FREE WHELAN: It’s the little luxuries that add up
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In this Stockhead series, investment manager James Whelan from VFS Group offers his insights on the key investment themes and trends in domestic and global markets. From macro musings to the metaverse and everything in between, Whelan offers his distilled thoughts on the hot topic of the day, week, month or year, from the point of view of a professional money manager.
Quick review on our “Long NVDA on the back of Nancy Pelosi’s front running her own support of a $52bn chips bill” and it’s pretty good.
Entry on Monday night and it rallied as far as 8% before coming back a little bit on Friday with the rest of the market. Congress has agreed to vote on the bill supporting funding fabs and R&D so it’s off the races for semis.
Nancy was right that Congress would get behind it. Her insight is unparalleled. How would she know that this exact thing would happen from her position of *checks notes* Speaker of the House?
We’ll be following it. Like I said, happy to hold either because of the funny money heading their way and also because it’s a name high on the list of Quality stocks.
When I say it’s going to be a big week I’m not understating that.
weekly #earnings https://t.co/lObOE0dgsr $AAPL $AMZN $GOOGL $MSFT $META $SHOP $UPS $BA $XOM $KO $F $ROKU $TLRY $GM $QCOM $PFE $GE $V $CVX $MCD $BAX $INTC $ENPH $SPOT $INFY $RTX $PHG $VLO $CL $LUV $MA $NEM $HOLX $ADM $SQSP $MO $TDOC $MRK $X $WM $PG $ACI $BTU $CMG $NXPI $DORM pic.twitter.com/H5reFzEm0j
— Earnings Whispers (@eWhispers) July 23, 2022
Coke, Maccas, The Google, Visa, The Facebook, MC, Altria, The Amazon and more.
If the biggest companies in world history announcing results isn’t enough for you, add in US New Home Sales, Aussie CPI, US Durable Goods, US GDP and The Fed raising by 75 basis points.
If you want to take a big position in the market before this is ahead then you’re a better man than I am, Gunga Din. Maybe wait until we’ve had a look at outlook, know if the Fed need to stay as aggressive and also know if there’s still money flowing into equities like last week.
The fact I’m steering clear of the States this week and I’m only monitoring NVDA means I still need something to talk about.
We added to Quality last week in smalls. For most clients this was a rare averaging down of positions which for me is not something I do lightly. But I am still very much of the opinion that when the dust settles on whatever all this is we will see a natural flow into names that provide high ROE, stable yoy earnings growth and have low debt.
The other space I’m adding to is the long end of the bonds space. 10-30 years out. I think expectations for yields that far out are declining so you can pick up some OK income and perhaps some capital appreciation as yields drop.
GGOV is run by Betashares and has a 20+ year portfolio of G7 countries bonds. Brings in a little over 3% p.a.
AGVT (again Betashares who probably owe me a beer now) with 7-12 year AUD bonds. 2.23% p.a.
I just feel that going into the next few months we’ll see a relaxation of expectations in where rates are heading. The market will have fulfilled its own slowing prophecy and done the job for the Fed.
We look forward to welcoming the return of the 60:40 portfolio, in part at least. This chart was put together by Morgan Stanley over the weekend and I draw some confidence from this that portfolios can be made “whole” again.
At the time that I said it when calling for higher rates at the end of last year (and getting attacked pretty hard for it) I mentioned the peace that it offered super funds to be able to have a proper allocation into bonds and also meant people could have achievable returns at lesser risk (the goal for us all).
This warms my heart.
In other news I’m looking at European luxury companies which have been tipped to have the best leverage and most upside to the Chinese reopening trade we’re all waiting anxiously on.
Current contenders are the SSGA one, code STR listed in Paris, the iShares one ESIC listed in London or just going direct into LVMH (Moet Hennessy Louis Vitton SE) in Paris and being happy with the diversity that single name provides.
The ETFs carry a P/E of about 12x. Happy there. This time next week I’ll be long one of those.
Of course there’s this which gives me some pause…
All the best,
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