Value Stocks, Bitcoin, Copper,
Tesla and Lumber

Brent Wilsey, President, Wilsey Asset Management, comments on Value Stocks, IRS ruling on Bitcoin, Copper Boom, Tesla competition and Lumber prices.

Wilsey believes value stocks will continue to outperform growth stocks is because he sees GDP growth remaining robust.

“According to research from RBC Capital, since 1979 the U.S. economy has grown an average of 2.5% per quarter year over year. When GDP has been below the average, growth investing has outperformed and when GDP has been above the average, value has outperformed. As of now, I see GDP doing well through the end of next year.

Another interesting area to consider is earnings growth. For the first time in about a decade, the Russell 1000 Value index is expected to have higher earnings growth over the next 12 months than the Russell 1000 Growth index.

Value is expected to see growth of 28% compared to 24% for growth. Be careful of those highflyers.”

IRS Rules Bitcoin is an Asset

“In a recent ruling the IRS has classified Bitcoin as an asset not a currency. This is important because the IRS can seize an asset for past due taxes but cannot seize a currency. So, if it is not a currency then how can it be the currency of the future?”

Boom in Copper?

A boom in copper set to continue? The green energy push is a major plus for the commodity as it has various applications. Electric vehicles contain as much as 180 pounds of the metal which is four times higher than a gas-powered car. Onshore wind turbines occupy four times the copper that fossil fuel powered power plants do, and offshore wind turbines use even more. Green power related demand was just 3% of copper usage in 2020 and with this new green push, Goldman estimates it could hit 16% by 2030. A company like Freeport-McMoRan (FCX) could be a major benefactor here, but with the stock price over $40 it is now more than 360% higher than its 52-week low of $8.60. I think there could be some potential with this company long term, but I am looking for a pullback first.

Tesla Fighter

I see troubled waters ahead for Tesla (TSLA) in the form of more competition. Mercedes Benz has released what is being called the "Tesla fighter". The 2022 Mercedes EQS will be available this summer. The price is starting around $100,000 and now brings MB total electric vehicles to four. Some people may think I hate Tesla. I do not, I back them as an American company. However; I worry about the American investor who for some reason saw no competition from other car makers. That is changing and I do see troubled waters ahead for Tesla. The company is down over 33% after reaching its high of $900. Competition is never good for a business and I do believe within six months we could see Tesla at lower levels.

Lumber

Signs of inflation continue. On May 7th lumber hit a record high of $1670.50 per 1000 board feet. May 11 copper futures also had a record high of $4.76. Steel futures not to be left behind also hit a record high on May 11 of $1630 for a short ton. What do these three commodities have in common? They are all used in building a house. I am very concerned on the future of the housing market because prices continue to climb above what people can afford. Climbing interest rates just adds more concern going forward. I caution people be careful what you are paying for housing these days.

Editor’s Note: As one of San Diego’s leading investment advisory firms, Wilsey Asset Management has built a reputation for effective investment management and expert financial guidance along with financial planning services nationwide. Over his 40+ years in the business, Wilsey has found value stocks provide the best long-term return.

For a complimentary consultation, www.wilseyassetmanagement.com.