Monthly, we update our wholesale investors on what’s happening in the market. Running what’s probably the only late-night trading desk from New Zealand, we’re well-positioned to feel the pulse of the market’s direction.
I attended a ‘Meet the Managers’ event the other week. Fund managers from around the world came to talk about their feelings on the market we find ourselves in. The opportunities and challenges for 2024.
The consensus was that ‘the last mile’ of inflation will take longer to get under control than was first thought. Or wished for.
It’s one thing getting inflation to 3.1% (US) or 3.3% (Europe). But that’s not 2%.
So enthusiasm was muted on the coming bull-market driver of rate cuts. The bull that was rushing in December is now in slow motion. It’s tentative.
There was also the anticipated excitement over AI. Nvidia’s Q4 revenue was up 265%. Mark Zuckerberg is likely to spend $9 billion in chips from them this year.
Nvidia has taken rate-cut-jilted markets up with it. AI poses the opportunity for a whole new industry. Converging with others to power mental grunt-work and make many companies smarter and more profitable.
So, why have we thus far focused on companies using AI as opposed to making chips?
Our strategy focuses on margin of safety. The AI boom has pumped chip companies like Nvidia to stratospheric prices on the value spectrum. (P/E over 65).
Of course, given the growth seen, you need to concentrate on the ‘E’ and less so the ‘P’.
But I well remember the dotcom crash of 2000. Share prices for internet companies got well ahead of themselves. The promised transformation of the internet actually took more than a decade to hit its stride.
Here, February has been mainly flat, to correcting with some downside protected.
Tentative sways in the market have provided some good opportunities to buy into value. And this is likely to remain the case going into March, unless we get better news on the inflation fight.
Managed Account performance*
For the month of February 2024, we were down 0.01% across the composite portfolio (total aggregate return across all portfolios following the strategy).
Our MSCI EAFE benchmark was up 1.71%.
Our average annualised return since inception is 14.07% p.a.
Please see our performance chart for more details.
We are capturing strong value for the future
When the last mile on inflation is reached and interest rates fall, we expect our bag of share prices to do very well indeed.
Meanwhile, they are throwing off some great income, with typical running yields over 6%. It’s a good time to be investing.
Regards,
Simon Angelo
Editor, Wealth Morning
*Past performance is not an indicator for future performance. Your actual portfolio will differ from the composite portfolio mentioned. The information contained in this document does not constitute an offer to sell or a solicitation to buy an investment, nor should it be construed as investment advice. Wealth Morning Managed Accounts are available to Eligible Investors and Wholesale Investors (not to Retail Investors) as defined in the Financial Markets Conduct Act (2013).
