Hello all, So it has been a reasonable length of time since I made a post. Last year wasn’t great on many fronts and like many traders I look back at how I could have handled 2022 in a better way. Y2022 was really a great example of how timing the market with any degree of accuracy is so difficult. Q3 and Q4 of 2021 ended with a weak market, and 2022 didn’t begin so well (so by end of Jan / early Feb 2022 it was beginning to feel like there was chance of a small rebound for Q2).
The clouds of the upcoming Ukraine war were closing in but it was far from clear that a full on escalation of hostilities was going to happen. In hindsight taking profits off the table in Feb/Mar would have been smart. The conflict in Ukraine simply serving as the catalyst for an ensuing house of cards style collapse. Once hostilities had kicked off the decision was then to hold in the expectation that things would be brought to a swift end or adopt a short selling position with a longer term view.
Again timing here was key. Even diversification was not a silver bullet with commodities whipsawing up and down, bonds falling, and a catastrophic collapse in the Chinese equity market, together with the FTX debacle resulting in bitcoin falling into the abyss. After managing a reasonably sized portfolio on my own for the past decade one thing I have learned is that when it comes to market timing nobody knows anything with any degree of certainty and everyone can find one indicator or another to backup their own point of view. When the market is bearish we all see quotes from Jeremy Grantham & Michael Burry plastered all over social media and when things are going well it’s another voice.
There are many decisions in hindsight that I wish I would have taken in Y2022 to mitigate the eventual year end drop, however I would be kidding myself to believe that I could have turned a profit as a buy and hold tech heavy investor during a steep bear market decline like that.
I am pleased to see that Y2023 has begun in better stead but again I am certainly not patting myself on the back here and there remains a lot of risk factors ahead. Recession or no recession this year my objective is to hold and adjust positions as needed in around 20 – 25 selected companies, balanced between more aggressive growth stocks (many of which have been crushed in 18mths) and value stocks / financial services players to act as a stabilising baseline / inflation hedge. In 2022 chipmakers $NVDA (NVIDIA Corporation) $AMD (Advanced Micro Devices Inc) and others were smashed but in the last few weeks these positions have begun a reversal.
Despite its expensive valuation Nvidia has the potential to explode as we saw in Jan, and back in 2021 when Bitcoin soared. $NET (Cloudflare) and $CRWD (Crowdstrike Holdings) are both exciting tech plays. I have recently spent time working closely with the latest suite of Cloudflare products and they have a unique market proposition in the content delivery space at a time when scams, bots and malware attacks are rising at record levels. As a business Cloudflare takes a longer term customer acquisition strategy and gives away a lot of technology to its customers upfront. In time this will pay off for them and I am very bullish about NET stock for the future.
Another 2 tech companies I am closing following are Salesforce $CRM (Salesforce Inc) which again had its valuation destroyed during COVID and $META (Meta Platforms Inc) which gambled a lot of resources on the metaverse and is facing declining growth in the face of rising competition. Let’s first take Salesforce. Just before the share price collapsed CRM made a huge acquisition of slack (a bet on the future with significant balance sheet impact). Its sales and distribution model, which relies heavily on face to face engagements, and partners was badly hurt by COVID lockdowns. In fact I was personally involved with one platinum SF partner that collapsed during the lockdown as the sales team was unable to effectively operate in the field and budgets were hauled in by big firms. However, SF remains the market leading SaaS based CRM and this technology is not going away. There are simply no competitors that have a comparable product for enterprise. SF will bounce back and we saw media reports just this week of new investors coming in. Perhaps it will be a while before this one rebounds to where it was but I have confidence in CRM.
Meta is a slightly different story from my perspective. Of all the social media plays Meta takes a lot of stick. Zuckerburg isn’t such a popular figure and there is a waning public trust around Meta / Facebook as a platform. User growth is slowing and competition is rising for sure, however Meta has some big upsides. It remains the #2 ad platform internationally and has huge revenues. It owns instagram and whatsapp. It has a lot of cash in the bank. It’s P/E ratio is one of the best in the software development / tech sector. Personally I am fairly bullish on the mid to longterm growth of Meta stock given the recent hammering in the price.
I think that’s about all for now. Happy trading.