Hugo Angelo Lucien Manenti
Edited
Hello everyone, It seems that Santa was a bit late this year (supply chain issues?), but we still got our rally in time for Christmas! Hopefully we can carry on until the end of the year and generate over 20%. Let’s do a recap of what happened since my last post. 𝟭. 𝗖𝗼𝘃𝗶𝗱 Data confirms the view that I expressed in my last two posts. Omicron is indeed very contagious, evades immunity, but generally causes mild disease (unless you are part of the at-risk and/or unvaccinated population). Markets dropped sharply due to Omicron and Fed policy concerns, and rebounded nicely as data confirmed that it won’t be as bad as initially feared. As usual this year, small caps and cyclical stocks took the worst hit, but have since recovered. There seems to be a good chance that Omicron will be the last bad wave of covid. By the time it ends, the vast majority of people will have built immunity against covid, through either vaccination or infection. Covid isn’t going away, but it is increasingly likely that it is the last time that harsh restrictions are put in place. It is clear that Delta and Omicron have been setbacks for our strategy, but thanks to those developments I feel as confident as ever about our portfolio's prospects. I can highlight companies set to rebound such as Corsair, Levi’s, Abercrombie, Asos, Porsche, etc. 𝟮. 𝗠𝗶𝗰𝗿𝗼𝗻 𝗧𝗲𝗰𝗵𝗻𝗼𝗹𝗼𝗴𝘆 $MU (Micron Technology, Inc.) It is maybe worth repeating my investment thesis here: (1) memory demand is set to increase by about 20% p.a. on the back of several trends: automation, electric vehicles, artificial intelligence, big data, etc. and (2) memory supply will be limited by the fact that the sector has become an oligopoly where actors behave rationally, ensuring strong and stable prices. Given the above, I viewed Micron’s valuation of 8-9x EPS as way too low. It has been our largest position for over a year, and some questioned it given the drop in share price between April and October. I maintained that the drop was not justified by any fundamental reason, and took advantage of it to increase my position. It turns out that we were right. Q1 results slightly ahead of expectations, Q2 is guided slightly higher, and the fear of lower prices / over-ordering was entirely unjustified. 2022 will be a record year for Micron, with strong growth and profitability. Share Price is up 40% since the lows, and it still has ample room to grow. 𝟯. 𝗢𝘁𝗵𝗲𝗿 𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗺𝗲𝗻𝘁𝘀 Worth mentioning the good performance of homebuilding stocks, with $BLDR (Builders FirstSource Inc) hitting another ATH this week. We made a video highlighting the opportunity there – even after a great run: youtu.be/_-eZ2H3dlFs $NVAX (Novavax Inc) received EU and WHO approval but sold off on the news… sentiment has been negative for vaccine makers as Omicron proved less severe than expected. My view is that although covid is likely to recede from here, half of the World is still unvaccinated, 95% haven’t received a booster, and at-risk populations (over 60 y-o and others) will likely need an annual jab. So plenty of opportunities. Data shows excellent effectiveness against variants, as well as the best tolerability profile (limited secondary effects). In addition, logistics are much easier than MRNA vaccines. Novavax looks set to win a good share of the vaccine market. CONCLUSION Fair to say that Delta and Omicron delayed the rally that I was expecting, especially for our stocks, but we can look ahead with more optimism. 2021 was still fairly positive, and 2022 shouldn’t be bad either. Finally, let me wish you all a merry Christmas (if you celebrate it) and happy holidays. It’s been another testing year, but now is the time to relax and take care of ourselves! So please all take care, stay safe, and try to enjoy the holidays! Now time for me to close my laptop and prepare my World-famous 𝘨𝘯𝘰𝘤𝘤𝘩𝘪 𝘢𝘭 𝘳𝘢𝘨𝘶. Cheers, Hugo $SPX500 $NSDQ100
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