Why this earnings season is key to predict 2023 | January 14th, 2023 Newsletter

$AMZN $ACIW $WWE $SLG $WSM $VWS.CO $CALM $NVDA $GIS $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $NUE $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT $META $BWA $LEA $PSQ $SRTY $SQQQ

Weekly summary in a paragraph

Second week of upside in a row in this 2023 as last Thursday’s CPI report pleased more the bulls than it did the bears. Despite the disinflation narrative, China re-opening and more resilient than expected European market, the positive sentiment does not seems entirely justifiable.

The first Q4 earnings reports have started to come in, traditionally kicked off by the major US banks, which mostly surprised and finished higher in the Friday session as well as for the week. While the P/E multiple might have contracted as much as it will for this cycle, the fate of earnings is much more uncertain and it is therefore key to closely watch the Q4 earnings results and forecasts for any sign of weakness.

Asset classes weekly performance

This week the Dow gained +2.0% (+3.6% YTD) while the S&P500 did better with a +4.1% jump (+4.4% YTD, we are 1x short), the Nasdaq finished +4.8% higher (+6.6% YTD, we have a 3x inverse position) and the Russell 2000 gapped up +5.3% (+7.6% YTD). $Gold finished higher +2.9% (5.4% YTD, we are long) while silver was +1.8% stronger (+1.5% YTD, we are long). $Oil rebounded +8.5% (1.4% YTD). The 20-y advanced +1.5% this week (+6.8% YTD). The European stock market beat the main US stock market indices and gained +5.2% (+10.8% YTD). The Euro gave up 1.8% against the USD (1.2% YTD).

Weekly pitch

Stocks follow earnings and earnings expectations. If the earnings of a publicly listed company grow, so does its stock price. That is why the bull market which started in March 2009 and lasted 10+ years: in fact the S&P500 average earnings bottomed back then and have grown year on year. The spanner in the works of this more than decade-long favourable trend has been the sudden rise of interest rates, which has contracted the P/E multiple: that is the main reason why the major stock markets around the world entered into bear market territory in 2022. With the FED expected to soon pivot to a more dovish (or less hawkish) monetary policy, all eyes are now on earnings, especially for 2024 because the markets are forward looking: should the earnings continue to grow, a new bull market will be born; else there will be more pain ahead for investors putting their money to work on the long side.

Weekly Portfolio Update

Here are this week’s movements: we started a position in $AMZN and $ACIW, took partial profits on $PSQ (+5.1%), took profits on $BSX.US (+9.41%), reduced our hedge position in $SH (+3.3%), and initiated a sell position on $WWE and $SLG while a SL was triggered on our $SIG short position. Cash, precious metals and hedges amount to 38% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$CPE +10.61% (Oil)

$THO +10.19% (Consumer durables, recreational products)

$GPS +9.59% (Apparel of footwear retail)

$NUE +9.47% (Steel)

$CMG +8.75% (Restaurants)

Portfolio Asset Allocation

Long stock positions 54% (reduced)

Short stock position 8% (increased)

Hedges 8% (reduced)

Silver & Gold 4% (unchanged)

Cash 26% (increased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance in Euro is +2.43% (excl. dividends) vs the European market gain of +9.6% and +3.63% in USD vs the S&P500 gain of 4.4%.

…in case you missed it…

Check out last week’s newsletter to read the 5 things I got right in 2022…and the 5 I got wrong.

Invest responsibly!!!

5 things I got right in 2022..and 5 I got wrong | January 7th, 2023 Newsletter

$WSM $VWS.CO $CALM $NVDA $GIS $SRTY $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $NUE $PLUG $TELL $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT $META $BWA $LEA

Weekly summary in a paragraph

While the Santa rally did not materialise, the first trading week of 2023 did not disappoint for stock markets around the world which finished higher. In the US the 4 days of trading were choppy with the Friday session bringing it home thanks to the justification which came from falling ISM services and a less than expected rise in the average hourly earnings, both of which offset the strong jobs report.

The stock market rally continued in China, particularly for tech, as investors are bullish on rumours that the crack-down on publicly listed companies may ease. Europe outperformed the US even though its gains were offset by a sharp weakening of the Euro relative to the Dollar.

There is a growing bullish sentiment, even in the Nasdaq who some analysts believe to have found the bottom. With the Q4 earnings season due to kick off next week, investors need to remain vigilant as this will be a key quarter to watch for signs of weakness especially with regards to 2024 estimates: the markets are forward-looking!

