The 🔥H.E.A.T.🔥 Formula

AI Driven Insights to Spark Your Portfolio

February 13, 2025

I am going to be on Making Money With Charles Payne Today, Sometime Between 2-3PM EST

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.

Our Next Webinar

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Thu, Feb 27, 2025 2:00 PM - 3:00 PM EST

1. Bullets From DeepSeek to Disruptors: Explore how one AI breakthrough (DeepSeek) reveals cost-effective strategies and under-the-radar opportunities beyond mainstream tech giants.

2. Finding Alpha in the Noise: Learn how AI-driven data-mining cuts through market hype and identifies genuine growth catalysts—even in emerging or overlooked sectors.

3. Comparing & Contrasting Strategies: Discover how to harness AI to evaluate different investment approaches.

We will be hosting The Watchlist every Tuesday and Thursday. Jeremy Vreeland (Bullish Bears) and I will be discussing stocks we are currently watching, buying, or shorting. We will also be discussing how to structure trades for asymmetrical returns and we will take your questions.

Click below to register for the Thursday:

Tuesdays are live streamed on YouTube here:

Market Recap

CPI came in hotter than expected, the market sold off hard but recovered a lot. Powell played it down somewhat, which probably helped…..

"I would say we're close but not there on inflation. And you did see today's inflation print, which says the same thing. I mean, we've made great progress toward two percent. Last year, inflation was 2.6 percent. So great progress, but we're not quite there yet. So we want to keep policy restrictive for now so that we can see."

Couldn’t agree with Vivek more on this…..

Today is PPI, which now becomes important in light of yesterday’s print. Market expectations of the first Fed rate cut moved from July to September/October, and we still have no idea what tariffs will do, if anything.

SPY pretty much going nowhere, my sense is that tariff overhang kind of puts a top on rallies, hotter inflation doesn’t help either.

This caught my eye this morning for obvious reasons….

GPT agreed that this could be a major issue….

Conclusion

  • Large chip tariffs would effectively tax HPC expansions and hamper AI infrastructure buildouts. The HPC meltdown mania overshadowed by unstoppable expansions might quickly stall.

  • Losers: HPC chip designers like Nvidia, AMD, Apple, plus big cloud providers, and the broader U.S. stock market if AI-driven growth expectations drop.

  • Possible Winners: Intel or domestic fab equipment over the long haul, but short-term the entire HPC ecosystem sees disruption.

  • Risk: The market reaction could be severe. The administration might then reverse or moderate tariffs. But if the tariffs become reality, near-term losers are HPC-laden AI expansions that rely on TSMC-based chips.

However, I asked it to rate the probability this happens….

Conclusion: While a nonzero risk, an all-out HPC chip tariff is more likely used as a bargaining tool than fully enacted. We rate the chance at 4 out of 10—not negligible, but still below a 50% threshold.

A major factor in this growth was Robinhood’s crypto business. Robinhood pulled in $672 million from transaction-based revenue, but over half of that — $358 million — was crypto-based revenue. That was a more than 700% jump in crypto-based revenue from the same quarter last year.

Coming into the year, and with Trump, I thought crypto would be a major theme, still do, but Bitcoin and the miners have not done well. HOOD earnings last night (don’t own but have a 2X on it) is making me start to think that the real winners could be the brokers. I do own COIN (earnings tonight), which is up pre market, would like to see it break back above it’s 50 day……

I had GPT analyze HOOD…..

Robinhood has evolved into a unique “stock + crypto” brokerage with potential expansions into tokenized assets. After its blowout quarter, the near-term outlook for higher interest income, surging crypto volumes, and the new RWA (real-world asset) tokenization roadmap are enticing catalysts. If you believe crypto volatility is near a trough and HPC meltdown mania overshadowed by continuing interest in digital assets, HOOD can be a “must own” to capture that synergy across retail stock and crypto trading. Still, weigh the risk that crypto’s cyclical downturn or abrupt regulatory changes could dampen momentum.

HOOD is going to be a bit extended this morning….

ADBE is a stock I own, love this chart….

Had GPT analyze the article, kind of what I thought, solid AI name to balance out the more speculative stuff……

Adobe remains a strong, relatively low-risk AI play among software names, given brand loyalty, enterprise reach, and new generative expansions. Holding makes sense for a balanced AI portfolio—especially if you prefer software over HPC hardware.

TEM

William Blair downgraded them to neutral yesterday….

"We are downgrading shares of Tempus AI to a Market Perform rating from Outperform. Shares have see-sawed since the June IPO; they are up 92% from IPO pricing at $37 per share (versus the Russell 2000 up 15% during the same time frame), up 211% from the late-June lows, but actually finished 2024 down 9% from IPO pricing. More recently however, shares have surged yet again, up a whopping 111% year-to-date.

Probably going to see resistance around the November highs here….

Got GPTs take as well…..

TEM – Possibly overextended, fundamentals not changed, share price outran fair value.

If it’s good enough for Nancy it’s good enough for me, but I may trim some today.

Chile?

Eliant is the one who first got me to notice Argentina. I had GPT take a look at Chile….

Conclusion

  • The possibility of a rightward political shift in Chile is rising, reminiscent of investor excitement in Argentina. Still, Chile’s shift likely lacks the radical “Milei factor.”

  • Chilean stocks could see a moderate rally if a conservative victory cements pro-business policies and clarifies the new constitution’s direction—restoring foreign investor confidence.

  • SQM stands out among US-traded Chilean names for direct lithium exposure, while BSAC (banks) could benefit from improved growth sentiment. If you want to bet on a less dramatic but stable environment for Chile’s markets—yes, it may present a buying opportunity at current depressed levels.

I am always on the lookout for companies announcing they are being hurt by some aspect of AI in their earnings calls. Did the same for TTD, I had GPT analyze the call and asked if this was a name I should short…

Final Verdict: Should You Short TTD?

  • Unlikely. TTD’s narrative around AI is more about enhancing their platform than overshadowing it. The biggest short argument revolves around valuation risk and competition from Amazon, not HPC meltdown mania illusions.

  • If you want to short companies that are losing from AI disruption, TTD is not the best target, given it remains an AI beneficiary. Their recent shortfall is from internal execution changes, not from HPC meltdown mania overshadowing or major AI competition.

Summary: The data suggests TTD is not a strong short candidate if your thesis is “AI is hurting them.” TTD invests heavily in AI for ad-tech optimization, which more likely helps than hurts, especially as they remain a leading platform for open-internet advertising.

So I then asked if I should buy the dip……

Final Verdict: “Buy the Dip”?

Yes. TTD’s Q4 miss likely represents short-term execution missteps, not a structural AI threat. The company remains an AI beneficiary in digital advertising, with potential to rebound as reorganization and new AI-infused offerings take hold.

Conclusion: Buying TTD on the dip can be wise if you believe in TTD’s long-term open-internet ad model and its robust AI-driven approach. Ad-tech volatility is normal, but TTD’s fundamentals and HPC meltdown mania overshadowed synergy with AI suggest the recent weakness could be an attractive entry point for investors comfortable with some volatility.

I will keep an eye on this one, at the moment it looks like it is going to blow through any support level….

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