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Where Are We Now?

April 16, 2024
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Wiko Steyn
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Wiko Steyn

Core Fund Update 11

 

The Federal Reserve is still on a mission to lower inflation by destroying demand, the dollar has strengthened significantly against almost every currency, global tension is still running high, we have record high temperatures in the UK and there is no solution to the supply chain side problems. If you are unsure what this means for the stock market, we can assure you nothing good. 

So why do we invest? A new acronym that became popular over the last two years might explain it best - TINA (THERE IS NO ALTERNATIVE). That hard-earned money you are leaving in your bank account is losing value at a staggering rate. Thanks to inflation and compound interest working against you. We prefer to invest in the best companies in the world, which create real value and generate real cash flow. We also accept the significant risk associated with this approach, because we understand the risk of not investing at all.

Earnings season has started in America and as always we get to enjoy the volatility of this period. 

Volatility is the price of admission. The prize inside is superior long-term returns. You have to pay the price to get the returns. -Morgan Housel

We started off with some decent numbers from a few banks and by Thursday the market had staged quite a decent recovery, which was definitely boosted by Musk delivering again with another great quarter from Tesla. And then we had a repeated scenario of precisely three months ago, where Snapchat's terrible earnings sent the market crashing down. We wrote an article When Opportunity Knocks the day after and added The Trade Desk to our Core Fund. Here is a snippet:

Snapchat is an unprofitable social media stock which fell more than 40% yesterday after their management warned that they might miss guidance. This sent the whole Ad Tech market crashing down. Dissecting the sector and looking for quality companies might reveal some opportunities.

So why does the market put so much emphasis on this low-quality unprofitable business? Well, the world's financial system is still on edge and Mr Market is looking for leading indicators to see if we are in a recession or soon to be in a recession. Advertising is usually one of the first expenses cut during a recession and that is why this $16B dollar company can create a ripple effect through the market, cutting a quality compounder like Alphabet's market cap by over $40 billion.


 

Portfolio Update Summary

We are using this 7% drop in The Trade Desk to pick up some more shares and bring us to a full position.

  • Buy $250 TTD at $41.05
  • Buy $250 ASML at $506.11

 

 

Disclosure

This article is not financial advice and is based on the author's opinion. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk, and a financial product's past performance does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products. The $20K in the Core Fund is not real money and only a demonstration of a typical portfolio. This is an actively managed portfolio, where we will buy and sell positions as we deem fit without any regard for taxation. Remember, all selling of stocks triggers a tax event in most countries and it is the investors personal responsibility to always remain tax compliant.



 


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