Editor's Notes:

• No significant new themes - caution around AI, EV, JP interest rate increase and China economy, overall pointing to short-term profit-taking at year end.

• No names caught my eyes today. Crocs indeed is super cheap now, but lacking near-term catalyst. And the narrative-driven Tesla continues to be ... expanding its narrative (I do admire the company, but the valuation...)

• I would monitor closely on Japan stocks in case of any irrational / technical selling due to BOJ interest rate decision later this week - potentially a buying opportunity (but I don't expect any sharp falls).

This market digest reveals that global markets are currently shaped by intensifying AI bubble debates, significant strategic pivots in the EV sector ("EV Winter"), and structural changes in capital markets such as Nasdaq's extended trading hours. Key regional dynamics include Japan's "deep value" opportunities despite macro headwinds, and Hong Kong's downturn driven by weak China economic data. This analysis focuses on critical macro trends and selective micro opportunities for investors.

(a) Overall Themes, Market Sentiment & Debates

US Market: Mixed Picture on Labor

US stocks diverged on Tuesday, Tesla stock hitting a new record at the same time that the Dow and S&P 500 slumped as investors saw a mixed picture from updates on the labor market. The delayed November jobs report showed an uptick in jobs added last month but also found the unemployment rate jumped to a 2021 high. Many traders are betting on two rate cuts from the Fed next year, as policymakers focus on tackling the labor market rather than dealing with sticky inflation. CPI data for November to come on Thursday. Fed will study these two reports for interest rate decision in January.

US Market: Navigating Tech Transition and Structural Shifts

• AI Bubble Debate Intensifies: Sentiment remains highly polarized regarding AI-related stocks. Noted short-seller Jim Chanos expressed bearish views on data center operators (CRWV, IREN, CIFR), characterizing them as a "low-margin, highly capital-intensive commodity business" vulnerable to rapid GPU depreciation and credit crunches. He also flagged Oracle (ORCL) and Amazon for potential struggles in monetizing large AI investments. Countering this, NVIDIA CEO Jensen Huang maintained that AI is at a "tipping point," expecting adoption to accelerate. This debate underscores the critical need for differentiated analysis beyond broad AI enthusiasm.

• AI's Growing Energy Demands: A significant and emerging theme is the immense energy consumption required by AI's computing power. This is poised to drive substantial demand for utility and traditional energy (Oil & Gas) stocks. The positive outlook for US electricity demand, particularly from AI data centers, is now explicitly impacting utility valuations (e.g., Vistra Corp. (VST) received a positive Goldman Sachs revision). Utility hiring patterns are even being monitored as a potential leading indicator for AI growth, suggesting a tangible link between technological advancement and legacy infrastructure.

• EV Winter & Strategic Pivots: Ford (F) took a substantial $19.5 billion charge on its EV business and cancelled the F-150 Lightning EV, signaling a strategic pivot towards hybrids and a partnership with Renault for European EV development. This move reinforces the "EV winter" outlook projected by Morgan Stanley through 2026, which led to a downgrade for Rivian (RIVN). For Tesla (TSLA), this competitive recalibration is seen as beneficial, with some analysts broadening its investment thesis to an "orbital compute infrastructure" play, encompassing xAI, Dojo, and SpaceX assets beyond automotive.

• Nasdaq Extended Trading Hours: In a significant structural development for capital markets, Nasdaq is planning to expand trading to 23 hours a day, five days a week. This initiative, driven by global investor demand, continuous news cycles, and competition from 24/7 crypto markets, points to an ongoing evolution in market access and liquidity.

Japan Market: Macro Headwinds vs. Micro Opportunities

• BOJ & Yen Carry Trade Unwind: The Japanese market experienced a notable -4.11% decline, primarily driven by anticipation of Bank of Japan (BOJ) monetary policy shifts and the potential unwinding of Yen carry trades. This unwinding is viewed as a significant bearish signal, carrying global liquidity risks and prompting profit-taking. The diminishing advantages from yen depreciation and rebalancing sales contribute to a cautious investor sentiment.

• Divergent Fundamentals & Corporate Reform: Despite the macro caution, Japanese Manufacturing PMI is approaching expansion, and future business optimism remains strong, offering a counter-narrative to global sentiment troughs. While investor skepticism persists due to demographics and systemic factors (leading to short-selling in TSE Growth companies), there's a tangible positive shift in corporate reform. New leadership, accelerated by post-COVID retirements, is actively challenging "bubble-era conservatism," suggesting potential for value unlocking, especially for firms better suited for private ownership.

• "Deep Value" Opportunity: Amidst the broader market retreat, a "buying opportunity" is perceived in deeply undervalued Japanese stocks, particularly SMID caps and those with hidden assets like real estate. Sodick Co., Ltd. (6143.T) is cited as a prime example, with significant cash relative to its market cap, a low P/B of 0.58x, and an estimated ~3.6x EV/EBITDA for FY2025.

