Note To Public Community: Recent Weakness in Tech Sector and China/Alibaba, Comments on Semiconductors, Bond Market Selloff Accelerates
Public Commentary + Latest YT Video
Hey YT Friends, it's your friend & Investment Strategist Larry Cheung, CFA. 😊
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Larry’s Investment Strategy
In a research note to my Investment Community hosted on Patreon on March 28th and in my weekly public email note last week, I discussed the fact that risk/reward had diminished across opportunities in SPX, Tech, and China.
This is also why I discussed reductions I had made in late March in some of my more recent positions in NVDA/SHOP/PYPL, which I had discussed towards the end of my recent Youtube Video.
“Long-term investors should not look to be immediately buying these levels (SPX 4550 as we are entering overbought territory in the short-term.
“Alibaba RSI jumped from 20 to 55 over the past trading sessions and risk/reward on $BABA has changed to neutral, while LT outlook still looks good IMO.
(Image from 3/28 Patreon Post on SPX)
(Image from 3/28 Patreon Post on China- Alibaba specifically)
Despite my timely opinions provided both publicly and privately, I am still holding significant positions across U.S. Tech and Chinese Tech, and those positions have retraced quite a bit in the past week.
Semiconductors took a major hit in particular this week as investors digested the latest pulse on the Russia-Ukraine crisis and its impact on chip stocks as well as China’s Zero covid policy and recent lockdown on the chip sector.
I discussed in a recent Seeking Alpha article that Broadcom (AVGO) remains a key company I’m watching as it relates to the health of semiconductor demand towards enterprise spending.
In summary, here’s what happened this week as well as my brief thoughts going forward. Please understand that my longer-form thoughts as well as entry/exit strategies are shared with my private investment communities.
On U.S. Markets
Theme wise, value stocks (ticker Vanguard VTV) continued to outperform the growth trade (Vanguard VUG)
As I’ve mentioned many times publicly and privately, I do NOT believe the tech rally is healthy without market-leadership from Semiconductors. The importance of semiconductors in driving QQQ is often misunderstood and underestimated.
Semiconductors as measured by the SOXX ETF is dramatically underperforming QQQ (Calculated via SOXX/QQQ). Geopolitical concerns abating will spark a massive rally in SOXX. Until then, it remains under pressure.
I do not believe FAAMG can lift durably/sustainably QQQ without the support of SOXX.
On China
Alibaba retraced below 115 and now flirts with the psychologically important 100/share level again. As I wrote in my note to my investment community, I had the patience to not chase $BABA at 115 but now I’m more interested at this price level.
Zero COVID policies in China will continue to weigh down China consumption. I discuss this point in greater detail on its sector impact for Chinese Internet broadly speaking inside Patreon.
Chinese Internet LT outlook still looks constructive. ST is dependent on the gov. management of recent COVID cases.
Navigate the intermediate-term with me inside our community if you are interested in this sector.
On Bond Markets
I do not believe the 10Y Yield will continue its latest momentum without a retracement in yields. At some point, investors (including myself) will be interested in buying bonds or ETFs tracking them given its much higher yield (completely risk-free) compared to just several months earlier.
I’m studying the thesis behind peak inflation and how that will cause an intermediate term top in the 10Y yield soon.
Net-net, the indexes held up relatively well this week but masked a lot of weakness underneath the hood. Any movement towards a resolution in the Russia-Ukraine situation as well as clarity on COVID in China is likely to spark a violent risk-reversal.
In terms of timing and when that happens, follow my thoughts more closely inside our investment community.
If you enjoy this type of concise commentary and want longer-form analysis as well as my thoughts on asset class strategy with my thinking behind when risk/reward becomes attractive, come join our community where I share my researched insights as well as resources on personal development & mindset training. 👍
My Latest Youtube Video
Given that we’re approaching a late economic cycle, I wanted to share a curated list of stocks that have BOTH the attributes of dividend-growth as well as fundamental growth.
I personally think it’s important to be in the “right” types of growth companies that have both offensive and defensive qualities given a deteriorating consumer outlook in the U.S.
Here’s what my latest Youtube video is about:
Topic: Best Dividend Stocks and ETF to HEDGE Inflation And The Upcoming Recession
Unique Angle: Discussing growth stocks that have dividend-growth policies (not as common)
Intended Audience: 1.) Investors who are looking for (more) defensive strategies 2.) Investors who are interested in studying what types of growth companies perform better in late cycle economics
Reason I made this video: To help our Youtube community understand that risk-taking should continue, but it needs to be the right type of risk-taking. Security analysis becomes more important than “passive” investing.
That’s it for this update. Leave a like if you enjoyed this email. Share my newsletter with friends/family/colleagues if you believe they will enjoy/benefit from my work. ❤️
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See you back on Youtube soon,
Larry 😊