May 2024 – Investment Update


Share this post


  • Buy Meta (META US) over Tesla (TSLA US)  
  • Rio Tinto (RIO US) – Quality dividend and Future prospects 
  • Structured products at 9.75% p.a. and Preference shares at 8.75% p.a. available   
  • Opportunities in Consumer Cyclicals 
  • Softer Inflation Removes chances of FED hikes  

Growth Stock Opportunity:   

As we come to the end of Quarter 1 earnings season, I draw attention to two growth stocks that reacted very differently to their recent earnings announcements. Tesla (TSLA US) rose 13% as cheaper car plans were brought forward while Meta (formerly Facebook, META US) fell 11% as AI spending is likely to grow substantially. I would like to compare these growth stories as both are heavily involved in the AI secular growth theme and present intriguing investment opportunities.  

Both companies are at a cross-roads and are about to embark on the next wave of AI-driven products and services.  

What are their Growth strategies?  

Tesla Growth Avenues: 

  • Cheaper Model Launch: Tesla plans to release a more affordable car for the mass market by early 2025, aiming to attract more customers. 
  • Autonomous Driving: Tesla is doubling down on training its AI for Full Self Driving (FSD) software, aiming to make it safer than human driving. 
  • Energy Storage: Tesla expects growth from its large-scale battery systems, which store excess energy from renewable sources like solar and wind. 
  • Optimus Bot: Tesla is developing a humanoid robot called Optimus for factory tasks, which could be a game-changer in operations efficiency. 

Meta (Facebook) Growth Avenues: 

  • Monetization Efficiency: Meta plans to improve ad delivery and user engagement across its apps such as Instagram and Facebook using AI-driven optimizations. 
  • AI Services: Meta aims to create AI-driven services through Chat Bots, Creator AIs, and Business AIs, integrating them into its apps to enhance user experience. 
  • Metaverse Development: Meta is building a virtual shared space called the Metaverse using AR (augmented reality) technologies such as Meta Glasses.  
  • Reality Labs: Meta continues to develop new immersive experiences, such as Quest Headsets, to drive engagement.  
  • AI Infrastructure: Meta is investing in AI infrastructure to support its various services and technologies, ensuring scalability and efficiency. 

What is the risk/reward differential between these two opportunities? 

Track record is a clear area of risk/reward differential between the two CEOs. Mark Zuckerberg (CEO) has masterfully led previous company transitions from Facebook to Instagram, to fending off Snap/TikTok Competition, to reining in Metaverse spending and improving the core operations of the business. Elon Musk (CEO, Tesla), on the other hand (although brilliant) has been poor at delivering on expectations. He frequently over-promises on product timelines, is erratic in nature and, as of late, is increasingly side-tracked from Tesla goals by his other business ventures (Twitter, Space X to name a few.) 

However, Tesla has a much clearer goal to work toward e.g. delivering a cheaper mass market car and perfecting FSD (full self-driving); Meta’s path forward is more uncertain. Of course they are increasing CapEx (capital expenditure) in AI infrastructure but what exactly they want to build and what the consumer will ultimately look for from AI products is unknown. Meta’s sell-off after earnings reminded investors of 2022 when the company had to rein in Metaverse spending due to much lower demand in that area than previously expected. 

Despite the cloudier horizon for Meta it should be noted they have been down this path before. Their playbook is to make great products, scale them and then monetize aggressively. Meta has perfected this in software and I expect a similar outcome with AI integrations. However it remains to be seen whether this will translate over to hardware success in Oculus headsets and Meta Glasses.  Meta also has a lower risk profile as their core business is very stable and cash generative. Any increased AI optimized tools added to their family of apps are likely to be accretive, without disrupting the entire business model.  

However, Tesla is working more against the clock with customers demanding a more diverse product range and competition, especially from China gaining ground. Although the Biden Administration recently announced a 100% tariff on Chinese EVs the impact will be muted as the USA imports very few Chinese made EVs. This move likely maintains the current status quo there. However, China’s EV growth throughout the rest of the world can still dent Teslas growth ambitions as well as their ability to scale economies successfully. A failure to deliver on FSD or a cheaper model could significantly impact the premium already built into Tesla’s share price.  

