Our weighted average return in August was +1.28%, bringing our year-to-date return to +13.29%.
Going into August, we had reduced our positions in the technology sector. We did so because we had managed to make extraordinary profits in the sector this year, and decided to focus our efforts on less crowded trades.
As such, we continued to increase our positions in base metals miners. We find this sector attractive because it is wildly under-owned and has a minute weighting in the S&P 500 index (0.1%). As a new generation of investors dreams of start-up ‘unicorns’ and ‘mining’ virtual currency, we have been taking a decidedly ‘old school’ approach and buying quality mining companies that have emerged from cyclical lows with stronger balance sheets and are poised to benefit from global economic growth.
Last night JPMorgan Chase CEO Jamie Dimon took a shot at bitcoin, saying the cryptocurrency “is a fraud.”
Here’s the article: JPMorgan CEO Jamie Dimon says bitcoin is a ‘fraud’ that will eventually blow up
In the same time, people from the tech world are saying that “Bankers’ mistrust of bitcoin is still the greatest argument for it.”
Furthermore, Financial Times is posting graphs with a bubble forming pattern overlaying the Bitcoin price
From time to time we get a request from our clients and potential clients regarding investments in gold.
In our view gold isn’t the best investment as it isn’t generating any return. Yes, it’s been able to sustain it’s purchasing power though in very long time periods, we’re talking about decades and centuries.
Furthermore, gold is quite volatile and thus investor may lose some part of their investment. Gold’s performance has varied year by year. Picture below shows that gold had a real drawdown that lasted 32 years. Are you willing to hold an asset that is underperforming other asset classes and losing money by itself?
People tend to get preoccupied with things that are shiny. Investors often fall prey to the same instinct – especially those that are obsessed with gold. Such people are often referred to as ‘Gold Bugs’.
Congratulations! However, there is a far more interesting metals trade going on at the moment: base metals.
Electric vehicles have been in the spotlight lately, which creates an opportunity as well as a problem for the producers of the metal that the batteries of electric vehicles are made off – lithium. A mineral for which, as long as the demand for electric vehicles continues to increase and an economically viable alternative is not found, the demand is also going to increase respectively. The prices of lithium carbonate have more than doubled in the last two years.
Currently, 67% of global lithium reserves are located in Chile and Argentina, even though Australia is the biggest lithium producer.
We have an amazing team here at BlueOrange. Kaspars is on a well deserved vacation, and Krista and our summer intern Renārs do a great job keeping everything in order, while also providing thoughtful and fresh insights into making us a little bit better every day.
Here are some links that they found interesting this week:
Tesla manages to raise $1.8b through junk bonds yielding 5.3%
Earlier this month, Tesla came out with a statement saying that the money required to fund the projected production ramp of its recently released Model 3 is going to be raised through a bond offering. At first, the electric carmaker wanted to raise $1.5 billion, a number that, due to high demand, was later increased to $1.8 billion.
Our weighted average return in July was +3.10%, bringing our year-to-date return to +11.86%.
During July we focused on analyzing corporate earnings releases. As a whole, the results were very impressive. As of the end of July 72% of S&P 500 companies beat their mean earnings per share (EPS) estimates and 70% beat their mean revenue estimates. These results were evidently very encouraging to equity investors. The S&P 500 ended the month up 1.95% and market volatility reached new lows.
What is the opportunity cost of waiting for a market correction?
LINK: Opportunity cost of waiting for a market correction
Disney to leave Netflix
Starting 2019, Netflix and chill is going to have to take place without the usual late-night session of Frozen, as the media giant announced its plans to remove its content from Netflix and start its own streaming service.
Reportedly, Disney is also going to launch an ESPN streaming service early next year, which is going to feature sports events from the NHL, MLB, MLS, collegiate sports and Grand Slam tennis.
People are keener on buying Nike on Amazon than at Foot Locker
According to a report by UBS, more US consumers prefer to purchase Nike products on Amazon (13%), rather than making the purchase at Foot Locker (9%). The recent findings indicate a significant switch from a year ago, when Foot Locker was the option more people chose.
Nike was wary of opening a store on Amazon over concerns of counterfeits being sold and the customer experience being poor, but the sports apparel manufacturer caved and announced a deal with Amazon, which sent the shares flying 7%.