The 🔥H.E.A.T.🔥 Formula

AI Driven Insights to Spark Your Portfolio

January 30, 2025

I will be on Mornings With Maria on Fox Business Today at 7AM 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.

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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.

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In The News

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Market Recap

Ton’s of news. FOMC kind of a non-event, we knew they would be on hold. Interestingly the announcement was somewhat Hawkish, but when Powell saw the market selling off he kind of walked it back a bit. He or Nancy Pelosi much have bought calls. Tech was weaker on continued DeepSeek fallout and news that Alibaba may have an even better model.

Earnings after the bell seem to have been taken pretty well by the bulls. META and MSFT both reiterated their cap ex plans. MSFT is selling off, so watch that as a potential tailwind.

The tech giants on Wednesday talked up their AI strategies and said they are sticking with ambitious investments in the technology despite the investor panic this week over the rise of DeepSeek. That Chinese company’s claim that it built an advanced AI model with far less money and fewer advanced chips than big-name U.S. competitors has caused many to question the wisdom of pouring oceans of cash into developing cutting-edge AI systems.

Microsoft Chief Executive Satya Nadella and Meta CEO Mark Zuckerberg said in earnings calls that DeepSeek had made real innovations. But the two portrayed the Chinese company’s work as part of a technological evolution that will make AI cheaper and more widely used rather than the extensive disruption that some observers have perceived.

NVDA

That was what Microsoft MSFT -1.09%decrease; red down pointing triangle and Meta Platforms META 0.32%increase; green up pointing triangle have in combined capital spending in the December-ended quarter, according to the companies’ earnings reports Wednesday afternoon. The expenditures were higher than what Wall Street had anticipated, not to mention nearly double from the same period the previous year. The bulk of it is going to chips and data centers to power generative artificial intelligence services.

That should have been great news for Nvidia NVDA -4.10%decrease; red down pointing triangle. But the market’s prime AI chip maker saw its shares slip in after-hours trading following the reports of two of its largest customers. And that follows a bruising run that has already clipped around 15% off the company’s stock price since last week, when a Chinese AI startup published claims about developing an advanced AI model at a fraction of the computing cost required by U.S. competitors. Nvidia is one of only three companies valued at more than $3 trillion, so such a drop leaves a wide mark. About $1 trillion of the U.S. stock market’s value was wiped out on Monday alone, according to Dow Jones Market Data.

Still think you should be buying the dips in NVDA

MSFT

Investors should definitely study Microsoft’s bookings numbers when considering Azure’s slight miss. Whether all of that business will come through as revenue in fiscal 2025 will be answered gradually, as Microsoft balances its spending with the demands and needs of customers. It’s not a bad problem to have.

GPT likes it….

I believe the author has a strong point:

  • Microsoft’s long-term AI and cloud story remains compelling, with the bookings figure acting as a leading indicator for future growth.

  • The post-earnings sell-off likely reflects short-term disappointment rather than any fundamental weakness.

  • Investors who look past the immediate noise and focus on the robust demand pipeline, strategic AI partnerships, and disciplined capex strategy may view the stock’s pullback as an opportunity.

Microsoft is still a cornerstone tech name with a broad portfolio and a proven ability to execute. While no technology leader is immune to macro pressures or competition, Microsoft’s business model and the emerging AI tailwinds suggest that the recent sell-off might be too pessimistic in light of future growth potential.

TSLA

Tesla Inc. revealed plans to begin robotaxi operations and forecast a sales recovery this year, fueling what Elon Musk predicted would be an “epic” period of growth for the electric vehicle maker.

It’s a good thing for Tesla that its chief executive has cozied up to the US president, because the company’s latest numbers are awful.

Tesla Inc. missed earnings estimates for the fourth quarter. The bigger issue is that the miss would have been even worse if Tesla hadn’t pulled a couple of levers. Another big slug of greenhouse gas credit sales combined with an unusually large dollop of “other income,” due mostly to an accounting change related to Bitcoin holdings, added up to $1.5 billion. Tax-adjusted, that’s half of Tesla’s entire earnings for the quarter right there. These earnings aren’t just weak but low quality, too.

