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 will be January 23,2025 at 2pm EST.

‍How to Make Money In Markets During 4 Years of Trump

• 3 Hidden Investment Themes Ready to Explode: Uncover the markets and sectors quietly poised for major moves—before the rest of the crowd catches on.

• Harnessing AI to Pinpoint Winning Ideas: Learn the exact process for using artificial intelligence to zero in on high-potential themes and keep your portfolio ahead of the curve.

• Structuring Trades for Asymmetric Returns: Discover how to engineer positions that limit your downside while preserving massive upside potential—perfect for a volatile market.

• The Problem with Covered-Call ETFs—and What’s Better: Why these “income strategies” might be costing you long-term gains, plus a fresh alternative approach that’s poised to potentially deliver superior results.

‍Register Below:

https://attendee.gotowebinar.com/register/980141392770803292

We are doing something new, we will be hosting The Watchlist every 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.

Here’s the latest episode:

The Watchlist 1/16/25

Click below to register for the next one:

https://register.gotowebinar.com/register/1497212025166258773

NVDX Is The Best Performing ETF of 2024!-Financial Times

Here’s a link to my appearance on Schwab Network this week:

Mega Cap Outlook Under Trump 2.0, Trading NVDA & AAPL

A few interesting developments yesterday that bear watching:

1. Taiwan Semi had a strong upside surprise in capex spending, which impacted the entire semiconductor equipment space

Nvidia supplier Taiwan Semi reports profit surge. AI capacity is ‘very tight,’ CEO says.-MarketWatch

1. Apple sold off 4% on news that of iPhone sales dropping in China

2. Fed head Waller said the following on CNBCCuts plural

3. Crypto did not come up in Bessent’s testimony yesterday, but Bitcoin is currently back over $100K

My partner in The Watchlist, Jeremy Vreeland, pointed out an area related to the California wildfires that I had not been thinking of, companies that make flame retardant materials. So I asked GPT…

1. Likelihood of Flame-Retardant Rebuild

1. Heightened Building Codes:

   1. California’s existing fire-safe building codes (e.g., Chapter 7A in the Wildland-Urban Interface) already call for certain fire-resistant exterior materials. After major fires, state and local authorities often reevaluate or tighten these standards further.

   2. Implication: Builders in fire-prone areas increasingly adopt flame-retardant or non-combustible siding, roofing, decking, and insulation to reduce future destruction risk.

2. Insurer & Homeowner Demand:

   1. Insurance companies and homeowners may demand more durable, flame-resistant structures to limit potential damage and secure coverage.

   2. Implication: Growth in demand for fire-resistant insulation, siding, composite decking, and other building materials with strong fire ratings.

Overall, a positive shift is likely toward more flame-retardant construction in high-risk wildfire zones, creating a tailwind for companies offering relevant products.

2. Potential Publicly Traded Beneficiaries

A. Siding & Exterior Solutions

1. James Hardie Industries (NYSE: JHX)

   1. Focus: Fiber cement siding and related exterior products.

   2. Why It Matters: Fiber cement is known for fire resistance compared to wood-based siding. California rebuilds often favor fiber cement in wildfire-exposed areas.

2. Louisiana-Pacific Corporation (NYSE: LPX)

   1. Focus: Engineered wood products, some lines with added fire retardant or “FlameBlock” panels.

   2. Why It Matters: LP has been developing fire-rated sheathing and framing solutions that may see an uptick in markets with stricter building requirements.

B. Insulation & Roofing

1. Owens Corning (NYSE: OC)

   1. Focus: Fiberglass insulation, roofing shingles, and composite materials.

   2. Why It Matters: Fiberglass insulation has fire-resistant qualities, and the company often develops roofing products that meet strict fire ratings. An increase in demand for flame-rated roofing could boost sales.

2. Rockwool International (Copenhagen: ROCK-B) (If open to international)

   1. Focus: Stone wool insulation, inherently non-combustible.

   2. Why It Matters: Though not on a U.S. exchange, Rockwool’s stone wool is known for strong fire resistance. If you consider global listings, they’re a prime candidate in wildfire-prone areas.

C. Composite Decking & Exterior Materials

1. Trex Company (NYSE: TREX)

   1. Focus: Composite decking and railing systems.

   2. Why It Matters: Trex’s products are often less flammable than wood, though not entirely fireproof. Rebuilding communities might consider composite decking for lower fire spread risk.

2. The AZEK Company (NYSE: AZEK)

   1. Focus: Similar composite decking, trim, and exterior products with an emphasis on durability.

   2. Why It Matters: Similar rationale to Trex: if builders push for less combustible decking materials, AZEK might see incremental demand.

D. Chemicals & Specialty Materials

1. Albemarle (NYSE: ALB) or Dow Inc. (NYSE: DOW) / DuPont (NYSE: DD)

   1. Focus: These large chemical/materials companies produce or distribute flame-retardant chemicals (among many other products).

