๐ฅWeekly Portfolio Report 17.05.21๐ฅ
Bear Market Game Plan, Market Updates of The Week and More!
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๐ฎWeekly Portfolio Performance Reportย
๐ป Bear Market Game Plan ๐ป
As the whole world finally wakes up to the fact that stocks don't keep going up forever and inflation risk started to get more real than ever, the significant correction that I have always anticipated is finally here. Short term traders are the ones who are hurt the most from the recent sell-offs.
โOnly when the tide goes out do you discover whoโs been swimming naked.โ - Warren Buffett
Ever since the market rebound to an all-time high late last year, I always tell my copiers to only invest 30-40% of their investible money in companies that are reasonably priced or copy my portfolio, never invest all your money in a market that is so obviously in a bubble. I.e. only deploy the rest of your cash when the market is genuinely reasonably valued or undervalued. Without a doubt, that is exactly what I have done myself.
โ ๐ข๐๐ฟ ๐ฐ๐ผ๐ป๐๐ฒ๐ฟ๐๐ฎ๐๐ถ๐๐ฒ ๐๐๐ฟ๐ฎ๐๐ฒ๐ด๐ ๐ถ๐ ๐๐ผ๐ฟ๐ธ๐ถ๐ป๐ด:
I have made every decision in my long-term investments in the portfolio based on robust fundamental analysis, which explains why I haven't added any individual stocks to my long-term investment portfolio for the past few months except $BABA (Alibaba) because I could hardly find any other stocks that are worth investing in in the long term.
As of today:
โก๏ธ 96.9% of my portfolio are occupied by long term stock positions, all of which were carefully opened at the right price many months ago - which explains why their profits are all preserved in green percentages even after recent sell-offs (except Alibaba due to recent Asian stock slumps)
โก๏ธ 3.1% of my portfolio are occupied by short term, speculative trades, which are the ones that are most seriously hit by the recent selloffs (Spotify, Skyworks and Bitcoin). This shows you how risky it is to try to time the market and trade on speculations. It bugs me how many traders allocate 100% of their portfolio to speculative trades like these all day long.
โ Stocks on my shopping list:
Stocks that I would be eyeing in the near term would preferably be non-tech value stocks like $PG (Procter & Gamble Co) or $JNJ (Johnson & Johnson) in order to diversify my portfolio.
This week I have opened a big position in $VOOV (Vanguard S&P500 Value ETF) in order to diversify my portfolio further to weather the recent and upcoming tech sell-offs. Right now, $VOOV is the second-largest holding in my portfolio. If we do see more market pullback in the upcoming weeks, I will keep adding positions into $VOOV as it goes down.
However, if any of the tech stocks that I now own do fall to their intrinsic value, I would then add more positions.
โ ๐ช๐ต๐ฎ๐ ๐๐ต๐ผ๐๐น๐ฑ ๐๐ผ๐ ๐ฑ๐ผ?
You can choose to do nothing and come back a month later. This will work out much better for most people so that you won't make irrational decisions, such as closing the copy position at a slight loss knowing that the market does always recover soon after you sell.
If you manage to only buy stocks during times like these and hold all your positions during the market rally, for the next ten years, not only would you indeed be compounding your wealth, rest assured you can sleep well at night all year round without worrying about the next bear market.
Would you like to own this exact same portfolio?
If you want to get the most out of this,ย and if you havenโt already, consider joining over 6700 investors to kick-start your investment journey today by following orย copying my portfolio on eToro. (read more aboutย copy-trading)
If you are not ready,ย which is absolutely fantastic because that means you are hungry for more knowledge about the stock market before making the leap, and I am here to help.ย
๐ย What did you miss last week?
Stocks extended loss for another week.
After staging a strong rebound following their steepest three-day declines in nearly seven months, the S&P 500 and Dow each lost at least 1.1%, while the tech-heavy Nasdaq lost 2.3% for the week. The latter logged its fourth consecutive week of selloffs, the longest decline since August 2019.
