An Even More Fertile Habitat

September 8, 2020 Leave a comment

2 months ago, in the link below I wrote about equities being a fertile investing habitat.

I’d even say, there is no alternative (TINA), but that’s just a headline grab.

I mainly discussed the relative valuation and importantly the Earnings Yield of the S&P 500 versus the 10 year bond.

n.b. when P/E’s are 20, 30 and 40, absolutely cheap is difficult to find, although us stockpickers will continue to search.

https://robzdravevski.com/2020/07/15/equities-the-fertile-habitat/

Next year’s consensus P/E for the S&P 500 is 23 but on this occasion I wanted to extract the EPS estimates of the “inflated” FANNGM stocks.

These 6 stocks now make up 49% of the Nasdaq 100’s market cap and 26% of the S&P 500.

I found this work below which puts the S&P 500 P/E ex-FAANGM on 19.4.

This means the S&P 500’s Earnings Yield is 5.15% or 7.3 times more than the 10 year bond yield.

Re-iterating & re-phrasing comments from the linked story above…this multiple has NOT been seen since World War 2.

So, what’s the trade?

Perhaps…..Long selected portfolio stock ideas (or Russell 600 Small Cap) and Short Nasdaq 100 to hedge out the “overvalued” market risk?

I’ll get back to you.

source: https://www.yardeni.com/pub/faangms.pdfhttps://www.yardeni.com/pub/faangms.pdf

September 8, 2020
by Rob Zdravevski
rob@karriasset.com.au

Filed under Finance & Investment Tagged with ,

Aged Care at home

September 6, 2020 2 Comments

This is not a new investing idea although I sense that due to COVID-19, this theme will accelerate.

The shift away from the traditional nursing home and hospice providers surely towards the independent living and aged care in residence scenario must be an attractive proposition now that labour amongst nursing professionals is in abundance, amongst other obvious reasons.

The Dutch have been pioneers in Thuiszorg (meaning “home care’) and has been refined by Netherlands based company, Buurtzorg which translates into “neighbourhood care”.

As an investor, I’m scouring the world for appropriate, publicly listed opportunities.

In the U.S., Amedisys comes to mind.

I’ll keep you posted as I find other candidates.

by Rob Zdravevski
September 6, 2020
rob@karriasset.com.au

Home Buurtzorg

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Margins on Gold futures have tripled

September 6, 2020 Leave a comment

Here is an 11 year overview of the margin (maintenance) requirements to trade Gold futures contracts on the CME.

Follow along and your pattern recognition will develop.

I hope you didn’t think that the price of Gold moved based on demand from Indian jewellery merchants ?

While there are arguments abound whether it’s a measure of inflation, a store of value or even considered currency.

The chart below and my notes within suggest that more than anything else, Gold is a “financial instrument derivative”.

Gold prices seem to be influenced by the futures margins which are set by the CME, which in turn fuels or repels the speculators.

Where the price of Gold typically falters (or is stifled) is when the percentage of the required margin creeps above 4% of the notional contract value.

The eliptical area in the chart is a period when the margins were closer to the 5% of the notional contract value, which is similar to today.

Over the past 2 years, the margins required to trade a Gold futures contract have tripled while Gold has risen 67%

What if the CME increases margins by another 25% or 50%?

by Rob Zdravevski
September 5, 2020
rob@karriasset.com.au

Filed under Finance & Investment Tagged with , , ,

Illusions continued – France’s CAC-40 is same level it was 19 years ago

September 5, 2020 Leave a comment

In a continuation of my thinking that the “great bull market” is yet to happen…..

The chart of France’s CAC 40 shows that its trading at the same price it was in 1999, 2001, 2006, 2008, 2015 & 2017.

Many global indices are trading at the same price they were 10 or 15 years ago.

August 16, 2020
by Rob Zdravevski
rob@karriasset.com.au

Filed under Finance & Investment

And the UK’s FTSE 100 is at the same level seen 21 years ago.

September 4, 2020 Leave a comment

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The VIX is not what it seems

September 3, 2020 Leave a comment

I had a topical discussion with a peer about why the VIX is hovering around the 23 mark yet the S&P 500 is making new highs?

Today, the VIX rose again (to 26.6) while the S&P 500 and Nasdaq climbed 1.5%.

