According to the CFA Institute, only 10% of investors use AI tools to find a nonlinear relationship inside of asset classes.
The rest rely on traditional ratios, which they defend until they get hurt by the abrupt Rotation, like the one we experienced this week
See how Value outperformed Momentum styles by 79%
In simpler terms: Energy Stocks +16% while Technology is down 1% this week.
What we know for sure about stocks that are beneficiaries of Covid:
1. their fundamentals would face really tough comparisons in Q2 2021
2. their sales might even decline (ppl don’t need another $3K Peloton bike) – demand pull forward
3. their valuations are insane – top multiples on topping fundamentals
4. they are owned by “weak hands” – the RobinHood crowd
Other than that, you have nothing to worry about!
If you are an investor at Zoom or Peloton at 35-100x Sales – pls sleep well
This Pfizer 90% effective vaccine is a HUGE deal for style/Sector rotation…
That would psychologically help to funnel some money back into the Covid-recovery stocks away from Covid-beneficiary stocks
People are rushing to sell ZOOM, Peloton and Waifair.
Peloton and Zoom are down 15-21% this morning …
Yes, we root for the restoration of some normalcy in this world.
Do we have reasons to cheer for this equity rally when 3-4 out 10 Sectors are completely decimated by covid?
1. Real estate (commercial) – devastated
2. Energy – effectively bankrupt
3. Financial Sector – banks and Insurers with real estate on its knees and low rates will not recover
4. Industries – like Airlines, Education (colleges, schools) and Retail comprising parts of Industrials and Discretionary are tapped out, gasping for oxygen…
Beyond that, we have nothing to worry about – ZOOM & Peloton grew revenue +300% in 2020…
Two issues with big Technology stocks going into early 2021:
1. Valuations (i.e. expectations) are much higher as they have seriously outperformed
2. Fundamentals – Technology stocks would be anniversarying very tough revenue comparisons
Beyond that, we have nothing to fear about when “investing in” ZOOM at 105x Revenue.
Should I assume that to achieve a 5% return in Equities in 2021, the Fed should put to work and additional $9TR (their ability to add digital zeros to numbers is infinite)?
Unless the economy improves…
We believe – yes! because: Continue reading “Can Fundamental Investors Benefit from Using Cross Asset Money Flows?”
Why the shape of a Yield Curve is a solid predictor of a recession (or a recovery)? I actually never heard a coherent explanation of why a flat or inverted Yield Curves signal recession so well. Typically 99% of answers to that question would center around what a Central Bank of a country would do and what investors think about its possible moves. It has some validity but the argument is incomplete. Continue reading “Why Yield Curve Shines at Seeing the Future and Central Banks Don’t”
In general, Gold and Yields for 10YUS Bonds are not very correlated. For the last 2 years, these two seemingly related assets correlated only half of the time. But currently, our Tools think that a Sell off in Gold is a leading signal for higher interest rates. Continue reading “Is Gold acting as a Leading Indicator for Rates?”
