| DAILY ISSUE Tom Yeung here with today’s Smart Money. Car designers all know it’s hard to have everything all at once. In 2011, Nissan attempted to produce the world’s “first all-wheel drive crossover convertible.” It combined a sedan, SUV, and sports car into a single vehicle. 
When designers add too much to a single car
The result was the Murano CrossCabriolet – a vehicle so terrible it won CNN’s award for the “most disliked car” of the year. Car and Driver magazine noted the SUV portion added weight and height that caused a “frightful lack of grip.” Meanwhile, a reviewer at the Jalopnik website noted how the convertible aspect meant you “can’t see anything smaller than a fire station” with the top raised. Nissan discontinued the car several years later. Investing is usually the same way. Everyone knows that 1) high growth, 2) high-profit companies bought at 3) low prices are the key to success. Warren Buffett bought Apple Inc. (AAPL) in 2016 when it was trading for just 11X forward earnings. It eventually netted his firm $120 billion in profits. Eric helped his readers gain 1,350% in only 11 months from another “triple threat” firm back in 2021 – copper and gold miner Freeport-McMoRan Inc. (FCX). But it’s hard to find “triple threats” like Apple and Freeport that combine these three things into a single package. Most firms usually only satisfy one of the three criteria (or two if you’re lucky). And those fulfilling all three often have something terrible going on beneath the surface. That’s why finding these triple-threat firms is one of the greatest joys in investing. It’s that “aha” moment when you realize why markets are completely wrong about a stock. And it’s why Eric recently recommended to his Fry’s Investment Report members a company that embodies all three criteria. It’s a fast-growing AI stock that’s so high-performing that, as Eric says, if we pulled a brown bag over its logo, so that we did not know the company’s identity, its raw performance would be enough to tempt anyone to buy in. But, before we get into this company, let’s consider some other AI firms that illustrate why finding these triple threats is so hard… | Recommended Link | | | | The market is adjusting to a new reality. We are in a period of dramatic upheaval, and it’s only getting started. It’s all thanks to what Louis Navellier calls the Economic Singularity. This isn't just another market cycle or recession; it’s a fundamental restructuring of how wealth is created, how work is valued and who gets left behind. Make no mistake: This could either cost you dearly, or make you significantly wealthier. That's why Louis has broken his silence. The sooner you understand what’s really unfolding – and position yourself accordingly – the better off you’ll be as this shift accelerates. |  | | The "Single" Threat Most AI stocks are much like Xometry Inc. (XMTR), a firm I recommended last March in the InvestorPlaceDigest e-letter. Though shares of the company have since risen 20% (a splendid return by any measure), it only covers one of the three triple-threat criteria (growth) that top stocks should have. Xometry is a 3D printing marketplace that uses AI software to match customers with producers. A small firm looking for a half-dozen parts can log onto Xometry’s site and get an instant quote for the order, no matter how complicated the piece might be. Even large customers benefit, since the digital marketplace can channel bulk orders to the cheapest producers. That’s turned Xometry into a hypergrowth firm. Net profits are expected to flip from negative $2 million to positive $13 million this year, and then double twice over the next two years. However, these fast-growing companies usually lack quality and value… and Xometry is no exception. - Quality. Xometry has generated losses since its 2021 initial public offering, making it a tough company for conservative investors to swallow.
- Value. Shares trade at 110X forward earnings, more than five times the S&P 500 average.
