So....What're We Buying These Days?

Fun times in the market right now huh? Curious where people are deploying capital (if any) and why they're targeting whatever they're targeting. My 2 cents (literally what they're worth these days...):

  1. I'm waiting to see how the rest of the big tech companies report the next couple of days. Google and Microsoft had decent quarters, but Google I believe missed guidance and is dropping. I'm a bit worried that these Megacap companies missing could trigger another downward move in the market just because they such big components of the S&P by weight. I personally am not buying any more dips until I see what shakes out from Amazon, Apple, and Facebook especially as well as how the market reacts.

  2. My overall prediction is we have a sideways to slightly down market that is going to slowly move downward. It's in sharp contrast to the COVID bust where we dropped into bear territory in a matter of days/weeks. Barring some unforeseen outside catalyst (like Nuclear War - which I guess isn't impossible anymore), I don't think any recession we have would be severe. We still have a fairly robust labor market and many firms in finance, consulting, tech, etc. still seem to be desperate for talent. That said, these positive effects I'd imagine are going to be slightly offset by rising rates, which will reset valuations (negative wealth effect) and make debt/expansion more tricky to come by. 

  3. Given the above, I'm looking to avoid any long-duration assets (i.e. growth whose cash flows are going to deferred further into the future or long-term bonds) and mostly want to buy companies that are trading at reasonable multiples (avoids the valuation reset risk), generating cash flow now, and potentially growing their dividend/otherwise giving me some income in case the market trades kind of sideways or we see minimal growth. I also like commodities or hard assets because I want to take advantage of firms that have pricing power (i.e. relatively inelastic demand for products), given supply chains are now going to potentially get crushed even further if China shuts down over COVID.

  4. Names I'm buying are $VIG (generic place to park my money since dividend growth is a (weak) proxy for health and to generate income), Oil/Gas (anyone have good nat gas plays - already own $EOG and $CVX), maybe financials if yield curves start to steepen. I'm also looking at semis, since they've been absolutely beaten up lately (i.e. might be catching the bottom of the cycle) and but think they'll continue to be in huge demand long-term. The main ones I'm looking at are $MU, $SKWS, $AVGO, but open to other ideas. 

  5. Outside of this, I honestly have no idea what to do or where to park my money. This is the first time I feel like I have little conviction in anything because it feels like everything is getting crushed and it's not even great to be holding cash because it's getting inflated away quickly.

Happy to discuss any issues with my thoughts above and definitely want to hear what others are doing in these markets!

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Comments (40)

  • Associate 1 in CorpDev
Apr 26, 2022 - 10:27pm

No change from me. After meeting my 401K match and maxing ESPP program, just putting everything else I have left into VTI once a month. Too many other things to worry about at work than micromanaging my portfolio - but I did put some money into $GFS fairly recently. 

  • Analyst 1 in IB-M&A
Apr 27, 2022 - 1:56am

In my PA - I savings bonds. If you buy before May 1, guaranteed ~8% by the us govt. You have to hold for min 1 year though. Fine by me since i dont see markets rallying any time soon

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  • Associate 2 in PE - LBOs
Apr 28, 2022 - 4:57am

0DTE OTM call options on TQQQ is the way to go.

Apr 27, 2022 - 10:46pm
cockguzzler69, what's your opinion? Comment below:

Buying China obviously. I expect a lot of emotional FOMO in 4-5 years whenever it's announced that China has officially surpassed the US in nominal GDP (just like Chinese stocks mooned in 2014 when they surpassed us in PPP).

  • Intern in IB - Gen
Apr 28, 2022 - 12:42am

Glad I'm not the only one - crazy how China stocks have been flat last 10 years while GDP grew so much 

Apr 29, 2022 - 4:28pm
CarsnWatches, what's your opinion? Comment below:

I don't think this is a big concern for bigger names like BABA or Tencent. If you are concerned with it you can have your ADR shares converted to Hong Kong exchange shares apparently. 

