The 🔥H.E.A.T.🔥 Formula

AI Driven Insights to Spark Your Portfolio

February 14, 2025

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

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.

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

News that tariffs are still a few weeks away seemed to calm markets yesterday.

“We know this is a new norm,” he said. “It’s not the market moving past it, it’s absorbing it bite by bite and waiting to see what’s being executed.”

After chopping around for a few weeks, SPY looks like it wants to retest the highs…..

Same with QQQs…..

Small caps are still weak. Personally, I still think small cap indices, like the Russell 2000 are great trading vehicles, not great buy and hold vehicles……

Seeing more and more talk about Europe vs. US. Time to buy Europe was the beginning of the year IMHO……

How ‘tail risk’ — uncertainty over inflation, tariffs, political chaos and other unknowns — could trigger a chaotic market downturn

One key aspect of The H.E.A.T. Formula is the “H”, always have hedges in place. There are a number of ways to do this, and none of them include buying bonds. I run a couple of systematic shorting strategies, short a couple of ETFs I think suck, run a 0DTE SPY strategy that often has me in puts, and buy volatility when it looks oversold. You don’t have to get the complicated, you could simply buy SPY puts or put spreads when markets go up.

COIN looks to be down a bit on earnings, but I do own it and like this chart….

Yesterday, I speculated that the main beneficiaries of more interest in crypto could be the brokers. I had GPT rate the opportunity in crypto brokers and COIN specifically…..

Crypto Brokers Overall: 8/10

  1. Why

    1. More Favorable Policy Climate: The new U.S. administration’s pro-crypto stance (moving away from “regulation by enforcement”) lifts a major overhang that had weighed on the industry.

    2. Global Crypto Adoption Rising: Along with improving sentiment for Bitcoin, Ethereum, and other tokens, brokerages can benefit from increased trading volumes and broader retail + institutional participation.

    3. Secular Growth in Web3: DeFi, tokenization, and NFT markets keep evolving. Crypto brokers can adapt as on-ramps to emerging product categories (e.g., staking, yield products, tokenized real-world assets).

  2. Risks

    1. Cyclical Volatility: Crypto prices can boom or crash quickly, compressing trading volumes at times.

    2. Fees Under Pressure: Fee competition from new entrants or decentralized platforms.

    3. Regulatory Flip-Flops: Politics can change swiftly, and some countries might adopt harsher restrictions.

Conclusion: The entire crypto brokerage industry stands to benefit from the next bull cycle. If crypto truly enters a “golden age,” brokers are direct beneficiaries—hence an 8/10 rating.

Coinbase (COIN): 8.5/10

  1. Why

    1. Market Leadership: Coinbase is the most recognized, fully regulated crypto broker/exchange in the U.S. with strong brand trust and advanced compliance.

    2. Blowout Q4: Revenue soared ~88% q/q, driven by robust trading volumes and subscription/services. Guidance also points to continuing momentum in Q1.

    3. Expanding Offerings: Growth in staking, Coinbase One subscriptions, and institutional services. Could gain further from broader retail adoption or advanced crypto features (e.g., NFT marketplace, tokenized assets).

    4. Regulatory Tailwind: If the Trump administration cements the U.S. as a crypto hub, Coinbase is best positioned to capitalize.

  2. Risks

    1. Dependence on Crypto Prices: Revenue can drop sharply if Bitcoin/Ether slump.

    2. High Valuation: The stock is up over 100% in 12 months, leaving limited margin for error.

    3. Competition: Potential from decentralized exchanges, or from traditional brokerages (e.g., Robinhood) ramping up crypto offerings.

Conclusion: Coinbase has a slightly higher rating than the broader sector (~8.5/10) because it’s the top U.S.-based exchange with a broad product set and brand advantage. With crypto at a potential inflection, COIN can capture outsize gains—albeit with the usual volatility.

Been talking about China the past couple of days, looks strong this morning so far. I own BABA, BIDU, and GDS. You could argue that BABA and GDS are now extended, BIDU chart still looks buyable….

I had GPT analyze the article and compare BIDU and BABA…

1. Key Points From the Article

  1. Baidu’s AI Push

    1. Baidu is offering an enhanced, free version of its Ernie chatbot to desktop/mobile users, plus “deep search” for more complex tasks.

    2. Baidu apparently lost out on a rumored Apple partnership that went to Alibaba, which is a blow to Baidu’s ambition of dominating consumer-facing AI in China.

  2. Alibaba’s Gains

    1. Alibaba’s chairman Joe Tsai confirmed a major AI partnership with Apple—meaning Apple Intelligence in China would rely on Alibaba’s advanced LLM or custom AI solutions.

    2. This overshadowed Baidu’s standing as a prior rumored Apple partner.

  3. DeepSeek Factor

    1. DeepSeek is a Chinese startup with advanced AI that claims near-Western-level performance. This keeps pressure on both Baidu and Alibaba to innovate rapidly.

