SPECIAL FREE IDEA FOR HX RESEARCH READERS

As you all know, we have both free and paid newsletters at our firm HX Research.

This letter - HX Daily - is our daily free letter where we talk about what is happening in the market, economy and give our thoughts about trading and investing.

With our paid products, we do make the introduction to our readers available on a free basis but we save the actual idea for our paid subscribers. We appreciate and respect their support!

To help introduce our service to more readers, though, we have decided to occasionally have a “FREE IDEA” out there. This will be an idea that we will have given our paid subscribers a few days or week earlier but we will then make available to everyone.

We will not do this very often, but in consideration of our second month of operations at HX Research, we thought we would share our first free idea.

This is an idea we sent to our paid readers in HX Income a week ago and they are already up almost +50% on the position. We still think it is a great idea!

Reminder - the stock screening we use for both HX Trader and HX Income is the same.

We are looking for “winner” companies that have been great stocks that have become oversold. We then dive in and figure out what’s going on and - if it all checks out - we take advantage of the dip.

HX Trader is focused on buying liquid equities while HX Income focuses on selling put options to “harvest” the premium as income. Most often, stocks we choose for either publication would fit in both strategies.

We usually do NOT, however, recommend both because we want to have unique ideas for all of our paid publications.

This free idea, though, is an example of a stock opportunity that is great for both strategies.

If you would like to subscribe, you can subscribe to everything we publish in a special one-time launch offer and save $5000!

You can also subscribe individually to each publication for $77 per month.

As an HX Daily reader, we hope you enjoy this idea…

Two Technologies Collide to Create an Income Opportunity

Over the last few decades, influential trends in technology have changed how we do almost everything.

One of these influential trends in software is called "Software-as-a-Service" or "SaaS." This describes the move from making one-time software sales to a subscription model.

There have been trillions of dollars made from this evolution…

One of the following influential trends is artificial intelligence. We are sure you have heard plenty about this subject recently!

We are still determining if trillions will be made here, but there surely be major disruption.

Today's idea for HX Income is an opportunity to take advantage of a sell-off as these two technology trends collide.

Here is the idea…

The company is Adobe Inc. (NASDAQ: ADBE). It is arguably the company that pioneered SaaS.

You may be familiar with their products. They do software to handle document production and editing under the Adobe Photoshop, Illustrator, and Acrobat brands.

They have been a market leader in this area for decades.

The company was founded in 1982 in the founder's garage. Today, it generates almost $20 billion in revenue and has nearly 20,000 employees.

In April 2012, the company announced that they would be moving to a SaaS model. At the time, only a few were familiar with that model.

When a company first does this, they see significant drops in revenue. Instead of selling a software package for $1000 and getting that money, now they are getting $50 a month. That is a 95% drop in revenue that month from that customer!

It is also money the NEXT month from that customer that the company would otherwise not receive.

The transition takes time but ultimately leads to better customer retention and economics.

At my old fund, we took advantage of the confusion around this change. Here is the stock chart back then…

You can see the stock traded down from $35 to a low of about $22 per share or a -35% drop! After that, though, the stock went higher, much higher…

The stock has only continued to move higher in the decade since this time. Here is the more extended chart…

The stock got hit during the post-COVID market sell-off in 2022 but trades at almost $550 per share today. That is +2400% from that 2012 bottom in the stock. Not too bad!

This stock performance makes sense because the company has one of the best performance track records out there.

This table shows revenue and earnings per share (EPS) since 2012…

Wow! No wonder the stock has been so excellent!

The company has also performed well against analyst expectations. Here is the chart of their performance relative to expectations when they report EPS…

They have beat expectations every quarter (except one) for a decade.

Our readers know that when you see this kind of performance, you will also see rising analyst estimates. Here is that chart for 2024 EPS estimates…

The company saw some negative revisions post-COVID, but estimates have increased steadily.

This combination of operating performance is why the stock was approaching all-time highs.

Look at the chart, though; you will see the stock got walloped last week. It was down almost 10% on Friday in a stock market that was only down a little.

What is going on?

The answer is artificial intelligence!

Two weeks ago, the leading AI company – ChatGPT – announced the roll-out of an AI-powered video engine called "Sora."

According to the company, Sora can generate complex video scenes with multiple characters, specific types of motion, and accurate details of the subject and background. It currently can create videos up to a minute long. However, Sora is still being tested and unavailable for public use.

We saw a bunch of these videos, and they were pretty trippy! Here is the video the company put out with the announcement…

https://www.youtube.com/watch?v=HK6y8DAPN_0

The videos are super impressive, and the technology is amazing.

When will this be available to the public? No idea.

Will this be a competitor to Adobe in the next few months? NO. WAY.

Will it EVER be a competitor for Adobe in the future? Who knows, but we have seen similar situations and are skeptical.

Regardless of what happens in a few years, we do NOT think the sell-off is warranted.

The stock market is overheated in the short term, and ADBE has been up nicely over the last six months, but this sell-off is overdone in our view.

Do you like this idea? Right now - as part of the launch of HX Research - we are offering a special opportunity to sign up for a HX Research Lifetime Partnership with no one-time fee. That is a savings of $5000! Simply pay the annual membership fee of $333 and you get everything that we publish. Click here to subscribe.

We also offer monthly subscriptions to both HX Trader and HX Income for $77 per month. Click HX Trader or HX Income to subscribe.