Hello everyone! Hopefully everyone had an oxpicious Chinese New Year!
We wanted to share some quick thoughts on the stock market and where our head space are at now.
Over the past 2 few weeks, the US market continued to rally and we continue to reach new all time highs for tech stock counters. In the meantime, the Singapore index has seen a downward movement following its strong rally in January.
While we previously mentioned that we had missed out on the potential returns from the Singapore market in January, the market has taken back all of the gains and the Singapore index is trading at November / December 2020 price levels.
Although the US market has continued to hit all time highs, there are some counters which experienced huge pull backs, and we thought we want to highlight them here as they may be great opportunities to accumulate some.
3 US Stocks With Recent Share Price Pullbacks
The first counter is Palantir – a B2B software company that has been serving important organizations in the United States. Earlier yesterday, Palantir’s share dropped 12% following its earnings announcement. The share drop was because its revenue growth was lower than what analyst expects, and hence market saw a mini sell off.
In the current environment where all stocks have high expectations baked into its high share price and valuation, any stocks that fall short of its earnings expectation will see the market punishing its share price, often sending the price down by 5-15%.
Following the share pullback, ARK Invest actually picked up a very sizable amount of Palantir shares yesterday. According to their daily trade filing, ARK Invest bought 1,560,200 Palantir shares at about $52 million, which is about 0.4961% of its ARKW ETF.
The second counter that we wanted to share is Unity – Unity is a game engine which allows game developers to build games on. earlier this month too, Unity’s price dropped 14% following its earnings announcements. The share drop was because its revenue growth is again lower than what analyst expects.
Again, following the share pullback of Unity, ARK Invest also picked up 419,000 Unity shares at about $52 million, which is about 0.33% of the ARKK ETF, and a further 183,300 Unity shares for about S$23 million, about 0.48% of the ARKW ETF.
The third counter that we wanted to highlight is Tesla. Over the past few weeks, Tesla shares has taken a breather and has been falling back to the $800 price range.
Both these 3 counters are counters that we have positions in – and we still think they are great future growth themed companies. Palantir and Unity are growth at more than 30% growth rate annually.
Palantir has technology that is 5 years ahead of anyone, and is investing into the business. Unity, while the valuation is expensive, actually shared that of the top 1000 mobile games, they are powering more than 70% of these mobile games! Tesla on the other hand, needs no introduction.
The fact that ARK Invest scooped up a sizable amount of these counters (Unity and Palantir) following the share pullbacks speaks volume on their conviction on the counters too.
Putting The Money Where Our Mouth Is
If we had more funds, we will definitely average in our positions in Unity, Palantir and Tesla. For Unity, Mr Budget had already averaged down in December and hence has 2 open positions with Unity.
For Palantir, the price is now close to Mr Budget’s entry price, and hence for readers who are looking at the counter, i think this is a great opportunity to pick up the counter. If Palantir drops further, we may consider average down on our position, but if it doesnt, we expect the price to recover following the US index.
For Tesla, Mr Budget had previously mentioned that he bought more into Tesla in December, hence only Mrs Budget rotated her funds from Amazon into Tesla shares during the pull back last week.
We previously mentioned that we are taking a stock diet to increase our cash in hand, but it is proving to be a very hard decision for us because we are now also deploying our capital into the crypto market.
We are starting to also study more about the cryptocurrency space and it is a massive universe. We just learnt that there are savings account and crypto lending, or yield farming which provides upwards of 100% annual interest rates! Sounds really unbelievable but there are people who are early in the crypto space benefitting from all these crazy returns.
We are also wondering if all of these is just a bubble, but as everyday goes by, the more we find out about the crypto space, the more we realized that there is a very big decentralized finance universe.
The risk vs rewards of being involved in the space is simply too big to be ignored. The risk being losing 50-90% of our capital in short run (but definitely positive returns in the long run), while the reward can potentially be 500 – 1000% of our capital. The question we keep asking ourselves is – what if crypto is here to stay? What if all of these is just the beginning?
We will be spending some time reading up more about the space and if there are any interesting findings, we will be sure to share them here. For now, our crypto portfolio is growing bigger as we allocated more capital to accumulate move cryptocurrency for the future.
Our crypto portfolio is now at 21% of our net worth – very sizable, and there is a chance that it may grow bigger and eventually overtake our US portfolio. We are currently holding Bitcoin, Ethereum, Binance Coin, and are looking at Polkadot – hence these will form the core holdings of our crypto portfolio.
Also, Bitcoin has hit the US$50,000 mark earlier this week too. We think it will continue to go up as more corporates and S&P500 companies look to explore exposure into bitcoin on their balance sheet.