Super Micro Computer’s Stock Surge Amid AI Boom and Auditor Change; Spirit Airlines Bankruptcy Update

1) Shares of Super Micro Computer (SMCI) have just demonstrated another remarkable shift in their market trajectory…

The company has capitalized on the burgeoning AI sector, manufacturing advanced servers equipped with cutting-edge chips from Nvidia (NVDA). In a significant surge, its stock skyrocketed by 31% yesterday following the company’s announcement of BDO USA being appointed as its independent auditor. This development follows the high-profile resignation of Ernst & Young (“EY”) just three weeks prior, which reverberated through the investing community.

Since August 29, I have consistently cautioned my readers about the risks associated with SMCI; despite yesterday’s upswing, the stock still remains down 37% from that time. I remain skeptical of the company’s financial practices, as I suspect it has been involved in accounting malfeasance, a concern brought to light by EY’s earlier findings.

I predict that BDO will uncover these discrepancies, compelling SMCI to amend its financial statements… consequently, I advise investors to proceed with caution and steer clear of this stock.

2) In a troubling turn of events, the ultra-low-cost carrier Spirit Airlines filed for bankruptcy earlier this week, leading to the complete loss of value for shareholders…

As I outlined in my October 4 e-mail, I had previously owned the stock because I believed there was more than a 50% probability that a judge would approve JetBlue Airways (JBLU) to acquire Spirit at $33.50 per share, making my investment of $15.89 appear disproportionately undervalued.

However, the judge ultimately blocked the merger—a decision I consider erroneous—determining, alongside the Justice Department, that such a move would harm consumers by reducing competition. Ironically, Spirit’s current situation only highlights the adverse impact of that judicial ruling.

Spirit asserts its intention to continue operations, yet it appears severely weakened—ultimately placing consumers in a more disadvantageous position than if the merger had proceeded.

This brings me to a vital investment principle that I was fortunate enough to implement: When my original rationale for owning a stock—my investment thesis—was proven inaccurate, I promptly sold my shares.

This concept may seem straightforward and intuitive, but it is often far from easy. As I conveyed in my October 4 message:

The instinctive reaction to a significant financial setback is often to become self-pitying, to ruminate over losses, and to cling to the hope that the stock will rebound to your original purchase price, allowing you to exit with your investment and self-respect intact.

This is exactly the erroneous approach.

The market remains indifferent to your entry price, your sense of dignity, or your prayers for recovery.

What’s crucial is to detach from your emotions and ponder a simple but pivotal question:

If I didn’t already hold this stock, would I choose to buy it today at its current price?

Continuing on, it is paramount to avoid fabricating new justifications for retaining such a stock:

In my situation, my investment rationale hinged entirely on one factor: that the judicial ruling would favor Spirit, resulting in a rapid doubling of my investment.

Once that vital pillar crumbled, it would have been tempting to substitute it with another—based on the perceived low price of Spirit’s stock. Emotionally, I was inclined to cling to this notion to avoid acknowledging my loss; I thought that as long as I remained invested, there could still be a chance for recovery.

However, I managed to set aside those emotions and recognized that I was not prepared to make a completely different wager on a struggling airline in a troubled industry… and so I exited my position promptly following the court’s decision.

The legendary investor Warren Buffett succinctly encapsulated this sentiment: “You don’t have to make it back the way you lost it.”

In testimony last year supporting the JetBlue merger, [Ted] Christie, Spirit’s CEO, conceded that larger airlines had established a winning strategy through their expansive international networks, premium offerings, and lucrative credit-card partnerships. Major carriers have also attracted budget-conscious travelers with their own discounted fare options.

Moreover, Spirit has been besieged by rising labor costs and operational inefficiencies exacerbated by an ongoing shortage of pilots and air traffic control challenges.

The airline has also been disproportionately affected by issues identified in certain Pratt & Whitney engines, necessitating inspections that have grounded a significant portion of its fleet for extended periods.

“Everything kind of happened at the wrong time,” remarked analyst Conor Cunningham from Melius Research.

3) In the latest e-mails sent Friday and Monday, I shared insights gleaned from 96 13-F filings submitted by some of the most notable and highly respected money managers in the industry.

One of my close friends, Paul S., provided me with a thoughtful analysis of these filings:

I’ve been tracking your updates on 13-F filings and found it intriguing to sift through them to identify which stocks caught the attention of multiple asset managers during the quarter, as this may indicate particularly promising investment opportunities.

I discovered the following 22 names (listed alphabetically): RELY, LRCX, ESTC, SPT, GOOG, GLBE, LBTYA, APO, VMC, NSA, ADC, WMG, RHI, DAVA, DIS, MSFT, ROIV, SHOP, DYN, TECK/B, DASH, and PINS.

