I am not doing much these days with the exception of buying childcare names with dividends that hit my account but it is very small scale and not particularly significant.
I have a couple of stocks that I am keeping my eyes on and am waiting to purchase on weakness. I’ll update the blog once I deem the opportunities juicy enough but for now I am staying patient.
The portfolio is chugging along nicely, at roughly 5.6% YTD which is a good performance all things considered. Glashouse Brands, Kaspi, Petrobras, Alto Ingredients and EML Payments were the biggest contributors. Atento and coal names were the biggest detractors. I haven’t lost more than 150 bps on a single position this year, which is a wild improvement over last years 500+ bps loss on Atento…
On performance: Yes, I know that the market’s performance is roughly double that of my portfolio YTD, but I am no stressed by this cause breadth is super narrow, indicating that this is rather a fluke than a grave misstep on my end with regards to positioning:
The entire market is just lifted up by the tech megacaps. Of those I own precisely none, because they are either outrageously expensive (TSLA, NVDA, AAPL) or heralded as AI-winners, …. which I am not really sure they are. I expect that this size factor bet will reverse eventually and my portfolio will catch up.
Excluding big tech, the market is flat:
Since inception of the FCM portfolio in January 2022 it remains well ahead of markets (+6% vs SPX, +11% vs NASDAQ, +52% of crazy Cathie’s ARKK) despite the recent rally in tech and junk. Acknowledging that none of the big bets (oil/commodities, Uranium, US Cannabis) has played out so far, and I have committed a few major blunders (Atento anyone?) this strikes me as satisfactory.
Coming back to the topic of AI: My understanding of AI and related tech is very limited, but it seems to me that it would probably make the world “flatter”. I imagine AI makes startups more likely to somehow disrupt “big tech”, rather than that it cements “big tech”’s leadership position. It appears to me that the emergence of AI reduces the predictability of pretty much everything, including the very richly-priced future cashflows of big tech… Now, if they were “cheap” this wouldn’t matter so much, but with their mid 20s multiples they are anything but…
I also think that the market has already gotten way ahead of itself with its enthusiasm for AI. Look at the FT headline below, it basically tells you all you need to know:
A pre-product, pre-team startup (first employees started working “only days ago”) valued at quarter of a billion USD? Oh please… Reminds me eerily of the crypto hype a few years ago which thus far … hasn’t … amounted … to … anything … uSeFuL?
VCs once again deserve what’s coming for them.
Finally a word on options. The word is “Don’t”. Over the past year, I’ve held puts on TSLA, NVDA, GPI, and AAPL, as well as calls on SLV, BABA, APPS, and KWEB. On some of these, I was wildly in the money at some point (650% profit on KWEB for instance), however, in the end I’ve lost money on almost all of them because I held them to maturity and gave back all paper gains, or on others I never even got to the point of having paper gains. This quote perfectly sums up my experience so far:
Needless to say, my appetite for further options trades is minimal. I am not ruling it out per se, but based on my experience so far, the perceived convexity would need to be enormous for me to engage again… The only “option” that has gone well so far this year has been related to a lawsuit. Maybe I should specialize on buying claims? Long Burford maybe? :-) (No position, but tempted if it goes down enough…)