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Up, Up And Away… Or Mother Of All Crashes? What Will Happen In 2H2021?

Nobody knows for sure.

That’s the short answer.

Even the experts are very starkly divided.

Smack within the bear camp, we have big names including the famed Michael Burry, who has made his views very much known. Burry thinks we are on the precipice of a mother of all crashes:

All hype/speculation is doing is drawing in retail before the mother of all crashes. #FOMO Parabolas don’t resolve sideways; When crypto falls from trillions, or meme stocks fall from tens of billions, Main Street losses will approach the size of countries. History ain’t changed.”

“Don’t resolve sideways” sounds… docile. But it’s really his way of saying that they’re going to plunge massively in a short period of time, leading to contagion and a cascading effect of further losses.

In other words, it won’t be pretty.

Burry also thinks hyperinflation is on the horizon and when you combine both his predictions, that’s like the equivalent of a solar eclipse in the realm of catastrophes; everything aligns together at the worst possible time: we’d have big losses in the markets, coupled with a hyperinflationary environment which limits the Fed’s ability to cut rates and pump yet more money into the system.

Well, we have some pretty big hitters in the bull camp too, with Cathy Woods being 1 of the most prominent. Her views couldn’t be more opposite. Woods thinks the “underlying bull market is strengthening” instead, and that instead of inflation, the greater risk is actually deflation. She sees strength in the most innovative companies, and these are usually at the frontier of the latest tech, and/or opening up whole new industries.

So there we have it: collectively, the experts are pretty much polar opposites in their views.

Let’s take a look at the current market environment we are in: On 24th June 2021, Microsoft (NASDAQ:MSFT) ended the trading day with a market cap of over USD 2 trillion, while shortly a few days later, Facebook (NASDAQ:FB) broke yet another milestone to reach a market cap of over USD 1 trillion.

MSFT chart
FB chart

As it stands now, the US has five technology companies each exceeding USD 1 trillion in valuation: Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL/GOOG), Microsoft (NASDAQ:MSFT), and Facebook (NASDAQ:FB).

Incidentally, all these companies operate in the technology/ consumer electronics space and ride on the recent technological trends such as cloud computing and data streaming.

Let’s take a look at the recent few IPOs that took place over the past one month.

Confluent (NASDAQ:CFLT), a data streaming platform based on Apache Kafka, raised around USD 828 million and saw its share price up by 25% when it closed on the first trading day.
https://www.cnbc.com/2021/06/24/confluent-climbs-26percent-after-raising-828-million-in-ipo.html

A few days later, SentinelOne (NYSE:S), an Israeli-based cybersecurity company went public and became the highest-valued cybersecurity IPO in history, beating competitors Crowdstrike (NASDAQ:CRWD) and McAfee (NASDAQ:MCFE), and giving it a market cap of more than USD 10 billion on its first trading day.
https://www.cnbc.com/2021/06/30/sentinelone-soars-in-first-trade-as-highest-valued-cybersecurity-ipo.html

NASDAQ Composite Index (INDEXNASDAQ:.IXIC) hit a low of 6.8K points in March 2020 at the height of coronavirus news outbreak. Fast forward 15 months later, it’s now at an all-time high of 14.6K points, an increase of ~115% since the March 2020 low.

NASDAQ Composite Index chart

The tech-heavy composite index certainly enjoyed its massive rally over the past few months, bringing some others to reach their new high in terms of their share price.

Another beneficiary of the run-up is Nvidia (NASDAQ:NVDA), which sent its share flying ever since it announced results at the end of May 2021, breaking its 700-milestone and later 800-milestone in days. No doubt the strong current quarter sales guidance of USD 6.3 billion helped, the impending stock split certainly helped boost investors’ frenzy.

https://finance.yahoo.com/news/bull-day-nvidia-nvda-092009090.html

NVDA chart

Another NASDAQ-listed counter I want to specially mention is Futu Holdings Limited (NASDAQ:FUTU), which should not be an unfamiliar name to many considering how active it has been on its marketing front and efforts, especially in Southeast Asia.

FUTU chart

<All pictures shown in this post are for illustration purposes only>

Futu shares also saw a steady run-up from mid-May leading up to end-June 2021, after a significant hike at the start of 2021.

So as we can see, thus far at least, the bull camp seems to own the upper hand, with every dip eventually proving to be a mere blip, as the market continues its upward march to new highs.

