Category Archives: 2cv

2CentView performance in 2017

At beginning of 2017 stated the following

"2CentView is that 2017 could be a great opportunity to make 15-20% if Trump delivers on his election promise, tax cuts and infra-structure spending could really boost company earnings." – this has turned out to be true and the US market performed well in 2017.

2CentView portfolio returned 17% for year vs 12% benchmark, outperforming by 5%.
The benchmark return for the portfolio is 50% of S&P 500 return (18% for the year) = 9% + 50% FTSE100 return (6% for the year) = 3% so 12% in total.

Overall return since 2013, 103% (20.6% annually).

Unlike 2016, 2017 was not volatile and global stock markets had a good year – except perhaps the UK market which rallied a bit on the last few days of the year – Brexit still a concern for investors.

2CentView did well holding core position in FaceBook, Apple, Google and Nvidia. Financials also did well – MS, GS and HSBC. 2CentView also had a small position in Bitcoin though the XBT tracker and holds a core position after it doubled. X (US Steel) also did well as US Infrastructure rally on hopes of Infrastructure spending in 2018.

Biotech – namely Celgene (down 35 per cent in one week!), Acordia, Alexion all had a tough ride costing the portfolio around 2%. Positions in UK stocks (DLG, TW. etc) were fairly flat.

Themes for 2018

  • The scale of US tax reform and tax cuts is huge and will lead to US Companies being awash with cash leading to a higher US Stock market as money is spent on on infrastructure, technology and buy backs. However, wages will rise (unemployment already at lows), leading to inflation and interest rates going higher – stay long the banks as an inflation hedge. Keep an eye on US 10 year bond yields – above 3.50% could trigger a major correction
  • Economies in Europe – which are lagging the US by 18-24 months should play catch up and perform well in 2018 if inflation stays low.
  • BlockChain technology will be adopted by the Banks and perhaps also other industries such as HealthCare as we look for more secure , transparent and cheaper ways to transact and hold information. Be careful of the hype though – an ice tea company put the word BlockChain in its name and rallied 500 per cent!
  • Commodity prices could be poised for a rally according to Jeffrey Gundlach (the ‘Bond King’) who sees commodity prices at a relative low with respect to potential growth in the economy. Energy stocks which have under-performed in 2017 could also do well in 2018 as they repair balance sheets and as oil stabilizes and could head towards $75, having some energy exposure is also a natural hedge against rising domestic fuel costs.
  • Bitcoin and crypto will be volatile – if you decide to get in prepare for volatility and invest small – only 2-3% of your portfolio. XRP could be a winner in 2018. Crypto and Digital currency will transform the method and cost of making cross-border payments.
  • There may be some rotation out of tech and into more value stocks (the so-called reflation trade), but long term tech will do well as US companies spend their excess cash on tech- stay long names like FaceBook, Amazon, Google, Nvidia, Apple and Microsoft. Driverless cars will soon become a reality on our roads – Google’s share price does not reflect the potential of Waymo.
  • Volatility remains very low – look at the chart of of the VIXY ( it looks like a reverse image of BitCoin peaking at 15000 in 2008) – but 2018 could see a pick up in volatility which tends to pick up as economic activity increases – there are also still geo-political risks out there like North Korea and Israel/Middle East following the decision to make Jerusalem the capital. 2CentView has taken a long position in the VIXY.
  • Retail and Media – 2 industries being threatened by a secular decline, will continue to stage their fight back: [2017: Shopping malls consolidate (Hammerson buys Intu, Westfield/Rodamco and in the US General growth properties by Brookfield), retail stocks rally and Disney announce a deal buy  media assets of Fox]

For full list see Conviction ideas in the sheet (requires subscription).

If there is not a single stock you like in a sector then , look at ETFs rather than single stocks – there are thousands of ETFs – e.g. XLF, XLE etc. including the BitCoin investment trust – all of which are pension fund eligible.The NYSE also plan the so-called ProShares Bitcoin ETF and ProShares Short Bitcoin ETF which would track the markets for bitcoin futures. Look for a good commodity or materials ETF like the XLB.
Be careful with Bitcoin and BlockChain investments and investment trusts – seek specialist financial advice on these.

Finally, keep your portfolio diversified across sector and geography and have a mix of stable, growth, recovery and speculative plays. If you need some help in constructing your tweet me direct.

Happy 2018 from the 2CentView team.

Themes for 2017

The Brexit Vote and the election of Donald Trump as president of the United States, indicates a shift away from globalisation and towards protectionism.

Globalisation has created a free labour and trade markets, resulting in input prices staying low and inflation staying extremely low. This has allowed Governments to print money to stimulate the economy, following the credit crisis in 2008. This policy has worked to certain extent in the United States – but not really in Japan or Europe. Being a businessman, Donald Trump recognises the troubles businesses have in growing in this environment – which is made worse by over regulation in Industries such as Banking & Energy.

