Investing / Holding / Selling / Rebalancing

[Basil]

Cautious optimism is my phrase of the day     When you've been round the block a few times, it all starts to look a bit familiar LOL

I would like to say thanks to Cathie Wood and her ARKK fund.  Its been the best market barometer I have found. I've been watching the stocks within it slowly cruise through their 50 and 200 day MAs.  As more of them did it, I got more optimistic and bought more stocks.  It pays to remember that an index, particularly one that is market cap weighted, is a lagging indicator.  One has to watch what the duck is doing under the water, not above it, to figure out if its going to go anywhere.  High growth stocks like biotech started falling in Feb 2021, so they have been in a long 19 month bear market, and the capital destruction of individual stocks has been 80-90% in many instances.  The Nasdaq is useless now because all it really tracks are Meta/Alphabet/Microsoft/Apple/Amazon/Tesla. By the time it turns, most of the good gains in the smaller stocks will already be done.

Great post but I don't think we are out of the woods yet, (you see what I did there), with some of the no earnings tech stocks in her AARK fund.  In any event those sort of stocks are not the pond this old mutt likes to swim in.  I don't think I am there yet with the "cautious optimism"...I'm more like a dip a couple of claws of one of my paws in the water and see if one of them gets bitten off.

[KW]

Great post but I don't think we are out of the woods yet, (you see what I did there), with some of the no earnings tech stocks in her AARK fund.  In any event those sort of stocks are not the pond this old mutt likes to swim in.  I don't think I am there yet with the "cautious optimism"...I'm more like a dip a couple of claws of one of my paws in the water and see if one of them gets bitten off.

Not talking about buying ARKK stocks, I am talking about tracking market sentiment towards growth stocks of which the ARKK stocks are nicely representative, so you can tell when the smart money starts flowing into stocks again, and what type of stocks.  The big leaders in the ARKK resurrection are the biotechs, so that's what I'm buying on the ASX.  TLX, PNV, NEU.  Although I did pick up one ARKK stock - CRSP as its a beautiful chart :-)

[Shareguy]

I feel the market turned last month so have been deploying surplus cash. Now at 90 percent fully invested. Mainly into US stocks Apple,Alphabet,Amazon and PayPal. All are well up especially PayPal which seemed very cheap at the time and wish I had got more. In NZ have added more Ryman,Fph,Sum,Mft and Pph.

10 percent of my portfolio is "punts" which are very high risk . So doubled down on Pacific Edge.

[Shareguy]

An insert from Pie funds newsletter today

Last month I wrote how July has produced positive returns for the Nasdaq every year for the last 14 years. Well July 2022 didn't disappoint, making it 15 from 15, which is quite remarkable. What's perhaps not so remarkable
is that the market staged a significant comeback after smashing negative record after record in the first half of the year. Why is this not surprising? Because the level of pessimism was reaching extreme levels in late June/early July, and even bear markets can have quite big rallies.
Was that the bottom?
The question that's on every investor's mind after a move like July is, 'Was that the bottom?'. To answer that question I've looked at 10-year bond yields, inflation, Fed guidance, investor sentiment, liquidity and recession predictors. Here are my findings.
1. Bond yields. Look to have peaked mid-June. Positive.
2. Inflation. Also looks to have peaked mid-June. Positive.
3. Fed guidance is "meeting by meeting" so the market is forecasting a peak another 75bps higher, then a hold. Improving.
4. Investor sentiment. Hit extreme bearish in July. Positive.
5. Recession predictors. Getting close to contrarian pivot. Positive.
6. Liquidity. The Fed is removing liquidity. Negative.
Based on the above, there is a chance that July could be the low. However, we are happy to hold cash at current levels given we have just had a strong rally, and we need some more data points to plot a trend. Despite this,
I suspect many may ask, why we didn't move to fully invested in July? Without stating the obvious, we cannot predict the future. Markets have been treacherous this year so the prudent thing is to be cautious. It's not the time to be a hero. Since the early part of 2022, we have raised cash, reduced risk, and moved to more defensive growth names.
What is remarkable, and proves my point, is just because we are positioned defensively doesn't mean we can't perform. The returns for July were achieved with cash
at around 20-25% and a market short on, in some cases bringing the net position to only 70% invested. When I was managing the Growth 1 Fund (now our Australasian Growth Fund) for nine years, the average cash weighting was over 30% during that time period and yet the fund returned around 20% p.a. after fees.