Introduction to moomoo powered by FUTU

Moomoo is a trading platform offered by Moomoo Inc, a subsidiary of Nasdaq-listed Futu Holdings Limited (FUTU). FUTU provides wealth management platform and a proprietary one-stop digital brokerage platform such as moomoo. FUTU was listed on Nasdaq on March 8, 2019.

In Singapore, Futu Singapore Pte. Ltd offers investment products and services on moomoo. Three months since setting up shop in Singapore, they have seen a whopping user base of over 220,000 and 100,000 paying clients.

(Futu Holdings Limited About Us Page)

Backed by its largest investor, Tencent, alongside Sequoia Capital and Matrix Partners, Futu raised USD 90 million in its IPO in March 2019 and is now valued at ~USD 23 billion.

Moomoo – the trading platform and investor app – provides free real-time market data, live streams, broadcasts of corporate events and online courses that promote financial literacy.

Available on both mobile and PC, the one-stop investment platform app currently supports investment products across Singapore, Hong Kong, and the US, without the need for users to create separate accounts to trade in overseas markets.

It is expected to add several other investment products from other markets in the coming months. Take a look at some of the features in the app that I captured while navigating the platform.

This is how the live streams feature looks like. On a cursory glance, it resembles Facebook’s live streaming feature promoting live discussions among users on the platform.

Something interesting is the online course feature to promote financial literacy. It covers topics from beginner’s content such as stock fundamentals, cryptocurrency basics, and stock options. The content offered is also contextualized into the US and Singapore stock market landscape.

There’s also the feature of being notified by text messages on breaking news and developments regarding topics and counters users are interested in.

Moomoo – Fundamental Data & Analysis

Both the mobile and desktop apps provide stock analysis to inform investors of better investment decisions. Take a look as I was running through an example using AVGO:

(AVGO ‘Quote’ Tab – for illustration purposes only)

The ‘Quote’ tab captures fundamental information such as 52-week and day high/low price, market cap, and as mentioned, it also shows intraday data on real-time order book.

To delve deeper into its financials, refer to its ‘Analysis’ tab where it details company valuation information such as Price-to-Earning, Price-to-Book, and Price-to-Sales data (see Analysis > Interpretation below), as well as the financial ratios e.g. EPS, ROE, FCF, EBIT, etc (see Analysis > Financial below).

Moomoo powered by FUTU’s New User Promotions

Onto the promotions, moomoo powered by FUTU has been generously giving out free shares to new users. These are some of the ongoing campaigns:

  1. Deposit Rewards – 1 Free AAPL Share
    (worth around USD 144.50 at the time of writing)

  2. Users will have to successfully open a FUTU SG Securities account from now till 2nd August 2021.
  3. Users will have to deposit a total of SGD 2,700 or USD 2,000 or HKD 16,000 within 30 days from account opening.
  4. There is no need to complete any trades to get the 1 free AAPL share.
  5. If you need help to open a FUTU SG Securities account, you may refer to this video guide here.
  • Unlocking LV 1 trading badge OR Completing 5 Trades – 1 Free NIO share
    (worth around USD 46.34 at the time of writing)

  • Users will have to deposit a total of SGD 2,700 or USD 2,000 or HKD 16,000 within 30 days from account opening.
  • Users will have to either unlock LV 1 trading budget or successfully complete 5 trades.

Referral Rewards

Notice there is also one part on Referral Rewards: up to 20 free TWTR shares (valued at ~USD 69.86 per share at the time of writing).

I know of a friend who’s intrigued by moomoo powered by FUTU’s promotions and I’ve specially requested a screenshot of her portfolio. Take a look below.

(Screenshot of friend’s moomoo mobile app portfolio page, taken on 1 July 2021)

It was July 1st when she took this screenshot. She has since collected 1 AAPL share and 5 TWTR shares. That’s a whopping 24% gain of USD 480 by depositing merely USD 2,000 (plus 5 other referrals) in 2 months. Not too shabby considering there’s no committed capital outlay invested and it’s cash nonetheless during these difficult times. Thanks to Futu Singapore.

If you don’t already have a FUTU SG Securities account, you can use my link and sign up here to get your welcome bundle.

This post is written by Team ThumbTack in collaboration with FUTU Singapore Pte. Ltd.

ThumbTack Fund – New No.1 General

Broadcom (AVGO) has been occupying the top general spot since inception, sitting pretty at the top for the past 14 months.

