Prior year results
*Note that I pretty much finished 2021 at ATH, as I started pivoting to cash after a great Nov 2021. Which means my 2022 progress is also about how far off my ATH I am.
2022 (below are where port is YTD, and not the performance of the month by itself)
Mar +.09% (ok, call it 1%!)
April Summary: It sucked. End of March was pretty much a recent high for most stocks, and April just did not have much in the way of meaningful sustained bounces or rallies.
Obviously I was sitting pretty at end of March, so what the hell went wrong?
Simply got back in too early. I didn’t trust in my gut that the lows would be re-tested.
That may be partially unfair, as I also had “fantasy/low” targets for most stocks I like, and I did not foresee GLBE and UPST both dive-bombing below those levels. At least not without a relief bounce here and there.
I do like PTLO, but if I could sum up my concern on any stock right now, it is simply this:
“I DON’T KNOW WHAT THE MARKET WANTS TO VALUE THINGS AT RIGHT NOW!”
Think about that for a second. Recency bias or looking at % off highs are easy ways for us to get fooled into thinking our stocks are now at “bargain” levels. But what if market takes them even lower? Just impossible to time a bottom. If you get one, it is like a hole in one in golf in that you were trying to time the bottom, but it was just really luck that it happened and odds are you will rarely if ever nail it.
- going into 2022, I discounted impact of Russia war with Ukraine. I think it is largely a nothing-burger to my stocks directly, but indirectly it is pouring gas on the fire that is/was inflation run amok. Trump was a liar, but so is Biden admin when claiming the inflation/gdp/Fed issues are all due to Putin’s war. What a cop-out. We went overboard due to the friggin pandemic, and Fed fell on their face. Covid hurt supply chains. Ukraine war makes it all just that much worse.
- Related to the above, I expected a Dec 2018 type of reckoning for valuations. But I did not anticipate a recession. Not saying we will have one, but the bad news is piling up now.
- Some stocks have corrected less, proportionally, than others. Meaning I understand DDOG should have a higher multiple - I am saying it is still too high though. Covid birthed tons of retail investors who probably don’t even remember that in 2018, a 20 P/S was kind of a big deal. Then I remember ZS was at 30…wtf! Then in 2020-2021, we started handing out P/S of 40/50/60+ like halloween candy. TTD was especially frustrating for me, because they simply didn’t deserve their late 2020 run-up. They are still floundering as a result of that. TSLA should never have run up. GME and the meme stocks. SPACs. C’mon people. We were all just drunk or high? So % off a 52-wk high is misleading if the stock grew irrationally in the two years prior.
- In Summary, I see more air to be let out of certain bubbles.
- Question is, will that happen individually after ERs, like we saw with FB and AMZN recently, or are we stuck in an everything-is-up-today or everything-is-down-today market for the foreseeable future? I hope the former.
GLBE - this global environment, thanks to Ukraine/inflation, is not good. They forecasted great growth. Will they walk that back? Their next ER is so crucial to the short-term of this stock. Long-term, if they stay partnered with a healthy Shopify and we move past today’s economic challenges, they should grow for years. Question is, how low do they go first? $26 was shocking. $22 is humbling. Is $18 that much different at this point? Dunno. I am hesitant to add more until ER, even if that means losing out on a lower cost-basis.
UPST - more or less the same, just instead of ecommerce, what does economy do to personal loan requests, car loans volumes, etc…? I have no idea.
PTLO - If they keep future store openings as consistent as their current restaurants, they will flourish. Question still becomes, what valuation does market want to give a supply-constrained, worker-constrained, inflation-impacted, restaurant business that will PURPOSELY show lower earnings as they reinvest in 10% new locations every year for many years? Their per-unit restaurant comps are awesome, and as a lifelong fan, this is a Peter Lynch type move for me where I invest in what I know.
What am I watching?
DDOG, NET, and all the “saul” stocks are of interest, at lower prices.
DIS, GOOG, and even SPG (again) and others are becoming appealing due to fact I believe they are going nowhere in the US or global landscape.
Plenty of stocks feel like trading block material, like ROKU or FB and others recently. I just don’t know if this is yet the environment to play bounces, if we still haven’t reached our lows.
Are we close to a bottom?
No idea. But I think maybe for certain stocks. The megacaps could implode further which crushes the indexes due to their weighting, but if all stocks stop moving in unison and get decoupled and judged on their own merits, then we could be near bottoms for certain stocks and not others. Again, no idea for sure. The Macro gurus I follow are mixed from near a bottom to there could be more sideways chop before a final leg down to this will be a generational bear and buying opp when the carnage is over and it has a long way to go. No consensus.
More brain vomiting:
This is probably too complicated and not very concise, and it is early on Saturday, so why the heck am I even writing. Oh yeah - rainy/crappy outside.
If 2000-2003 in the analog for today, one of the things I see off with that are in strength of cloud and the megacaps.
My view in 1999-2000 was more limited to tech and biotech (Celera was going to rule the world, yeah! Enron. Cisco, Juniper, and every network company or fiber company was on fire. Excite.com baby, Gorilla game S-curve investing run amok (shades of Saul’s board today).
