rob zdravevski's blog

Stock-picking over Indexing

I am (and have been) positioning portfolios for rising inflation.

Because of this view, I think certain sectors will perform better than others (see sector rotation) and as a function of my business, my focus is picking the better companies to be invested in.

This is dominated by placing an emphasis on the ‘risk’ part of an attractive risk/reward opportunity.

In other words, try to take the least possible risk while seeking an adequate return and picking the stocks with tailwinds should take care of the rest.

In turn, due to many reasons (including a large overweight to technology), I think broad-based index tracking ETF’s (and the indices themselves) will be poor performers in the coming years.

It’ll be evident which money managers are index huggers.

I’m not being dangerous nor a maverick but I can’t help observe that in the asset management industry, all that a fund manager needs to do is, make sure their performance is similar and close to the rest of the sheep.

It’s safer staying with the flock…..you get to keep your job, retain assets and keep the gravy train chugging along.

I dare to say, that diversification certainly helps you achieve one common thing…….it’s that you are able to lose less money than others.

July 29, 2021

by Rob Zdravevski

rob@karriasset.com.au

HSCEI – most oversold in 5 years

“Keep your head while others are losing theirs”, in paraphrasing a Rudyard Kipling quote I am paying to attention to investing opportunities in selected listed Chinese companies.

When everyone is ‘hating’ on something vehemently, it’s OK to explore the antithesis.

The Hang Seng China Enterprises Index (HSCEI) closed on Tuesday July 28, 2021 at 8,880 and has fallen 27% from a recent high seen 5 months ago, to now being at its most Oversold Weekly reading since February 2016.

While there will be some finesse to determining an entry point and downward momentum shouldn’t be dismissed, it’s always worthy of scouring for mis-pricing’s when an index falls 12% within 3 trading days.

Incidentally, the SSE (Shanghai) Composite has ‘only’ declined 5.5% over the same time.

I’ll look for the HSCEI to test the 8,550 level which is 3.7% lower than yesterday’s close, it should hold 8,300 but current levels are interesting enough.

3 weeks ago, I wrote this note.

July 28, 2021

by Rob Zdravevski

rob@robzdravevski

Portuguese 10 Year Government Bonds

Are they such high quality that they deserve a yield of 0.21%?

Perhaps 0.62% is more appropriate?

Shorting here is worth doing some work?

July 26, 2021

by Rob Zdravevski

rob@karriasset.com.au

Let’s move to Calgary?

you’d get a bargain,
let’s move to Calgary?
If we can ‘work from anywhere’….
Why not?
1.5 million people,
A good ‘COVID’ profile,
Bannf is nearby,
The sunniest city in Canada 🇨🇦,
An international airport ✈️: 3 hours to LA, 4 hours to Dallas and 9 hours to London.

https://www.bnnbloomberg.ca/calgary-s-downtown-office-vacancy-rate-hits-new-high-at-29-2-1.1631820#.YP4KGhAlUh0.linkedin

Closing the Natural Gas Long

Friday’s trading session saw the current active contract price in Natural Gas hit my published $4.07 target.

It’s a Gas, Gas, Gas !

This coincides with other readings which determined the closing out of the Long trade and now looking for lower prices in the coming weeks.

My view will also have ramifications for Oil & Gas related equities.

July 25, 2021

by Rob Zdravevski

rob@robzdravevski

Macro Extremes (week ending July 23, 2021)

The following assets (on a weekly timeframe) registered an Overbought reading or traded more than 2.5 standard deviations above its rolling mean.

Extremes “above” the Mean (at least 2.5 standard deviations)

USD/KRW (signifying a weaker Korean Won)

USD/SGD (sell your USD and Buy Singapore Dollars)

EUR/AUD (telling me the Euro is strong compared to a weakling AUD)

Overbought (RSI > 70)

Tin (for the 13th week)

Gasoil

Hot Rolled Coil Steel

Natural Gas

the CRB Index

Switzerland’s SMI equity index (for the 6th week)

Australia’s ASX 200

the Nasdaq 100

S&P 500 Index

and the Amsterdam, Copenhagen and Helsinki equity indices.

