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The H.E.A.T. Formula
From Pelosi’s Tempus Bet to Starlink’s Launch: AI Healthcare Takes Center Stage
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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Most of the market talk continues to center around Tariffs and the Trump Coin. I think that’s misguided at the moment. The real story is what’s going in in AI related to healthcare. Jensen Huang and Marc Andreessen have both stated that healthcare is going to be the biggest beneficiary of AI. Over the weekend we heard that Nancy Pelosi bought stock in Tempus AI, so one has to wonder what she knows. Yesterday saw the Starlink announcement (more below). If you watched the press conference, all they talked about was the potential of what AI can do in healthcare.
I am going to be working on names here. Luckily I already own TEM, hard to say whether I would buy it here if you don’t already own it. It’s up another 10% pre market and you have to wonder what Nancy knows that we don’t. On the other hand it’s a wild stock. Some other potentials are:
SDGR
RXRX
VEEV
ILMN
ISRG
I thought this was a year or two away, I was wrong, this is now. I will continue to build this out.
Meanwhile, I agree with Jefferies on Tariffs…
Our view has been, and still remains, that tariffs are a negotiating tool. Even the 25% tariff intention of Mexico and Canada is likely the opening move to start the negotiation process. Overnight comments on possible 10% China tariffs also suggest start of the negotiation process. The uncertainty date has now shifted to 1st April when new tariff announcements could be made. But this gives the Trump administration and other countries time to negotiate trade policies.
Yesterday’s Analyst Calls That Caught My Eye
CW- New Buy at Citi PT $440
GPT’s take…
With nuclear poised to meet rising AI-driven power needs, Curtiss-Wright’s substantial involvement in nuclear engineering and critical systems puts it in a strong position to benefit. We therefore rate its AI-related revenue growth potential at 7, reflecting a meaningful upside if nuclear plants ramp up to supply HPC data centers worldwide.
VST- Resumed Outperform at Evercore PSI, PT $202
Nancy Pelosi’s new buy outweighs any analyst opinion
AAPL- Cut to Hold at Loop and Underperform at Jeffries
RTX & NOC-Raised to Buy at Citi
I’ll be taking a deeper dive on the defense contractors soon, more about drones for me than anything else though.
Still like TSLA….
I saw that Jefferies upgraded an AI Company I have never heard of…
GENPACT $G upgraded to 'Buy' (from Hold) at Jefferies with a $55 price-target: "We upgrade Genpact to Buy from Hold, and increase our price target to $55 from $44. We believe growth rates in Data-Tech-AI and Digital Operations have bottomed and will continue to accelerate over the medium-term. As growth accelerates to the high-single-digit range, we expect strong earnings appreciation and multiple expansion. We expect Genpact's Data-Tech-AI segment (47% of revenues) to exit 2024 with revenues growing at a high single digit pace, up from low single digits a year ago. As 2025 progresses, we expect this rate to be maintained in 1H25 but then begin to move higher in 2H25. As discretionary spend and AI tailwinds accelerate, we believe this growth rate will further accelerate to a low double-digit pace in 2026 and 2027."
I had GPT rate them, too many good companies to invest in to take 7s IMHO…
Conclusion
Considering Genpact’s (i) large portion of revenue from data/AI solutions, (ii) broad BPO/consulting heritage, and (iii) Jefferies’ forecast for accelerating growth, a rating of “7” seems apt. This indicates meaningful upside from AI tailwinds—especially if enterprise spending on AI-based transformation continues to climb—while recognizing that Genpact may not see the exponential gains characteristic of a pure-play AI software provider.
DOGE Theme
I put the DOGE Executive Order into Chat GPT
And asked for the winners, rated from 1-10…..
Takeaways
Booz Allen (9), Palantir (8), Microsoft (8), and Amazon (7) appear best positioned to gain from an immediate government-wide modernization push.
Oracle (6), Google (5), Salesforce (5), and ServiceNow (5) can also benefit, albeit overshadowed by competition.
Leidos (5) and Splunk (4) might see moderate expansions.
Additional integrators or specialized data analytics providers exist, but these ten are prime candidates.
BAH is interesting as it has gotten crushed by DOGE speculation.
I also asked for possible losers…
Conclusion
Under the DOGE Agenda’s rapid modernization approach, the vendors likely at greatest risk of losing federal contracts—and thus seeing noticeable revenue hits—are DXC (8 rating) and Unisys (6 rating), as they rely heavily on legacy infrastructure deals. Teradata (5 rating) and IBM’s mainframe segment (4 rating) could also face moderate churn if agencies decommission older data warehouse or mainframe solutions in favor of agile cloud-based alternatives.
That said, all or some of these vendors may pivot effectively into modern solutions, reducing potential losses. Furthermore, actual contract terminations or replacements often happen slowly, meaning any revenue declines might unfold gradually rather than abruptly.
AI in Healthcare Theme
Yesterday I talked about Nancy Pelosi buying TEM and the potential of AI in healthcare. Found this chart on X…..
Meanwhile, this could be huge. If you saw the press conference the only thing they talked about was AI in healthcare….
This is behind a paywall, but bottom line is Google is poised to be a major player in biotech…
AI Power Theme
For AI to work it is going to require tons of power and tons of new infrastructure.
Both Exxon Mobil XOM -0.76%decrease; red down pointing triangle and Chevron CVX -2.00%decrease; red down pointing triangle said last month that they are talking to potential data-center customers on deals to supply natural-gas-fired power paired with carbon-capture technology. Exxon is working on a power-plant design with at least 1.5 gigawatts of capacity—enough to power more than a million homes. TotalEnergies TTE -0.04%decrease; red down pointing triangle, which has a power business, last year bought 1.5 GW of natural-gas-fired power plants near Dallas and Houston in Texas.
“Think about the data centers, artificial intelligence, we have waiting times now on large gas turbines. Actually, customers are coming and saying, hey can I make a reservation and I’ll pay you for a reservation? Just think about that. It hasn’t happened for a long time,” Kaeser said.
“I believe the electrification age has just begun. Whether that’s gas turbines or wind or solar or something else, we’ve got everything, and the customers decide in the end. And one thing I believe one should not underestimate, the White House is not buying much [but] the customer does,” he added.
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