Asset classes weekly performance

This week the Dow gained +1.45% (+1.45% YTD) just like the S&P500 (+1.45% YTD, we are 1x short), the Nasdaq finished +0.98% higher (+0.98% YTD, we have a 3x inverse position) and the Russell 2000 gapped up +2.4% (+2.4% YTD, we are 1x short). $Gold finished higher +2.4% (2.4% YTD) while silver was -0.6% lower (-0.6% YTD). $Oil fell sharply by -4.1% (-4.1% YTD). The 20-y was markedly higher with a +3.7% gain this week (+3.7% YTD). The European stock market gained +4.7% (+4.7% YTD). The Euro gave up -1.5% against the USD (-1.5% YTD).

Weekly pitch

5 things I got right in 2022:

Sold $AAPL and $GOOG close to the peak (August), plus other long-duration stocks which do not do well in a rising interest rate environment
Hedged, including raising cash
Sold short $TLT
Monitored the markets more closely than I would do in a bull market
Followed macro trends and invested accordingly, for example in oil and energy stocks in general

..and 5 I got wrong:

Did not hedge enough and early enough
Did not exploit the energy rally enough and missed the opportunity to invest in LNG stocks
Was too attached to some of my historical long positions without sufficient justification
Covered the $TLT short too early in the year
Partly missed the rally in commodities

Weekly Portfolio Update

Here are this week’s movements: we started a position in the Danish company $VWS.CO, we accumulated on our long position in $META, took profits on the $CSCO short position and initiated a sells position on $WSM. Cash, precious metals, hedges and short stock positions amount to 41% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$NEM +11.53% (Precious metals)

$FCX +11.26% (Precious metals)

$MC.PA +10.44% (Luxury)

$THO +10.24% (Consumer durables, recreational products)

$SBSW +9.38% (Precious metals)

Portfolio Asset Allocation

Long stock positions 59% (increased)

Short stock position 4% (increased)

Hedges 9% (unchanged)

Silver & Gold 4% (unchanged)

Cash 24% (reduced)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance in Euro is +0.22% (excl. dividends) vs the European market gain of +3.2% and the S&P500 gain of 1.45% (+0.27% US market beat, expressed in $).

Invest responsibly!!!

Lessons learnt from beating the stock market | December 31st, 2022 Newsletter

Weekly summary in a paragraph

The last trading week of 2022 in the US stock disappointed: despite a strong leg up in the Thursday session, the Santa rally did not materialise and all the major US market indices were mildly lower. Some late earnings report dominated the news in a week characterised by low volume due to the holiday season: $NKE surprised while $MU disappointed.

The Bank of Japan made another unexpected move by launching ‘emergency buys’ of 2 and 5-year bonds. Mild weather in Europe have helped ease the pain of a still unresolved energy infrastructure and base load crisis.

Meanwhile in China a total U-turn on Covid restrictions is allegedly causing millions of deaths with consequences on policies all over the world. Investors need to watch this development as it may impact earnings as well as commodity prices.

Asset classes weekly performance

This week the Dow lost -0.1% (-8.58% YTD) just like the S&P500 (-19.44% YTD, we are 1x short), the Nasdaq retraced -0.3% (-33.03% YTD, we have a 3x inverse position) and the Russell 2000 finished flat (-21.40% YTD, we are 1x short). $Gold finished higher +1.4% (-1.23% YTD) and silver gained +0.8% (+2.14% YTD). $Oil continued its climb with a +0.9% gain (4.24% YTD). The 20-y lost -2.6% this week (-30.04% YTD). The European stock finished -0.3% lower (-15.86% YTD). The Euro gave up -0.8% against the USD (-6.14% YTD).

Weekly pitch

The year that just ended was one the of the worst for investors long stocks and bonds – here are a few lessons learnt along the way: 1) a rising interest rate environment hurts intangible, long-duration stocks much more than companies operating in the so-called real economy; 2) dollar strength negatively impacts on precious metals and emerging markets; 3) the war economy accelerates de-globalisation and is one of the contributors to sustained high inflation; 4) hedging is a critical tool available to investors that allows them to follow a risk-based approach. Many of these themes will continue to dominate in the new year, or at least for part of it, so if investors want to beat the market in 2023 (just like we did in 2022), they need to adopt an active (as opposed to a passive, ‘buy-and-hold’) approach to investing and hedge.