Financials Comparison:


Tesla is undoubtedly ahead of the competition in FSD. Tesla’s head start is already substantial and it could continue to create an important flywheel effect. All data collected from current FSD cars drives improvement and a more efficient product, which may be difficult to replicate. Their dominant position could look like Google’s in the Search Engine industry, if they can overcome regulatory roadblocks and reach sufficient scale before competition. On the cheaper product Tesla does not have a lead advantage and is competing with BYD (EV company in China), which although is highly innovative, is also being heavily subsidized by the Chinese government. 

Meta’s AI goals are similar to that of Apple, Google and Microsoft. These companies have vast amounts of data. They are all trying to determine how AI can utilize this data and can be integrated into their product and services to power future engagement. There is a real risk that market share will be lost to competitors as the playing field is quite even. 

Meta is up 157% and Tesla is up 1258% over the last 5 years.  


Meta’s has a lower risk profile than Tesla given their strong recurring revenues and CEOs track record of execution. Tesla is more high stakes given the large opportunity to dominate the full self-driving market, but reaching that goal is more of a challenge.  

Meta is cheaper on every financial metric and closer to its all-time high than Tesla, which corroborates this risk/reward dynamic.  

I think both stocks are opportunities for growth investors at current prices for investors with a long-term investment horizon.  

Crucially, position sizing is very important as both investments carry highly different risk parameters. Please talk to me if you are thinking of adding either position to your portfolio so we can discuss suitability.  

Income Stock Opportunities: 

RIO TINTO – (Ticker RIO US) – Dividend 6.41% 
Rio Tinto PLC is a global mining company that focuses on extracting various minerals and metals, including aluminum, copper, iron ore, and uranium. With operations in 35 countries, Rio Tinto serves clients worldwide and operates in four primary business units: Iron Ore, Aluminum, Copper, and Minerals. 

Rio Tinto anticipates increased demand for its products as the world transitions to a lower-carbon economy. The company highlights that the race to achieve net-zero emissions will create additional demand for its commodities, particularly those essential for renewable energy infrastructure. 

Key commodities such as copper, used extensively in electrical wiring and renewable energy sources like wind turbines, will see heightened demand. Additionally, the shift towards electric vehicles and energy-efficient transportation will drive increased demand for aluminum, known for its lightweight and strength. 

See below how much commodities are needed to build a wind turbine, solar panel or electric car versus a conventional car to appreciate the scale of the opportunity:  

Additionally, iron ore, vital for steel production, will experience heightened demand in the construction of wind turbines, and other renewable energy infrastructure requires significant amounts of steel. 

China makes up 60% of the company’s revenue. With the CCP (Chinese Communist Party) now starting to take targeted measures to aid their struggling economy, this could be the opportune time to pick up RIO as their iron ore business has struggled recently due to the Chinese slowdown.   

Not including Chinese economy upside rebound potential, the next few years’ revenue growth is expected to be low at RIO, but the bigger longer-term theme is the green energy transition. Timing its impact of the green transition for the mining industry will be difficult, but while you wait for this upside, you can avail of 6.4% annual dividend yield.  


Other Investment Opportunities:  

Structured Products:  

Amazon 2 year Notes – yielding 9.75% per annum with 65% barrier.  

Preference Shares with Broker being NCB Capital Markets:  

X-Uma 2.0 IC of Origo Holdings ICC – Coupon 8.75% per annum paid quarterly with principal amortization each quarter, maturing February 2, 2027.  

World Markets:  

US Markets:  

Key points:  

  • AI/Cloud infrastructure spending in big tech still is large and presents great opportunity for investment.  
  • Consumer Cyclical brands are seeing pull backs, presenting some high-quality names for cheap prices 
  • Companies are not mentioning inflation as a problem. FED says they very unlikely to hike again in this cycle.  

