Short Note re: our Stock Positions
Dear LPs:
This is a quick note meant to serve as a precursor to a 2nd note for later today or tomorrow, where I'll run another code-based analysis for something that I now discovered to be very positive for our stock positions. I know the -41.5% number attributed to in my last newsletter might have unnerved some of you, and you might be thinking what it is that I see that makes me relatively calm and confident to weather this storm. I have something that will calm you more than anything I could say.
Analyst Ratings are a measure of what the main analysts on Wall St. think is the true value of each individual stock. Typically, one analyst at a top bank covers atmost 3-4 stocks or the main stocks within one particular sector. For each stock, the scale goes (bearish to bullish) - Sell, Underperform (moderate sell), Hold, Outperform (moderate buy), Buy.
I just happened to go back and look at the analyst ratings on each of our 8 stock holdings within my brokerage account, and was quite pleasantly surprised to realize that all of them had a Buy rating on them, with the Price Target much larger than the entry point for each, which is not inconsistent with the July simulation I had run.
In other words, the true value of each is much much higher than what it is now and hence it's simply a matter of time till we get there. Also note that while these 8 are direct stock positions, 4 of our remaining 9 positions are all stock-based ETFs, 2 of which are directly proportional to the stocks we already own. In other words, those ETF price target ranges too will be comparable in uptick to what the corresponding sectoral stocks we own suggest.
Anyway, this is a practical signal to support my continued bullishness on our positions. In my analysis, I'll hold conservative price targets for the other positions (similar to July) except for these stocks (determined by their respective Price Targets), and run a code to show you the expected returns. I'm just interested in ensuring that you do not worry too much about this recent run of events, which is an abnormal liquidity-led problem and not fundamental. It's been keeping me up at nights and the least I could do is communicate effectively so you don't lose sleep.
Finally, the bond markets in the UK are finally stabilizing as of this morning with the new Chancellor gutting the proposed tax cuts program, which has slowed down Dollar's rise as of right now. I'm telling you this kind of an intervention will happen here in the US too at some point, and when the Dollar stops strengthening, that's when this artificial dampener on our market positions will lift. Earnings thus far for Q3 have been just fine and not ugly, and earnings will possibly surprise on the upside for tech and consumer stocks. That too should help the markets come out of this funk, perhaps sooner than having to wait for the Fed to stop hiking rates early next year. So, there's a chance markets could recover within this quarter itself on stronger than expected earnings.
I'll send the analysis tomorrow or Tuesday. Please do not worry, I really know what I'm doing. Sometimes you gotta take concentrated bets and watch the basket very carefully, and I know what's causing what for each position.
Regards,
Pranjit Kalita
CIO