🚨Trade Alert #5: Buying A New Growth Position, Increasing Two Positions and Adding A Precious Metal
Buying a new growth position with a favorable risk/reward profile, adding on two of the existing positions that have favorable setups, and reducing fiat exposure ahead of macro and geopolitical risks.
We are in a stock picker’s market.
What the hell does this mean?
It means buying the market at this point and expecting a historical 10% annual return won’t likely work in the short to medium term.
This makes sense as the market recovered to all-time highs despite nothing much having changed in the macroeconomic environment since Trump unveiled tariff plans in April.
The market is now pricing in trade deals, but it forgets one thing—we didn’t even need such trade deals before tariffs.
These trade deals are now being negotiated to keep tariffs at reasonable prices, not to abolish them completely.
Yet, when we had the market at all-time highs before that, none of those tariffs existed. So, it’s overly optimistic for the market to climb all the way back to highs without much of a change in the growth estimates.
Plummeting equity premiums show this. According to Bloomberg, US equity risk premiums are near their lowest in two decades:
Yet, exceptional businesses will keep thriving, and you can still get nice returns if you buy them at attractive prices. It’s a stock picker’s market.
Given the low return prospects for the broader market, you may think of waiting in cash until the market pulls back a bit.
I wouldn’t do that.
Though you should definitely keep some cash on the sidelines, having too big a cash pile is not a good strategy.
The dollar index has lost 10% since the beginning of this year.
You may think this is seasonal, but I wouldn’t bet on that, and keep large amounts of cash. I think USD may be entering a long-lasting bear market. There are many reasons:
A weaker USD strengthens the competitiveness of US exports.
It helps the US to inflate away a portion of its debt.
De-dollarization and shifting global reserve dynamics.
As US government debt kept increasing, skyrocketing in the last two decades, other countries began to believe that the US is exploiting the reserve currency status of the USD.
Thus, they have been actively searching for alternatives. The share of global reserves held in USD has declined from 62% in 2000 to 45% in 2024. Share of gold increased from 13% to 21% in the same period. (We aren’t buying gold; this is just to demonstrate erosion of trust in USD)
This means that you gotta keep allocating.
How do you allocate in a stock picker’s market while the market is at all-time highs, the macroeconomic outlook looks grim, and conflicts are rising across the world?
Buy small companies that have secular tailwinds of growth ahead.
Buy defensive companies with strong moats and trading at attractive prices.
Get exposure to precious metals to hedge against macro and geopolitical risks.
If you have been following the publication, you know that we have been executing the first two prongs for a while now.
As a result, our portfolio is up 31% in the last 12 months and 10% year-to-date against 10% and 2% returns of the S&P 500 in the same period.
Today, we will keep executing the first two steps and also add the third step for the first time since 2020.
In sum, I’ll be executing four trades today at market open:
Buy a fast-growing micro-cap stock with secular tailwinds ahead.
Increase position in one of our European holdings.
Increase position in one of our defensive holdings.
Add a precious metal to the portfolio.
I have scheduled this to go out before the market opens today, so everybody can have time to read and digest.
Here are the exact transactions I’ll be making:
The first one is buying a micro-cap stock that I believe has a strong potential to become a multi-bagger in the course of the next decade.