To The Moon

I caught the video of Cathie Wood and her explanation on traditional stocks - automakers like Ford, energy and financials being in their all time highs even though they are technically slow growing in nature - and that the valuations of these stocks are in bubble territory. For those of you who have not watched that video yet, I highly encourage you to watch it. Some of you may be dissing Cathie and saying all sorts of nasty things about ARK ETFs at the moment but quite a number of you who bet against innovation at this juncture are going to be in for a rude awakening. And before you go on saying that I am an avid supporter, let me caveat that I drill down to fundamentals and go by rationale of what establishes the best potential for the future and likely gains that can be accrued. 

Firstly, take a look at the dot-com bubble in the 1990s and you will see that the stocks then - many of them did not even generate proper revenues and were being speculated on. This is where the unsustainable element comes in. At the end of the day, a business must make money - if it is a growth stock, then its revenues have to be growing rapidly. Investors will be willing to stomach losses in the short term to see a business turn a profit eventually on the long term when it has captured sufficient market share and looks to profitability. These were mostly missing in the 1990s but look at the growth stocks in the past few years - the total opposite has happened. We are seeing real huge growth rates. Upstart $UPST is literally, in meme stock terms, "printing money" at more than 100% each time it reports growth year over year. This is not a made up pie in the sky and the sweet by and by dream stock of the 1990s. This is real, substantiated, revenue clocked in. You can cycle through all the names in ARK and you will see real deals going on. There are of course, duds and mistakes made and it is not easy to stomach them, but with this is where risk management comes in - the position sizing and exiting quickly. 

Secondly, the inflation and interest rate issue that is taking place right now that has scared off investors from growth stocks - that is where i believe many of the folks betting Agagainst growth by hiding in "safe" names will be wrong footed. Even with inflation rising - and the interest rates going up - the truth of the matter is - these will "eat" into the traditional stocks faster than they will with the leading growth stock names. The history of investing in growth stocks shows the precedence, that the stocks with fast growing revenues typically attract the investment money because at the end of it - investors want to see a business growing and expanding, and are willing to support that growth trajectory. No one wants to be in laggards and yesteryears. This is not to say that Warren Buffett's strategy should be retired. If you notice Berkshire - they have also taken the position to deviate from their timeless strategy. Just look at Snowflake and you know what I mean - sky high valuations. In fact, in this bear market, it is an emerging leader that I have flagged out on my side for my note because it not only corrected the least, it was one of those off the bottom very quickly. The potential of this cloud computing stock is huge and hence,the sky high valuation. Cheap can sometimes be cheap for a reason. Trust me - that is why Hermes will always never be on sale, and H&M will run sales till the cows come home. 

As an investor, it pays to take a contrarian view and invest with the business outlook in mind. It is ok to be wrong - that is the thrill of investing - to take a position, manage the risk and if you are wrong, close it and move on. I know some folks may disagree with my analysis of their favourite stocks and that is absolutely fine - i may well be wrong and they may have a Big Bang on that position and I am happy for them if that happens. It means that I must change the way I view their stock. Of course, i would wish that I had the same analysis that they had at the time they got in early, when that happens! But I dont have a crystal ball. So i have to rely on fundamentals, business acumen, and suss out opportunities. I am certain you are doing this too, even as you read about this. Only time can tell how we will all do and how well we have stewarded our accounts. I wish each and every one the very best as we ride out the confluence of major events taking place. May your analysis be spot-on and your rewards be fruitful!