GPT urges some caution…..

My Take: Caution, but Not a Lost Cause

  • Short-Term Outlook: The negative reaction to Tesla’s Q4 miss and reliance on non-core earnings drivers is justified. Margins are under pressure, and any slowdown in consumer spending or prolonged price war will weigh on near-term profitability. If you’re looking for stable earnings growth in the immediate future, Tesla looks risky at its current valuation.

  • Long-Term Potential: Tesla remains a uniquely positioned brand with strong global recognition. Its continued push into AI and autonomy, while heavily promoted by Musk, does have real potential upside—if executed properly over time. Likewise, the overall EV adoption trend remains a multi-decade opportunity, and Tesla still leads many global peers in this domain.

  • Valuation & Volatility: Tesla’s stock traditionally trades on future expectations more than short-term fundamentals. Because of that, the share price can surge on Musk’s announcements even if the near-term numbers look weak. That can make Tesla both a high-risk and potentially high-reward play, depending on your time horizon and risk tolerance.

My Recommendation:

  • Aggressive, Long-Term Investors: May see the dip (or any further dips) as an opportunity, betting on Tesla’s future in advanced AI, battery tech, and a re-acceleration of EV demand.

  • More Cautious Investors: Might wait for greater clarity on Tesla’s margin trajectory and actual EV demand in 2025, especially given price wars, regulatory uncertainty, and the possibility that hype around AI and robotaxis could outpace real adoption.

Bottom Line: Tesla’s fundamentals do not match its lofty valuation in the near term, and the Q4 earnings highlight real weaknesses. However, the company’s brand, scale, and pipeline of tech projects (autonomy, AI) keep the long-range story alive. Whether it’s a “buy” depends heavily on your tolerance for near-term volatility and your conviction in Musk’s ability to execute on big promises down the line. If you believe Tesla will dominate the future EV/AI ecosystem, the recent sell-off might be a chance to build a position—just be prepared for the roller coaster that comes with it.

IBM

IBM is a sneaky AI and Quantum name that I have held for a while….

As for DeepSeek, he said: “We have been very vocal for about a year that smaller models, and more reasonable training times, are going to be essential for enterprise deployment of large language models. We have been down that journey for ourselves for more than a year.”

“We see as much as 30 times’ reduction in inference costs using these approaches,” he continued. “As other people begin to follow that route, we think that this is incredibly good for our enterprise clients, and we will certainly take advantage of that in our business. But I believe that others will also follow that route.”

NOW

This is one I’ve had my eye on, only reason I don’t own it is I have a LOT of positions and can’t own everything, but a buy the dip could be enticing…..

GPT has been a fan of the stock, so I asked it to analyze the article and tell me if it would buy the dip…..

Would I Buy the Dip?

Short Answer: I lean yes, with a mid- to long-term investment horizon—but keep some caution about near-term volatility.

  1. Why Yes?

    1. Prudent Management: ServiceNow’s leadership has a track record of under-promising and over-delivering. If federal deals and consumption-based AI drive a back-half acceleration, the second half could beat expectations.

    2. AI Tailwinds: As AI models get cheaper and more widely adopted (thanks to DeepSeek and other developments), ServiceNow can integrate these capabilities into its workflow platform. Lower infrastructure costs could also mean stronger margins over time.

    3. High Enterprise Stickiness: Large enterprise software deals rarely unravel. Renewal and expansion rates tend to be high once companies integrate ServiceNow’s platform.

  2. Potential Risks

    1. Prolonged Macro Pressure: If federal spending or enterprise budgets tighten further, the timeline for contract signings could be extended.

    2. Competition & Evolving Tech: AI is evolving rapidly, with many cloud and software players entering the field. ServiceNow must stay ahead in feature innovation to justify premium pricing.

