Updated: Apr 25
Last Week in a Nutshell
The NASDAQ was well on its way to closing down 2% on the week when something remarkable happened. On Friday, around 2:30pm EST, someone (with a lot of money) fell asleep with their elbow on the 'buy' button. In under 2 hours, the NASDAQ gained over 2%, closing the day up 1.24%.
However, the rotation of growth & tech stocks to value and cyclical plays continued on this week. Between the potential for herd immunity by June and never ending stimulus, investors who have positioned their portfolios with 'economic' sensitive stocks have enjoyed outsized returns.
To visualize the intensity of the napping-broker-buying that took place Friday afternoon - see the below image - on the right side of the chart, as the green bars (red = selling) at the bottom increase (buying volume), so does the level of the NASDAQ (yellow line ramping up).
With this level of institutional buying (retail couldn't pump up an index like that) to end the week, could this be the start of a ‘melt-up’ in the NASDAQ that some are predicting? …..cue the William Wallace HOLDDDD.
“The Suez Canal handles around 12% of global trade, making it an essential point of passage. Each day of blockage disrupts more than $9 billion worth of goods….”
As absurd (and almost comical) as the story is, it is important that this situation gets resolved given the potential consequences it could have on an already stretched global supply chain.
Is this the week the NASDAQ outperforms or will the cyclicals continue to be favored?
As always, keep an eye on the 10-year yield as inflation expectations/worries persist. As stated by Peter Tchir from Academy Securities, “the rise in 10-year bond yields …. reflects that investors anticipate there will be a rise in inflation.”
In summary, the current narrative of stronger economic growth and rising inflation expectations will continue to favor cyclical exposure - but with the NASDAQ's ridiculous close on Friday, is this the start of a 'cooling off' period for value and for a melt-up in tech and growth?
Stock of the Week
** I have a position in that security
Boston Beer Company (NYSE: SAM) **
Boston Beer Company needs very little explanation - beer and flavored malt beverage manufacturer. The story here is the seltzer market and how much Millennials love to drink them. Truly The company introduced the Truly brand in April of 2016 and has since seen serious sales growth. In 2016, during the very early stages of Truly marketing and distribution, the company’s sales declined 4.75% year over year (YOY). Since then, growth has taken off:
15.41% growth in 2018
25.50% growth in 2019
38.88% growth in 2020 - during the year Truly sales grew over 100% YOY and was the only hard seltzer brand not introduced in 2020 to grow its off-premise (buying alcohol and taking it elsewhere) market share in 2020. This means to say that its #1 competitor White Claw did not grow its off-premise market share on the year.
The rise and dominance of Truly has been well noted by the market as SAM stock has risen over 600% since April of 2016. It's not out of the question to think that the seltzer story has already been fully captured in the share price. However, I believe that the seltzer story is still in the early innings and SAM still has some juice left. The Company's Commitment to the Truly Brand Truly is expected to be their leading growth segment and the company sees significant growth opportunities for the brand in 2021 and beyond. They are consistently coming out with new Truly flavors with their launch of Truly Lemonade in 2020 and the launch of Truly Iced Tea Hard Seltzer in early 2021. This bodes well for the company:
According to YouGov, 60% of Millennials are more likely to try new drinks.
The company also stated that, "Truly Lemonade was the most incremental new product in the entire beer industry in measured off-premise channels in 2020" and that the Truly Iced Tea launch has been very well received thus far.
Truly and Seltzer Sales Going Forward The Millennial age demographic cares much more about physical appearance than other age demographics. Truly:
2gs of sugar
Gluten free (this seems to be a big thing for Millennials..)
In 2020, once the weather started warming up, Millennials chose hard seltzer over the classic light beer (i.e. Bud Light, Coors Light, etc.). With the U.S. re-opening and summer right around the corner, Millennials, who had a year of their youth stripped from them, will be out in full force. Hard seltzers will be consumed like no other over the next 6 months and this should be reflected in SAM’s 2021 sales and earnings. Hard seltzers adoption hasn’t even started on the international level but given the rapid U.S. adoption, I expect hard seltzer consumption to eventually trickle over to international waters. Anecdotal Evidence Lastly, in my opinion, there is no better evidence than anecdotal evidence. Anytime I am at a party or have a party that is full of millennials, it is absolutely disgusting how many seltzers I am throwing away the next morning.
Cryptocurrency of the Week
** I have a position in that security
Nexus Mutual (NXM)
Decentralization is essentially removing power/planning/decision making from one specific party. This is one of, if not the most important aspect of Bitcoin and the Ethereum blockchain
Decentralization is built on inclusivity and it entails information being sent directly from one person to another. No company serving as a middleman and acting how they see fit.
Right now, there is a lot of interest in decentralized finance (DeFi). Think about Venmo and Cash App. Yes, you are transacting peer to peer (sending money to one another) but PayPal (Venmo) and Square (Cash App) act as the financial intermediaries who have the ability to freeze your account, seize the $ in your account and/or block your transactions.
With decentralized finance, there is no PayPal or Square in the middle and you have full control and visibility over your assets.
Cryptocurrencies and decentralized finance are still in their infancy and there’s a lot of jargon. Over the coming weeks and months, I plan to publish blogs that try to explain the area further as I believe this space has tons of opportunity and has a big place in our futures.
Back to Nexus Mutual...
Here to disrupt the insurance industry, take power away from the large insurance companies and give it back to the people.
Why do you buy insurance on something? Say that your house burns down in a fire. If you have insurance on your home then after a long tedious process with your insurance provider, you will (probably) receive compensation for losing your home. If you didn't have insurance, then you'd be sh*t out of luck.
Cryptocurrencies have become very popular and with that there has been a big rise in the creation of exchanges to purchase and sell those cryptos. This has introduced the risk of hacking and the loss of assets on these exchanges.
Enter in Nexus Mutual...
Say you are crypto fanatic, you purchase and exchange cryptocurrencies on one of the cryptocurrency exchanges (i.e. Uniswap). You are afraid of the exchange potentially being hacked and your assets being stolen. You can take out insurance on Uniswap via Nexus Mutual to protect your assets.
With Nexus Mutual, you invest your capital (the premiums you pay for insurance) into a pool and in return you receive a NXM token that is fully backed by the capital in that insurance pool.
Back to Decentralization...
What separates Nexus Mutual from your classic insurance company is that the members of NXM (the individuals who have NXM tokens) decide on the legitimacy of each claim filed by other members. It isn't the insurance provider who is the decision maker and the all powerful...it is the members. The NXM token is what gives the member the rights to governance, claim and risk assessment (giving you full control and visibility over your assets).
NXM Revenue Stream
Nexus Mutual makes money the same way a regular insurance company would. They receive the premiums for the insurance as well as earn, “float” on the capital in the pool
Right now, it is pretty tricky for Nexus Mutual to invest this money and have limited investment options that are considered 'safe'. Nexus Mutual lays out the current investment strategy on their company site.
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