The đŸ”„H.E.A.T.đŸ”„ Formula

AI Driven Insights to Spark Your Portfolio

February 07, 2025

Today we launch The Rareview 2X Bull Cryptocurrency & Precious Metals ETF (BEGS)

In Today’s Edition:

  • Market Recap

  • AMZN

  • AI Spending

  • GOOGL

  • BABA, BIDU, and GDS

  • Should You Buy DOCS?

  • Revisiting My EIX Short

  • The 60/40 Portfolio is Still Stupid

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.

Preview of Coming Attractions

I think AI is going to make traditional indexing and active management obsolete. I am putting my money where my mouth is


The investment firm is introducing eight new AI-focused funds, including offerings targeting UFO disclosure and DeepSeek's emerging AI technology.

Our Next Webinar

Uncovering Hidden Themes with AI: How DeepSeek Is Rewriting the Investment Playbook

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.

YouTube Videos

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

AMZN earnings were last night (see below for more analysis), leaving only NVDA in the Mag 7 to report. It’s down a bit over 2% in the after hours. Their commentary about DeepSeek echoed what others have been saying


"What you heard the last couple of weeks that a DeepSeek is a piece of it, but everybody is working on this. I believe the cost of inference will meaningfully come down. I think it will make it much easier for companies to be able to infuse all their applications with inference and with generative AI.... the cost of inference coming down is going to be very positive for customers and for our business."

Mike O’Rourke echoed what I have been saying about Fed policy and Trump in his note last night
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Heading into tomorrow's January employment report and the CPI report next week, the FOMC finds itself in a position where its hands are figuratively tied. The aggressive 100 basis points of Fed Funds easing at the end of 2024 left the FOMC little choice but to go on policy hold to start 2025. That is only part of the equation. The inauguration of the Trump 47 Administration means the political and fiscal policy landscape will shift dramatically and nobody, not even the Trump Administration officials, know how events will play out. This week's tariff twist is a great example. Significant tariffs were announced and postponed in the span of 72 hours. Trade and fiscal policy uncertainty have no path to resolution in sight. Monetary policy is left with no choice but to wait and watch the evolving situation. There is an argument to be made that forecasting during a Trump Presidency is dangerous in that a forecast will provide a false sense of security. President Trump is the ultimate wild card, and although he has a plan, his tactics and their consequences are unpredictable. Therefore, any forecast would need the absolute lowest confidence level applied to it. In that case, policy makers are likely better off remaining highly attuned to developing events and responding when necessary.

There are several forecasts indicating that the enactment of the current tariff policy will raise Core PCE inflation by 70 basis points. Therefore, FOMC can't immediately respond to a decelerating economy, the Committee needs to consider how tariff policy (along with several others) is proceeding. Hence, the Fed's hands are at least partially tied. We would argue that economic forecasts focused on tariff policy miss unknown unknowns, as well as the known unknowns of Trump policies. For example, a known unknown is what the economic effect of these DOGE spending cuts will be. Could they nullify a tariff inflation bump? President Trump has many balls in the air that will influence the economy. He is more likely to pick more up than put any down. For Chairman Powell and his colleagues at the Federal Reserve, they need goldilocks economic readings to continue, not so they can ease, but simply to avoid having their policy approach pressured or even forced in a highly uncertain environment.

Yesterday I talked about a rotation out of Mag 7 names into other areas, this has also been happening with a rotation out of US into Europe. Good summary from Jefferies this morning, and I agree with them that I would be long US over Europe
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One of the interesting moves this year has been the outperformance of European stocks over the US (Eurostoxx in up +9.4% vs 3.4% for S&P and 2.5% for NASDAQ). This has been a pain trade as market started the year with a consensus US vs Europe view. The wobbles in the AI sector led to an unwind of positions and big Tech performance has weighed on the US indices. Our positioning indices suggest that the market is still long US over Europe, hence the pain trade could continue. However, medium term, we still see US macro picture as resilient and would be long US over Europe.

I asked GPT if I should be buying the dip
..

Final Verdict: Buy the Dip or Be Cautious?