Capital Spending (CapEx) 

We watch capital spending as a leading indicator to share price growth for the following reasons: 

  • Investing in growth increases productive capacity 
  • It increases future sales and earnings potential  
  • It enhances competitive position 
  • It is a sign of confidence by management of future prospects 

We noted some key commentary on quarter 1 earnings calls around AI and cloud spending. We believe this spending highlights a key trend that should be invested in.  

ImageCapital Expenditures (mostly AI infrastructure) is forecasted in 2024 to far outweigh previous years (see below) (in billions) 

Microsoft: $MSFT CFO “We expect capex to increase materially on a sequential basis driven by cloud and AI infrastructure investments…we expect FY 25 capital expenditures to be higher than FY 24”  

Meta (Formerly Facebook) $META CFO: While we are not providing guidance for years beyond 2024, we expect CapEx will continue to increase next year as we invest aggressively to support our ambitious AI research and product development efforts” 

Alphabet $GOOGL CEO: “We have developed new AI models and algorithms that are more than 100 times more efficient than they were 18 months ago” (highlighting area of focus) 

Amazon: $AMZN: “We will be meaningfully stepping up our CapEx & majority of that will be to support AWS infrastructure and specifically generative AI efforts…in Q1, we had $14B of capex. We expect that to be the low quarter for the year” 

Advanced Micro Devices – $AMD CEO: “2024 as a start of a multiyear AI adoption cycle” 

Add to that the US governments mission to lead semi-conductor’s development worldwide due to strategic and national security reasons.    

The Biden administration aims to bolster the US semiconductor industry through significant funding for both manufacturing and research. While most attention has been on manufacturing grants, the $11 billion Chips and Science Act emphasizes research to develop next-gen electronic components and maintain technological leadership against China. 

Chips Act Hand Outs so far:  

  • Intel $8.5 billion,  
  • TSMC $6.6 billion,  
  • Samsung $6.4 billion,  
  • Micron: $6.1 billion  
  • GlobalFoundries $1.5 billion 

Incredibly 50 cranes at work on Samsung’s 17 billion Chip Plant in Texas. One building alone is 11 football fields long! 

Consumer Cyclical Weakness: 

We see some weakness in some high end consumer goods companies as customer’s finally start to push back on high inflationary prices. In the long term we know prices are coming down and this creates the opportunity for some long-term attractive investment opportunities in high quality names:  

Company Name / % from all time
NIKE / -48%
SHOPIFY / -67%

Some of the latest earnings call commentary confirms this trend: 

STARBUCKS $SBUX “we did see a softening of US traffic. Specifically, our occasional US customers who tend to visit in the afternoon came in less frequently” 

LULULEMON $LULU CEO: “As you’ve heard from others in our industry, there has been a shift in the U.S. consumer behavior of late and we’re navigating what has been a slower start to the year in this market” 

NIKE $NKE CEO: “However, sales in the geography fell short of our expectations this quarter as we navigated increased macro volatility and softening consumer demand” 

SHOPIFY $SHOP down 18% after reporting earnings (largest one-day drop ever) on weaker guidance 

WALLGREENS $WBA CEO: “In our US retail pharmacy business, we are navigating a challenging backdrop…our US customers confronting considerable pressure from multiyear inflationary trends & depleted household savings with US household debt at record levels and delinquency rates on the rise  

Pepsi $PEP CEO: “The lower income consumer in the U.S. is stretched, is making a lot of — he is strategizing a lot to make their budgets get to the end of the month 

Inflation is not a problem according to company’s earnings.  

Despite a poor start to the year on inflation, keeping with the earnings call theme it has become clear that companies are not mentioning it. This indicates they no longer see it as a problem and it’s only a matter of time before the official CPI data reflects this reality. In fact, April CPI report showed a return to the disflation narrative, helping the S&P 500 and Nasdaq to recapture their all-time highs this week.   

If you would like to speak to me about any of the opportunities mentioned here or set up an investment portfolio, please contact me for a review/consultation.  


Subscribe to our mailing list to receive all of our latest news and updates.

Next Post
Previous Post