For parallels, I would say:
2000 had the dot-com trash and no-rev/no-profit trash for sure. I also remember random biotech IPOs popping constantly.
2021 had SPAC-mania and 2020 had covid-fueled valuation nonsense in everything from PINS & PTON & ZM to ad-tech to Crypto to meme stocks, etc.
Another parallel would be, imo, that late 90s saw ameritrade/etrade and in general a surge in online brokerages giving retail easier access to “gamble” on the market. 2020-2021 era saw almost a reboot of this with no-fee trends, robinhood, and stimmy checks for everyone a couple times over, and there was even a hint that lack of sports in 2020 drove many to “gamble” in the market.
When you train everyone that things always go up, they keep expecting it to do so, valuation be-damned. So that is the parallels I see.
What is different?
I didn’t research this post, but from memory, Cisco, Juniper and the mighty broadband/fiber/network segment did see growth slow down. I think it was that perhaps we overbuilt the broadband rollout early on? Can’t remember all the details anymore, but point is that companies weren’t crushing it, outside of perhaps AMZN (which was all pre-AWS and much smaller of a story back then). AOL was a monster and “bought” TW and then all of a sudden AOL wasn’t growing. Remember Yahoo? Microsoft was a monster, and I am unsure of their growth in 2000-2003, but they have continually reinvented themselves a bit, and I believe they moved from O/S focus to controlling the browser game and perhaps there was a lull in growth.
Contrasted with today, and I see no slowdown in these trends:
Cloud computing - AWS, Azure, GCP all reporting huge growth at mammoth scale. The Datadogs and Snowflakes and MongoDBs of the world that rely mainly on cloud growth all continue to have great numbers.
SaaS/Enterprise SW - see cloud. Examples are ServiceNow, Salesforce, Atlassian, Okta, Twilio, that continue to have growth on larger and larger numbers.
Biotech - not really my game anymore, but Moderna has shown that mammoth upside exists, but this space has always seemed littered with a few titans and thousands of moonshots. Gene editing is only getting started.
NVIDIA and the rise of ML/DL/AI - ties into both big-data/datacenter and eventually autonomous driving and then the “metaverse”. That is one investment I got out of waaaaaaay too early.
Edge/IoT - have barely scratched the surface on an oppty many consider to be larger than “cloud” has been.
Ad-tech/Streaming - I envisioned something like TTD long before TTD existed, simply because I hated non-relevant commercials so much. Netflix may seem saturated at moment, but think of them as an NBC in the 1980s on cable/standard television. Netflix isn’t the end-all for streaming, it is just the trend-setter. HBO/Discovery, Disney, Netflix, Paramount, Peacock - I believe we will eventually get back to a cable-like bundle structure. So what was the point in moving away from cable? To me, it was never about the content being digital…it was about the ads being digital, and being programmatic and trackable. Everything will go this route eventually. Shopify partnered with Roku, for example…so that the small businesses could have a local ad venue. And yes, we can joke about the metaverse, but as the virtual/augmented reality worlds grow, fueled again by the driver (advertising) that brought you megacaps like FB and GOOG, some of the most powerful players will be those with the strongest brand (looking at you, Disney and Apple, etc).
Autonmous cars - see NVIDIA and see Ad-tech. More than just transportation-as-a-service as the real by-product is advertising and branding once again. Will you prefer an apple-connected vehicle, android, and are the windows also serving as augmented reality screens. I predict “silent” cars will become a thing, like the silent cars on passenger trains, as we ironically pay more to escape the constant bombardment of information. Blade-runner world is coming.
I could say more, but if the 2000 titans were GE, MSFT, CSCO, and others, I think the 2022 versions of AAPL, AMZN, GOOG, BRK.A, are all doing well. Plus the banks, which aren’t an area of expertise for me at all, are supposedly stress-tested and in better shape than what led to the 2008-2009 catastrophe. So I feel tech is stronger now (in terms of ST, IT, LT growth prospects) than in 2000-2003, financial sector seems sturdy. Manufacturing is improving by (wait for it) deploying technology (drones, IoT, Edge, smart sensors, data analysis, automation, etc etc).
And I didn’t even get into nascent industries like Space which will some day be bigger than everything else. EV space (thanks to leader Tesla) is very very real. Just ask Ford about their plans.
So I do believe valuations are still out of whack, but I don’t think a collapse is imminent due to a lack of growth.
That said, we could get our butts kicked for a year easily. Many stocks do need their valuations right-sized, and the longer the carnage (or even sideways whipsaw choppy chop) continues, the more retail will “give up” and btfd will stop working, and that will also help normalize valuations.
“But Dreamer, DDOG metrics are awesome!” Yeah, well…so was TWLO once, and OKTA, and ZM, and dozens of others that have fallen back to Earth. And they are still good companies and likely growing and around for many years to come. But all that tells me is that S-curve investing is just a game of hoping another sucker is around that is willing to buy the expensive stock you just sold. Because once growth “falls” to a “paltry” 30-40%, their valuation will plummet. So they were never actually worth their previous multiple. It is just a game. And if you are good at that game, then keep playing. Just make sure you know what you are doing and be intellectually honest with yourself so that you can be unemotional about entries and exits.