Hong Kong Market: China Macro Continues to Drag

• Weak China Data Impact: The broader Hong Kong market, including the Hang Seng Index (-1.54%) and Hang Seng Tech Index (-2.4%), experienced a significant downturn. This was primarily attributed to persistent weak China economic data, including slowing retail sales, industrial output, and general macro concerns. This macroeconomic weakness broadly impacted major tech players such as Alibaba (9988.HK) and Tencent (0700.HK), as well as industrial and mining firms like China Hongqiao (370.HK) and Zijin Mining (2899.HK).

(b) Notable Big Stock Moves, Earnings and Development by Each Stock

(c) Interesting Comments, Facts, and Ideas

• McDonald's (MCD) - Beyond Fast Food: The traditional view of McDonald's as a quick-service restaurant misses its evolving identity. Analysis points to MCD functioning as a primary real estate company (82% operating margin on franchise revenue) and an emerging tech company, leveraging AI for operational efficiency (e.g., Virtual AI Manager, Drive-Thru AI). Its massive loyalty program and global expansion efforts reinforce a target price of $400+ by 2026, suggesting a durable, compounding business with diversified drivers.

• Altria Group (MO) - The Overlooked Growth Story: Despite the declining US cigarette market, Altria is argued to be a deep value buy. This thesis centers on its enduring "moat" in traditional tobacco combined with the underappreciated growth trajectory of its 'on!' nicotine pouches, which boast a 60% CAGR and are projected to constitute 25% of total revenue by 2029. Consistent share buybacks, stable dividends, and growing margins further support this contrarian view.

• Platinum - The "Bitcoin of Precious Metals": A bullish long-term outlook for Platinum posits it as the "Bitcoin of Precious Metals." This bold claim is underpinned by its extreme rarity (less than 0.5 grams available per person), persistent supply deficits, growing investor and jewelry demand, and increasingly critical industrial applications in hydrogen fuel cells, AI semiconductors, and cancer treatments. This confluence of factors suggests a compelling case for significant future price appreciation.

• Sodick (6143.T) - A Classic Japanese Deep Value Play: As an example of the "generational buying opportunity" theme in Japan, Sodick is highlighted as profoundly undervalued. With ¥42bn in cash against a ¥49bn market cap, a P/B of 0.58x, and an estimated ~3.6x EV/EBITDA for FY2025, it embodies a classic value unlocking candidate amidst Japan's new corporate reform mandates.

• Cleveland-Cliffs (CLF) - Multi-Layered Steel Catalyst: Bullish calls on CLF are predicated on a robust set of catalysts: pervasive undervaluation across the steel industry, potential strategic investment from POSCO, impactful plant idling initiatives, expansion into rare earth mining, benefits from protective tariffs, and anticipated debt reduction driven by future rate cuts. These factors cumulatively support an expected stock price range of $20-$30+.

• Alphabet (GOOGL) - Discounted Tech Core: Despite its foundational role as the internet's backbone and strong positioning in AI, YouTube, Cloud computing, and Quantum research, Alphabet is still considered a "major discount." Its relatively low P/E ratio, coupled with robust free cash flow, suggests the market may not be fully appreciating its fundamental strengths and multifaceted leadership in key technological domains.

• Crocs (CROX) - Oversold Resilience: Crocs is identified as potentially oversold, currently trading at approximately 7x Fwd P/E with an impressive ~15% FCF yield. Its aggressive share buyback program, strong operating margins (25%), and continued international growth are cited as key mitigating factors against concerns regarding the HEYDUDE acquisition and a perceived cooling of its US brand, indicating underlying business strength.

• WW International (WW) - GLP-1 Tailwinds and Turnaround Story: WW is strategically positioned to capitalize on the GLP-1 trend. Having recently emerged from bankruptcy with significantly reduced debt, the company is actively expanding its clinical segment and forging new strategic partnerships. This indicates a strong turnaround potential, with target prices ranging from $35.52-$47.17.

• Zebra Technologies (ZBRA) - The Enterprise Backbone: Zebra Technologies is characterized as a "backbone company with a moat," benefiting from a strong balance sheet. Trading at a 27 P/E, the company is perceived to have significant upside potential, underpinned by its essential role in providing enterprise asset intelligence and automation solutions across various industries.

Disclaimer: This content is generated using AI, synthesizing public data (filings, reports, news) and social media (Reddit, X). It may contain errors, inaccuracies, or hallucinations. Nothing herein constitutes financial advice. This newsletter is for informational purposes only; please consult a qualified professional and conduct your own due diligence before making any investment decisions.