It is urgent to wait
November 9, 2022
The burst of the bubble has begun. The airship in which we, investors, find ourselves, slowly loses altitude. To our great pleasure: the closer we are to the ground, the less brutal the fall.
So, like us, you're probably wondering when to reinvest. When will the airship be low enough to jump in and follow it on its next ascent.
Let's take a look at the "sexy stocks", the fetish stocks of investors. Their valuations have peaked in 2021, totally disconnecting from their fundamentals.
Where are they today?
SnapLe développeur de l’application Snapchat a vu son action chuter de 80% en 1 an. The value of his company has dropped from $85 billion to $15 billion. An opportunity? Surely not, the company is showing an operating loss of $1.1 billion over the last twelve months. With no profitable scenario in sight, Snapchat's business model definitely seems to be based on ephemerality.
UberOn the Uber side, the stock is down 39% year-over-year. However, the accounts show the same thing. Operating result over 1 year: loss of $2.2 billion. Once again, the business model seems to be doomed to negative margins and value destruction. The attempt to raise prices in order to find the right balance has resulted in a massive return of cabs in the game. A deserved redemption? Note that Uber is still worth $55 billion on the stock market...
CoinbaseThe cryptocurrency exchange platform is losing 83% of its value over a year. Crypto prices in free fall, trading volumes at a standstill, and a drop in the number of users: a painful hangover for the crypto ecosystem. Over the past 12 months, Coinbase has posted a $1.2 billion operating loss. A very uncertain future for a company still worth $13 billion. When you praise speculation, you have to assume that you are at the heart of speculation.
This situation concerns a large number of companies among which we can still mention Shopify, Snowflake, Peloton, WeWork, Doordash, ServiceNow, etc.
Conclusion: the airship is still high. And there is still a lot of air to deflate.
If you wish to reinvest, be careful and selective.
Market and Portfolio Focus
Over the week (from 31/10 to 7/11), the fund is up 2.4% and the Nasdaq is down 3.9%.The resistance of our equity lines and the performance of our short position on the Nasdaq explain this performance.
At the beginning of the week, the pre-FED meeting market rally seemed particularly inconsistent to us. With the effect of good news already in the price, we increased our short position on the Nasdaq by 50 contracts. As we expected, the FED's stance was less accommodative than the market anticipated. We liquidated our 50 contracts 2 days later, taking a profit of $550,000.
On the equity side, we increased our position in Biontech last Thursday following the announcement of a meeting between German Chancellor Olaf Scholz and Chinese President Xi Jinping. Mr. Scholz was accompanied by company executives, including Biontech's founding CEO Ugur Sahin. Speculation that Biontech's zero covid strategy would be released and that its vaccine would be approved in China helped us crystallize $250,000 in profits.On the bond side, we continue to gradually increase our exposure, now at 17% of the fund.
Have a great week,Pierre
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