Answer: Buy the dip if your horizon is 1–2+ years, focusing on HPC/AI. Amazon’s HPC expansions are historically rewarded once hype around meltdown mania fades. Yes, near-term margins are pressured, but the HPC usage wave should eventually convert these outlays into outsized AWS growth. If you can weather short-term volatility, Amazon remains a must-own HPC/AI champion in the cloud.

If you seek near-term alpha or minimal HPC risk, you could be cautious. But HPC meltdown mania historically has proven ephemeral once HPC usage roars back. Hence, for HPC/AI conviction investors, buying AMZN’s dip is a sensible long-term bet.

After DeepSeek the tech giants did what they needed to do to support the AI infrastructure names. I had GPT analyze this article and pick some winners and losers
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Must-Own or Must-Sell Stocks

Must-Own (if HPC is your focus)

  1. Nvidia (NVDA): Despite meltdown mania, it remains the #1 GPU supplier. If HPC expansions continue or AI usage surges, NVDA is well positioned.

  2. Coherent (COHR) or Lumentum (LITE): HPC optical winners if you want an optical supply chain name.

  3. Vertiv (VRT): HPC cooling solution provider. We’ve seen them hammered by meltdown mania, but these big HPC expansions reaffirm the need for advanced cooling solutions.

Must-Sell or Avoid

  1. Pure meltdown mania HPC plays with no real HPC advantage. If meltdown mania is overshadowing them, they can’t pivot.

  2. Hyperscalers themselves if you want near-term alpha. HPC expansions hamper short-term margins, e.g., GOOGL. Could be a near-term headwind, though Amazon’s e-commerce might remain stable.

  3. Small HPC startups reliant solely on HPC meltdown mania if they can’t maintain HPC usage on the scale of the big 4.

Final Thoughts

  • All four big tech (Amazon, Google, Microsoft, Meta) reaffirm AI HPC expansions, ignoring meltdown mania. In the short term, HPC meltdown fear depressed HPC hardware stocks, but these expansions suggest HPC usage is still set to rise.

  • Conclusion: HPC meltdown mania is overshadowed by official guidance from the biggest spenders, who are pouring tens of billions more into HPC expansions. If you’re HPC-oriented, stay or add to HPC supply chain enablers (Nvidia, advanced memory, optical interconnect, HPC cooling/power). Avoid or reduce pure meltdown narratives or smaller HPC illusions with no big partnerships.

  • For near-term margin, these HPC expansions weigh on hyperscalers’ stock prices. If you’re a short-term investor, you might skip big tech short term. But for HPC-laden supply chain picks, buy (or hold) remains the stance.

I bought the dip the other day, and like the chart as long as the 50 day holds


GPT is a little less optimistic short term
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Final Recommendation: Cautious or Buy the Dip?

  • If You Value HPC/AI Long Horizon:

    • Google invests heavily, ignoring meltdown mania. AI usage might indeed balloon, eventually justifying HPC expansions. That’s a medium/long-term bet.

    • Near-term HPC meltdown mania + mild cloud slowdown => stock volatility. If you’re patient and want a top AI ecosystem, GOOGL can be attractive on dips.

  • If You Want Quick HPC Gains:

    • GOOGL’s HPC expansions weigh on margins, and the Street wants near-term HPC-based revenue proof. Cloud’s 30% yoy is still decent but below expectations.

    • A short- to mid-term HPC meltdown narrative can keep GOOGL from popping unless AI search or HPC-based cloud share gains appear soon.

Conclusion: Cautious near-term, optimistic long-term. Google remains a top-tier AI/HPC investor, but HPC meltdown mania + uncertain monetization weigh on the stock. If you have a multi-year HPC/AI thesis, GOOGL’s massive spending might pay off once HPC meltdown mania abates and AI-based revenue streams appear. Otherwise, if you want immediate HPC revenue traction, you may prefer HPC-laden names like Nvidia or specialized AI-laden software.

Off the DeepSeek news I bought BABA, BIDU, and GDS. I also filed for an emerging market AI ETF as I think this will be a powerful AI theme. Had GPT revisit BABA off this article
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Verdict: Alibaba remains a compelling buy if you believe HPC meltdown mania is overstated and that BABA’s advanced AI (Qwen) plus cheap valuation can drive outperformance. While trade tensions create near-term risk, the article’s message is that BABA is cheap, invests heavily in AI, and is underappreciated—a strong reason to consider or add shares on dips around $95–$100.

