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)

2019 Year In Review - Mask On...Mask Off

Thank you Future - Mask On...Mask Off. Represent...I Gotta Represent

Mask Off - I am currently closing the books for 2019 and reflecting on a year of ups and downs.  Personally, I was rocked to my core this year as I lost my father. It was a deafening experience because he was an amazing father, husband, educator, community and spiritual leader. When it happened, many of us were stunned, discombobulated and grasping for balance.  

I use the word numb because I arguably experienced my best personal year I have ever had…and didn’t care.  I was very fortunate from a very early age my father taught me how to be strong, independent, and prepared to lead the family when that time came. So that is what I – what we all have tried to do, with him in mind.  Finally, this year marked my second daughter and 3 nephews being introduced to the world and my family and they are a big source of joy as we recover from our loss. 

Mask On - I get my strength from my family and push on to make a difference in this short life we are given.  I keep my eye on the prize and financial independence, being spiritually guided, and mentally woke is a powerful combination that NOBODY can touch.  So mask on and back to the lecture at hand: I ran the numbers and I turned in a pretty solid year. At roughly 23%, my personal portfolio that I manage did fairly well and IMO I didn't take on a ton of risk as I targeted value stocks.  Some are discarded gems, others I did detailed research and just saw a different story and narrative than many others.  I kind of like going against the grain...following the herd is NOT in my DNA ask Kendrick Lamar. .

Remember you all can do this. Need proof, the broader market turned in a similar performance and an event better performance was found in a technology based strategy like simply buying the NASDAQ index this year (to the tune of roughly 35% this year). I've got big goals this upcoming year and I will introduce them later but here are the remainder of the best picks I uncovered for 2019:

• Symantec / NortonLifeLock (SYMC)- Value Play; Part of the Business was bought out gave us a nice pop 
• Telsa (TLSA) - Value Play Doubled in 2019 
• Sprint (S) - Played options very well (now letting the profits ride on T-Mobile deal approval will be biggest gain if hits)
• Okta (Okta) - Cybersecurity trade that I sold too early but you live and learn
• Allergan (AGN) - A beaten down value play that finally payed off; This company make BOTOX and will be bought out by Abbvie
• Arconic (ARNC) - Pickup up some shares about the $19-21 range; value play that was dogged by litigation from a high-rise fire in London; Sold to early but it's all good
• Humana (HUM) - This stock ran up after a few big issues failed to damper healthcare stocks: 1) the Trump administration came down lightly on fines for not disclosing their negotiated rates ( a supposed game changer to bring down drug prices) and 2) Elizabeth Warren scaling back her Medicare for all plans
• Red Robin Gourmet Burgers (RRGB) - Pleasant Surprise; Stumbled on to an under performing value stock that is under pressure to change CEOs and deliver better results
• Cronos (CRON) - Surprised to see this one was so profitable; traded the Marijuana stock a few times. I have big hopes and so does the alcoholic beverage industry as they took a major stake in this company. One of the few companies I still hold a stake in
• CrowdStrike (CRWD) - Cybersecurity IPO stock that focuses on protecting your devices; They got absolutely crushed after a bag earnings and I was nimble and played this stock very well. I will be back in CrowdStrike this year
• JD. COM (JD) - My patience was rewarded; I calculated that America and China need each other. Trump removing the China tariffs caused this stock to take off from the mid 20s and now its in the mid 30s. This is a core holding for the future 

I want to wish you a very Happy New Years. Many blessings to you all and don't be afraid to dream but do it rationally, help others, take prudent risk, and take care of those who are good to you.

Here is my gift to you the rest of the best:

• VIX Index - I traded in and out of the VIXY; I'm waiting for volatility to return in 2020
• Zscaler - Plagued by earning's misses; I traded ZS in 2019 and expect to be more active in ZS and the Cyber stocks in 2020 as expectations and acquisitions are ripe for the picking
• Kohls - Between dividends and a small profitable trade, Kohls made my list but then turned into my achilles heel; I fell for their splashy venture with Amazon which was probably to cover for a bad earnings call to come. They got crushed and will need to bounce back  
• Century Link - No big notes here. They stabilized around the $10 range and it was a nice win
• Ceasar's - A good example winning and lose. I bet on Ceasars in 2018. Was happy when a deal was announced and thought I won big. No deal came and my trade blew up. I put the trade back on and benefited when El Dorado decided to buy Ceasars...so only a small gain comes from all this work.
• AVEO Pharmaceuticals - I had a small win but AVEO continues to have disappointing drug trials  
• RedHat - bought out by IBM wish I had a bigger position
• Novagold - Gold is back and being helped by Brexit and the recent attacks in the Mid East
• Anadarko - Bought out by Occidental Petroleum; I beat my buddy Buffet to this trade as he funded Occidental's purchase
• Facebook - Hard to fight the beast. They known everything and are selling it...ohh marketing it to anyone with cash
• Foot Locker - Hurt by the China issues, severely under-performed but Nike's resurgence may bode well for them in 2020
• Newell Brands - A value play that I think has bottomed. Let's see if we can trade this stock on the way up 

Clearly 2019's song of the year is HOT by Young Thug featuring Gunna and Travis Scott...

 my job is to keep it HOT in 2020...look out