The weekend is over, now let's start a new week of investment.
The market fell again last Friday, especially high-tech stocks, so a risky investment portfolio is uncomfortable.
However, as I said last week: "In the short term, those who dare to take certain risks can short some stocks that do not have a great future but had skyrocketed recently. Such a strategy can play a hedging effect on risky portfolios, so it's not as risky."
For example, buying some put options on Meta expiring in mid-March has had a return of 70% on Thursday and Friday, which can provide a good hedging.
As long as the stock market is expected to fall, it is necessary to hedge to stop loss, because according to Buffett's golden rule: "The first rule is not to lose money, and the second rule is to abide by the first rule."
Even for long-term investments, it makes sense to hedge and profit from being bearish on some stocks.
Such an approach is still needed and would be effective this week, as the market is turning from a wild bull market in January to a jittery one, fearful of inflation and Fed hiking of interest rates, and data in the next few days, unless the situation becomes clearer.
Some specific stocks
1. Oil companies. As I talked last Thursday: "EXXON Mobile is better than CHEVRON in many aspects, and you can do pair trade when the general situation is unclear or even bad, but you may need to find a short sell object that is worse than Chevron. Chevron is also good, Buffett owns US$23.9 billion of its stocks, and the company has announced to buy back US$75 billion of shares, so shorting it has a great risk. We only short stocks that are not good.”
As it turns out, Exxon Mobil XXON Mobile rose 4.22% on Friday, and Chevron rose 2.1%. The driver was Russia's announcement of production cuts and higher oil prices.
Some background to know. In 2022, the Big Six had more revenue than in any year in the history of the industry: More than $200 billion. The six companies are BP, Chevron, Equinor, ExxonMobil, Shell and Total.
Such gains have angered climate activists, accusing them of war profiteering and it has cast doubt on the commitment of executives, politicians and investors to the Paris climate agreement. But that's how human beings act, they have been always acting in hypocrisy. People do want to decarbonize, but can’t, but if you don't even talk about anything to decarbonize, not good either, so we move forward slowly. Resisting pressure to decarbonize more than any other energy major is the giant Exxon Mobil which has ramped up production through 2022, and its shares have risen more than 50% for the year, posting a record $55.7 billion profit.
Short-term neutral, long-term holding.
2. Tesla stopped climbing, its individual followers outnumber any other high-tech stocks, so it has been flying high, and its tide needs to retreat later than others. If the market panics further, it will follow suit. If the market picks up, it will run wild again.
Neutral
3. Microsoft: Due to artificial intelligence and chat AI, I am optimistic about Microsoft, because the entire office software will benefit, people will be a new experience and gain higher efficiency. Its search engine Bing will also grab more search share from Google.
Buy the dip.
4. Chips: also due to artificial intelligence, I'm still optimistic about Nvidia and TSMC, although the two have dropped significantly on Friday.
Buy the dip.
5. Netflix and Disney, short term they will provide limited profits with risks.
They have their own pros and cons.
Disney is much bigger, with a lucrative theme park business and a rich legacy programs.
Netflix is smaller, newer, and more innovative.
But on the vital streaming business, Disney, Warner Bros. Discovery and Paramount, will still lose money and burn through cash, while Netflix is expected to generate a 19% operating margin and a record $2 billion in cash this year. Plus, advertising is much more incremental to Netflix's EPS.
But Netflix fell 4.18 percent on Friday, while Disney fell 2.08 percent.
Neutral
6. I said last Thursday that "Uber is good for after the epidemic, especially in an inflation environment, or if the economy is not so good, that would increase in taxi drivers. Of course, if the economy is good, more active economic activities are also good for it. Buy. But in short term, there is limited room for profit. You can short LYFT, and Pair Trade can do hedging, which is more exciting.”
On Friday, LYFT fell 36% due to its poor performance.
In the long run, the good one will be even better and the bad one will be worse.
So for Uber: buy the dip and continue to short Lyft as needed.
7. Google. Last Thursday, I said that "Google's stock price continued to decline, because to face OpenAI ChatGPT its BARD offensive has come out in a hasty way. Although Google will have the ability and funds to meet the AI challenge, the final outcome is mixed. There is no need to enter. sex."
Google's small drop of 0.46% on Friday was a stop.
Neutral.
In general, the outlook for inflation and interest rates is unclear, or more likely to be unfavorable for the stock market, so this week we should still be properly hedged, buying some stocks on dips, short selling others for profit, and make the overall hedge balance.
DB Investments