The WeWork Die PO

I’m 100% not sure this is the cause of the most recent sell of, but it sounds like a possible culprit in my mind.

Sure the initial sell-off was from sector rotation, profit taking, the wind blowing the wrong direction, or who knows.

But the last few days seem to be sparked by fear of all “High-growth SaaS/Tech stocks thanks to the disaster that is known as WeWork.

I think everyone on this board probably threw up if we read their S-1 and how ridiculous it was, but it feels like the investing world has dumped all of our wonderful stocks that don’t have any of that nonsense going on into a trash pile with WeWork and lit them on fire.

So what does this mean?

Really…nothing. For me, this isn’t a time to do anything other than continue buying great companies with my monthly contributions. I may sell some losers that are my less confident positions for the tax benefits and reinvest into my favorite companies, but I’m certainly not going to cash. Not with 30+ years of time ahead of me.

Remember. Many of our companies are still up hundreds of percent over the last couple years and in my opinion they deserve to be. So the key is, stay invested in our best ideas for the long term.

20%-40% sell-offs are rather normal in companies that give you generational type returns.

Look at The history of Facebook, Amazon, Google, Netflix, Salesforce, etc.

Every single one of them has 40%, 50%, or even 80% pull backs on their way to life changing returns.


“But the last few days seem to be sparked by fear of all “High-growth SaaS/Tech stocks thanks to the disaster that is known as WeWork.”

I think you are on to something but I think it started with Slacks IPO and all the buzz prior to it’s first trade date. Maybe the possible failure of WeWorks IPO is a sign that we can now settle down and we are closer to the end of this sell off.

I privately emailed Saul back in I think June about my concern of so many cloud IPOs rushing to market as it seemed to me that this was the greed of Wall Street jumping in on a red hot sector.
When that many, I think there were 100 scheduled, you have more investing dollars spreading out, more slices of the pie publicly traded at sky high multiples something has to give.

Last December during the sell off most of these stocks were still under owned by Wall Street and individual investors. They caught fire again when the market rebounded and more and more investors jumped in pushing the prices higher and higher. Now that so many are in, now that there are more hot names that are public and came public at very high valuations, I think the sell off is different.

Well obviously it is as these names are no longer leading the market.

I’m not trying to make a case for doom and gloom. I just think one has to be patient here and not expect that just like last January, a month or two from now all these names are going to be back up to all time highs.

Stay the course and pick you spots to add is the only way to play this IMO.


MS Prime Brokerage sayeth:

'Was That It?

Summary: While factors exhibited a lot of volatility 2 weeks ago, notably the Momentum sell-off, flows since then suggest that many view the risk of a further rotation as fairly limited. For example, L/S funds bought momentum in significant amounts last week, shorts are working again (and funds have been adding back here), and Growth vs Value positioning has barely budged. This begs the question: was that it?

In our view, the lack of continued reaction reflects the fact that the recent rotation was likely less painful than some others have been in the past…but it also potentially suggests there could be more to go. As we highlighted in our note two weeks ago, similar events in the past have usually taken more time to heal. In particular, the lack of rebound among the crowded longs suggests that risk appetites haven’t really returned yet and while momentum is working once again, the Momentum longs continue to be lackluster (all the performance is coming from the Momentum shorts selling off again). To be clear, the shorts working does help offset lackluster performance on the long side. However, if the market were to pull back and longs were to lag at the same time, performance would likely take a hit and an effort to preserve YTD gains could drive further de-risking.

On a related note, looking ahead to 4Q seasonality, we often see net lev rise and gross lev fall towards year-end. Given net is currently low and gross is still elevated over the longer term (despite falling over the past two weeks), there’s plenty of room for this to take place. Taking these points in aggregate, it seems premature to have confidence that de-risking is largely behind us. The biggest moves might be, but volatility could remain as performance protection remains a focus. ’


Extract of what “MS Prime Brokerage sayeth:”

flows since then suggest
it also potentially suggests
there could be more to go
have usually taken more time to heal
suggests that risk appetites
if the market were to pull back
if longs were to lag at the same time
would likely take a hit
could drive further de-risking.

The above is proof that they have no clue about what will actually happen.

Denny Schlesinger