He pointed out that an extraordinary amount of call options are being traded compared to put options and this may be distorting the call/put calculation of the VIX and changing its traditional guide of measuring “fear” or risk.

I found a reference that we are recently seeing something like $3 or $4 billion worth of call options traded each day versus the normal $1 billion.

Temporarily, this is changing the VIX’s behaviour and the indicator isn’t all that it seems.

Then I looked at the VXN (the Nasdaq’s volatility index) and it has been rising for 10 days all while the Nasdaq has also forged higher.

It should not be so correlated.

There is speculation in certain popular names which is dramatically pushing up the prices of call options associated with those companies, relative to their put options.

Speculative options trading is near 12% of the NYSE volume last week. (see graphic below)

And market makers who are selling call options to those speculative buyers are forced to hedge their position and buy the underlying shares.

September 3, 2020

by Rob Zdravevski
rob@karriasset.com.au

Filed under Finance & Investment

Stretched

September 3, 2020 Leave a comment

A little something I am looking into, as I work on determining entry prices for some gold stocks

The attached chart shows Saracen (SAR:ASX) over a near 5 year period on a weekly basis,

On three occasions (denoted by the highlighted circles in the chart below), the stock was trading at a price resembling 3 times higher than its 200 day moving average.

On each time, the stock reverted to visit its 50 day moving average and eventually kissed its 100 day moving average.

September 3, 2020
by Rob Zdravevski
rob@karriasset.com.au

Filed under Finance & Investment

Lebanon – Aid comes with a price

September 3, 2020 Leave a comment

Earlier this year I mused whether Carlos Ghosn could become the next PM of Lebanon.

https://www.linkedin.com/pulse/could-carlos-ghosn-next-prime-minister-lebanon-rob-zdravevski/?trackingId=trackingId211

Earlier this year I mused whether Carlos Ghosn could become the next PM of Lebanon.

Interestingly, France is showing interest (offering aid) in Beirut’s affairs following the recent destruction at its port.

n.b. Mr Ghosn has Lebanese and French nationality and was once Chairman & CEO of Renault.

and we can’t discount pending influence from Iran (see Hezbollah) and Turkey. (in other news Turkish/Greek tensions are rising again)

Ghosn won’t likely get a call now as President Aoun will need to be seen pursuing a traditional and diplomatic candidate initially.

https://lnkd.in/e76W4T2

It doesn’t cost anything to speculate on such things and nothing seems far-fetched in politics anymore.

September 3, 2020
by Rob Zdravevski
rob@karriasset.com.au

Filed under Finance & Investment Tagged with

A sample portfolio

September 2, 2020 Leave a comment

Investment advisors such as myself are hamstrung (legally) and for good reason from touting performance returns mainly because (in my case) I don’t operate, invest and manage money within a pooled fund or unit trust.

One, generally cannot advertise “returns” if you’re unable perform or produce audited results of the “fund” from a recognised firm.

Because my clients take my recommendations and execute the investments in a brokerage account of their choice, I am unable to publish anything resembling investment performance.

This is the next best thing I can show you, what I do…..

below is a screenshot of a client’s international brokerage account,

We’ve cropped his top 6 holdings (as of Aug 31, ’20), the other 8 positions are quite recently acquired (3 are in the “red”, they’re yet to mature and I’m keeping proprietary respecting that client’s retain me for this advice).

I tend to run concentrated portfolios of between 8-18 positions.

The 6 holdings below represent Google (Alphabet), Docusign, Paypal, Zillow, IHS Markit & Experian.

The value of these 6 stocks started at $174,103.
They are now worth $562,206

Most of these shares have been held for at least 3 years.

* sold Paypal, Zillow & Spotify this week
* see my disclaimer

by Rob Zdravevski
rob@karriasset.com.au

Top 6 portfolio

Filed under Finance & Investment

Another pearl from Seth Klarman

September 2, 2020 Leave a comment

“Today, with Wall Street largely recovered from its March 2020 sell off while Main Street has barely lifted off bottom, a pernicious and crushing inequality could not be more evident.

It’s untoward that, once again, Wall Street has been effectively bailed out while programs designed to assist Main Street have been ill-designed, slow to be implemented, and inadequate to address the pandemic’s lasting impact.”

– Seth Klarman, July 23, 2020

Filed under Finance & Investment

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