He came up with some simple solutions : cut back on free labour/trade markets and keep production in the US, protect: for example, the Steel Industry from low cost steel available in the US Market from the Chinese, encourage companies to repatriate the $2 trillion in Cash sitting overseas; cut (and simplify) the corporate tax system where some companies pay 38% and others zero; and finally cut income tax. These policies will protect US jobs, achieve GDP growth of over 4% and keep more money in US consumers allowing them to spend more – if you are voter it was no brainer – Trump’s style was the only issue in getting elected and created many doubters – but ultimately people vote with their wallet – they need food on the table more than anything else – just ask the steel and coal workers in the North of America whose livelihoods have been destroyed by cheap Chinese commodities available in US Markets, tariff free!

The polices will create higher Inflation which will result in higher interest rates. 10Y US Bonds have widened over 100bp in a few months. However, if Trump does deliver on his pre-election promises, and inflation stays under control – we could see a rally of 15-20% in 2017.

So the main themes for 2017 are:

Financials – stay long US Financials, they will benefit from less regulation and higher interest rates.

Commodities – a massive infra-structure upgrade spend in the US, with tariffs imposed in imported materials, will see Steel and Copper companies do well – could possibly see an commodity rally in the scale of 2003-2008 when China built it’s infra-structure.

Energy – Oil prices are unlikely go back to sub $30, and possibly go higher.

Technology – Tech will do well as it continues to shape our lives – but now things are getting scary as we see the Introduction of driverless cars and the huge potential of Artificial Intelligence, which could start see computers starting to ‘think’ as the big data combined with ANN (artificial neural networks) start to see commercial applications.

HealthCare – this sector is under pressure to so called ‘price-gouging’ – so out of favour at the moment – but breakthroughs are happening – so do not completely ignore this sector!

Sectors which will remain under pressure are Retail – many retailers are just too behind the technology curve and the industry is fickle, Utilities (which have been purchase as bond proxies as bond yields are so slow.

More on specific companies within each theme to follow.

Happy investing new year 2017.

2CentView team.

2CentView on Trump

How does an apparent xenophobic, racist, homophobic businessman become president? Only in America!.

But now he is president, and his conciliatory tone calmed the market to the tune of a dramatic U-turn in the Dow from being down 800 to being up, what next?

Being a businessman Trump is pro-business, and there is frustration that Obama Administration was not – or not enough.

And If Trump does deliver on loosening regulation – where over regulation is choking the financials and oil industries ; encourages corporations to repatriate and put to work (in investing in infrastructure) the $2 trillion in overseas cash currently doing nothing; cuts corporation and income tax, then this could lead to significant growth in the US Economy which in turn could see some reflation and higher interest rates.

The beneficiaries of this strategy will be US financials – Banks and Insurance Companies, US Commodity companies – oil, steel and copper and Industrials.

BioTechs could also benefit from less focus on their strategy of price gouging.

Markets in the above stocks have already rallied considerably.

The losers would be companies exposed to Obama policies which will be dismantled – such managed health care ( look at Centene Stock).

Amazon is lower – Trump at war with Bezos, mainly over the coverage in the Washington Post, which Bezos owns.

Tech stocks also got sold off – but this could be more on rotation out of growth and into stocks which benefit from Trump’s polices – Financials, Industrials and Commodities. The top tech stocks generate so much in Corporation tax, making it difficult for them to keep growing is not a good strategy – the tech revolution will continue and the US does not want China to become the leader!

Look at the asset allocation in your portfolio and reposition – assume Trump will be successful – he is a winner and wealth creator – not a maverick wealth destroyer – if he turns out to be the latter we are all doomed!

Do not rush out and buy – some stocks have gone up too far too fast ….! More tweets to follow on suggested trades.

For sake of the Planet – let’s hope Trump is a great president!

$AMZN, $FB, $AAPL, $GOOG – why are they all lower post results?

Facebook and Google reported great numbers but the stocks are down….Amazon reported much lower EPS numbers and Apple reported a revenue decline and was blasted by Analysts on the conference call!

Fair Values as follows:

$GOOG = $700 vs $800 $80bn in CASH

$FB = $114 vs $121

$AAPL = $115 vs $109 Yield = 2%, $237bn in CASH [ most of which is overseas]

$AMZN = $500 vs $760

Apple stock had a good run up to $118 because of the Samsung Note 7 total recall [Samsung will bounce back from this set back], however they reported a revenue decline, supply issues with Iphone7 plus and struggling sales in China. The Services revenue grew 24% – which was encouraging, but still small relative Iphone revenues. What was interesting, is that apparently they had some interest in Time Warner, which is being acquired by AT&T – as 2 legacy businesses join forces in a vertical merger – to take on the threat of chord cutting and direct to consumer entertainment.

2CentView maintains a core position in Apple – the last quarter only included one week of iphone 7 sales and a trump victory could see the opportunity to repatriate the $200bn in overseas stock at a low tax rate.

$FB declared another revenue and earnings beat above expectations, MAU now 1.8billion – but the stock went lower – Zuck made it clear that growth [ specifically ad revenue] will slow and the company will invest heavily in Video [ and take on SnapChat!] . The 2CentView fair value of $114, implies 5 year growth around 22% versus consensus of 30%. It is likely the consensus growth will come down and analysts will lower their price targets from $160, which implies 30% growth over 5 years.

