Freebie Friday, Part I

Here and there we may do a freebie Friday, paid members get the pure thoughts on our holdings and the current trades we enter and what else is on our minds. It is pretty cheap.


There is a lot of talk on the 10YR, inflation, cyclical rotation, value, etc. There are always a lot of reasons to sell & rotate, I love the headlines all across financial media. Financial pundits telling you what to buy, let me say if they had all the answers they would not be on the TV telling you what to buy. If I knew all the answers I would not be writing and building out a website. What we can build is a knowledge base on core businesses and understand them to the best of our ability.


Have your business fundamentals changed during this chop session? Probably not. Someone once told me that the best time to buy is usually the most uncomfortable, when things just do not seem to be going your way. Seeing some of the names we cover -30% off highs makes you feel a bit uneasy..until you realize you are at levels not seen since *checks chart* November.


We all know what the Fed is doing holding down the fort buying roughly $120b per month in Treasury bonds and MBS (mortgage backed securities). That is cool, but not why I buy equities.


Growth was extended, value was ignored. Does not mean I want to position myself to value. For those who know me I am concentrated in my conviction, and businesses like Altria Group are not in my line of sight (does not mean I dont like them, addicting businesses are always solid). I enjoy learning about new and rapidly growing businesses, I can't help it, Tobacco bores me.


I do not talk about NFT's here, I do not talk about Bitcoin. I stay focused on my interests and believe I add value in that sense. There is this older investor guy, you might know him as Warren Buffet and he once said he has been a net buyer of stocks every year since he was 11. You think inflation fears and 10YR is going to change the businesses I own? Sure, you can position yourself to "hedge" against these, but I think that is very short-term thinking. Good luck and to each their own.


The ability to gut volatility in this industry helps build character and knowledge, I think seeing my account drop 29%, 30% respectively in 2020 and 2021 (off the lows now) shows me none of us are invincible and we don't know anything (these are the largest drawdowns I have had in 7 years). The market continues to humble those who speak loud, I like to lurk in the corners of the internet. I do not want to advertise, I would rather spread word of mouth.


Where do we go from here?


My members know I am bullish, I do not give price targets on indexes I think they are silly. What I do know is the underlying businesses I own are doing well. Well enough for me to stay invested and keep buying, although my March performance will most likely be bogged down, the long-term CAGR is the focus which I think will still outperform my benchmark QQQ. I do not believe my names to be strictly WFH, absolutely not, they are COVID+ stocks, beneficiaries of the stay at home environment and more. I will let you digest this chart the way you want:

Watch knee-jerk reactions in the market, for the newbies out there. Pundits will talk and talk but zoom out a bit.


Howard Marks in his most recent memo is methodical as always and when I read what he writes, he always sounds like he takes a step back and puts all the pieces together he has at his disposal. That is how I want to write, 95% of my job I feel is easing the emotions of the irrational. He states he does not base his investments on macro forecasts, neither does Fiducia. Why would you? He makes the point we never know what is going to happen, beginning of 2020 was bright and dandy, chugging along and then the black swan event happens driving us down 33.4% in 32 trading days causing immense fear in global markets. No one knew that was going to happen. Sure, it was scary, but I guess this is why you always have cash on the sidelines. I deployed some and got some very nice prices on some very nice businesses. If you are a true investor, I highly recommend reading his memos https://www.oaktreecapital.com/insights/howard-marks-memos


Down below we have some Factset earnings insight:

Marko Kolanovic: https://www.cnbc.com/video/2021/03/18/treasury-yields-will-stabilize-and-spark-rush-back-into-stocks-within-days-j-p-morganas-marko-kolanovic-predicts.html


I stop what I am doing everytime he speaks. He was on CNBC yesterday, and stated stocks will go higher. Well, that fits the Fiducia narrative so lets feed into confirmation bias for a second and see what he says...

  • Medium term, market (SPX) to 4400

  • Recent Tech hit = higher yields (his thoughts)

  • Bonds will find bid, inflows into bonds

  • Yields stabilize, tick lower, NASDAQ move higher (more than compensate for equity outflows)

  • Rebalance of momentum factor, inflows into some of the laggards into Energy

  • NASDAQ and Energy moving higher -> interesting

  • Higher multiple, higher earnings, or both on 4400? Both (cyclical laggards)

  • Inflation? Higher inflation good for EM, cyclicals, overweight there. But do not think runaway inflation to hurt growth.

Okay, not bad. Have a good weekend.


Fiducia

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