    3. FX Volatility: Currency fluctuations remain a wildcard for global software companies.

Ultimately, the post-earnings drop looks more like a short-term reaction to slightly conservative guidance than a fundamental deterioration. ServiceNow remains a key player in enterprise workflow automation and AI-driven services. If your investment thesis extends beyond the next quarter or two, the dip may present an attractive entry point—provided you’re comfortable with the usual growth-stock ups and downs.

DDOG

Stifel downgraded DDOG to hold yesterday. Been one of my favorites and GPTs. Here is their analysis….

DDOG Downgrade to Hold As Revenue Growth & Margins Likely Moderate in FY25, (St too optimistic) as customers optimize (OpenAI renewal) and DDOG ramps S&M investment fairly full valuation (13.5x recs 47x FCF) and outperformance since 3Q print (+10% vs IGV) creates a less favorable risk/reward – Expect OpenAI (est ~$80M) to renew (at least for 2025) but believe it has meaningfully optimized creating growth headwind (and potential seq 1Q decline); continue to believe DDOG needs to invest more heavily in S&M to sustain ~20% core (ex-genAI) growth and thus see St est calling for stable Y/Y OM (@25%) as too optimistic (expect 100-200bps pressure) and see limited upside to St FY25 rev est; see growth multiple to AWS continuing to contract (down 5 straight qtrs) as customer become more efficient with observability tools. Expect initial FY25 guide for 16-17% core growth +$180M in AI revs (19-20% all in). $140 FV. MSFT Azure reports tonight, expect more modest than typical growth upside in qtr with guide for 2H acceleration (known) likely needing to be significant (35%+) to lift DDOG shares. Prefer set up @ DT.

Prior thoughts - DDOG needs to invest in S&M to reinvigorate growth even if it means de-levering the S&M line in the near term; S&M headcount was +4% in 2023 while its picked up in 2024 we believe its needs to do more; Core DDOG growth, ex. Gen-AI natives, slowed to ~22% in 3Q (~23.5% last qtr) and $100K+ customer growth slowed for the third consecutive quarter to 11.5% (lowest ever). Plus, Gen-AI (OpenAI) optimization/pricing compression is expected to become a headwind in CY25. At similar size, DDOG is growing more slowly than TEAM CRM NOW CRWD SNOW while underspending most on S&M (as % of revs). We believe the stated goal of "attempting to increase our sales capacity to top line growth rates" is too modest, given the somewhat limited rate of S&M headcount growth over the last ~2 years, especially when compared to other high-growth software companies. We prefer DT here, who has been investing in GTM (direct & channel) and closing the growth gap to DDOG. M&A, particularly in security, could add heads/growth and adjacent mkt entry.

I had GPT analyze this and give it’s take..

Overall Assessment of Stifel’s Downgrade

  • Short-Term: Stifel’s concerns about a near-term growth deceleration and margin pressure from ramped-up S&M are plausible. The slowdown in big expansions from HPC/GenAI customers (like OpenAI) plus “high bar” valuations could mean the stock’s risk/reward is less compelling in the immediate future.

  • Long-Term: Datadog still leads in cloud-native observability, releasing new modules (security, developer analytics). Historically, it has delivered high net expansion with minimal S&M overhead. Even if growth normalizes around 20–25%, the business model remains attractive.

Conclusion: Stifel’s Hold rating (vs. prior Buy) is defensible if you believe that near-term HPC usage is stalling, big customers are optimizing usage, and management must invest heavily in S&M—denting margins. However, if you view Datadog as a long-term winner with strong cross-selling, a sticky user base, and potential to attract new AI-driven workloads, the short-term slowdown might be a buying opportunity. Ultimately, the stance depends on your time horizon and confidence in Datadog’s ability to reaccelerate or maintain margins.

Final Rating on DDOG’s Potential

  • On a scale of 1–10 for Datadog in the broader AI-enabled DevOps space: 8/10 for long-term potential, though near-term the stock could remain choppy if Street expectations are indeed too high or HPC usage from big AI customers normalizes.

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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.