So FaceBook unlikely to go above $130 over the next 3 months – consider buying if the stock falls back to $110. 2CentView has always stuck with the Zuck since 2013, and plans to retain a core position (the trading position was sold at $130) as it plans for its next phase of growth.

$GOOG – reported another good quarter. The New Pixel looks good and sold out!. 2CentView has a core position. Stock trading lower – will look to add to the core position on further weakness.

$AMZN – Bezos surprised the street again, as it reported lower than expected EPS as it invests heavily in India and also considering expanding in the Middle East. Amazon cannot be valued correctly using EPS (earnings per share). Bill miller, the legendary VALUE investor, has held a position in Amazon since the IPO – and he looks at Enterprise Value / EBITDA (a metric often used by analysts to come up with price targets) 0- which for Amazon is only 13 in 2018…$MSFT EV/EBITDA for 2016 is 11 – so based on this metric Amazon is not that expensive.

Ultimately, to hold Amazon stock you need to believe Bezos will create one of the greatest retailers (and cloud services) company the world has ever seen – which operates seamless logistics, great customer service, great prices all over the world [except china!].

2CentView doubled its position in Amazon post results – take profit target $880.

Hold at least one of these great stocks in your portfolio. Recent stock price movements are not necessarily company specific but somewhat overall market related due to the US Election, which has seen the S&P 500 go lower for the year, in matter of weeks.

 

 

Move down in the financials is scary! Stick to stops

2CentView is overweight financials on the assumption US And UK rates would go higher in 2016.

This is not playing out as the yield curve flattens and rates go lower and in some cases more negative…as BJ Baracus says in Rocky … the only result is pain! [But great for the property portfolio!]

In such situations you need to stick to stops – as some commentators talk about a potential 2007 style credit crisis! – the CDS Markets is certainly NOT saying that so perhaps the down move is overdone… but you cannot the fight market if it continues to go lower.

Cut or trim positions when stops are hit … and look to buy back lower…

2CentView SectorViews – Update

A horrible start for stocks in 2016 as china stock market crashes again and oil prices dip below $30 and the $ gets ever stronger.

2CentView down 9% on the year as Financials get hit hard – the yield curve has flattened as the market prices in the prospect of a global recession and low interest rates for even longer.

Sell positions which are not working or hit stops.

However , this is the precise time to Look to buy QUALITY Companies at discount prices! This is the chance to buy stocks you always wanted but were too expensive! Be greedy when others are fearful, and fearful when others are greedy.

No need to rush in though – take your time and be selective. Market will continue to be volatile with negative sentiment until oil finds a bottom.

No Partner on Valentines day ? Well get yourself an invisible one and prove to your friends…

https://invisiblegirlfriend.com/ – Gives you real-world and social proof that you’re in a relationship – so no embarrassing – ‘what you are doing on Valentines day’ worries anymore – you can prove to your friends that your girlfriend just wants to dine in or go to that special restaurent….as you will have a text to prove it…

For 24.99 a month you get texts, phone calls emails etc… from a girlfriend – just as you would in real life! I wonder if you can decide what she looks like and demure – like in total recall!

great for:
Soldiers abroad with no girlfriend
Busy workalcoholics who when they meet friends feel not having a partner makes you a weirdo!
Computer Geeks – do you really think nerds date amazing blondes like in big bang theory
Anyone who wants to make their ex jealous…

– in 3 weeks 50,000 people have signed up in 3 weeks – you do the math!

Why has 2CentView – which normally talks about fair values, price targets and catalysts – blogged about invisible girlfriends? – because it is a great IDEA and great ideas can make money!

Xiaomi raises $1.1bn in ipo – valued at $45bn!

2014 has the start of a real challenge to the US Dominance in Internet and Mobile.

The first few companies like RenRen and SINA have not been successful – but $BABA was the largest ever IPO to hit the US and is widely held by US Hedge fund managers and respected as a company which can start to challenge the likes of Amazon.

Will Xiaomi challenge Apple? – it may first take on Samsung which is the dominant player in Asia before it starts getting any traction in the US – but more and more Chinese companies are starting to see their market caps grow – tencent, baidu and vip shop have had great years in 2014.

Now foreign investors can invest in Mainland China – worth looking at one of the following ETFS:

CHNA – up 54% (powershares)
ASHR – up 47% (db x-trackers)
PEK 41% (market vectors china)

$JCP (JC Penney) what retail investors dont see and why you should avoid..

Retail investors are at huge disadvantage when deciding whether to buy a household name stock like $JCP.They make their decisions on the basis they may like the store – the stock has sold off from recent high of $11 and this could be a bottom…and the fact that Equity Analyst do not give insight into the debt side of the company.

Professional investors and hedge funds look at short interest, credit default swaps (debt situation) and earnings over the next 5 years..
ALL these 3 indicate the market is not convinced right now $JCP has future – the default swaps have widened 200bp since the Sep 2nd high of $11, short interest has been increasing gradually and future EPS forecasts show EPS being negative for the next 5 years….

If CDS continues to widen then this could indicate $JCP could be another $RSH — 2CentView is stay clear of it for now…and wait for the Credit market to become bullish first…