It’s been a wild few weeks for Mr. Market since my last update. In this post I’ll go into moves I’ve made, trends that seem to be emerging, and things I am looking for over the remainder of 2020.
The great unwind
It’s pretty interesting the dichotomy between most people on my Twitter feed and, like, “the rest of the people I interact with on a frequent basis”. Judging by my Twitter feed alone, the rotation out of tech into “value” and specifically “energy/oil” is virtually a guarantee and it’s only a matter of “when”. Similarly, based on the feed, the incredible pumping of anything tech or electric car related is a giant bubble just ready to be popped. However, in interacting with “real-life people” - almost all of them are chasing the hot tech plays (Fiver, Etsy, DKNG, NIO, Tesla, etc.). It’s fascinating to watch the stocks go up 40%, stall a bit, have a 5% pullback and see all the “oh wow what a buying opportunity” posts. It really feels like the thinking is completely divorced from any sort of objective valuation and is literally just “is the price lower than what it has been recently”.
That said, the more I think about the market, and the more I look at the “tech” stocks the more red flags I see. Similarly, the more I look at boring “energy” stocks the more upside I see (hint: everyone worrying about peak demand should be worrying about peak supply).
Now, Stonks go up, I get it. But when looking at something like $NCNO (I work in the space so its the one I maybe kind of understand) they are trading at something like 35 times revenue while continuing to lose money. The chances they can continue to grow into that valuation seems...low? I am sure there are examples of better 'value' but everything just feels extended. And look, a true correction will probably never come because so much of everything is just driven by passive fund flows and machinations I don’t totally understand (and the money printer goes brrrr). However, when I look at trying to pick individual stocks - even those bearish on tankers see a double in the next 3-4 years - will Amazon be at 6K by then? Will Tesla be at 1,000? Maybe, but I kind of doubt it. We have begun to see things wobble a little bit - no one knows what the catalyst for a big correction will be - but it is within the realm of possibility.
Alpha Pro Tech is a manufacturer of disposable protective gear. Not a terrible business to be in during a pandemic. Currently trading around $12, I think there is solid 2x upside here given the incredible demand for N95s. Demand for protective equipment is forecasted to not even begin stockpiling until 2022 and likely will last for a few years after that. I didn’t do a ton of due diligence on the math in this post, but it generally lays out the bull case well.
I figure on this one, if I am wrong, it likely means the pandemic is over and we don’t have nearly the need for PPE. Which, if that happens, so be it, that’s a giant win for “life”.
My grand aspiration was for $BMYRT to hit thus netting me a nice 3-4x which I could then immediately roll into $MACK for another similar play. Unfortunately, $BMYRT isn’t shaping out so well, so I’ve just been slowly establishing a position in $MACK when I have some extra funds. With no real catalysts seemingly in the very short term, not in a huge rush, but want to keep growing the position of the next 3 or so months and will then hold as we head into 2022/2023/2024 when things should start getting interesting.
Whenever Kuppy lays out a small cap on Twitter I try to grab some if for no other reason than to catch the Kuppy bounce. Not a big position, but didn’t have much cash sitting around. Another Crypto play to add to the basket.
My first ever purchase of cryptocurrency was on January 10, 2018 in a random Uphold account I had opened. I spent $100 buying .07 of an Ethereum coin. At the time, Ethereum was trading at $1,347. Over the subsequent roughly 9 months I invested $2,450 in a combination of BAT, XRP, and ETH. After being down over 50% it is now hovering around break even. Yay. Since that time, I purchased a decent amount more $ETH within my Robinhood account for a total of 16 coins at an average cost of ~$180. However, I’d always been hesitant to jump into the mother ship, $BTC, likely because the cost per coin just made it seem so expensive. However, with a position in $GBTC and now adding slowly to $BTC I continue to attempt to bump up my crypto exposure.
I am becoming more convinced in the next month or two this is going to see a breakout. Vaccines are a ways away and we will likely need Covid therapeutics for awhile even once the vaccines start rolling out. Most everything approved at this point is pretty worthless. Regeneron probably has the best drug - but it has nowhere near the supply needed. Working with NIH, Barda, and Operation Warp Speed - I think this has a good shot for emergency use approval and could run like crazy if so. Adding to my position when I can.
Just adding here and there while below $5. Longer term play, but seems undervalued given most everything I see on Twitter/read.
Sigh. If you read my previous post you will know I was pretty big in $BMYRT. It represented a large portion of my Biotech allocation. Unfortunately, the PDUFA date came and went without a decision from the FDA. Although the FDA was able to inspect the plant in Bothell, WA - they have thus far been unable to inspect a plant in Lonza, TX - which is required in order for the FDA to approve. My cost basis was $2.80 and I have sold lots at $1.75 and $1.10. Ultimately, it came down to “I could remain stubborn and hope for the best, or I could have somewhere around $7,500. I chose the $7,500. I have 2,000 shares remaining. Recent tweets from the head of the FDA have raised hopes moderately we may have an approval by 12/31, but I am not holding my breath. I think my biggest takeaway from this is to be constantly evaluating my positions. Heading in to the conference call where $BMY notes there was no inspection scheduled for Texas the stock was hovering around $3.25 or so. On Twitter there were many threads wondering what would happen to the stock price upon full approval of Liso-Cel with many thinking we might see a bump to between 4 & 5. Knowing that it was unlikely $BMY would give away any good news that close to the PDUFA it likely would have been prudent to take some off knowing that the downside of any negative commentary would dwarf the upside. Alas, you live you learn.
This was a winner thanks to Sheep. Unfortunately, my position was far too small so it didn’t really move the needle much. Basically a double though, so I’ll take it. That said, I read somewhere (twitter, naturally, but can’t find it so apologies for the lack of attribution) “the only thing worse than being wrong, is being right without the proper position size”. A good reminder for me that given the aims of this portfolio - much better to make big bets with conviction versus diversifying away any potential large gains. I’ll say it again: diversification is the key to maintaining wealth, concentration is the key to building it.
I had a small position in this, but ultimately didn’t have the conviction I actually understood the details of how everything would shake out (now in bankruptcy and I still don’t totally get the waterfall) and decided to put the money elsewhere. Perhaps I will spend more time on this in the future, but for now decided to reallocate to other plays.
$240,664, balance. 16% to goal.