Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Dec. 10. The Bottom Line segment of today’s podcast starts at (3:52), followed by Stocks on the Contrarian Radar©️ featuring Google ($GOOG / $GOOGL ) at (5:50) for listeners who want to skip ahead.

State of Play

Stocks dropped a bit yesterday on news of an antitrust probe by Chinese regulators into Nvidia (NVDA ) that sounds in no way to be politically motivated. As we eye our board of indicators for signs of direction at 0645, there isn’t an awful lot to go by just yet:

* Stock index futures are flat as a board with no major US index moving at all from the break-even point;

* Cryptos are moving a bit lower. Bitcoin is down 1% to trade around $97,500;

* Commodities are treading water. WTI crude oil is down 0.6% to trade around $68/barrel, basically where it’s been for weeks (or so it seems). Copper is down 0.5%;

* Bonds are selling off a bit. The 2-year yields 4.14%, up 1 basis point, with the 10-year yield up 3 basis points to 4.23% (yields move inversely to prices).

Today’s Known Events

Earnings are once again the story. The only story of the day, at least where known events are concerned.

Reporting before the open at 0930 are AutoZone ($AZO ), Olli’s Bargain Outlet ($OLLI ), and Designer Brands ($DBI ). So a pretty good selection of retailers.

After the close we’ll hear from GameStop ($GME ), Dave & Buster’s ($PLAY ), and Sportsman’s Warehouse ($SPWH ).

The Bottom Line

Looks like another dull day, then. The major event weighing on markets yesterday was the anforementioned move by Chinese regulators re: Nvidia ($NVDA ). The concern here isn’t so much about Nvidia but trade wars more generally. We saw this the last time Trump was in office. Lots of tits for tats interspersed with leaks from the Trump administration that they were making progress on a trade deal. This is all forgotten because in the end it didn’t matter and stocks rallied.

Could history repeat itself? Sure, and that’s why yesterday’s selloff wasn’t particularly dramatic. The issue is just the uncertainty of it all. Markets, if you’ll recall, hate uncertainty more than they hate bad news.

A little bit of selling is probably warranted anyway after the run-up of the last month. The Contrarian was happy to see some of his dip buys rally yesterday: Target ($TGT ), discussed here; Newell Brands ($NWL ) and Estée Lauder ($EL ) among them.

Stocks on the Contrarian Radar©️

The Contrarian has started to ask if Google ($GOOG /$GOOGL ) could be a buy at these levels. The stock has trailed its benchmark, the Nasdaq 100 ($QQQ ) most of the year:

Google has been under regulatory scrutiny. There has been noise about a forced breakup, with the latest being news it could be forced to sell the Chrome browser business. Despite the incoming Trump administration apparently being kind to companies like Google and their transgressions, this caused the stock to sell off.

In retrospect that may have been the best buying opportunity. But it’s impossible to time these things perfectly and there are indications the company is poised for growth. A lot of growth.

Self-Driving Cars

The main driver (pun intended) may just be the Waymo business, which positions Google/Alphabet as a big winner in autonomous driving. This is exciting. Driverless cars will eventually change everything. The Contrarian wants to be onboard for that transition (again, pun intended). He has been researching this technology for awhile. All signs point to this being ripe for adoption. One prominent critic of this technology has already had his come-to-Jesus moment. Some regulatory stuff needs to be cleared up but the incoming Trump administration is apparently on that already.

But enough about self-driving cars. Yesterday Google made a splash with its Willow chip, apparently a ‘mind boggling’ foray into quantum computing — another major growth area. This actually caused the stock to gain ground yesterday when the rest of the Nasdaq sold off, much to the chagrin of anybody who chose yesterday to start building a position.

That aside, the valuation at 23x earnings is actually below the S&P 500 average of ~27x, to say nothing of other tech stalwarts like Microsoft (36x). Apple (39x), Amazon (47x) or Nvidia (56x). Oh, and management is buying back stock.

Okay so maybe Google is losing some ground on the search engine side of things. Not just to ChatGPT and the like. A point of concern is with iPhones and whether Google is still the default search mechanism on these devices. That’s certainly fair. Google’s search engine business is, well, it’s literally a verb. Or was. If that changes it stands to reason the company will lose out on revenues. No way around that.

But let’s not forget that YouTube is a Google product. Is there a viable competitor to YouTube? Don’t think so. There’s also gmail and a bunch of other potential growth drivers that are under the radar. Take AlphaFold for example. This literally won Google a Nobel prize. In bio pharmacology.

So yeah, growth drivers are in place. The stock is cheap compared to peers. A drop in search engine revenue is already priced in. Looks like this thing is a buy at these levels. This thesis may not materialize overnight. But chances are Google will be worth a lot more in a few years’ time.

Full disclosure: The Contrarian has a limit order in to buy GOOGL, the A-shares version. He already owns a small position in his retirement account.

Not investment advice!

Housekeeping

* Obviously this is not investment advice (duh). Do your own research, make your own decisions.

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