VALUE, VALUE, VALUE
Os envio un reporte que me han pasado de un fondo americano.
Quiza sea un poco dramatico pero creo que el fondo tiene todo el sentido del mundo.
Tambien da algunos valores value donde invertir y practicamente aconseja salir de las y de valores growth.
It was 1973-74.
inflation was raging.
The US had capitulated in Vietnam.
There were wars breaking out all over as simmering civil divisions erupted. Gasoline prices were sky high.
Congress was investigating a political scandal from the previous administration.
Commodities were roaring.
High tech small and mid caps went down 50-80% first.
Then it came the turn of the NIFTY 50.
ALL of them went down by more than 50% and the average was 59%.
Avon, Baxter, Polaroid, Eli Lilly, GE, Citi, IBM, Kodak, Disney… everyone owned them. No one did not own them.
They all collapsed over a 9 month period with no exception.
And they fell for poor reasons. Like Netflix this week. But more on this in a minute.
People were dollar cost averaging all the way down. When they went down a lot in one day, no one could get out. (Like Netflix this week). So, every time there was a subsequent rally, people used the rally to exit a losing trade. This went on til 1983.
Growth tech 1974-77 — down 60%
Value 1974-77 — up 235% (after years of underperformance).
In the meantime, inflation caused a rotation into the stuff we need — consumer staples, defense, food, healthcare, utilities, consumer finance, energy.
Look at what is happening to the darlings of 2017-2021 — each of them is doing a round trip head and shoulders. Netflix has completed most of it.
Look at Alphabet — very scary. It is likely next. $1500?
Meta seems to be finishing up as well… a bottoming out at 150-160
Could Apple and Microsoft beat the trend? History is not on their side.
Nvidia’s stock chart looks hideous. And so forth. Look at incomplete right side formations of head and shoulders all over — they are likely to to be completed.
WHY?
THE DREAM HAS ENDED.
THE SUSPENSION OF DISBELIEF IS OVER.
THE HOPE OF EVER HIGHER VALUATIONS IS CAPUT.
PEOPLE WANT TO LEAVE THE PARTY.
THEY DO NOT WANT TO GO OUT FOR MORE BOOZE.
THEY WANT TO CUT LOSSES AND DO NOT WANT TO AVERAGE DOWN.
THEY DO NOT FEEL LIBERATED & RICHER. THEY FEEL TRAPPED & POORER
THEY HAVE NO DRY POWDER LEFT. THEIR AMMO IS ALL WET.
LET’S TAKE THE CASE OF Netflix.
Counting you and me, about three million people knew the following:
Cost of content was going up ALOT
Competition on streaming in everyone’s homes was going up ALOT
There are few new Subscribers — subscribers are switching to the ‘new’ thing
There is less money to spend on content.
Netflix costs went from $12bn to $17 bn in two years.
There is $30 bn of balance sheet amortisation over four years.
Market cap is $99 bn. With negative free cash flow and flat operating income.
We ALL knew this when we watched all the new streaming channels with kids and loved ones. There are 7 major streaming channels eating losses to gain market share. A massive consolidation is inevitable. It turns out that too much competition is a bad thing. Carnegie was notorious for saying this.
People are trapped in the trade and cant get out.
Change strategies. Have a shakeout. Go away for a weekend and talk about value stocks.
Our favourite VALUE STOCKS which have some inflation protection are Walmart Mexico, Monster, TI, Valero, AMAT, Regeneron, Novo Nordisk, Dassault Syatems, DIAGEO, Advantech, CSL, HOYA, SMC, Fanuc, Oriental Land (JPN). Japan is the best value market in the world.
On financials, I would add Visa, PNC, Fifth Third, Alpha (GR), JYSKE, Moneta, OTP, Groupo FIN,