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Puru Saxena Profile picture
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10 Jan, 5 tweets, 1 min read
Several high growth stocks have come back down to their pre-COVID multiples -

$LSPD $MELI $OKTA $SE $TWLO to name a few...

The e-commerce, payments, software companies got shot first, so will they also bottom out before the indices? Jury still out, time will tell.
Noteworthy SPACs peaked about a year ago and the majority of the growth stocks peaked in early November.

At today's low, $ARKK was off 50% from its ATH...

Its pre-COVID peak two years ago was $60 and today it touched $80....just $20 or 33% gain in ~2 years!....
Over the past two years, ARKK's underlying companies have grown a fair bit, so 33% gain in approximately 2 years is not a stretch....

Impossible to time the low, but can't help but think bulk of the selling in the high growth stocks probably in the rear-view mirror. We'll see...
Remember, growth stocks peaked months ago and they are already down 40-75% from their ATHs....

The indices are still within a few % of their ATHs...and they haven't corrected yet.

If growth stocks decoupled from indices on the way down, they can also bottom before the indices.
If Fed tightens excessively, the economy might get a growth scare....PMIs and long-term UST yields will probably come down.

Under this scenario, conceivable that the long-term secular compounders might come back into vogue and bottom out before the indices. Something to watch.

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More from @saxena_puru

Puru Saxena Profile picture
1 Jan
1)Portfolio Dec-end -

Long - $ADYEY $DLO $GLBE $LILM $LSPD $MELI $MQ $S $SE $SOFI $TOST $TWLO $TLT

Short - $ARKK, Russell 2000 futures #RTY_F

Return since 1 Sept '16 -

Portfolio +672.73% (46.76%pa)
$ACWI +80.02% (11.66%pa)
$SPX +119.60% (15.90%pa)

Contd...
2) YTD return (2021)-

Portfolio +21.81%
$ACWI +16.80%
$SPX +26.89%

Biggest positions -

1) $TLT 2) $SE 3) $MELI 4) $MQ 5) $SOFI

Contd....
3) Commentary -

December was a brutal month for growth stocks as the previous month's selling continued before a relief rally briefly reversed the downtrend.

At the beginning of the month, I sold out of all stocks and around mid-month, positioned my portfolio for the post-QE..
Read 16 tweets
Puru Saxena Profile picture
29 Dec 21
Monetary policy is the horse, economy is the cart.

Liquidity moves the economy + financial markets in both directions. Monetary policy works with a lag and its effects become obvious several months later.

GDP and CPI are lagging indicators, they always look hot near the top.
The recent boom was created by the easiest liquidity conditions....ever!

The abrupt ending of QE and tightening by other central banks will bring about big economic slowdown in H1 '22.

Lots of carnage under the hood, many stocks weak...the indices are skating on thin ice.
Based on liquidity conditions and several leading economic indicators, it appears both economic activity and inflation will peak soon...

Thereafter, we are likely to get a swift contraction in risk assets and flight to safety (US$ and USTs).
Read 4 tweets
Puru Saxena Profile picture
27 Dec 21
Fed announced QE "taper" in Nov and accelerated it in Dec....but data shows that over past 4 weeks, its balance-sheet still grew by ~$120b!

In anticipation of the end of QE, hedge funds dumped tech stocks in Nov/Dec. With Fed still pumping $120b/month, will HFs now ↗️ exposure?
After realising that despite QE "taper" announcements, the Federal Reserve's balance-sheet still grew by $120 billion over the past four weeks, I covered my #NQ_F short at a loss, also my long $ futures position and $TLT

I've also increased exposure to growth stocks.
In November, the Fed announced it would reduce QE by $15 billion per month and in December, it announced it would reduce it by $30 billion per month (with view to ending it in March).

Despite these 'hawkish' declarations, its balance-sheet still grew by ~$120b over past 4 weeks!
Read 4 tweets
Puru Saxena Profile picture
25 Dec 21
Current cycle -

The current QE-cycle has been unprecedented!

Between March '20 and Feb '21 (11 months!), most high flying stocks quadrupled, quintupled or more and over the past 2 months, they have declined by 40-70%!

During the upswing, years of gains were compressed,,,
...into just 11 months (stocks usually quadruple, quintuple or more over many years!) and this contraction over past few weeks (40-70% declines) has also been very abrupt!

Due to the size of QE, fiscal stimulus + animal spirits, the moves were exaggerated in both directions...
...After the high flying stocks had run up so much so quickly and their valuations had become super stretched, it was obvious to me that future returns were going to disappoint. I shared this sentiment several times in my posts in late '20 and early '21.

This is why, instead...
Read 6 tweets
Puru Saxena Profile picture
23 Dec 21
Portfolio positioning -

Long - US$ futures, $TLT + some growth stocks, $ cash
Short - NASDAQ futures #NQ_F

Portfolio is net short stocks
We are dealing with a QE cycle (not rate hike cycle) -

That'll come later...

In the past, each QE-end was followed by ~20% decline in the indices from ATHs...back then, valuations were way lower too.
Word of caution -

No crystal ball here, so anything can happen....

However, am familiar with stock market cycles and Fed's QE cycles....both suggest caution during H1 '22.

This is not a recommendation, please do own DD and I reserve the right to be wrong.
Read 5 tweets
Puru Saxena Profile picture
16 Dec 21
Update -

With central bank intervention/QE, asset markets have become prone to massive booms and busts.

Algos + online trading have made the markets super fast and now, big moves happen very quickly.

10 or 20 years ago, stocks used to decline 40-50% in a year or two and....
....now, they go down this much (and more) within weeks! In Nov '21, when Fed announced QE taper, many high growth stocks tanked by 40-70% within 6 weeks and during this period, my hedging strategy did not offer me full protection.

My high growth stocks declined more than the...
...ARK ETFs and in order to protect my capital, I sold all my stocks and to profit from the intense selling, also went net short.

Going forwards, when the tide of liquidity goes out again, instead of remaining invested and hedging, I may (once again) sell all stocks and...
Read 4 tweets

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