During my last update, the 5 “generals” list is:

TTI’s 5 Generals

  1. Broadcom (AVGO)
  2. Alibaba Group (BABA, 9988)
  3. Rocket Companies (RKT)
  4. Pershing Square Tontine Holdings (PSTH)
  5. Still interviewing applicants

Over the past 3 weeks or so, I’ve been steadily taking profit on AVGO, and have cut my exposure by approximately 50%.

With an average entry price of around USD 220, and having sold at USD 460-470, AVGO has returned approximately 110% in the past 15 months, including dividends (less 30% WHT) and option premiums.

Broadcom (AVGO) – Blue line

S&P index – Red line

When compared against S&P, AVGO has done extremely well during this time frame, outperforming S&P even whilst excluding dividends. AVGO is also known to be generous in its dividend payout.

Bear in mind that S&P itself has been on a wild tear upwards all this while.

AVGO continues to be an electric mix of both growth and profitability, whilst generating FCF every quarter, which they deploy (partially) into maintaining their lead, particularly in the semiconductor solutions segment. While AVGO has constantly been in the news every couple of years due to Hock Tan’s strategy of acquisition and successful assimilation, little attention has been paid to their R&D, which itself is a lean and mean growth centre.

Coupled with an exceptional management that’s shareholder friendly, IMO, AVGO remains 1 of the best mix of both growth and diversification. A case in point is their fairly recent acquisition of Symantec in 2019. The market doesn’t talk about it right now… but I remember the share price took a hit when the acquisition was announced back then.

Analysts were scratching their head as to why AVGO would be acquiring a seemingly unrelated business, that has next to no growth prospects. Many were speculating then, that Hock did a “panic buy”, as AVGO failed to gain regulatory approval to buy Qualcomm. (That was despite Hock getting a nice photo op with Trump, just before news of AVGO getting blocked in its hostile bid for Qualcomm broke.) Now, imagine if AVGO had succeeded in acquiring Qualcomm… today, against the backdrop of a chip shortage…. This kinda shows you how Hock sees things a few years ahead of the industry. I don’t believe that he’s just “lucky”. You can’t just get lucky with acquisitions after acquisitions, repeatedly.

Now, a mere 2 years after the Symantec acquisition, AVGO has launched new, innovative products, particularly in the cybersecurity space. Hock Tan is notoriously laser focused when it comes to R&D, as he should be, and as I would want him to be as a shareholder. I think many companies fail to optimize their R&D, that is, make sure there’s an end goal. That end goal surely has to involve monetization for the shareholders.

Let me side track a bit. There’s a local construction company, BBR Holdings, that I wrote about several years back. They branched out into doing all sorts of stuff, with a “Green arm”, exploring the commercial application of solar panels. They had some co-op with the gov and were experimenting with floating solar panels in the reservoirs. After a ton of precious cashflow being diverted to all this, after so many years… the company had a grand total of something like 2 clients, and both are on ridiculously onerous terms that makes it near impossible for the company to turn a profit. (The clients pay nothing for solar panel installations, and they pay for any electricity generated at the normal market rates. It was estimated that the company would “breakeven” after like 10 years of selling electricity at the then market raters!)

This is surely the prime example of diworsification!

So why did I pare down my AVGO stake despite singing praises about the company?

The short answer is: Valuation.

Markets have priced in a very successful AVGO future ahead. I’m very reluctant to sell out completely though, as past experience tells me it’s a mistake to bet against certain businesses that are dominant in their industries and will continue to be in the foreseeable future. Also, it’s really all just about opportunity costs and whether there are safer, more productive avenues to park capital in.

With that, here’s TTI’s new top 5 generals list:

TTI’s 5 Generals

  1. Nippon Yusen Kabushiki Kaisha (9101), Mitsui OSK Lines Ltd (9104), Kawasaki Kisen Kaisha, Ltd (9107)
  2. Alibaba Group (BABA, 9988)
  3. Broadcom (AVGO)
  4. Pershing Square Tontine Holdings (PSTH)
  5. Rocket Companies (RKT)

Nippon YKK, Mitsui and KKK are the 3 largest shipping firms in Japan. They collectively own One Ocean Network (ONE), in approximately 3 equal parts. Pretty sure most people would recognize ONE’s bright pink containers.

Since I can’t really differentiate and choose between the 3, for my top spot, I’ve decided to buy all 3 over the past 3 weeks or so. I hold long positions in all 3 in the form of both direct equity as well as a structured option position. Amongst the 3, I’ve the greatest exposure to KKK (9107), which incidentally, is the smallest too.

Alright, that’s all I have for this short post.

Stay tuned for more exciting investing adventures in the next episode of TTI!