Last weekโs stocks selloffs were largely driven by a higher-than-expected consumer price index (CPI) hike of 4.2% in April from a year before. According to the Labor Department, it is the greatest surge in any 12-month period since 2008. The index tracks changes in the prices of consumer goods and services by households, such as clothes, restaurant meals and vehicles.
Economists had expected a less pronounced increase in CPI. The sharp surge in CPI means there is way too much demand from consumers as Covid-19 restrictions ease while supply reaches bottleneck, all of which drove the prices up on everything. Because of that, investors are concerned that rising prices could lead the Fed to raise its target for short-term interest rates sooner than expected.
โThe Biden Administration is providing the biggest positive stimulus to demand since WWII, and at the same time doing everything it can to suppress supply. Higher [unemployment insurance] benefits, closed schools (which keep one parent at home), and promised corporate tax hikes practically guarantee that supply can not keep up with demand. It is a recipe for an inflation shock we have not seen in the U.S. in a generation.โ - Kevin Hassett, formerly served as chairman of the White House Council of Economic Advisers
As a result, technology and similar growth stocks which trade at premium stock prices based on promises of strong profit growth far in the future are the ones that are most threatened by increasing inflationary environment as rising prices and higher rates can eat into the value of future earnings. In such an environment, there is no point paying a premium valuation for high growth tech stocks; on the other hand, โcheaperโ value stocks such as telecommunications or cable TV, which tend to offer more immediate rewards and therefore less affected by inflation would turn out to be more attractive.
The streaming rally loses steam.
While Netflix added fewer than 4m subscribers globally as reported in Q1 this year, when only 450,000 of them signed up in the US and Canada, both of which represent its biggest market; Disney+ added 9m subscribers; ViacomCBS added 6m, and HBOโs Max streaming service signed up around 3m US subscribers. As more and more streaming services seem to pop up every now and then, there are now more than 100 streaming services available (according to data company Ampere)
Today we see an excess of video streaming subscriptions than there are people in America (according to data company Ampere). There are currently 340m subscribers to a population of around 330m in the US. This raises a controversial question of how many streaming services US households will keep paying for.
Unlike the consumer electronics sector, which often benefits from having a bigger โmoatโ by trapping users in its own ecosystem of software and hardware, as Apple does with all its devices; streaming service, on the other hand, can be cancelled as easily as a few taps of a keyboard, which make one wonder how sustainable is it to expect growth in the sector long into the future from this point onwards.
After Netflix reportedly missed its subscriber forecast in Q1 2021, Disney also missed its forecasts by 5m, sending its shares lower in after-hours trading last Thursday. Disney had declined 6.03% by the end of last week.
Alibaba missed on earnings but beat on revenue.ย
Last Thursday, Alibaba had reported mixed earnings results for its Q4 FY 2021, which ended on March 31st. The company had missed analystsโ predictions in Earnings Per Share (EPS), which sharply lowered the stock, although its EPS was up 12% year-over-year.
However, the e-commerce giant posted a strong, expectation-beating revenue of about RMB187.4b, vs RMB179.9b as predicted by analysts, which turns out to be a year-over-year growth of about 64%.
Another key metric that surpassed consensus estimates was its annual active consumers in China, which posted to be 811 million, beating analysts' predictions by about 20 million. That is an 11.7% year over year growth, the strongest quarterly performance in more than a year. The strong growth in its number of active consumers is particularly crucial. It proves that the company has retained and attracts more consumer supports, which would eventually lead to more advertising revenue.
Revenue for its cloud computing sector, which turned positive for the first time last year, had grown only 37% year over year. This is considerably slower than the 58% growth it posted for the same quarter last year, mainly due to the exit of a top customer outside of China. Although it remained unnamed during the earnings reporting, two sources familiar with the matter later identified the company as ByteDance, the owner of TikTok. Alibaba Cloud now represents 9% of Alibabaโs revenue, which used to be 11% last year.
All things considered, the Chinese e-commerce giant remains a strong company as a whole even after the $2.8 billion anti-monopoly fine that the Chinese regulator imposed. The company reported that it expects to generate revenue of 930b yuan in its 2022 fiscal year, which is around 29.65% YOY growth.
๐ฆย Tweets to start the week
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Best, HaoNing