Quick Update

Last nite I covered some PE shorts that weren't working.  Will probably cover more tonight.

I'm less short than I'd like, but its hard to reload now as nothing is bouncing.  I missed the chance early last night.  Short term, we are probably in a crash, wait for it to play out over a few days, cover some, then see if I can reload.

Always cut your losses.  And don't look back, you can never look back.

Update: After open 3rd Nov.  

A lot happened in 3 hours:

• Some things bounced pre-market, till they were int he middle of their Hedgeye risk ranges.  Shorted them before market open
• Covered more of the PE shorts after market open.
• Apple collapsed.  Their results beat expectations, but outlook gloomy due to margin pressures.   Stock was down 3%, I think the market reaction tells all.  I sold it, plus the rest of my Big Tech (Microsoft) and Software (IGV).  If the King can't survive, no one can.  I may have been too early as its bouncing now.  Lets see how it goes.

Quick Update

Small adjustments, trimmed a few longs and shorts:

• Covered part of Europe, I forgot the other part.  Why be short something thats not falling in a crashing market.
• Stopped out of some software, took some profits on healthcare.
• Stopped out of some other shorts, individual positions that weren't working.

Performance has been good the past 2 days.  Of course.  Portfolio up 1.5%.

Its hard to tell when the market is oversold or crashing.  I give it a 2/3rds chance of the latter.  I'll probably hold most of my shorts for the next 1-5 days, before covering 1/3rd to 1/2.

I remind myself to cover more of the higher beta stuff, like silver and crypto-stuff. Less of the normal stuff like Q's and Russell.  And don't bother with High Yield.  The high beta stuff can really rip your guts out in the next vicious bear market rally.

Getting squeezed

I added to some shorts early this week.  Too early, I got squeezed a few days.  Tough week:

Sold the LATAM bank, Nubank, last night, on the rebound after the Brazil election loss.  Don't want to hold a high beta EM stock into a correction.  Got a little shorter:

Bought CTOS Digital

CTOS Digital is a Malaysian Credit Bureau, part of an oligopoly selling credit reports.  They had a 71% market share in Consumer reports.   I got the idea from the Asian Century Stocks Substack (1) (2).

They had a cyber security incident recently, and their services have been suspended until further notice.  Their chart is a falling knife:

I bought some on Monday and some today, average price 38.3c.  Its a 4% position.

This is a profitable company with recurring revenue, a sustainable competitive advantage, and a gross margin in the 60s.  Some notes:

• Their tax rate will rise in 2027 as a tax exception expires. 
• Malaysia is implementing Bank Negara's Open Finance Network next year.  This will allow 6 months of anyones bank statements to be downloaded by another bank, with the consumer's consent.  However a bank statement only gives payment details, it does not say if payment was full or on time.    I don't think this is a thread to CTOS.  But it would be better if CTOS had access to these statements as well - currently it seems like they don't - only banks can request the statements.
• At current price, I get a forward PE of 10 to 11.  Excluding the suspension.

Its not part of EWM.  Its a mid-cap, part of a few Malaysian indexes, so stock price might still  be affected by an overall market correction.

The big unknown is how much their longer term market share and revenue is affected by the suspension.

Wild Week

Been a wild week.

Both my longs and shorts have been working.  I've been taking profit:

• Took profit on some shorts as they kept going down (precious, cyclicals).  I cover a bit on the day they breakdown.  Then sell down to my min one or 2 days later when they breakdown more. 

• Covered 1/2 of my Russell short after it dipped slightly on Thurs & Fri - its an overcrowded short which isn't going down enough.
• Stopped out Big Tech longs.  Now only 2 of the original Mag 7 left.
• Software longs went up a lot, took profits, position down to min.
• Added some shorts in private equity - but they turned against me Thursday.  These are my only short positions at a loss.  Its at a max position.

• VIX up to 19.

Looking to reload both sides when I get a chance.  If I get a chance:

Hard to know when a particular trade - or the market overall - is oversold or crashing.

Got Shorter

Wed morning 21st Oct, before market close.  Woke up and my shorts were up (against me), added some more.

Now filled around 3/4 of my max short position.

Sold Japanese SAAS Companies

My Japanese SAAS stocks were 2 cloud accounting companies: Freee (4478) and Money Forward (3994).  Got these ideas from Asian Century Stocks.  Since I bought them in Feb, they've been pushed up by good results, a buoyant Japanese stock market, and a recovery in software stocks being hurt by AI.

Sold them today.  Average over 40% gain in 8 months.  Supposed to sell Friday but busy at work.

Why did I sell?

• Market share data is hard to come by.  There is a big private competitor (need Japanese VPN), Yayoi, that has a large market share in legacy (desktop) accounting software.  They claim to have 560,000 active contracts (one or more users per contract) which is more than either Money Forward and Freee, and probably more than both.
• Both Freee and Money Forward are still in early growth stage, where PEs are not meaningful.  Price to sales.  The story is that they will grow profitable by converting greenfield users.  They may - recent growth figures have been good.
• I think we're at the end of the economic cycle, the current AI boom is ending.  Like 2001.  Stocks probably get hit, especially growth stocks.  I don't want to hold "Price to sales" stonks into a downturn.
• One of Hedgeye's signals for Japanese equities turned negative. last week  It was on a day that everything fell (Oct 15th), so it could be a false alarm.  But given everything else, now's a decent time to sell.

I may be missing out in two multi-year compounders.  But I also may be missing out on a market correction.