GVI Investor Video Update – February 8, 2023

Hello, Manward family.

Well, what caught my eye this week, actually over the last fortnight, I have got some fascinating, interesting data to share just with you.

So let's go through it.

Well, first of all, if you're wondering why the markets are doing so well and why, I don't know, for some reason the hedge fund managers, and the fund managers, and the talking heads and the CNBCs and Bloombergs are all caught off guard.

Well, they shouldn't be.

The reason is the market looks forward, it believes as this JPMorgan data set shows that we're nearing the peak in interest rates and they'll start declining.

Remember, we're coming from a place where we were afraid interest rates could just keep rising and rising and rising. There was a sense of panic around November and October of last year, but now that seems to have gone finished and we tend to look about... I think the markets tend to look about 12, 18 months ahead. So that's one key reason why it's been such a strong start to the year.

I have to say, I think for most of last year I must have been a lot in cash. I mean, when I had cash to deploy, I didn't necessarily deploy it in a rush. This year the story has changed. It really is a story of really getting right into it and investing, but investing carefully and that's what I'll lead you to.

I also wanted to show you this. You see, people will be slow from last year having suffered a lot of losses, as many will. Obviously those who weren't really paying attention will have suffered significant losses. This reminded me of a lecture I used to give at Oxford University. Loss aversion, the tendency to strongly prefer avoiding losses over acquiring gains can lead to missed investment opportunities.

I really think that's the story for the start of this year, start of 2023, is that psychological bias. It's something which was brought to mind because of how quickly the markets have turned around and it's why a lot of people are being wrong footed.

Okay. So where did we stand? Well, at the time of this recording, January of course is finished and we're about already almost a percentage up in February on the S&P 500. January was up 6%, the best since 2019 and the first positive January in three years. Thank you very much on that one.

Now looking at this, I know you're all thinking "I can't wait till July." Well, I think we might be doing all right before then. But I just thought I'd share this with you.

Now where are we overall given the presidential cycle? Now again, another thing which really caught my eye and I'd forgotten about this, that where we are in the presidential cycle means that we should still be getting a few more gains. That's if you go by history over the last 90 odd years. Of course, history is no guarantee of the future, but I think it's well worth looking at.

Some examples of that are, and this is just seven day returns, when I put these are up. Tesla, Nvidia, Meta, I mean those are not returns we've seen for over a year now. So again, there's a lot of money coming in and it's coming in fast and people are asking me, is it a bear trap? No, I don't think it's a bear trap, and by that I assume they mean falls of 20%, a bear market will resume. I don't think we're going to drop 20% from where we are now. We might get one or two days of drops, but 20% seems a bit like overdoing it.

I also went head to head with Michael Burry. Yes, you know the guy from The Big Short. Well, he said on Bloomberg's Twitter, he said "sell." That was on the 31st of January at 7:04 PM. I said, he's wrong. I said, "You should buy." By the way, those are local times. So when he posted, it's his local time. When I posted it's my local time. So I didn't post buy before he'd even put his message in. I said, he's wrong. Buy.

You might recall after the Federal Reserve there was a sharp rise, and actually you can even see since then, since February the first, there's been a sharp rise. So that's the reason why he was wrong. I was right. I've already explained it was we're expecting interest rates to top out.  So maybe they'll make a movie about me and call it The Big Tall. I don't know, The Big Long.

S&P 500 best performance through first 20 trading days and then what's gone on to happen. Now, this was fascinating. Price return, first 20 trading days, and look at the years in which ranked the best. 1987 ranked the best. It was 13.2% up, but price from day 21 to the rest was down 9.6%. Price return full county up, up 2.3%.

Anyway, where are we at the moment? We're in 12th place, and you can see you are more likely given these returns to then have a remainder of the year, which is positive and a full calendar year, which is positive. So it really is a time to sort of, I wouldn't quite say fill your booths. We've still got to be... of course you got to pick through our GVI Investor very methodically still with proper due diligence. After all, in many cases it's our life savings and our children's inheritance we're talking about.

But what I'm saying is I'm a lot more bullish than I was a while back.

I also wanted to show you this from Bloomberg. I got some Bitcoin. The reason I bought more Bitcoin is, well, I looked at this in January it was, so I didn't get in as low as 17.2 and they said it could drop 40%. I said, yeah right, drops 40%. That's good to know. So I make sure I don't have my life savings in there obviously, but there's a resistance. Could take you up to 130% returns. Indeed, as you'll have seen Bitcoin since January has done rather well. So I thought I'd mention that.

I'm in good company, by the way. I showed you and mentioned my Oxford University interviews, lectures. Slight humble brag because I knew that one of the slides that was coming up is the one from a Wharton professor. Maybe I should get in touch with Jeremy Siegel and say, "yep, I agree." He says stocks are on the cusp of a new bull market. So we've got some backup. I mean, I'm not bothered what he says as much as what my analysis and what my team and the hedge fund provide me.

Now, Jeremy Grantham, who's always a negative, warns of a 17% this year. Doesn't look like it's going to happen yet. Okay? You never know what's going to happen. He can see further in the future than I can if he thinks that. Having said that, Jeremy Grantham wakes up every January and says the market's going to fall 20%, and guess what? Every 10 years he's right.