Apr 28, 2022 - 9:55pm
GoingToBeAnMD, what's your opinion? Comment below:

Maxed out 401k to have general exposure to the market and my BB. Been doing that for years.

In my personal portfolio, I am direction neutral; just write spreads with low deltas. Requires me to be fairly active but I wrote a web interface that lets me manage it quickly. Next up I'm writing a txt app that will let me manage it even quicker, like my own personal order runner. I focus on high liquidity so it's all the usual suspects (QQQ, GLD, IWM, SPY, UNG, etc, etc) but again, direction neutral.  

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  • 2
Apr 30, 2022 - 2:44pm
FinancelsWacc, what's your opinion? Comment below:

Surprised you can write spreads at a BB, generally thought the compliance programs around employee investing were very stringent, although I admittedly didn't do a ton of research to see what was acceptable vs. a huge pain in the ass due to Bank policy during my time...

Apr 30, 2022 - 4:22pm
GoingToBeAnMD, what's your opinion? Comment below:

Yeah, they don't make it easy but it's possible. I have to (1) use a broker they designate. Which is generally OK because it makes the reporting easy on me and the broker is good and (2) my BB publishes a "whitelist" of securities I can trade without a compliance check. I just take that list and put it in my scanner so I'm never "off script". So yeah, I'd like to be able to do TSLA all day but it's mostly broad ETFs that are allowed. But again, it still leaves me plenty to choose from with stuff like QQQ, SPY, USO, GLD, the XL* stuff, even ARKK is on there ;) . It's enough items to keep me interested and not run into issues.

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  • 2
Most Helpful
  • Investment Analyst in HF - Event
Apr 29, 2022 - 12:56pm

Situation

Fed is risking a recession in order to tame inflation after being grossly wrong about it by saying it was transitory. 

Aggregate demand will get affected and demand-pull inflation would decrease but rate hikes would do less to impact cost-push inflation.

Higher dollar and higher crude prices are risking sovereign debt problems around the world (look at Japanese yen to Siri Lankan high yield)

so central banks increasing rates all over the world means we are going towards slower global growth which affects the Chinese economy as well

conclusion

So in equities, the net exposure is negative towards the market, especially towards cyclical and sensitive sectors

(short tech, industrials, real estate, EM high yield debt, EM sovereign debt ) 

(long commodities, utilities, healthcare, energy )

Now, these are generic sectors, industries, and asset classes I mentioned

the effects differ by demographics and segmentation within these

for example, residential real estate and variable rentals, and industrial REITs are affected differently 

Apr 30, 2022 - 1:08am
halo5guardians, what's your opinion? Comment below:

I definitely would trust an Investment Analyst in HF - Event-driven Investing haha

Exceptional analysis and market read. But are you not looking at emerging market especially countries with high commodities net export

  • Associate 1 in IB - Gen
Apr 29, 2022 - 4:39pm

Added more TQQQ today

If we keep dropping I'll keep buying more

  • Associate 1 in PE - Other
Apr 29, 2022 - 6:32pm

LEAPs on MSFT, GOOG, QQQ - started thinking about these today, still bit hesitant but it's likely a decent time to start buying in. Personally I'll probably wait a month or two

UNH - monopoly on health insurance for American corporate workers. protected by ridiculous and perpetually increasing medical costs in America

COST - inflation hedged business + cult-like customer base

Apr 29, 2022 - 7:09pm
Purple9988, what's your opinion? Comment below:

This year I'm overweight and buying in mid caps and healthcare. General portfolio has been overweight tech and a few companies which will benefit from higher raises (mostly financials like State Street - STT - with their NII).  

Apr 29, 2022 - 7:16pm
notebookone, what's your opinion? Comment below:

Too early to buy in general. Fed will raise 50 bps next week and another 50 the following meeting.

