It's clear that buy on dip doesn't work as well as it has over the past couple of years. Perfectly agree that you can buy risk from levels further down: staying liquid, defensive and downsizing is the best you can do now. This liquidity is great for traders if you are patient and light on exposures!
Another 1st in class feedback Mr Blonde. Especially the defensive high quality growth vs cycles point.
Would only note the valuation decompression deleveraging of software names w/ 3sigma oversold signal u mentioned also includes a list of 1st in class super margin ( >25%) & growth defensive names just to name a few like 👍 IDEXX, ETSY, or even Intuit.
Time to add I guess ‘cuz they’re down 30-50% from their ATHs already but, then I saw that his crazy market risk Twitter post chart from @cullum Thomas on P/S ratios over time ( 1994).
Then all my buy now post 1st leg down inclination melted into ok…..let’s wait a little while to add more to the party. 😂
p/sales higher but FCF margin much higher across the market, cost of capital lower and in some areas, like software, recurring revenue high which lowers volatility of growth. for example, software stocks are like new economy consumer staples...stable revenue growth but much higher margin profile without commodity price inflation, etc.
i think only looking at valuation without also considering quality, volatility and compositional changes can be misguided. no doubt asset valuations have expanded and in absolute terms are expensive...but that is true across all markets. we have difficult choices to make...my bias is to favor the resilient ones with profitability. often times you get what you pay for
yes, sticking with shorts in retail (XRT) and housing (ITB). i did dial back XRT last week given peak/trough relative move of -20%, but will reshort on rallies.
rotated toward ITB and some broader high beta exposure like SPHB as i think next big risk is fading PMIs.
XRT/SPX has retraced 50% of its up move...will ultimately retrace 100%...just not in a straight line
It's clear that buy on dip doesn't work as well as it has over the past couple of years. Perfectly agree that you can buy risk from levels further down: staying liquid, defensive and downsizing is the best you can do now. This liquidity is great for traders if you are patient and light on exposures!
Another good piece, thank you!
Yup. Estée Lauder u L’Oreal come to mind 🙏👊
a list of names to consider here:
https://stuckinthemiddle.substack.com/p/high-quality-growth-compounders
i will also refresh this week the list of "quality value" that was offered here:
https://stuckinthemiddle.substack.com/p/thoughts-and-trades
Another 1st in class feedback Mr Blonde. Especially the defensive high quality growth vs cycles point.
Would only note the valuation decompression deleveraging of software names w/ 3sigma oversold signal u mentioned also includes a list of 1st in class super margin ( >25%) & growth defensive names just to name a few like 👍 IDEXX, ETSY, or even Intuit.
Time to add I guess ‘cuz they’re down 30-50% from their ATHs already but, then I saw that his crazy market risk Twitter post chart from @cullum Thomas on P/S ratios over time ( 1994).
Then all my buy now post 1st leg down inclination melted into ok…..let’s wait a little while to add more to the party. 😂
p/sales higher but FCF margin much higher across the market, cost of capital lower and in some areas, like software, recurring revenue high which lowers volatility of growth. for example, software stocks are like new economy consumer staples...stable revenue growth but much higher margin profile without commodity price inflation, etc.
i think only looking at valuation without also considering quality, volatility and compositional changes can be misguided. no doubt asset valuations have expanded and in absolute terms are expensive...but that is true across all markets. we have difficult choices to make...my bias is to favor the resilient ones with profitability. often times you get what you pay for
Once again, you've outdone yourself! Brilliant content as always. I didn't realise BTAL existed, wish I jumped on that late last year.
Still favouring short positing in retail and housing?
yes, sticking with shorts in retail (XRT) and housing (ITB). i did dial back XRT last week given peak/trough relative move of -20%, but will reshort on rallies.
rotated toward ITB and some broader high beta exposure like SPHB as i think next big risk is fading PMIs.
XRT/SPX has retraced 50% of its up move...will ultimately retrace 100%...just not in a straight line
Brill, thanks for the quick response 🙌