That makes the Maryland-based firm a bit like a Maserati GranTurismo: a beautiful sports car, but one with a high price tag and significant reliability issues. So, what does a “double” threat look like instead? Two Out of Three That brings us to Arm Holdings PLC (ARM), a British chip designer whose 99% market share in smartphone CPUs makes Nvidia Corp.’s (NVDA) 90% market share in GPU-embedded servers seem low. Arm is a 35-year-old firm that runs 99% of all smartphone CPUs. It has pioneered supremely power-efficient chip architecture, and its designs are a “must-have” wherever energy is at a premium. That includes virtually any battery-powered electronic device, such as laptops, Internet of Things (IoT) devices, and self-driving cars. Its designs are also increasingly found in data centers to help reduce power consumption. The “must-have” nature of Arm’s architecture has translated into generous royalty payments… at least for Arm and its shareholders. Its latest v9 architecture charges a 5% fee on final sale value on top of regular licensing fees. So, if Apple sells an iPhone 16 Pro for $1,199, 5% of that higher value (rather than the lower $485 cost of building the phone) goes straight to Arm. The British firm generates over 40% returns on invested capital. Arm’s AI ambitions have additionally turned the company into a hypergrowth firm. It is pushing ahead with power-efficient AI accelerators for both battery-powered devices and servers, and analysts expect profits to rise 25% on average over the next three years. However, this great news comes with an eye-wateringly high price tag, making the stock prone to selloffs. Shares trade at 61X forward earnings (despite having a slightly slower growth rate than Xometry). By that metric, it’s twice as expensive as Nvidia. Indeed, Arm’s stock plummeted 12% on May 7 despite an earnings beat, because management forecasted that sales would “only” grow 12% next quarter to $1.05 billion. (It has since regained two-thirds of that selloff.) That’s why neither Eric nor I recommend shares of this high-priced AI “supercar.” It’s simply too expensive in this current market. The "Real" Triple Threat So, what does a company that “has it all” look like? Consider Corning Inc. (GLW), a current holding in Fry’s Investment Report. Corning is an upstate New York firm that’s developed high-end glassware since 1851. It invented Pyrex in 1915, low-loss fiber optic cable in 1970, and the iPhone’s “Gorilla Glass” in 2007. Today, the firm is a leader in liquid-crystal display (LCD) panels, smartphone screens, and the fiber optic cable used in broadband connections. It’s an upmarket manufacturer that’s survived outsourcing and offshoring thanks to decades of innovation. Perhaps most excitingly, Corning also manufactures the high-end fiber optics used in data centers to link servers. This essential technology allows AI-focused data centers to send more data across tighter spaces. It’s become one of Corning’s greatest growth drivers. Meanwhile, Corning’s profitability is excellent. The company has earned positive operating earnings for the past two decades (even through two recessions), and analysts expect return on equity (ROE) to surge to 17% this year – roughly twice as high as market averages. Corning’s shares additionally trade at just 19X forward earnings – below the S&P 500 average of 20.2X. Now, you obviously might think there must be something wrong. How can a firm have it all without secretly being a Murano CrossCabriolet? And you’d be right to worry. Corning supplies many of the world’s top TV makers, which are now facing enormous tariffs on exports to the United States. Public funding for broadband expansion may also get cut in the upcoming federal budget. Both factors have contributed to a 15% selloff since February. However, it’s becoming increasingly clear that the market’s “sell first, ask questions later” approach has turned Corning into an irresistible “Buy.” Ninety percent of its U.S. revenues are generated by products made in America, and 80% of its sales in China are made in China. The direct impact of tariffs should remain under $15 million – a rounding error relative to Corning’s $2.8 billion in expected pretax profits this year. Corning also plans to create the first fully U.S.-made solar module supply chain. If successful, the project could help solar firms sidestep incoming tariffs on solar cells that could be as high as 3,500% if the U.S. International Trade Commission agrees with the Commerce Department’s proposals this June. One More Triple-Threat Company Corning’s data center connectivity products only nibble at the edges of the AI revolution. Eric’s other pick, the “brown bag” buy we mentioned earlier, is right in the center. As Eric wrote in a recent Smart Money… This “brown bag” buy competes directly against Nvidia Corp. (NVDA) in an industry that is brutally competitive and deeply cyclical. Because of factors like these, investors have been dumping the stock for months, despite the company’s superb operating performance and bulletproof balance sheet. The company’s core operations are making rapid gains, especially its fledgling data center division. This critical division is growing at a blistering pace. Last year, its revenues nearly doubled and accounted for half of total company revenue. In fact, Nvidia was almost bought by this forward-looking firm in the early 2000s. The company is a major supplier of cutting-edge semiconductors, and it has very profitably become a major player in many facets of AI technologies. And the company’s current share price has become too compelling to ignore. You can learn how to access all about this “have it all, triple-threat” – and many of Eric’s other triple-threat plays – in Eric’s free, special broadcast. You can click here for all of the details. Until next week, Tom Yeung Markets Analyst, InvestorPlace | 
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