The beating will continue until consumers cry uncle with demand destruction. So far, consumers are still hanging on, which means more beatings to come. The fed cant fix supply problems, so it will need to keep killing demand. It will take at least another quarter for consumers to pull back on spending. Beyond that, there is no visibility because it's all about Russia/China/Inflation.

With that said, if FB retest 171 and fails, then it will get interesting in the 150-165 range. That may be the buy of the year. 

Apr 29, 2022 - 7:59pm
Lester Freamon, what's your opinion? Comment below:

What's the thesis on Facebook? I feel like it rallied over pretty meh earnings. The only reason it went up is because DAU returned to growth, but I didn't see anything that led me to believe those users are just as profitable as they were in the past. I feel like they're facing some headwinds with Tik-Tok because everyone uses that now instead of IG. To me, an investment in $FB is essentially betting they can kill Tik-Tok with Reels like they did with IG Stories to $SNAP. 

Apr 29, 2022 - 10:23pm
notebookone, what's your opinion? Comment below:

FB is the cheapest mega tech out there with 2B MAU. Bad news priced in.  It's fixable - any improvement to deal with AAPL will return multiples to 20x PE. Zuck purposely tanked the stock to get target off its back. No one is talking about regulating social media in congress now right? He paints tiktok as the enemy - it's only partly true. tiktok as the enemy is great way to remind congress if FB fails, then tiktok may win globally, which is undesirable for US policy.

Tiktok competes more with YT, as short-form video may take shares away from long-form video. Reels is new and not a competitor to tt. Reels and whatsapp have no monetization, so that's a possible upside down the line.

Founder lead pluses are vision and execution, but hiccups are fixable. At 13-14x PE and mid teens to lo 20s growth, this is the best value in megacap tech.    

Apr 29, 2022 - 7:30pm
Aimar 21, what's your opinion? Comment below:

Short on $CVNA since the beginning of Jan. Currently considering buying CDSs of $CVNA. High chances equity is going to zero.

Apr 29, 2022 - 10:29pm
notebookone, what's your opinion? Comment below:

9% dilution and higher coupon on the $3.25 billion of bond financing are both bad news, but as independent used car dealerships fail, CVNA will gain market share. In 2 years they'll likely survive and be the largest car dealer nationwide. 

Apr 29, 2022 - 10:31pm
GoingToBeAnMD, what's your opinion? Comment below:

I agree that it makes for a good short. But what's your case for zero? Seems a bit drastic to me since their buying model - as a whole - seems like a success. Perhaps not profitable yet, but still a winner. Surely it can avoid zero, no? 

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Apr 30, 2022 - 4:06am
Aimar 21, what's your opinion? Comment below:

A few points of my bear thesis (in no particular order):

1) Any insider have bought equity besides Garcias

2) They have really struggled to place the debt

3) Garcias inserted whole provision on the unsecured debt (which indeed has been mainly bought by themselves and Apollo)

4) Apollo will likley replace Ally finance to buy part of CVNA´s receivable

5) Interest expense already going up to >500m in FY22, a company with c. $12b mkt cap 

6) Interest rates increasing rapidly which really punishes their finco business (c. 55% GM in FY21) 

7) Used car pricing having already peaked

8) MGMT has removed FY22 guidance 

IMHO, people & SS don´t realize that CVNA has been over earning in FY21. They cannot be profitable in a non-zero interest rates environemt where delinquency rates are high. This is a finance company with a car division on it, not the other.  CVNA is a cash burn machine

Apr 30, 2022 - 1:04am
halo5guardians, what's your opinion? Comment below:

Emerging market stocks

Indonesia, Malaysia  (Financial Services, Palm Oil)

Countries with net commodity export

Developed market stocks

China, Singapore (Chinese small cap tech only, Singapore large cap banks, REITs)

Chinese government regulates local big tech, allowing smaller companies to compete 

Apr 30, 2022 - 6:50am
BBDreamin, what's your opinion? Comment below:

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May 9, 2022 - 9:32am
iggs99988, what's your opinion? Comment below:

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