Inflation Is Here
Good morning to all investors,
It appears as if we will have another volatile week in the markets based on futures activity. As of this writing the S&P 500, Dow and Nasdaq futures are down 1.58%, 1.06% and 2.31%, respectively.
I’m guessing the entire year will be more volatile than the prior few years as higher inflation is beginning to pick up steam and effect all forms of life for everyday Americans. Remember, there hasn’t been inflation like this since the 80s. Most Americans have not experienced an inflationary environment, which in the worst case scenario, could get pretty ugly.
I spoke to a couple of you the other day and my views on investing have not changed despite the inflationary environment. I am a true value investor by heart. I buy undervalued assets that are not appreciated by Mr. Market. I purchase these assets in all business cycles and try not to focus on what the market is doing on a day to day basis.
Value investing works. If you buy undervalued assets and focus your analysis on the balance sheet and margin of safety, the upside will take care of itself. If you are wrong in your analysis and forecasts, the margin of safety will ensure that there won’t be a permanent loss of capital.
In addition, I don’t adjust the percentage of cash in my portfolio based on any macroeconomic views. Almost all macroeconomic forecasters get their predications wrong. It is a losing man’s game. The percentage of the cash held in my portfolio is based on the opportunity set of available investments Mr. Market is pitching at me.
As of this writing the cash percentage of my portfolio is almost zero. I have been finding a significant amount of attractive investments in this market despite the weird inflated period of tech stocks and high valuations. Click here to see the top four stocks in my portfolio.
Let’s get at it this week. Investing is a marathon, not a sprint. Focus on buying undervalued businesses and holding until they re-rate to your target share price. If Mr. Market pukes, buy more if your thesis hasn’t changed. Buying when everyone is selling requires balls of steel. Get those steel balls.
New Stock Idea
I published a new top idea last week. This stock now makes up over 10% of my portfolio and it is likely I will continue to add should there be any pullbacks.
On Thursday this company announced that they have engaged investment bankers to sell one segment of their company. According to a Reuters article, this segment could be worth upwards of $1 billion. The current value of the entire business is just under $400 million and you get the other business unit for free — which I peg has a valuation of $100-150 million.
Bids on these assets are expected to close in the second quarter of 2022. Should these assets sell anywhere close to where the investment bankers value them, it is at least a clean double.
Get access to this stock idea along with an archive of all of my past research. If you have any questions or want a sample of my research shoot me a DM.
Sycamore Partners is said to consider bid for Kohl's: U.S. department store Kohl's Corp. may soon receive a second takeover offer as private equity firm Sycamore Partners prepares to make a bid only days after a consortium backed by activist investment firm Starboard Value proposed buying the company, three sources familiar with the matter said on Sunday. Sycamore Partners has reached out to Kohl's about a potential offer that would value the company around $9 billion, one source said. The firm is willing to pay at least $65 a share in cash for the company, the source said. Read More.
Fortescue to buy Williams Advanced Engineering for $222 million: Fortescue Metals Group Ltd will buy Williams Advanced Engineering Limited (WAE) from private equity firm EMK Capital and Williams Grand Prix Engineering Limited for 164 million pounds($222.15 million), the iron one miner said on Monday. Read More.
Peloton's collapse spins up Apple, Nike, Amazon acquisition chatter: "At an enterprise value of under $10 billion, Peloton could make for an attractive acquisition target given their strong brand loyalty and valuable intellectual property. In my opinion, it would make a ton of sense for a company like Apple to acquire Peloton, integrating Peloton into the Health app." Read More.
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