The Main Message of Benjamin Graham. Value Investing. Growth Investing

Dear Reader,

I am currently reading the book "Security Analysis" by Benjamin Graham and David Dodd.

I think the main message is not that one has to always invest in value stocks. The investing community understands value stocks as companies with low Price/Book, Price/Earnings and Price/Sales ratios from mature industries.

I think Benjamin Graham's message is more subtle. He says that you have to invest with a margin of safety. That is, invest in undervalued by a high margin companies. The undervaluation represents your margin of safety. What Benjamin Graham underlines is that the stock of the same company could be investable or undervalued at one level and non-investable and overvalued at another level.

Almost half way through the book, I never saw that Benjamin Graham say you should not invest in growth stocks. His main message is that "In the short-term the market is like a voting machine, while in the long-term the market functions like a weighing machine". Basically, what that means is that the Efficient Market Hypothesis that the stock market is always right is wrong or deeply flawed. At any time you can find many undervalued securities in the market. Benjamin Graham says that the market always provides us with securities which are undervalued.

This Graham's idea can easily be applied to growth stocks. It was easy to see that Snap Inc.'s stock, the owner of the Snapchat social media application, was undervalued at 5 USD and at 25 USD nowadays its seems less overvalued. Or as Graham says "the stock of the same company could be investable or undervalued at one level and non-investable and overvalued at another level.".

In short, Benjamin Graham states the obvious truth that the stock market constantly misprices securities, but the main message is that one should invest in grossly mispriced companies, since the same companies could become even more undervalued.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Cryptocurrencies Investing Risk Management

Dear Reader,

Cryptocurrencies are the new force in international finance. Cryptocurrencies are the single new investing asset class in decades.

However, cryptocurrencies are notoriously volatile. While the standard deviation, a measure of risk, of the Standard and Poor's is around 15 % in years without financial crises, the standard deviation of cryptocurrencies seems to be around 30 %.

How to risk manage when you invest in cryptocurrencies? As in regular stocks investing there seem to be two approaches. Either you are a very short-term investor, that is a speculator, or you are a long-term investor. If you invest short-term you can control to some extent the volatility, but you will have to accept quick and not negligible real losses, swallow them and move on in anticipation your profits will ultimately outweigh the losses.

If you invest in cryptocurrency for the long-term, that is you employ a "buy and hold" strategy you will have to accept the huge volatility of cryptocurrencies and ultimately record paper losses, live with it and expect that cryptocurrencies will ultimately change the world of finance and the world itself. If that happens, you will definitely make tens if not hundred of times on your initial investment.

There is of course, the middle way where you try to time the market and employ a mid-term cryptocurrency investing strategy. 

In short, if you invest in cryptocurrencies you have to be prepared to live with high risk, but also expect high rewards. Ultimately, what will make or brake your investment is the acceptance of cryptocurrencies as a mainstay investing asset class. If cryptocurrencies become a true global currency phenomenon, the cryptocurrency market liquidity will rise many times over, which will attract institutional investors, which on turn will raise prices dramatically further.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Why Technology Stocks Keep Going Up and Outperforming?

Dear Reader,

Technology stocks, software, seem to be eating the world. Technology stocks measured by mainly the Nasdaq Composite Index keep going up and outperforming the other main indices like the Dow Jones Industrial Average, Standard and Poor's 500, FTSE, DAX, CAC, CSI 300, Nikkei etc.

Why? I think there are two plausible explanations. One is that we are in a technology bubble. Simply the prices of technology stocks do not reflect reality. They incorporate too high expectations for future revenues and profits.

The other explanation is that due to the coronavirus COVID-19 pandemic the digital transformation wave that has gripped the globe in the last 20 years has accelerated and the total addressable market for technology companies has expanded significantly, basically in the last 4 months. People are working, shopping and communicating not from offices any more, but remotely from their homes. Companies are using more and more cloud services to store, process and analyze data and perform their main activities. Advertisements and other activities are shifting online with accelerating pace. All this expands the total addressable market for cloud services, software as a service, online shopping, search, social networks and computer and smartphone hardware companies. And this should translate in higher revenues and ultimately profits and dividends for technology companies which is reflected in their share prices.

Actually, I think the truth is split like we are 70 % in a technology stocks bubble and 30 % the rise of technology stocks prices is due to the expansion of their total addressable market. This implies that technology stocks are 30 % overvalued, in my humble opinion.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Will Cryptocurrencies Change the Investing World?

Dear Reader,

Cryptocurrencies or digital currencies are the newest and hottest asset class that is changing profoundly the investing world.

Cryptocurrencies are akin most to stocks. They are a participation in a project or implicitly in the revenue or success of a certain company. Cryptocurrencies are basically stocks on steroids, meaning that cryptocurrencies are several times more volatile than stocks. This of course means, one can make a lot of money quickly, but also a lot of money can be lost quickly.

