I had a pretty good 2021. $SPY was up about 28% this year and I am up about 33% in my PA. My PA is a bit different than what I write up on here though. My main benchmark I use too is the Russell 3000 to capture an apples-to-apples comp of what I write about. I don’t compare annual results on the blog, but instead look at performance of my picks compared to just putting that money in the R3K (all on an equal-weight basis) until I say it is time to close out.
As you can see below, I am still outperforming by about 20 percentage points based on all of my picks. Unfortunately, the picks from this year haven’t performed. I am a long-term investor though, so I wouldn’t expect these names to play out in 12 months anyway.
Find further notes below the chart.
Here are some quick thoughts as I recap ’21 and look out to ’22:
- Thank you for reading. The blog had 40% more views this year than last and about 4x the views of 2 years ago. I hope to continue to drive engagement!
- Laughable to compare what I first wrote about to today.
- I have a saying that “when you hear a friends value-stock pitch, give it 6 months to “season”. Your friend thinks “it can’t get any cheaper!” and it invariably does.”
- I think that’s what I was doing when I first started the blog. I had such a feeling Nexeo was cheap, I had to write about it. It eventually got acquired by a strategic, but wasn’t that compelling at the EoD.
- Some of my worst performing ideas of ’21 I am still incredibly bullish about.
- I just did an update on $ABM, $LGIH is a long-term compounder that requires patience, and I have become even more bullish about my auto supplier thesis. I get more into auto suppliers below.
- Several names I picked from last year are not doing well comparatively, but I continue to like including $BIG and $NCMI – everything at the theater chains has proven they are not dead. Ad dollars will follow.
- A lot of my performance has been driven by good picks in 2020. Let your winners run, as they say. I still see value.
- Theme of 2021: a lot of auto and retail… is it a red flag as that is what I am bullish about in 2022??
- I have 18 names I discussed in ’21, 7 were auto & retailer names. Basically none outperformed this year.
- I concur with Andrew Walker that cyclicals and retail could have a resurgence in 2022 as the valuations as just too cheap.
- However, if I put my devils advocate hat on and my macro hat on (uh oh, this is dangerous), betting on cyclicals when the Fed is raising rates 3 times AND the yield curve is super flat. Stimulus is over.
- This doesn’t point to the robust results we’ve seen continuing. There are also signs all those excess savings from the pandemic and stimulus have been spent: “households making $30,296 to $44,955 made significant gains compared with 2019, yet typically had less than about $1,300 in cash on hand. The typical low-income family (those earning less than $30,296) experienced a much larger increase in relative terms — 70 percent — but that represented a total cash balance of only about $1,000.” This tier of the consumer is very important to drive the economy.
- Please feel free to ignore this: Even I will ignore this. We should all be more bottoms-up in our lives and stop stressing about Fed meetings.
- But here’s where macro meets micro: I don’t understand why consumer sentiment is SO BAD. I hear the inflation argument – that sours consumer moods. But it seems hard for cyclicals to work too long without the consumer.
- Why is consumer sentiment at 1990s recession levels? Or below 2001??
- Like I said, I am staying long and strong retail and auto next year, I see fundamental momentum and I personally think a lot of names have changed their business models for the better, but I see the negative tea leaves forming as well.
- My 2022 call is auto suppliers are going to crush it
- I plan on doing another post on this, following my first on American Axle and the other on Strattec. Auto suppliers definitely are a segment full of “value traps.“
- In my next post, I’ll talk about low inventories in the channel and how much (and how long) it will take to restock.
- Here is the bottom line: when do you have recession levels of production, but demand has already improved drastically. Even if demand slows, production has to be elevated to restock the channel.
- Investors are always worried about demand and production levels in autos given fixed costs, but the visibility of go-forward production levels is obvious: UP!
Another positive thing I saw was from twitter. Sorry a couple other macro things:
On a tops-down basis, earnings estimates in 2022 strike me as pretty conservative. In other years where real GDP grows 3-5%, earnings growth has averaged in the low-mid double digits — consensus earnings growth for 2022 is around 5%: pic.twitter.com/uen0knCzyE
— Conor Sen (@conorsen) December 27, 2021
Lastly, Consumer balance sheets do appear in good health and well below trend low. More capacity to lever up!
That’s all for now! Stay tuned for that next post.
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