@uplusk

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$80.6M follower assets

Investing, Tech and growth.

Discover -> Explore -> Exploit -> Repeat
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Uday's avatar
$80.6m follower assets
Asset class performance
A snapshot of YTD asset class performance

Cash = Flat
Gold = -0.5%
Treasuries = -9%
Inflation protected bonds = -6%
Equities = -17% (SPY) and -27% (QQQ)
Real estate = -18%
Bitcoin = -60%

What are you buying?
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Shocked that Gold is not performing in this environment. Can't have a more perfect environment for Gold to thrive according to history books than the one right now and yet Gold is not doing anything.
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Capital efficient SaaS
An interesting stat in the 2022 State of the Cloud report by BVP.
European B2B SaaS businesses are 5-7x more capital efficient as compared to U.S B2B SaaS. (Gross margin returns on sales and marketing spend). Almost all regions demonstrate higher efficiency, with Eastern and Southern Europe churning out 4-5x capital efficiency.

As the focus shifts on businesses and businesses models with a viable path to profitabilty and cash flow generation ability, capital efficiency could be crucial to getting there in a rising costs environment.

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Playing different games
Tech was the name of the game in the last decade. You invested in them because they were clear winners, and the stock prices became clear winners because you invested in them.
But the rules to the game we all learnt to play seems to have changed.

The game of “Growth At Any Cost” seems to be changing into a game of “Cash Flow and Profitability”. A common theme emerged during the recent earnings results where reining in free uncontrolled spending was cheered for and the excesses of the past, where money (that cost literally nothing) was ploughed in to chase the next big thing was punished really, really bad.

But are we learning to play a different game? Adapt the way we think about investing and the world to this new environment?

In Bezos book 'invent and wander' he talks about how in the dot.com crash, Amazon share price lost 90% of its value, but the business grew 6x in the year - a total dislocation between fundamentals and share price. There will be massive opportunity in this sell off to pick up winners for the next few years. But it always comes back to cashflow...
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Taking it all in
As the markets enter "bear market" territory, we are all trying to find instances of when it happened the last time or during similar market/macro environments. I've always believed that something like investing has to be experienced yourself to be well understood.

In my very short investing career (3-4 years), I've only experienced a unidirectional market: up and to the right, as they say. Covid was probably my first experience of a recession, a crashing market and everything else that comes with it. I read and read a lot about similar instances in the past, but the expected outcomes were very different from the realised ones, to say the least. Experiencing it myself, thinking about what to do and what not to do, was probably the most useful. In hindsight, it was all over (in the markets) before you could do much so I ended up doing nothing.

But corrections like these are key to understanding the macro, the micro, the market, and the economy and how they work together but most importantly, to discover what philosophy and investing principles resonate with you the most.

This correction feels like another one of those experiences, where you are forced to go back to basics, play the game you want to play, and think for yourself. You're surrounded by (in my opinion) an over-bearish sentiment where prices for stocks on your watchlist are at levels you could only wish for in the last two years. Can you still hold enough conviction in the business and test/refine your thesis? Do the reasons you bought them or wanted to buy them still hold?

I'm still taking it all in, going back to basics, updating my core beliefs and refining what I thought I knew.

PS: Feels like there is a disconnect between the narratives that were thrown out there just a year ago and the prices you are paying for them today, like Covid never happened and didn't change a thing about business and human behavior. Are we buying?
While the numerator of the equation (the narrative) hasn't changed markedly, the denominator (the discount rate) has. I propose that many of the valuations we saw over the last two years were a mirage induced by low rates and declining risk spreads. And current prices are more in line with normality. Do you have any thoughts on this line of reasoning, Uday? It would be great to hear.
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That part of the cycle
You know its that part of the economic cycle when you start seeing "value investors" getting louder. They've waited for more than 2 decades to start dunking on tech again, failing to realise that a couple quarter of inflows doesn't offset the money they've lost for 20 years, hoping that blaming the Fed would cover up their incompetance.

Make some hay while it shines, get some long overdue clicks while it lasts.
Value, growth, these are just factors. All good investing is value investing, they say.

And value can mean one thing to a person, and something else to another, if time horizons are different.
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Random Rant
99% of anon Fintwit accounts are cocky af, have schadenfreude for lunch and jack off to other people's mistakes.

Why?

Happy to have not seen that here on CS (so far :) )
Social media in general is toxic. Trolls are everywhere, people will say things that would get them punched in the face in public. …just sayin’
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A new new thing
How do we react to something we have not seen in our lifetimes? Revisting the past via history books is helpful, but some things have to be experienced to be well understood.

Most of us have not seen or been in an inflationary environment in our lifetimes. At the same time, we have been accustomed to a low cost and very affordable abundance in everything.

Rising living costs and higher inflation is a new new thing, both in life and in the markets.
How will we respond to this new environment?

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Only in hindsight
I cannot get enough of hindsight biases all over the place.

The entirety of the Fintwit and the investing enthusiast community coming out with pitches and forks at $NFLX. How it has bad unit economics, the worst content, Disney is better etc. etc. Even the audacity to call out Hastings and the decisions he took. All that is all in hindsight only my good sirs. The stock price drop is informing your false narratives. No surprise there with all the pseudo-expertise that gets thrown out every time there is a market based reaction.
It was a great business to own just a year ago. Hastings was being hailed as one of the best CEOs out there.

Same goes with the likes of $FB, Cathy Wood etc.

$NFLX still grew revenues and maybe has enough pricing power left. Why not look at it as some of those Covid gains in subs being given back?

As the saying goes, market reactions are far from linear. Always like a pendulum swinging from one extreme to the other. I suspect this one is deep in the negative extreme territory.

Will try going through the actual results in detail to check whether it is the case.
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Would you rebalance?
With the $QQQ and other large S&P names down 10-15% YTD (smaller high growth stocks even more), would you rebalance your positions and get them back up to your target/desired allocation?

The sentiment has changed, the environment has changed but the long-term secular story might still be intact.

If you have held a diversified portfolio across asset classes, you might have had some downside protection recently. Do you deploy fresh capital to bring allocations of what has worked, up? or average down on your larger positions that are down?