Weekly Portfolio Update

Here are this week’s few movements: we initiated a long position in $CALM, took profits on our $NVDA short position (+9.5% gain) and a stop loss was triggered on $PLUG. Cash, precious metals, hedges and short stock positions amount to 44% in our portfolio (unchanged compared to last week).

Top 5 Weekly Portfolio Performers

$CPE +2.92% (Oil)

$JPM +2.15% (Banking)

$META +1.95% (Social Media)

$LEA +1.72% (Auto Parts)

$CHTR +1.55% (Communications)

Portfolio Asset Allocation

Long stock positions 56% (unchanged)

Short stock position 3% (unchanged)

Hedges 9% (unchanged)

Silver & Gold 4% (unchanged)

Cash 28% (unchanged)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -9.47% (excl. dividends) vs the European market loss of -10.43% (+0.3% European market beat, expressed in €) and the S&P500 loss of -19.33% (+3.8% US market beat, expressed in $).

Invest responsibly!!!

IS THE SANTA RALLY ONE WEEK LATE ? | December 24th, 2022 | $NVDA $GIS $SRTY $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $NUE $PLUG $TELL $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT

Weekly summary in a paragraph

Mixed results in the US stock market this week: while the Dow finished higher, the S&P500 was mildly lower whereas the Nasdaq closed markedly down and is in the red for the third straight week. Good performance for precious metals and related stocks. The jobs report indicated resilience in the US labour market and the inflation data points were either in line with expectations or mildly hotter.

The Bank of Japan shocked the world with its decision to end its long-standing money printing policy. Oil showed its strength after Russia declared that production could be cut to counteract the price cap decision by the EU. All of this while the largest ever US equities outflow was recorded.

Meanwhile in China there are reports of record 34M Covid infections in a single day as well as growing concerns for headwinds due to the virus surge. Can a belated Santa Rally in the last trading week of 2022 relieve the pain of a so far rather negative month of December?

Asset classes weekly performance

This week the Dow gained +0.9% (-9.11% YTD) while the S&P500 fell -0.2% (-19.33% YTD, we are 1x short), the Nasdaq retraced -1.9% (-33.04% YTD, we have a 3x inverse position) and the Russell 2000 finished flat (-21.96% YTD, we are 1x short). $Gold finished marginally higher +0.3% (-2.46% YTD) and silver gained +2.2% (+0.84% YTD). $Oil showed its strength with a +7.2% gain and is now back in positive territory for this year (3.03% YTD). The 20-y lost -4.6% this week (-30.04% YTD). The European stock finished +0.3% higher (-16.80% YTD). The Euro recovered +0.3% over the USD (-6.31% YTD).

Weekly pitch

This week’s market behaviour should serve as a reminder that nobody knows what happens next, even when estimates or predictions are met. Investors should follow a risk-based approach and hedge. Simply put, hedging means investing on the opposite side of your main portfolio, though for a smaller proportion, in order to limit losses if the market turns against you. While this reduces your profits when you have the wind in your back, it does offer a parachute when the opposite occurs. Many of those who are beating the market in 2022, like us (see below), have hedged and are either in the black or simply less in the red. The Santa Rally may well just be one week late but why risk and not hedge?

Weekly Portfolio Update

Here are this week’s movements: we took profits on $GILD (+35% gain) and partial profits on our short position in $SIG (+10.88%); we started short positions on $NVDA and $GIS. Stop loss was triggered on $TELL. Cash, precious metals, hedges and short stock positions amount to 44% in our portfolio (increased compared to last week).

Top 5 Weekly Portfolio Performers

$CHTR +9.50% (Communications)

$NVDA +8.24% (Semiconductors, short position)

$SQQQ +6.49% (3x inverse Nasdaq)

$SBSW +6.16% (Precious metals)

$NEM +3.71% (Precious metals)

Portfolio Asset Allocation

Long stock positions 56% (reduced)

Short stock position 3% (unchanged)

Hedges 9% (unchanged)

Silver & Gold 4% (unchanged)

Cash 28% (increased)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -9.17% (excl. dividends) vs the European market loss of -10.43% (+1.3% European market beat, expressed in €) and the S&P500 loss of -19.33% (+3.9% US market beat, expressed in $).

Invest responsibly!!!

