September 2019 Big Rotation (Value In. Momentum Out)
Disclosure: The views and opinions expressed herein are those of the author and do not necessarily reflect the views of his employer or any other organization.
This is the most important chart in my view. For everyone to know that momentum has a ceiling, whereas value names will tend to have the strong moves from here on.
Read Further: https://www.cnbc.com/2019/09/10/shift-from-momentum-to-value-stocks-may-be-a-bet-on-rising-rates.html
The Momentum ETF used in this comparison invests large- and mid-capitalization stocks that have enjoyed big moves in valuation. It’s top five holdings are Visa, Mastercard, Microsoft, Procter & Gamble and Walt Disney.
The Value ETF, buys U.S. large- and mid-capitalization stocks with relatively lower valuations. It holds AT&T, Intel, IBM, Pfizer and Bank of America in in its top five.
Beyond signaling a bet on interest rates, a repositioning from momentum to value could indicate a flight to safety for investors concerned about a downturn, even as the market hovers around new highs.
“If interest rates are done falling and about to turn higher, it hurts high growth stocks with sky-high P/E ratios by diminishing the future value of earnings and raising borrowing costs,” Pearkes said.
*****
- Value names in my current portfolio have won. I have AT&T,Kroger, CVS Health and Capri Holdings. Plan to enter more value names. Here’s a few in my list.
Delta Airlines — In fact, Buffett likes Delta so much, he breached his 10% ownership rule to buy more.
While Buffett prefers to keep stakes in companies below 10 percent, his Delta holding has crossed that threshold at about 70.9 million shares, or 10.4 percent. The holding got a further boost from Delta’s repurchases. Breaking that barrier reinforces the view that Delta is at least a long-term investment, according to David Sims, president of Sims Capital Management, which oversees $50 million, including Berkshire Class B shares.
Berkshire is the biggest holder in Delta, with a stake valued at about $3.6 billion.
(Author’s note — by the way Buffett’s 5% stake in Apple is 50B dollars. la lang. hanep tlga noh.)
Goldman Sachs 8X Forward Earnings — Tie up with AppleCards
Bank of America 9.8X forward (Entry 27–29, Target 32–35)
Chinese Name Picks: Weibo
Short term resistance 58
Short term Supported 45
Longterm reasons -> increasing revenue streams thru new apps like Oasis (social shopping) with new functions that mimics Instagram and Pinterest with an e-commerce move.
strong earnings coupled with increasing daily average user base of 486M players at an unbeatable 11X earnings.
Momo- “Tinder” of China
Things about Match and Momo:
1.) When one looks for love, trade war is irrelevant.
2.) Paid subscriptions. Facts: TinderPlus is growing 40% with 5.2M paid subscribers . Total subscriber base is 9.1M users. OKCupid is the top dating app in India, 6 quarters of revenue growth.
3.) Momo generated about three-quarters of its revenue from its namesake app’s live video ecosystem last quarter. This platform lets users broadcast live video streams, then generates revenue when viewers purchase virtual gifts for their favorite broadcasters. Momo generates a smaller percentage of its sales from ads, mini games on Momo, and premium subscriptions for online dating, which are comparable to Tinder’s premium tiers.
Momo’s total number of monthly active users (MAUs) on its main app rose 5% annually to 113.5 million last quarter, and its total number of paid users (on both apps) rose 2% to 11.8 million.
4.) Momo’s marketcap — 7.4B dollars (half the price for Tinder even if it has more paid users haha. talk about undervaluation! (smiley)
A dating company that’s just 11X earnings despite growing 30% continous quarters? MOMO wins!
Technicals: (Huge range narrowing entry at 32–35 levels) — Resistances at 40- 48; Earnings Dec 9 2019
Reasons why Momo is cheap:
Risks: Regulatory
From the Momo prospectus:
Under [Chinese] regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Furthermore, internet content providers are also prohibited from displaying content that may be deemed by relevant government authorities as “socially destabilizing” or leaking “state secrets” of the PRC.
Failure to comply with these requirements may result in the revocation of licenses to provide internet content or other licenses, the closure of the concerned platforms and reputational harm.
