April Week 4: 75 Basis Points & Chill
Public Service: Books When Two Become One
Macro/Market: 75 basis points & Chill
April Week 4: Smug & Chill
Updates: #BNZL
So I was visiting my in-laws the previous week - I have the best in-laws in the world (matches wifey!).
Anyway, I did read two books, Excellent Investing by Mark Simpson whom I'm sure many of you know and The Psychology of Money by the lesser know Morgan Housel.
Excellent investing is excellent - no marketing slogans etc, just straight into the book. Not one for novices but Mark knows his faeces as Small Caps Live can attest to and certainly this is a more practical book for Private Investors who have a base knowledge.
I strongly recommend reading this alongside The Psychology of Money - a lot of what is discussed talks to how I manage my portfolio - which is not an excellent portfolio. Excellent Investing talks a lot of behavioural pitfalls - if they can't be eradicated, they need to be managed.
Expecting perfectly rational behaviour from yourself, when you know you are irrational is...well, irrational.
Cursory Market/Macro observations:
So this was not a good week - the commodity trade rolled over - China zero CoVid is causing all kinds of dramas and energy intensive commodity extractors are being impacted by the cost of energy & similar production/operational issues like other businesses with a geopolitical cherry on top.
I do wonder why if people want to be long commodities, they bother with the equity risk of being long commodities. I dare say the tactical/macro tilt on wifey should be looking to this as an opportunity to add. My tactical is longer than yours 😁
Technicals look OK - seems like they are coming up against some long term resistance after being overbought - maybe people need to just chill.
On the other hand, there is Mr Bullard who is most definitely not chilled (auditioning for Volker for when the FED fails - I'm a cynic!).
Much like the race among forecasters, he is upping the ante with 75 basis points hike to get the credibility back & shock the market.
Market was like WOAH - Chill!
Then other FED folk with power spoke, Guys Chill - we are going to shake our fingers at inflation like you wouldn't believe - but not going to shock you - 50 basis points is on the table.
Market was like WOAH - Chill!
And while the FEDs were speaking, Netflix was releasing (results), shareholders got killed & even Bill Ackman couldn't chill.
Aside: He is a good investor from what I can tell, but judging by the publicity that mea culpa got, he is also a very good marketer!
Proceeds into macro / tail risk hedges that he can show off about in a few months?
What other pandemic drama stock that was going to take over the world has gone from ex-growth to declining business that needs to sweat its assets.
Being a have fun staying poor kind of guy, I am more inclined to look into Netflix now but I'd be surprised if there aren't better ways to bet on the future in the carnage that has taken place. Netflix is not alone on share price or fundamentals.
Superficially a 200k loss on a 220m installed base when you drop 700k in Russia (Netflix only had 700k subscribers in Russia?) doesn't sound all bad. But sentiment is way too positive - oh only a few of those 100m non-payers need to convert.
Meanwhile, I own a company with a rock solid balance sheet. They have a subsidiary that already owns an ad supported & subscription content streaming service and pay a lot less for content - on a lower EV:EBITDA multiple.
I am in prep for Monster Tech - I am very concerned they have been overearning! Have Google, Amazon & Microsoft - my repurchases of Google & Amazon - only one remains a bottom tick - maybe I should be shorting Nasdaq 100 after I publish.
Portfolio Review April Week 4
One of the most pleasing things about being a rentier has to be the ability to sit on your backsies not have much going on and see the portfolio go up for little reason against the market trend and think - Yeah Man! I'm a genius.
On the other hand my portfolio benefitted from a lack of exposure to materials/energy stocks - wonder what happens if I try saying that three weeks fast!
Transactions:
CLIG - Sold - Relative valuation / path to growth
One of the major reasons I held this was the substantial discount it trades at versus the sector. That discount has closed (albeit not the way I would have wanted).
In the meantime, one of the biggest drawbacks is the path to growth is more difficult vs other asset managers (counter cyclical benefits aside).
Bonds (Karpus acquisition) have been hurt this last quarter (Smartest guys in the Room can't handle a 10% drawdown, levered igiats!) & Ashmore results were pretty ugly re EM.
May well be wrong but I have other preferences in the sector & given they are larger M/Cap & a lot more liquid - I can let them become much larger holdings / add to them whereas this would top out because I am a liquidity coward.
Haven't done it yet because I would be going against momentum.
Horrible things happen when you go against momentum!
TPFG - Finish reduction as per previous week.
Very small reduction in the prior week & finished it off. The previous one was meaningless anyway - let's see how cowardice rolls.
Updates & Results:
BNZL:
- Q1 Revenues up 13% actual, 12.5% CC. LFL 11%, driven by inflation. Fewer days down 1.7% & 3.2% from acquisition
- Continued momentum in base business 17% (inflation!) offset by 8% fall in top CoVid products. N America inflation, Europe/UK recovery in base business
- Guide modest revenue growth driven by full year of acquisitions with some LFL. Personally think 11% is better than modest but tougher comps going forward
- Margins slightly higher than historical levels - probably about right on forecasts, some room to beat - teetering on as expensive as it gets in terms of valuation
- Note that you thought Volex is a better opportunity than Bunzl in industrials and were reticent of adding to Volex because of too much industrials exposure
- HOLD - Think I am getting a bit bored / other opportunities but coffee can ex 100 bagger
And Finally,
So I mentioned my undying love for Manchester United, which remains - I am also a very loyal person as my twitter followers will discover if I notice them attacked (unless I am doing the attacking!)
One of the reasons this is short and superficial is I was distracted - I spent Tuesday watching Sky Sports News (don't think I have done that since undergrad, although I am not sure it existed during undergrad) & when Eric Ten Haag got appointed, I spent the day watching Sky Sports News
Football is outside my circle of competence but Manchester United share price is flat while the market has doubled.
Christiano Ronaldo is most certainly not a problem - he is working as hard as he can given limitations I think - the man is a winner & a professional.
The team seems wrecked and it is bizarre. 12 months ago things were great (when they conceded every game & came back to win in the 2nd half) - 2nd in the table, feel good factor, Ole signing the right players - it was all ready to go.
Guess similar to business, things can unravel quickly and turnarounds require new management. Alternatively & more akin to markets, it is bull faeces on the way up & bull faeces on the way down!
Adieu
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