including the possible loss of principal. Trade notifications are for informational purposes only. TCM offers fully transparent ETFs and provides trade information for all actively managed ETFs. TCM's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. Trade notification files are not provided until full trade execution at the end of a trading day. The time stamp of the email is the time of file upload and not necessarily the exact time of the trades.TCM is not a commodity trading advisor and content provided regarding commodity interests is for informational purposes only and should not be construed as a recommendation. Investment recommendations for any securities or product may be made only after a comprehensive suitability review of the investor’s financial situation.© 2025 Tuttle Capital Management, LLC (TCM). TCM is a SEC-Registered Investment Adviser. All rights reserved.