There’s no way to sugar coat this, but my portfolio is down big over the last two weeks.
There are three reasons.
Rotation Out of Growth Stocks
Okay, let’s have a bit of perspective. The cruise line industry is grounded. Carnival Cruise Line (CCL) announced that it will not sail before June 2021.
Is there money to be made in the sector? Considering that RCL, for example, was down 36.9% last year it is a fair assumption that the stock has nowhere to go but up. Even so, the cruise line industry underperformed the broader market even before the pandemic.
Amazon has a 32.64% upside over the next twelve months while Royal Caribbean Cruise Lines has a 20.42% downside.
It should be noted as well that cruise line stocks have moved higher because the GameStop (GME) crowd are betting on the sector. Outside of a headline there are no technical reasons to speculate on these companies. GameStop, by the way, has an 85.42% downside over the next twelve months.
Treasury yield rose to its highest level (1.614%) since February 2020. Bond prices move opposite yield which caused the bond market to retreat. Higher yields make stocks seem expensive particularly the soaring tech stocks which gave back about 5% last week. Because my portfolio is heavily weighted towards the tech sector those positions were hardest hit.
Gamblers Are Causing Volatility
Charlie Munger, vice chairman of Berkshire Hathaway and Warren Buffett’s close partner said last week:
“It’s really stupid to have a culture which encourages as much gambling in stocks by people who have the mind-set of racetrack betters … It’s a dirty way of making money.”
Munger was referring to the social media inspired Robinhood investors who have been bidding up the price of meme stocks like GameStop and AMC Entertainment (AMC).
Robinhood spokeswoman Jacqueline Ortiz Ramsay wrote in response to Munger:
“To suggest that new investors have a ‘mind-set of racetrack [betters]’ is disappointing and elitist. It should be celebrated that we are seeing market investors begin to diversify, and that education and awareness about the values of investing are diffusing further into previously untapped generations.”
Except that the volatility seen in GameStop is speculation not investing. Shares are bid up one day and sold the next. It could almost be compared to a Ponzi scheme. If a trader is on the wrong side of the curve they could lose a lot of money.
Congress and the SEC are investigating, but my opinion has always been that speculative trading — including short selling and options — should be illegal. This type of activity wreaks havoc on long-term buy and hold investors like me.
Last week presented an opportunity to buy stocks on sale. I added seven new positions.
Nvidia (NVDA): I sold this stock last month because it was underperforming. The company crushed its earnings and revenue estimates last week, but the stock went down. I bought the shares back on falling prices. They closed Friday up $16.28 (+3.06%).
Novavax (NVAX): I owned this stock last year when it was competing with Moderna (MRNA) to develop a Covid vaccine. Both stocks fell after preliminary test results were mixed. Shares had been up about $8,000, but I sold NVAX at a loss while MRNA was reduced to a modest $400 gain.
Etsy (ETSY): This stock was on my watchlist last summer when shares were priced around $70. I wanted to buy, but there were other opportunities. The stock closed Friday around $220. Big mistake to let this one slip by. Etsy is an online platform for selling arts and crafts. Amazon features an arts and crafts marketplace, but Etsy was already established.
Disney (DIS): I wanted to buy this stock at $150, but dropped the ball. At $200 it was not a buy, but shares dropped within the buy zone last week so I added a position. I sold Disney last summer after it had gone horizontal over the short term due to a period of consolidation.
Skyworks (SWKS): I owned this stock last year in anticipation of the 5G rollout. Shares have doubled since I sold. SWKS provides semiconductors for mobile communications systems. There’s lots of money to be made in 5G.
Maxlinear (MXL): The company, like SWKS, is engaged in the 5G semiconductor business. I never heard of this company until Friday when all of the technical indicators began flashing green. 100% Strong Buy according to Bar Chart.
TechTarget (TTGT): Investor’s Business Daily ranks this stock #1 on its list of Hot Growth stocks. The company engages in Information Technology.
My portfolio as of the end of February 2021 is displayed in the graphs below. Stocks are listed in order of market value beginning with Tesla (TSLA). Note that I took heavy losses in Tesla (-15.13%) and Invesco WilderHill Clean Energy ETF (PBW) (-15.35%).
However, I had previously cashed out of Tesla after it had gained 127%. The new position has been hit by stock rotation, rising yields and the company’s investment in Bitcoin.
PBW was already up 160% before Biden took office. It should continue to outperform as the new administration is favorable to the sector.
The two Nasdaq ETFs are down because they are heavily weighted in the tech sector which sold-off last week.
Just added Novavax releases their quarterly earnings report on Monday, March 1st. We should learn from the conference call if their Covid vaccine is effective in late-stage trials. Studies are behind in the United States, but positive results from the U.K. and Mexico could prompt the FDA to issue Emergency Use Authorization. Also, the company is further along in developing a vaccine for mutated strains of Covid. The stock is up 116% since January. Big mistake to sell last summer.
Investing involves substantial risk. Past performance should not be considered indicative of future performance. No reader should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research. SOAR does not offer licensed financial advice and is not liable for investment losses that may be incurred by the reader. This article is informational only and not a solicitation or offer to buy or sell any securities. Reader is wholly responsible for their personal investment decisions. The author has no position in RCL, CCL, GME or AMC.
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