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Trading Diary #11
YTD Track Record
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From Previous Weeks
[ Keep, Apr 11th ] The tech environment just got worse again. So expect to do nothing for a while. Bear, Nasdaq @13,371.57 (+7.4%) [ Keep, Apr 18th ] The market looks ugly. Price action is deteriorating again, so we're staying still for now. Even though we could increase our short positions to protect the portfolio, we'd rather let our long positions hit the stop instead of expanding the portfolio leverage. Don’t mess with leverage. Bear, S&P 500 @4,361.99 (+7.8%)
[Keep, May 2nd] You probably know that I’m bull on China as well. However, my exposure to the country is still small. I’m not sure about the timing, but we’re researching more before increasing the exposure. Considering that I don’t have any cash left, I’ll have to sell something to improve the Chinese exposure, so that requires being conservative for not screwing the compounding.
[Keep, May 2nd] I’m getting increasingly bull on Oil at the current prices. There is only a marginal sign of demand destruction, even though supply constraints have increased. We mentioned it in a Food for Thought edition, but releasing SPR inventory is stupid and non-sense. So instead, we proposed an alternative solution that would require support from the current administration. Unfortunately, our base case is that the current administration will let the market balance on demand destruction and, therefore, manufacturing job losses.
Bull, XLE @76.35 (+5.8%)
[Keep, May 9th] Although I’m still tactically bearish on tech stocks, we anticipated most of MercadoLibre’s extraordinary earnings and added heavily to our position. So in relative terms, Meli should outperform tech stocks. In my personal account, however, the leverage is low.
Bull Ratio MELI / XLK @6.60 (-11.4%)
Following my comments about Brazil o Apr 10th, I reduced the stop-loss for most companies on the portfolio. As you'll see on the spreadsheet, I got stopped in several trades with a reduced loss. Our trading posture regarding LatAm has to become increasingly bearish, and the only position we still hold in the conviction list is 3R Petroleum (RRRP3 - BS). Bear, EWZ @37.86 (+15.8%)Bull RRRP3 @44.00 (-3.9%)
I wanna keep it simple. I’m long RRRP, but not paying attention to EWZ anymore.
The market hit another support, so I’m changing my bias. However, the liquidity is still low. So, bounce on Friday means nothing. It could be a 3-10% bear rally. So, don’t take unnecessary risks and preserve capital.
This week, I had a small adds on NU, SE, and another big one on MELI.
NU and SE are releasing earnings this week. For NU, I expect the sell-side will write many negative notes about NPL and asset quality, which will “deteriorate” quickly. However, there is an accountant reason for that, and it’s because NU reports under IFRS 9, not BCB 2682, as most banks do. That are a few differences, but one of the most relevant is that NU provisions an amount for each loan the company issues. Obviously, the more Nu grows, the higher are provisions. For SE, I expect a higher cash burn, especially in Brazil (here and here). According to my estimates, SE will become profitable in Brazil only in 2024, and funding might be a concern.
I’ve been writing exhaustively about the company about Meli, but I insist it is the best vehicle to have exposure to LatAm eCommerce, Fintech, and Logistic businesses. According to my estimates, excluding Capex & Opex related to growth, MELI is trading below 20x FCF, reinvesting capital at a 25% return, and capturing a lot of market share much cheaper than peers. Of course, I have no idea about stock prices. Still, Meli’s cash flow is becoming extraordinarily predictable (robust), making me realize that Meli is operating in a league of its own. As a result, the company will be better competitive position 10y fwd.
Finally, I wrote previously, but I’m closing most of my trades, sticking just with the winners, and avoiding new bets. That’s the mindset right now. Simplifying the portfolio as much as possible and keeping it clean.
Tip: If you have a trade book, take this comment thinking about your cash position. If you had a 60/40 just considering the “Position,” the performance would be similar in 2022.
Obs1→ This week, I’ll run a pool to define priorities over the 2H22. Please, it’s important that you participate.
Obs2→ You might see Giro’s Newsletter on a different domain. I’ve trying Ghost for a while and am 95% sure to migrate the whole structure to them.
As a writer and entrepreneur, I’ve got several pushbacks with Substack and it’s been tough working with them. So, I’ve been looking for an outside solution, and Ghost seems a good one. I’ll ask you about this in the pool, but always glad to receive any feedback at email@example.com.
In case you’re curious, the tools I’ve tried in the past months: ConvertKit, MailChimp, HubSpot, Shopify, RD Station, Unbounce, ViralLoops, Ghost, Zapier, and FirstPromote.
Updated on May 16th.
Also, we recommend staying on the “DASHBOARD” tab if you just wish to see my positions. We intend to update the file weekly, so don’t worry about missing anything.