The Overbought Quinella – Both Overbought and Traded at > 2.5 standard deviations above the weekly mean)

Coffee

Orange Juice

Stockholm’s OSX equity index

Assets (securities) within my immediate universe which touched the other side of the extreme, being Oversold (where the RSI is < 30) or were at least 2.5 standard deviations below its mean are;

Extremes “below” the Mean (at least 2.5 standard deviations)

Cocoa,

the Russell 2000 and MidCap 400 equity indices,

the U.S. Government 10 & 5 year bond yields,

the Australian (10’s), Canadian, U.K.,  Chinese, Korean, German and Swedish 10’s

and the U.S. & Australian 10 year minus 2 year yield spread 

Oversold (RSI < 30)

AUD/JPY (a weaker AUD and a stronger Yen suggests ‘risk-off’ is tiring)

AUD/USD (signifying a weak AUD)

Hang Seng China Enterprise Index

the Hang Seng Index

Nikkei 225 Index

Dow Jones Transport Index

The Oversold Quinella – Both Oversold and Traded at < 2.5 standard deviations above the weekly mean)

None

Notes & Ideas:

The big moves and news for the week was in the bond market which saw buyers aggressively accumulating and thus sending yields plummeting.

Some currencies are returning to the ‘extremes’ list while more commodities are mean reverting and easing away from their Overbought extremes.

Most notably, the energy complex has seen a little profit taking and a result those commodities (including Iron Ore) have fallen below their 70 marks on the RSI.

In the bond world, we saw a rebound in bond yields from their mid-week lows, while most interesting to me was the Japanese 10 Year yield traded a 200% range. The JGB’s aren’t called the widow-maker for nothing.

Importantly, they didn’t ‘go’ negative.

The decliners included Iron Ore (3%), Platinum (4%), Soybeans (7%), Silver (2%), Taiwan’s TAEIX (2%) and the HSCEI (3%)

Advancers were dominated by equity indices such as the Semiconductor SOX index rose 4%, the Nasdaq and Helsinki markets climbed +3%, the Stockholm, Russell 2000, MidCap 400, DJ Transports, the S&P 500 all rose 2%…while amongst commodities Lean Hogs were up 2%, Lumber  & Coffee soared 17% and Natural Gas surged 11%

The U.S. 10 year bond yield fell sharply during the week, to a low of 1.13% yet closed almost unchanged at 1.28% from the previous week’s close.

It was a week to observe overreactions.

The 10’s remain bound in a larger range but we watch it broader capital markets could become explosive is the 10’s break either below 1.25% or above 1.65%.

No cryptocurrencies registered any Extreme readings.

And lastly, Bitcoin is trading 145% above its 200 Week Moving Average, which is higher than last week’s 127% reading and certainly lower when compared to its 466% peak in mid-April 2021.

July 25, 2021

by Rob Zdravevski

rob@karriasset.com.au

The age of the stockpicker

Stock-picking over Indexing

I am (and have been) positioning portfolios for rising inflation.

Because of this view, I think certain sectors will perform better than others (see sector rotation) and as a function of my business, my focus is picking the better companies to be invested in.

This is dominated by placing an emphasis on the ‘risk’ part of an attractive risk/reward opportunity.

In other words, try to take the least possible risk while seeking an adequate return and picking the stocks with tailwinds should take care of the rest.

In turn, due to many reasons (including a large overweight to technology), I think broad-based index tracking ETF’s (and the indices themselves) will be poor performers in the coming years.

It’ll be evident which money managers are index huggers.

I’m not being dangerous nor a maverick but I can’t help observe that in the asset management industry, all that a fund manager needs to do is, make sure their performance is similar and close to the rest of the sheep.

It’s safer staying with the flock…..you get to keep your job, retain assets and keep the gravy train chugging along.

I dare to say, that diversification certainly helps you achieve one common thing…….it’s that you are able to lose less money than others.

July 29, 2021
by Rob Zdravevski
rob@karriasset.com.au

#alpha#investing#portfoliomanagement