How Being Risk Focused Allows Me to Play Defense + Offense

Playing Offense - Embracing Technology to Be More Efficient

Being a cyber guy, I take a brutal stance to technology. I don't have Instagram, Twitter, or any other junk accounts to monitor my behavior, recognize my face, and tailor advertising JUST for me. Unfortunately, I have a Facebook account. But I'd be a fool to shun technology as I invest in them and understand how they attract the masses yearning for one simple thing --- human connection. I prefer to pick up the phone and chat, the most genuine form of communicating and being able to interpret the little things but we all have to adapt to the world around us. So you all would be proud of me, today, I wrote a majority of this post using a speech recognition service on my computer. In an effort to save time, I need am modernizing how I send emails and blog. I simply say open word pad and begin speaking. I understand computers, so slow and steady dictation spits out my thoughts while I work on other things or follow the markets. 

Playing Defense - When Defense Turns to Offense

For this post I wanted to talk about defense.  Being a risk manager, I often help companies play defense.  By playing defense and protecting your core assets from risk. I believe eventually, you'll hit an optimal point where you're actually playing offense.  I was recently reading an article that cited the great investor Bill Gross.  He was cofounder oOf the legendary PIMPCO bond funds.  I found what he said in this article very interesting.  To summarize, he was talking about playing defense.  He mentioned at this point there are not many investments areas to continue to make outsized returns. In my opinion, this is a dangerous place to be in a market when they're are not many investments remaining that can offer decent returns.

If you were to ask me what keeps be up at night, it would be just that --- as I evaluate most assets whether it be stocks, real estate, even precious metals they all seem to be moving in one direction...  and that's up.  I found it interesting that Bill mentioned tobacco, banks, and the geographical region of Europe as areas to invest. As I evaluate my portfolio, I believe I'm seeing a similar trend playing out.  When I filter for the stocks that have recently been increasing I find that my dogs or laggards in my portfolio are moving up nicely.  If you've read my blog in the past you'll notice that many of the stocks fall in the retail space:

RED Robin - Restaurants

Stitch Fix - Apparel

Foot Locker - Apparel

Viacom - Television and Advertising

TEGNA - Newpapers and TV stations Advertising (think USA Today and your local news)

AMC Theaters - Movies

NEWELL Rubbermaid - Consumer goods

Tapestry (Coach) - Luxury Bags and apparel

I find this trend surprising but I also welcome the frothiness of the market dissipating.  What keeps me up at night, is that these stocks are primarily  focused on the consumer. Similar to Bill's thesis of tobacco, banks, and Europe.  Let's take a quick look: restaurants, apparel, television, movies, and consumer goods. The resilience of humans is absolutely amazing.  With COVID and high unemployment still as the backdrop, you are seeing people yearning for a sense of normalcy so we do what we feel is normal -- the machine wants us to spend. And spend we are. I'm not sure if this is sustainable but I'd be a hypocrite if I didn't disclose my portfolio will do okay if these positions move up. While I hunker down, America is purchasing online I wish I owned Amazon, Target, Home Depot and Lowes but I am playing the ELECTIONS (with TV and advertising) and Gambling (Ceasars and DraftKings). Stitch Fix I was playing as a tech play but man holding on has been a long brutal wait. The rest, I can't wait to get out because like the Malls, I think the future of retail is owning the platform (Amazon, Shopify, etc.) and less the physical stores.

50c Candy Bars - My value Search

Finally, I always on the hunt for value or as my billionaire buddy Seth Klarman calls them cigarette butts. Me I called them the 50c candy bar deals. My spidy senses are looking at Viasat at these levels. Now comes the deep analysis of how to invest in a way that limits my risk --- haha finally I found something that won't keep me up at night :)

Stocks mentioned in this post: Tapestry (TPR), Red Robin Gourmet Burgers (RRGB), Stitch Fix (SFIX), Foot Locker (FL), Viacom (VIAC), TEGNA (TGNA), AMC Theatres (AMC), Newell Brands Inc (NWL)