Among these, I regard Pinterest (PINS) to be the most compelling, especially given its improving financial metrics. My primary inquiry revolves around whether the company has established a defensible “moat.”

Thank you for your insightful analysis, Paul!

Pinterest serves as a visual search engine and online scrapbooking tool that aids consumers in exploring ideas, gaining inspiration, and refining their personal tastes.

A brief look at the stock reveals that, after being swept up in the meme-stock trend, it has returned to levels akin to those at its IPO over four and a half years ago:

Paul’s observation about the improving financials of Pinterest is indeed valid, as the company has recently achieved profitability… therefore, I intend to add it to my list for further investigation. Stay tuned!

4) My wife Susan and I relished our final day in New Zealand, exploring the breathtaking beauty of Cape Kidnappers in Hawke’s Bay, Napier, engaging in leisurely hikes while predominantly unwinding amidst this stunning backdrop.

The expansive property spans 6,000 acres and was developed by the venerable investing icon, the late Julian Robertson, a remarkable individual I had the privilege of meeting several times. Here are some snapshots from our visit:

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.

‍What investment strategies are prominent investors currently using to navigate ‍the volatility of the⁤ stock market?

Certain prominent investors. It’s‌ fascinating to see how investment strategies can vary and‍ to observe any emerging trends in the⁤ stocks these managers are ⁣accumulating or shedding.

### Interview with Paul S. on Recent Stock Market⁣ Developments

**Interviewer:** Welcome, ⁣Paul! It’s⁢ great ⁤to have you here to discuss recent developments in the stock market, especially concerning Super Micro Computer ‍(SMCI) and Spirit Airlines.

**Paul S.:** Thank you for having me! It’s been quite a rollercoaster in⁣ the ‍market lately, especially with those two companies.

**Interviewer:** Absolutely! Let’s start with Super Micro Computer. The stock experienced​ a⁢ significant surge​ recently. What are​ your thoughts on their latest developments?

**Paul S.:** ⁢Well, it’s impressive how SMCI capitalized on the booming AI sector, particularly ⁣with the partnership⁣ with Nvidia⁤ for their advanced servers. That announcement regarding the⁤ new independent auditor BDO ‌USA seemed to boost investor confidence, ‍but I remain cautious given the previous‌ scrutiny from Ernst & Young, which hinted at ⁢potential financial irregularities.

**Interviewer:** That’s a valid concern. You mentioned in your analysis that you suspect accounting malfeasance. Can you elaborate on that?

**Paul S.:** ‌Certainly. My worry stems from the‌ timing⁤ of the auditor changes and the previous findings by EY. Such shifts often indicate underlying issues. BDO might spotlight discrepancies that ⁢SMCI ‍will be compelled to rectify, which could be‍ damaging for investors in ⁤the long run.

**Interviewer:** It will be interesting to see how that unfolds. Now, regarding Spirit ‍Airlines, the recent bankruptcy filing must have shocked ⁢many investors, including yourself. What do you make of the situation?

**Paul S.:** It was indeed shocking.⁣ I believed the JetBlue merger would provide a lifeline for Spirit, but when the judge blocked ⁤it, it was clear that ‌my investment thesis ‌had collapsed. The bankruptcy ⁣filing highlights the critical nature of reassessing one’s positions when the fundamental reasoning is no longer valid.

**Interviewer:** You applied a great principle of⁤ investment—when the rationale changes,‍ adapt your ⁢strategy. But many investors struggle ‍with emotional attachment. How ‌can they overcome this?

**Paul S.:** It’s certainly a challenge. The key is ‌to recognize your ⁤emotions and⁤ confront them head-on. Detaching from previous purchase prices and focusing on current valuations can help. Ask yourself, “Would I buy this stock today‍ at this price?” If the answer⁣ is ‌no, it might be time to reconsider your position.

**Interviewer:** That is solid advice. In light of these market movements, what recommendations would you give to investors currently navigating this landscape?

**Paul⁢ S.:** I’d advise staying ⁤informed and being quick to assess your holdings against the fundamentals. Watch for trends emerging from 13-F⁤ filings⁣ as they can‌ offer valuable insights into where respected money ​managers are placing their ⁤bets⁤ or cutting losses. Lastly, don’t allow your emotions to dictate ‍your investment decisions.

**Interviewer:**⁤ Wise words, Paul! Thank you for your insights today, and we look forward to⁢ hearing more⁢ from you as the market continues to evolve.

**Paul S.:** Thank you! It’s ⁢always a pleasure to discuss these critical topics, and I’m looking forward to what lies⁣ ahead ‍in⁣ the ⁢market!

— ⁣

This structured interview format leverages⁢ the insights ‍shared in your original text, emphasizing the importance of ​adaptability and emotional detachment in investment strategies.