Nobel, Price and Statistics
05 October 2022
There are three months left until the end of the year. The third quarter results start in a two weeks with Netflix. Everyone is talking about inflation, including central bankers. At the same time, some CEOs are starting to talk about lowering prices. That's what Nike's CEO said a week ago:
"We are taking decisive action to clear excess inventory. The only way to reduce this excess inventory is to sell off these shoes and therefore lower the prices.
Still on inflation, let's look at the price of freight mentioned this week by Nestlé's CEO as one of the main factors explaining their price rise: the price of transporting a container from Asia to the US is down by 80% since the beginning of the year, including 45% in September alone. It is still double the pre-COVID prices, but these are still deflationary signals.
These two examples show that it is really difficult to have a clear-cut view in the medium term on inflation and therefore on rates. In my opinion, It seems therefore reasonable to navigate by sight, imagining several scenarios and remaining flexible.
To know which scenario will prevail, the economist to follow at the moment is Paul Krugman, if you ask me. Because he won the Nobel Prize in 2008 and because he got it wrong last year when he said that inflation would only be transitory. Statistically, he can't be wrong every time, otherwise he wouldn't have won the Nobel. His latest article in the New York Times is entitled " Is the Fed braking too hard? »
We are organising a webinar on the 12th of October at 17:30 before the Q3 results.
Link to enroll : https://app.livestorm.co/monocle-am-2/webinaire-monocle-pre-resultats-t3?type=detailed
Market and portfolio focus
Behaviour: :
Over the past week (from 26/9 to 3/10), the fund has recovered +0.5% of performance while the Nasdaq 100 gave up -0.2%. The markets rebounded strongly at the beginning of the week, without any real improvement in fundamentals: the third quarter results will be closely watched (with Netflix's results on 18/10 in the spotlight) and vigilance is still required. The overall positioning remains cautious with a net equity exposure of 17% and the maintenance of our hedge positions on the Nasdaq.
Lines:
- Unilever: sale of the position (5% of the fund), after a good operation in complicated markets, with a profit of 1.2M in 6 months. The current valuation seems fair and the upside potential limited. Better opportunities should emerge.
- Volkswagen: (2% of the fund), building the position given the low valuation (5 PE on 2022 results) and the dividend yield of over 6% (coupled with an exceptional 12% dividend following the Porsche IPO).
Have a great week,
Charles
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