Bitcoin, Ethereum have risen many times, even hundreds of times in value since their introduction. Cryptocurrencies are a wonderful means for both investing and speculation. Since cryptocurrencies do not participate in the estate of the company if a company goes bankrupt, are not entitled to dividends and rank behind bonds, junior debt, preferred equity and common equity in the capital structure cryptocurrencies are a highly leveraged play on the future of a certain company that has issued the particular cryptocurrency.

Companies' stocks that are benefitting disproportionately from cryptocurrencies are Advanced Micro  Devices, NVIDIA and Microsoft due to higher demand for computer processing units, graphical processing units and personal computers respectively.

Cryptocurrencies are a revolution in the investing world. Cryptocurrencies are changing how people invest and are basically a revolutionary asset class. The one danger to cryptocurrencies is the fact that global regulators - Central banks, securities commissions and so on might not allow the asset class to flourish. But the benefits to society from cryptocurrencies are just too great, in my humble opinion. What is a cryptocurrency? Essentially a digital currency. Banks have been allowed to issue digital currencies for ages by creating bank reserves through the money multiplicator.

In short, the future of investing and cryptocurrencies in particular is bright!

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

What Is Going to Burst the Technology Bubble?

Dear Reader,

Technology stocks globally definitely are in a bubble, as far as I am concerned.

What is going to pop the bubble? I think the Federal Reserve diminishing powers to support the global economy is going to slowly contribute to popping the technology bubble. Trade and political tensions between the USA and China also can end the bubble.

The coronavirus pandemic, if it gets worse in the coming winter, could also prove the trigger, which could burst this technology bubble. Actually, the confluence of the aforementioned factors could bring about the bursting of the technology bubble.

I forecast the technology bubble could well pop in 3 years. Some sectors of technology like artificial intelligence and cryptocurrencies will survive and later prosper, and at least not be touched so much, by the bursting of the technology bubble. Artificial intelligence is the new oil and cryptocurrencies are the new United States dollar.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

The Technology Stocks Bubble

Dear Reader,

Yes, I do believe we are in a technology stocks bubble, almost to the tune of the dot-com bubble in 2000/2001.

I believe Microsoft, Apple, Amazon, Alphabet(Google) and Facebook are overvalued by between 30% and 60%. Why? Simply because their market capitalizations imply very high future growth of both revenue and profits, which is very improbable to occur, given their already extremely high market capitalizations and extent of revenues. If this future growth of the largest technology companies is going to happen, they would simply have to subsume entire industries outside of their current scope of activities.

Tesla is another glaring example of a bubble. The stock implies that Tesla is about to become by far the dominant automobile manufacturer in the world. Very improbable. I estimate Tesla is overvalued by 75%. Groupon, Fitbit, DDD, Gopro are examples of smaller technology companies bubble that have already burst. All of these companies were envisioned to experience rocket growth which never materialized and their stock prices came crashing back to Earth.

I forecast the Nasdaq Composite will fall more than 60% from current levels in the next 5 years. Money chasing money and money chasing winners works until it doesn't. This does not mean,  however that artificial intelligence is not going to change the world.

On the contrary, artificial intelligence is the new internet. Artificial intelligence will change our lives almost to the extent that the internet did. And yes Microsoft, Apple, Amazon, Alphabet(Google) and Facebook will benefit massively from artificial intelligence in the next 10-15 years, but the stock market, especially concerning technology companies, is way ahead of the near future much like it was in the dot-com bubble.

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich

Lemonade IPO Valuation

Dear Reader,

Lemonade Inc., the US online insurance start up, more than doubled in its first day of trading after the IPO.

What is the real intrinsic worth of Lemonade? Currently Lemonade is valued at 3.81 bln. USD on public markets. I think Lemonade is worth around 1.5 billion USD currently. In 2019 Lemonade earned 63.8 mln. USD in revenue but lost 108 mln USD. In 2018 Lemonade lost 52 mln. USD on 21.2 mln. USD in revenue.

Yes, Lemonade almost tripled its revenue in 2019 compared to full year 2018. But the company is loss making. Even if Lemonade continues to grow revenue very quickly, it will take 2-3 years for Lemonade to become profitable.

That is why I think Lemonade is worth 1.5 bln. USD, much less than the current public markets valuation of Lemonade of 3.81 bln. USD. That said, insurance is a huge market waiting to be disrupted. That is why I think Lemonade is worth 1.5 bln. USD, which is a lot of money.

One must bear in mind that we are undoubtedly in a technology bubble measured by overvaluation of technology companies, especially US based, of between 30% and 80%. However, the technology bubble could well run a long course driven by ultra easy monetary policy of central banks and millennials and new investors entering continuously public markets. 

Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".

Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!

Respectfully yours,

Petar Posledovich