THE POWER OF HEDGING: WHAT IT IS AND WHY YOU NEED IT | December 17th, 2022 | $KBE $CSCO $DEN $LIT $QCOM $BRK.B $SIG $TSM $NUE $HZNP $AMGN $PLUG $TELL $DIS $THO $MP $KSS $GL $WMT $TGT $GILD $AIG $ORI $USB $CNC $SH $GLD $SLV $SON $NEM $HLT $NXPI $DEN $GPS $JPM $CMG $MSFT

Weekly summary in a paragraph

Second week of decline for global stock markets as cooler inflation data published in the US was not enough to offset the impact of hawkish central banks. While the rate hikes confirmed by the FED and the ECB were in line with estimates, in the press conference Jay Powell kept pushing back against pivoting.

Meanwhile in China reports of more infections, increasing deaths as well as political speculation about propping the housing sector dominated the news cycle and resulted in further weakness.

The pressure is mounting on earnings estimates as the risk of further downside is materialising and spreading amongst analysts. Perhaps the only playable narrative for the bulls is the expected seasonal tailwind (aka the “Santa rally”).

Asset classes weekly performance

This week the Dow lost -1.7% (-8.63% YTD) while the S&P500 fell -2.1% (-19.17% YTD, we are 1x short), the Nasdaq retraced -2.8% (-30.90% YTD, we have a 3x inverse position) and the Russell 2000 gave up -2.4% (-21.03% YTD, we are 1x short). $Gold finished marginally lower -0.2% (-3.28% YTD) and silver lost -0.8% (-1.26% YTD). $Oil showed its strength with a +4.0% gain and is now back in positive territory for this year (+1.20% YTD). The 20-y gained +0.8% this week (-26.90% YTD). The European stock finished -2.3% lower (-16.16% YTD). The Euro recovered +0.6% over the USD (-5.73% YTD).

Weekly pitch

Weekly Portfolio Update

Here are this week’s movements: we benefitted from $HZNP being bought out by $AMGN (+14% average gain); we started a short position on $CSCO as well as long positions on $LIT, $KBE, $QCOM and $BRK.B; we sold our short position on $TSM, perhaps prematurely. Cash, precious metals, hedges and short stock positions amount to 40% in our portfolio (reduced compared to last week).

Top 5 Weekly Portfolio Performers

$HZNP +16.02% (Pharma)

$TELL +13.08% (Oil)

$SQQQ +8.07% (3x inverse Nasdaq)

$DEN +6.70% (Oil)

$PLUG +4.94% (Alternative Energy-Fuel Cell)

Portfolio Asset Allocation

– Long stock positions 60% (increased)

– Short stock position 3% (increased)

– Hedges 7%, though equal to 9% considering leveraged ETFs (reduced)

– Silver & Gold 4% (unchanged)

– Cash 26% (reduced)

YTD Portfolio Performance

Our currency-adjusted YTD portfolio performance is -8.97% (excl. dividends) vs the European market loss of -10.43% (+1.5% European market beat, expressed in €) and the S&P500 loss of -19.2% (+4.5% US market beat, expressed in $).

Invest responsibly!!!

Responsible Investor Portfolio Update, August 29th, 2020 | $TCEHY $NEM $BK $SYF $CLIX $GRUB $PCG $LVMUY $LRLCY $PEUGF $ELC.MI $WBD.MI

Just when one might have started thinking that the FED was running out of ideas to sustain the growth in the stock market, Jay Powell announced an unprecedented change to the inflation policy from 2% as a goal to 2% on average as the target. Not that inflation has gone up during years of balance sheet expansion, including in the EU, but it does provide more room should it pick up and pass the 2% mark. That news depreciated the dollar even further relative to the euro.

In more recent news, Japan was hit by the sad news of their long-standing Prime Minister Shinzo Abe announcing to step down due to illness after 8 years of service and one year before the natural end of his term. This exerted pressure on the Japanese stock market as it can be seen from the drop the $EWJ ETF had on Thursday. It will be interesting to see whether his successor will continue to embrace the so-called “Abenomics” and maintain the stability Abe achieved by ending a streak of several predecessors who only lasted 1 year on average as PMs of Japan.

The US stock markets have had an impressive week with the three main indices all closing 2%+ higher. Europe had a good week as the Stoxx index moved 1.1% higher but the national stock markets performance varied: for example Italy was up 0.7% while Denmark was down 0.3%.

No changes to our portfolio this week. Our best performer was $SYF which gapped 7.8% higher, followed by one of our two banks stocks, $BK, which grew by 5.1%. $GRUB fell 4.4%, however that’s not concerning given how much it has run over the past weeks.

On my watchlist there are stocks like $WDAY, $QCOM and inverse ETFs such as $SQQQ.

The table below summarises the portfolio performance since inception.

2000828 RIP

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