    2. The presence of more Chinese AI players signals robust AI competition but can also spur the entire market’s adoption of AI solutions.

  4. Market Reaction

    1. Baidu’s ADR gained 3.3% after news of its free Ernie. Meanwhile, Alibaba’s ADR is off 1.6% but up nearly 5% the previous day.

    2. Alibaba was a Barron’s 2025 pick due to low valuation and potential re-rating if Chinese markets warm up again.

2. Baidu vs. Alibaba AI: Where They Stand

  1. Baidu

    1. Strengths: Dominant search engine in China, Ernie chatbot for consumer-level tasks, plus an installed user base of 430 million. Baidu invests heavily in AI, including self-driving cars, voice assistants, etc.

    2. Weaknesses: Lost rumored Apple partnership, overshadowed by new upstarts (DeepSeek) and robust cloud capabilities from Alibaba.

    3. Opportunities: Monetizing Ernie beyond search, enterprise-level AI solutions, advanced cloud platform. But losing Apple might hamper brand perception of Ernie’s leadership.

  2. Alibaba

    1. Strengths: E-commerce giant, robust Cloud unit, recognized brand in China. Apple partnership for iPhone AI. Many adjacency angles—e-commerce, logistics, FinTech.

    2. Weaknesses: Some tension between e-commerce slowdown in China and HPC meltdown mania illusions overshadow expansions. But if Apple uses Alibaba’s model, it’s a major credibility boost.

    3. Opportunities: Integrate AI across e-commerce, cloud, and consumer devices (via Apple). Potential to become the top Chinese AI provider with open cloud architecture for SMBs.

3. Ratings: Baidu vs. Alibaba AI Revenue Potential

Baidu: 7.5/10

  • Why

    • Ernie has broad consumer usage (430 million), but losing Apple’s iPhone AI slot is a setback.

    • Baidu invests in multiple AI verticals (autonomous driving, enterprise solutions) but faces stiff competition from Alibaba, Tencent, and DeepSeek.

    • Growth in enterprise AI might remain robust, though overshadowed by Alibaba’s cloud scale.

Alibaba: 8.5/10

  • Why

    • Major Apple partnership for iPhone AI is a huge validation.

    • Alibaba Cloud plus robust e-commerce ecosystem can quickly embed AI across consumer, logistics, finance, and enterprise verticals.

    • Valuation remains relatively low, providing re-rating potential if the Chinese market or HPC meltdown mania illusions overshadow expansions remain unstoppable.

4. Should You Keep Baidu?

  1. Reasons to Hold

    1. Baidu is still a leading Chinese search + consumer AI platform, with a large user base (Ernie usage). The new free push might drive user adoption and brand loyalty.

    2. The AI race in China is not a winner-takes-all environment. Even second place can capture large revenues in a massive domestic market.

  2. Reasons to Reconsider

    1. If you want the top AI horse in China, Alibaba might have better synergy, especially after Apple’s partnership.

    2. If HPC meltdown mania illusions overshadow expansions remain unstoppable for Chinese cloud expansions, Alibaba is arguably more HPC-laden.

Conclusion: Baidu remains a decent AI play (7.5/10 rating). Losing Apple is a short-term negative but the Chinese AI market is vast. Baidu can still capitalize on consumer search-based AI, though it’s overshadowed by Alibaba’s HPC-laden cloud expansions.

Final Thought

  • BABA (8.5/10) outperforms BIDU (7.5/10) in AI synergy and near-term catalysts (Apple partnership).

  • Baidu is still worth holding if you see Ernie user adoption spurring future monetization, but if forced to pick just one or to tilt your Chinese AI exposure, Alibaba likely has the higher AI potential.

NVO vs. LLY

I’ve been back into the GLP1 stocks for a bit and have been noticing a divergence between NVO and LLY….

I’ve heard chatter that it’s investors thinking LLYs new drug is way ahead, which would explain it. Had GPT do an analysis, bottom line hang onto NVO……

Final Verdict

If you already hold NVO for the obesity/diabetes theme:

  • Reasons to Hold

    • Market leadership & brand trust from Ozempic/Wegovy, plus strong global presence.

    • Massive potential in obesity and diabetes with brand expansions and new pipeline combos.

    • Industry fundamentals remain favorable: HPC meltdown mania illusions overshadow expansions are less relevant in pharma, but obesity coverage expansions are unstoppable.

  • Reasons to Reconsider

    • LLY’s pipeline (retatrutide, etc.) might deliver next‐gen therapies that overshadow NVO’s portfolio if NVO’s pipeline can’t keep up.

    • Valuation: If NVO is priced for perfection, near‐term underperformance could persist.

Conclusion: Maintaining a position in NVO still makes sense, given its robust foundation and ongoing R&D. While LLY might be a half‐step ahead on the next wave of therapy, NVO still has a strong pipeline, brand, and global presence in a multi‐billion‐dollar market. If you can stomach near‐term sentiment swings, continuing to hold NVO for the long‐term obesity/diabetes growth remains a solid strategy.

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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.