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.
So a few ideas this week. Well, a hurricane of them. Seriously. I’m like Jan de Bont’s 1996 seminal masterpiece Twister, but with inherently stupid markets stuff, instead of the inherently stupid meteorological stuff.
Firstly Facebook is hands down, pants down, money down THE best short in the world right now.
I rarely have conviction (because markets are inherently stupid) but I’ll stake a fair amount of my deep reservoirs of reputation on Facebook being lower in the next few weeks.
Here’s why…
Then read the thread Jason posts.
It details a litany of alleged company-killing scandals. He knows of what he speaks to, trust me.
Sandberg’s signature is apparently underneath most of these scandals, like using FB’s market power to interfere in country’s news organisations, insider trading, fraud, all that nonsense that happened here along with a host of things still to come from the 2020 Insurrection attempt.
All allegedly of course but there’s more bad news than good news. Keep in mind too, that Apple basically destroyed their whole business model with the inclusion of the “allow app to track?” button.
I’ve gone long puts in FB and I hate buying premium. Loathe it. But when you have conviction that’s what you do.
I went long China again last week after going on the talking box and upgrading the “New Economy” from Un-uninvestable to Investable.
A few weeks prior I had upgraded China from Uninvestable to Un-Uninvestable and was resoundingly beaten up for some great wall-sitting.
I went long CNEW as opposed to KWEB mostly on valuation purposes.
CNEW is the China New Economy ETF listed here and managed by the Van Eck crew. They’re okay.
It has some stocks you wouldn’t have heard of and they’re all listed in China so you avoid any “SEC risk” which I believe still overshadows a few US-listed Chinese names.
From a “let’s buy value” standpoint it has the right sectors:
For the year just gone the P/E is 15.5x which is adequate and a Price to book of 3x which is… fine.
KWEB which contains more of your household China tech names (JD, Tencent, Alibaba etc) trades about 25x price to earnings.
It all forms part of my thesis that China absolutely only has one way to go from here: either through reopening by defeating Covid or loosening of Covid Zero restrictions. The springboard that happens as either of those (or both) becomes reality is massive. Xi needs to cement another five years in power in a few months so it’s all heading towards a boom of a reopening.
There isn’t enough copper to go around either. Copper futures have formed a candle that was great and now is questionable.
I’d be buying any dip on copper for the rest of the year as the shortage becomes more pronounced.
My preferred direct strategy to do that is through COPA which trades in London. It’s an exchange traded commodity backed by swaps in the copper market.
Aside from that there’s always BHP (ASX:BHP) which is a great way to gain exposure while collecting a healthy divvy too.
I’m doing some work on the copper shortage but it’s plain to see we’re heading that way this decade. Nothing I write will be better than anything already written there.
All the best and stay safe,
James
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