Sometimes You Just Don’t Know

For the first time in a long time, I literally have no idea what to say about markets. Usually, I always have something to say, whether it’s the ultimate YOLO call option or a theory about the velocity of money. This time, however, I really do feel the market gods, the millennials day trading from their Robinhood accounts, the insane volatility of news and price, has created a vortex that I can’t put into ink.

It’s not even worth thinking about, quite frankly. I am not interested in trying.

My own portfolio has shifted some and I hope I don’t jinx it by telling you all. I am overweight small cap stocks and it’s been a while since I’ve done that. I mean, I am amazed at all the money sloshing around, the stimulus, and yet some small cap companies are out there, dealing mostly in Dollars, US based, mucho cash on the books, no debt, and trading at like 5 or 10 times free cash flow. For me, the play is, and it’s a gamble, that just maybe some of these companies can actually use their unique positions of not feeling any financial squeeze, and use it as an opportunity to ignite their business. When 20% of your market cap is cash, and sales are sticky, while everyone else around you is trying to meet lofty growth expectations, squeezing water from a rock, the opportunity to be cash rich and locally based seems fairly unique.

I don’t need to say it, but I will anyways… yes growth has trounced value for years. I do think it’s about to get interesting, though.

In the spirit of The Last Dance, the ESPN documentary many of my friends are watching, I think of Jordan when he came back to Chicago Bulls after playing a year of baseball, abruptly quitting, and then, in his first year back winning a championship out of nowhere. When all the chips were stacked against him, and all the doubt and media chatter was swirling. That’s how I’m feeling about value. Especially small cap value.

I see some tech companies trading at 60 times sales. I am flat out amazed.

60 times sales.

Let’s just think about that for a second. Apple trades at like 4 times sales. Same with Google. For a company trading at 60 times sales it would have to grow at 100% for several consecutive years in a contracting global economy under severe pressure from a virus we still don’t even understand that well just to get a multiple that is the same as Apple or Google. What has me really thinking, though, is the commoditization of tech. Programmers and engineers are getting so good, they are abundant now, that the edge is getting smaller and smaller. Everything is everything. I have 16 video apps on my phone, 19 different work apps, and 12 text message apps. It will only continue. It’s all the same.

That’s all for now. It’s been a while since my last post. Outside of my own little portfolio’s world, the bets that have been made, I have no clue what’s going on.

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