FA Alpha Weekly Digest 01 22 2025

Wall Street’s stock picks can’t be trusted and the advertising bias of the mainstream financial media makes their news only sensationalist-driven. Gain an edge by knowing the trends that matter and some of the mispriced stocks in the market.

We bring you the FA Alpha Weekly Digest, a roundup of FA Alpha’s unique and unparalleled equity, credit, and macroeconomic insights over the past week.

In today’s digest, we’ll cover recent trends in Venture Capital, Ford Motor (F), Weatherford International (WFRD), Liberty Energy (LBRT), and IonQ (IONQ).

Venture capital's magic has worn off

Venture capital (VC) has evolved from its original model of spreading small investments across startups to a $1.2 trillion industry dominated by large firms making massive, concentrated bets. This shift, exacerbated by high interest rates, has squeezed smaller VC firms and reduced focus on riskier early-stage startups. SoftBank’s Vision Fund exemplifies the risks of this approach, suffering massive losses from high-profile investments like WeWork and Uber. The deviation from VC’s founding principles has led to an industry less focused on fostering innovation and more on managing scale. Meanwhile, microcaps remain a promising alternative, offering early-stage investment opportunities with significant upside potential due to their limited access to large institutional capital

This legacy automaker is struggling to compete with Chinese EVs

NVIDIA continues to benefit from strong AI investments and strategic partnerships, keeping its stock near an all-time high despite its expensive valuation. In contrast, Ford faces significant challenges despite appearing undervalued. Struggling with its electric vehicle (EV) transition, Ford's EV segment burns cash, and operational inefficiencies, quality control issues, and delays have worsened its position. Meanwhile, Chinese EV manufacturers, supported by subsidies and cost advantages, are rapidly expanding, offering competitive pricing and aggressively entering international markets. This puts Ford at a disadvantage in competing on price. Market expectations for Ford are low, with the EEA model indicating a significant drop in its future return on assets. Ford must address its cost structure and production inefficiencies to remain competitive against the growing Chinese EV threat.

This company's services are likely to see increased demand under pro-fossil fuel policies

With Donald Trump's return to the presidency, U.S. energy policy is shifting toward fossil fuels, creating opportunities for companies like Weatherford (WFRD). The company, which recovered from its 2019 bankruptcy, offers critical services in drilling, well construction, and production management for oil and gas producers. Weatherford’s technological innovations, such as the HB Spitfire and ForeSight 5.3 platforms, enhance operational efficiency and position the company to capitalize on rising energy demand. With a strong presence in international markets and a focus on technological advancements, Weatherford is well-positioned for growth despite potential volatility in oil prices. Despite concerns over market volatility, Weatherford’s strong operational strategy and technology investments suggest a positive growth outlook.

Drill, baby, drill!

The return of Trump’s administration marks a shift in U.S. energy policy toward prioritizing oil and natural gas while scaling back support for renewable energy. Liberty Energy (LBRT), a leader in hydraulic fracturing and shale services, is poised to benefit from this shift due to its focus on prolific U.S. basins like the Permian, high operating leverage, and strong pricing power. Technological advancements have revitalized mature shale fields, driving Liberty’s profitability to an 18% Uniform ROA in 2023. Despite market concerns about the longevity of U.S. energy demand, Liberty is positioned to capitalize on increasing domestic production and global energy security needs. With continued innovation and supportive policies, the company is well-equipped for sustained growth in the evolving energy landscape.

There is still a long way to go before quantum computing becomes profitable

Quantum computing, driven by concepts like superposition and entanglement, has the potential to revolutionize fields such as AI, cryptography, and medical research, though widespread adoption remains 15–30 years away. IonQ, a leader in quantum computing, has developed advanced technology, secured government and commercial contracts, and announced a $1 billion partnership to expand its headquarters in Maryland. Despite ambitious growth projections and increased guidance, IonQ remains unprofitable and heavily reliant on equity raises and government funding. Investors face a choice between high-risk, high-reward pure-play companies like IonQ and diversified tech giants like Alphabet, which offer exposure to quantum computing with less volatility.

We hope you find this week’s FA Alpha Daily articles insightful.

See you next week as we talk about another set of interesting names.

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