[KW]

On the "not the low" side of the argument is
7.  We have not seen the latter stage of a bear market, that of "despair".  This is usually the "I'm never buying stocks again" stage.
8.  Its the nature of the market to suck in as many suckers as possible before positively reaming them a new one, which is why they are called "Sucker Rallies"
https://www.investopedia.com/terms/s/sucker-rally.asp#:~:text=Sucker%20rally%20is%20a%20slang,the%20price%20heads%20lower%20again.

Best strategy to follow is to buy stocks that have strong momentum and then put tight stops on them to protect profits.  Cut losses quickly on non-performers.  Live to fight another day.

[arekaywhy]

agreed, I'm waiting for #7

[Shareguy]

Looks like inflation peaked in US. Dow up. I'm picking onwards and upwards.

https://www.cnbc.com/2022/08/10/consumer-prices-rose-8point5percent-in-july-less-than-expected-as-inflation-pressures-ease-a-bit.html

[Basil]

Looks like inflation peaked in US. Dow up. I'm picking onwards and upwards.

https://www.cnbc.com/2022/08/10/consumer-prices-rose-8point5percent-in-july-less-than-expected-as-inflation-pressures-ease-a-bit.html

Hope you're right.  There's plenty of value in our market.

[mcdongle]

So only an 8.5% rise   

[arekaywhy]

Looks like inflation peaked in US. Dow up...

or...did they re-define inflation? *chuckles to himself*

[KW]

Looks like inflation peaked in US. Dow up. I'm picking onwards and upwards.

https://www.cnbc.com/2022/08/10/consumer-prices-rose-8point5percent-in-july-less-than-expected-as-inflation-pressures-ease-a-bit.html

Peak doesnt really matter.  It just means we probably won't end up like Venezuela or Turkey (which I suppose is a good thing though).  What matters is what level does inflation settle at?  Entrenched inflation of 5% for years is worse than a rise to 9% and then a drop back to 2%.  At 5% inflation we are all still in negative real interest rate environments, which is stimulatory and therefore inflationary. 

[Shareguy]

Jeremy Siegel says the June low was a market bottom

You can count Jeremy Siegel among the group that is feeling more bullish about the U.S. economy and the stock market after the July economic data releases.
Quote from CNBC this morning

The Wharton professor said on CNBC's "Squawk Box" that he is growing more confident in the Fed pulling off a "soft landing" and that stocks appear to be on solid footing after a rough start to the year.

"I think the market has it right here, I think June will be a bottom, and I think the second half of the year will be quite good," Siegel said.

[KW]

Looks to me like stocks are rolling over now - many hit their 200 day MA and then failed at that resistance (along with the Dow and S&P).  Biotech stocks that were the first out of the gate in the rally are now on their way down again. I'm locking in profits, and cutting losses.  Starting to look like a classic bear rally in the end. 

[Basil]

I think the tech rally is a bit overdone.  S&P500 on a forward PE of 18 feels like close to the top of a new range to me.  Not chasing stocks on these level unless fundamentally they make a compelling case for themselves.

HGH on a forward PE in the mid 11's with their track record at placement price of $1.80 is compelling.
SUM, arguably one the best growth stocks on the NZX on a forward PE of just 13 is compelling.

[Basil]

Results round-up  https://www.goodreturns.co.nz/article/976520687/the-latest-results-season-has-proven-better-than-feared-what-does-this-mean-for-the-outlook-for-nz-stock-market.html?utm_source=GR&utm_medium=email&utm_campaign=GoodReturns+Market+Report+for+2+Sep+2022