I know in NYC (Wall Street) the last few weeks feels like the end of the world, but I’m writing this from Portugal this week – as we had a trip planned months ago to visit Lisbon, Algarve, and Sintra. Being in this game long enough, you come to understand that the market and your positions will only go in one direction (down) the minute you go on vacation, writes Tom Hayes, founder of Hedge Fund Tips.
That said, sometimes it’s nice to leave NYC and CT to get some perspective. In summary, no one cares about the markets outside of Wall Street! They are living their lives in the sunshine (I guess knowing that sooner or later good companies resolve to the upside).
As I keep a pulse on the markets, though, it is apparent that things have gotten stretched to the downside and that a reversal is in sight. If you’re trying to pin it to the day, I land in Newark on Sunday.
Meanwhile, for a recent MoneyShow virtual event, I prepared some notes about my investing style and market views. Here are some to consider…
* We buy straw hats in the winter! Durable, quality, predictable, cash-generative assets when they are temporarily impaired or out of favor. We usually own 8-12 companies that make up 80-90% of the portfolio – and when appropriate, a long-dated derivative overlay to juice returns without taking on material leverage.
* We take short positions from time to time when the risk is asymmetric in our favor and we express with long premium only where we can limit risk (i.e. 1% outlay has EV of 3-5x). As much as everyone wants to be short now, I don’t think an environment where M2 money supply is running $3T above the long-term trend is the right environment to do that.
* Last fall when Tech/Semis were hated and out of favor, we bought large positions in Amazon (AMZN), Alphabet (GOOGL), and Intel (INTC). Now that many value names are out of favor, we are loading up on names like Generac Holdings (GNRC), Stanley Black & Decker (SWK), and Bank of America (BAC).
* We try to spend less time on macro and more time on cash generation/business performance. You wouldn’t buy an apartment building or a farm (or any other cash producing asset) on the basis of this week’s put/call ratio and VIX level would you? We think about businesses in the same way and buy when Mr. Market is in his manic mood.
