Goodmorning newsletter subscribers, and welcome to our new readers. As we do every Monday morning on our newsletter we are breaking down what we expect from the market this week, which includes 3 names being included into the S&P 500 and one of our favorite names, SOFI, being left off the list. We are also going to be talking about Oracle, and how they are reporting this week. Earlier in the year we talked about how Oracle was our name to watch going into their recent earnings, and the stock SOARED almost 30% after earnings, but cooling off a little since then. Before we get started we would really love to suggest that everyone shares this newsletter with all of their friends and family to help them in their investing careers. Like we always say, it is never too late to start.

Every time that there is a rebalance coming in the S&P 500 there are always names that are speculated will be included. We must say we are actually surprised about this list and we will let you know why after we explain:

The December 2025 S&P 500 rebalance brings in three new members, which is pretty standard, Carvana (CVNA), CRH plc (CRH), and Comfort Systems USA (FIX). We have not recently talked about Carvana on our newsletter but maybe it’s time we start. The stock has EXPLODED in the recent years, all that way up from an almost 99% fall it originally saw. CRH, a major building-materials supplier, strengthens the index’s industrial and materials exposure, which has been something the index has been lacking with the addition of so many tech companies, and Comfort Systems, a mechanical and electrical contracting firm benefiting from infrastructure and data-center demand, moves up from the MidCap 400 as its market cap and liquidity now meet large-cap criteria. This is a data center name we have not previously talked about but it is certainly now gaining our attention. We will be keeping a close eye on this one over the next couple of months after the addition takes place.

To make room for the new entrants, three companies will exit the S&P 500 and shift to the small-cap index: LKQ Corporation (LKQ), Solstice Advanced Materials (SOLS), and Mohawk Industries (MHK). These companies no longer meet the large-cap thresholds relative to stronger-performing peers. None of these are names that we have talked about and none of these come as a surprise to us, as they have not kept pace with the larger 500 companies, and will most likely continue to lag behind the S&P 500. There is nothing that we are noting that should be traded around this announcement, and all three of these names will experience increased volatility.

Being added to the S&P 500 generally triggers an indexing affect, which includes higher visibility, increased liquidity, and forced buying from trillions of dollars in index-tracking funds. A great example of where we have seen this before was the addition of Robinhood to the S&P 500. Robinhood was one of our favorite names, and we knew that it was bound to happen it would be included in the index. The price was around 115$ when it was included in the S&P 500, and is sitting at around $130 now. We are not saying that this is is because of the inclusion, but it will help in all the other aspects we said.

One name that we have consistently talked about in our newsletter that we thought was going to be included in the S&P was SOFI. When we originally talked about SOFI in a recent newsletter breaking down the stock, we mentioned that we thought SOFI had a great opportunity to join Robinhood in S&P 500 inclusion. Furthermore, after the stock dilution just a couple of days ago, we thought that it was possible that the management team knew that they would be included and would take the fall of stock dilution to see the indexing jump after the news. This never came. Our opinion of SOFI is starting to change. It seems like every couple of months the stock is being diluted by management and there has not been much breaking news to show for it. We speculated last dilution that we were expecting to see an acquisition announcement, but it never came. Now again we are seeing speculation that this might be the case again, but we are not getting our hopes up.

How we are investing around this news:

There is not much to trade around the S&P 500 inclusion news besides knowing which three companies are being added and keeping an eye on how they move in the coming months. We are adding to our list these three companies to do deep dives into for our subscribers. The name we are trading around is SOFI. We are pretty big shareholders in SOFI so far, and with this announcement we are worried that without S&P 500 inclusion and the continuation of diluation, that there are some better names to shift focus too. We are currently looking at adding our position into Bitcoin under 100k as well as Bloom Energy, which we have recently done a deep dive into, and which is currently down around 20% from highs.

Oracle Earnings Coming up:

The week of September 9th we made one of our biggest calls of the year so far, which included buying Oracle before it saw a MASSIVE earnings beat, which sent the stock soaring. The stock jumped from $223 to $328, over a 30% gain, and destroyed wall street consensus estimates. This is what we said:

“We love Oracle and believe that it is a standout pick in the AI and cloud infrastructure space. It has the position as “fourth AI hyperscaler” which in our opinion is well earned. We see Oracle continue to have strong cloud and AI growth, with strategic expansion across global markets.

As we said before our biggest takeaway on this stock is the $30 billion annual cloud deal with OpenAI - yes annual. That is huge news as this is a continuous revenue stream and as OpenAI continues to get bigger, we would make the assumption that they partner together on more things. This contract is part of a broader Stargate initiative, with a multiyear project aimed at building some of the largest AI data centers in the world. This agreement positions Oracle as an important partner in supplying the infrastructure needed to power OpenAI’s next generation models, which increases demand for Oracle’s cloud and GPU capacity. Oracle is now competing head on with companies like Microsoft, Amazon and Google in the AI race.

We hold a small position in Oracle right now and will continue to buy before earnings release if stock stays around current price of $230. Many analysts that we follow see much higher returns in the long term as we continue to say that AI is the future. It is important to invest broadly and when it comes to AI and this stock in our opinion is a good long term option with the current market cap sitting around 650 billion. We think the market cap will only continue to climb along with the stock.”

Before I start on this analysis for the stock, I just want to say that the stock is sitting right around where it was before earnings and I think this is completely unfair. The stock just had an amazing earnings announcement and for some reason the stock started to fall. For this earnings report we are focused on a couple more things that we think that Oracle needs to execute on in order so see another big jump. The company recently took out around 18 billion dollars of new debt, which is a massive amount of money in this high interest environment, and profit needs to start showing up fast. The company is currently sitting on backorders from openAI and has not been able to turn these partnerships into meaningful profit. As investors, we are hoping that there are announcements of new data centers in the near future. In the type of environment we are living in, the announcement of new data centers is the fuel to the flame in terms of how investors value a company. If Oracle can give off the impression through some future announcements that these data centers that they took debt out will take shape, then I think we are in store for the stock to rise yet again. We are also looking at how Oracle plans to manage this debt. If they make any indication that there will be a stock dilution to help fund this debt, we will be very skeptical that they are not able to deliver meaningful profits in the short term to support this debt.

The information provided in this newsletter is for informational and educational purposes only and should not be considered financial, investment, or trading advice. While every effort has been made to ensure accuracy, we do not guarantee the completeness or reliability of the information. Past performance is not indicative of future results. You should conduct your own research or consult with a licensed financial advisor before making any investment decisions. We are not responsible for any losses that may occur from the use of this content.

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