Bit extended here and up pre-market. Tend to agree with GPT, would buy on a dip into the 10 day if you don’t already own it.

BIDU has been weaker and actually looks more like a short. Would buy on a move above the 200 day.

I zoomed out a bit on GDS as short term it looks like it wants to test highs, on a monthly you can see it has a lot of room to get back to all time highs.

Readers know that AI in healthcare is one of my favorite themes, we just filed for an ETF on it. Unfortunately, DOCS is not one of the companies I own.

Been a great chart and going to break the November highs


Seems a bit late to buy here, but I asked GPT
..

Bottom Line: If your “AI Healthcare” theme is about companies profitably applying AI to real medical workflows, Doximity stands out as a success story. With strong financials, new AI-driven features, and good traction among U.S. doctors, it’s well positioned. After a 25% jump, you might consider cost averaging or waiting for dips—but overall, DOCS could be a “must-own” for an AI-based healthcare portfolio.

Revisiting My EIX Short

If you recall I went short EIX off of the California wildfire news on the possibility that they could be facing significant liability. GPT helped me analyze that position and it has been nicely profitable. Short positions need to be managed differently than longs. You can theoretically hold a long forever, but most shorts have violent moves and then work their way back up. One of my favorite market sayings is “take your gains or someone will take them from you”. If you recall, Jefferies put out a positive piece on EIX the other day, which I had GPT analyze. It suggested I stay short, and I have.

So far that was the right move. Jefferies did another positive piece this morning, which I also had GPT analyze. This time the recommendation was to cover (see below). The major takeaway from this is not necessarily that you should cover EIX shorts, GPT could be wrong and the chart still looks real ugly. The takeaway is that for $200 a month I have an “analyst” at my beck and call that can help me make decisions on individual stock positions and interpret Wall Street research.

Should You Cover or Remain Short?

  1. Reasons to Cover

    1. Reduced Negligence Probability: Lowers the catastrophic scenario that typically justifies a short.

    2. Legislative & Fund: AB 1054 wildfire fund can cushion the blow, further undermining the short thesis.

    3. Tail Risk Premium: The market may have already priced in too much wildfire risk. If that risk recedes, EIX shares might rebound.

  2. Reasons to Stay Short

    1. You still see potential for new evidence of EIX’s imprudence. But the updated CPUC 315 report is quite favorable for EIX.

    2. Another “mega” fire or negative CPUC development could re-ignite liabilities. Yet that’s a new event risk, not the same Eaton Fire scenario.

  3. Conclusion

    1. Barring a fresh catastrophic event or brand-new negligence evidence, the catalyst for EIX meltdown is now less potent.

Verdict:

  • The short’s rationale (massive liability + negligence) is eroding. Cover your EIX short. The updated Jefferies note strongly implies a more contained liability scenario that undermines the original bear premise.

One tried-and-true investment strategy, the 60/40 portfolio, no longer feels so tried and true despite its solid performance in recent years. Now, some Wall Street asset managers are looking for other options.

Allocating 60% of a portfolio to stocks and 40% to bonds is a time-tested strategy. The idea is simple: Stocks fuel your portfolio’s growth when the market’s doing well, and bonds will cushion the blow when things go south. This mix has long been touted as one of the best ways to balance risk and safety, and the returns bear it out.

It’s not a “time tested” idea. A lot of things in the market appear to work because markets go up most of the time.

Before you go: Here are ways I can help

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  1. ETFs: We offer innovative ETFs that cover all aspects of The H.E.A.T. Formula, Hedges, Edges, and Themes.

  2. Consulting: I'm happy to jump on the phone with financial advisors at no charge. I've built a wealth management firm and helped other advisors grow their practices through the use of substantially differentiated investment strategies. If you want to talk just send me an email at [email protected]

  3. Monthly investing webinars

  4. Weekly trading strategy podcast

  5. Weekly investing podcast-Coming Soon

  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.