   2. Why It Matters: If flame-retardant additives are increasingly required in insulation, siding, or interior products, chemical suppliers could see modest growth in demand. However, these firms are large and diversified, so any wildfire-driven revenue spike may be small in the context of their total business.

3. Considerations & Caveats

1. Market Share vs. Overall Impact

   1. Most big building-material companies are diversified and sell products nationwide (or globally). Demand from California wildfire rebuilds, while meaningful, might not transform overall earnings unless there’s a long-term surge in strict building codes across multiple high-risk states.

2. Competitors & Alternatives

   1. Several private or lesser-known companies also produce fire-rated materials (e.g., specialty boards, stucco, metal roofing). The publicly listed names here simply have the brand reach and scale to benefit from a wave of rebuilding.

3. Timing of Rebuild

   1. Wildfire rebuilds can stretch over years, with insurance claims, permit approvals, and possible delays. The ramp might be slower, but it can also extend demand for fire-rated products over a longer period.

4. Evolving Codes

   1. The extent to which flame-retardant or non-combustible materials become mandated depends on county/state legislation and insurance incentives. If code revisions are robust, demand for these materials can see a notable uptrend.

Final Take

A broad “rebuild wave” emphasizing fire-retardant construction materials could boost the revenues of:

• James Hardie (JHX), Louisiana-Pacific (LPX) for siding and panels.

• Owens Corning (OC) for roofing/insulation.

• Trex (TREX), AZEK (AZEK) for decking solutions that reduce spread risk.

• Albemarle and Dow/DuPont for specialty flame-retardant chemicals (though the impact may be smaller proportionally due to their size).

While the impact on each company’s revenue from wildfire-related rebuilding alone might vary, these names stand out as plausible beneficiaries if California’s post-fire construction focuses more heavily on flame-retardant building materials.

I then asked GPT to rate them from 1-10 on possible revenue impact (10 is highest)

Summary of Ratings

1. James Hardie (JHX): 8

2. Louisiana-Pacific (LPX): 7

3. Owens Corning (OC): 6

4. Trex (TREX): 5

5. AZEK (AZEK): 5

6. Albemarle (ALB), Dow (DOW), DuPont (DD): ~3–4

These ratings reflect the relative potential for each company’s revenues to be noticeably boosted by California’s wildfire rebuild. Firms like James Hardie and Louisiana-Pacific—with strong brand association in fire-resistant siding and building panels—rank higher, while large chemical conglomerates see a lesser proportional impact despite possibly supplying flame-retardant ingredients.

Jeremy brought up a couple of other names, BCC and EXP, that GPT didn’t initially flag for me, so I asked….

Bottom Line

• Boise Cascade (BCC): Likely a 5/10 impact—wood-based structural materials remain standard, but the push toward non-combustible exteriors may limit a dramatic windfall.

• Eagle Materials (EXP): Likely a 6/10 impact—could see a modest bump if cement-based solutions (or specialized fire-rated wallboard) become a bigger part of the rebuild effort.

Neither BCC nor EXP is as directly associated with “fireproof” building components as, say, James Hardie (fiber-cement siding) or certain specialty insulation providers. Nonetheless, each can benefit indirectly from the overall increase in housing, commercial, and infrastructure reconstruction.

Here’s how much lumber Southern California will need to rebuild after the wildfires-MarketWatch

I asked GPT to rate the potential impact from 1-10 and to suggest some other names. Here’s what GPT had to say. Interestingly it also suggested JHX and LPX.

Summary of Ratings

(WY) 7 Large national timber operations; CA rebuild lifts pricing, but diversified scale

Boise Cascade (BCC) 8 Wood product manufacturer/distributor; more direct revenue boost from rebuild

Builders FirstSource (BLDR) 7 Major building materials distributor; sees good gains but is still quite large

West Fraser Timber (WFG) 6 Canadian supplier to U.S. market; some uplift, less direct dependency on CA

Canfor (CFP) 6 Similar to WFG, large int’l presence, moderate benefit if lumber prices spike

• James Hardie (JHX) or Louisiana-Pacific (LPX) may see an 8 or 7 respectively, due to specialized fire-resistant siding/panel offerings.

• If strictly “lumber,” BCC might top the list at 8. But among all building material plays, JHX also stands out at 8 for fiber cement’s inherent fire resistance.

All in all, the rebuild from California wildfires could meaningfully affect certain lumber and building-material providers, with Boise Cascade likely seeing the highest relative bottom-line impact among pure lumber names listed here.

I took a small short in EIX on the pop yesterday, kicking myself I missed the initial short but was focused on the insurance companies….

I asked GPT to rate the possibility they will be held accountable……

Summary of the “6” Rating

A moderate likelihood (6/10) exists that EIX could be found responsible for or at least partially liable in new California wildfires—owing to inverse condemnation and prior settlements. However, mitigating factors, including heavy safety investments and the state wildfire fund, may reduce financial severity if EIX is implicated. The overall chance is far from negligible but not an absolute certainty, given that thorough investigations and potential safety compliance might shield or minimize the extent of EIX’s ultimate liability.

Not great, but worth a small short just in case.

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