Hedge funds rushed to unwind bets on falling markets as stocks surge. It's like I said earlier, my colleagues in the hedge fund industry had perversely just got it wrong. I mean, they'd just been rather slow to move. Where are we in terms of valuations? This is where the caution might come in. P/E ratios I've put here, you can see the UK is cheap. US 24 times multiple, but which you might say is a bit expected, but forecast earnings per share or profits per share growth 15%, which gives us a price earnings growth ratio of 1.5.

Now you ideally want that to be below 1. Well, nobody's below 1 in the developed markets and a few are below 1. Well China is, it's had a bit of a beating and Thailand. Are you going to go to Thailand, Vietnam? Probably for a holiday, maybe even Brazil, maybe Turkey, but you're not really going to go based on that PEG ratio.

So is America overvalued? 1.5's not too bad. I'd be worried if it were 2. I'd be thinking ooh, that's a bit tight, but we're going to pick stocks based on undervaluation, so we're not too worried.

By the way, the big story of course is ChatGPT. I should say this is me, a human and not a machine giving this, and I think we're a bit away before machines give stock picks, but they do help me a fair bit in all the analysis.

I shouldn't call my staff machines.

Nvidia is one play which we liked as a result of chatGPT, but actually its financials had looked good. It dropped off quite a lot last year and so this extra story and story catches people's attention and just added to the plus on that.

Let's just have a look at the portfolio and where we stand. I want to draw some of them to your attention. Just not all of them, but just any which caught my eye.

Of course, we're up on APA, and one of the things that I just wanted to mention on that is of course we're talking gas, we're talking oil and exploration and all of those things.

Now there is a rotation out of energy stocks and people are pocketing some of the profits and putting them into others. So I will let you know if we decide to get out of this earlier than anticipated. But yeah, there is some profit taking out of energy stock because it was a bumpy year last year and moving into other areas.

Now, Pinduoduo, I wanted to mention not just because it's up about 50% for us, but also because China. Remember that I showed you the valuations for China and it's opening up again. As long as they don't keep sending balloons over the United States, we should all be all right. Their balloon comes down, hopefully the big balloon doesn't go up.

Top five China stocks to buy. It just is getting more and more attraction because it's listed in the US. One of our picks obviously, and people are getting more and more excited about China opening, let's get into more Chinese stocks. So it's done well, partly because of that, partly because the financials look good.

Genuine Parts, again, one I wanted to showcase for you, and the reason is for this one is higher inflation, high cost of living, still a dividend player. Still a dividend player and I think that's been one of the key reasons why it's also consumer cyclical. Now, people say Alpesh, consumer cyclicals, forget it. This year's all about healthcare. It's about financial stocks. It's about energy companies. No, and I've said this before, actually, technology and consumer cyclicals, the market looks 12 to 18 months ahead. Consumer cyclicals will continue doing fairly well.

Okay, ArcBest, it's doing all right. It's doing all right. What caught my eye on this are the banks keep pushing it. They're upgrading it. They consider it to remain resilient, particularly because of the margins. But more importantly, when we look at it, we're finding that as well. So that again, caught my eye.

Dover, done well for us and again, it's been the banks partly pushing it, and it's our job to sort of anticipate that they'll see what we see. It's our job to see it before they do by analyzing all the data, and that's what we've been doing with this one, and that's a classic one where the fundamentals are good. We saw them first. Then the banks come in later, they happen to see it. I don't know, maybe they're plagiarizing or hacking my computer and just seeing what I'm saying and then copying it. Sometimes does feel like that.

Perion Networks, up significantly about roughly 50% for us. Again, what caught my eye with this one is that the resilience, they're unlike the others. There isn't something where it's specifically oh, look at this. It's dividends. Oh, look at this. It is consumer cyclicals. Oh, look at this. It's actually just the solid fundamentals. It's just a company, almost boring in its way, just doing its thing. Doesn't make the headlines, gets the profits, gets the revenues, gets the growth, gets all the kinds of figures we're looking at on that one.

Okay, Shyft Group, what did I like and what sort of interested me about this? Well, you've got the EV angle of course, and its sort of electrified issue on there. I thought it was quite good to have a stock which wasn't just in one particular segment of the markets like so many other technology companies can be. It's good to be out there with the broader EV story and what's happening out there with electric vehicles more generally. They're going to stay in the news and people are going to say, well, okay, which are good, solid companies with good, which are in this space? You find oh, actually there's one.

ModivCare, one of our more recent ones, of course, that I'd picked and having gone through the earnings call transcript and looked at the company before selecting it more recently, we just like the direction it's going and it's one of those where I can say yep, we picked it. Oh, the news is steady and good.

Like I said, I wasn't planning to go through all of them. I just wanted to go through the ones which sort of caught my attention a bit and I had something to share with you and talk about.

So thank you all very much, Manward family, for listening, and I hope you like the update.

Hope we gave you some insights on the markets and how we look at things, and how we tend to be independent minded of what others are thinking, but also give you insights you can't get elsewhere.

Thank you very much.