ASML may have been a better investment for Berkshire?

ASML manufactures equipment to make semiconductors. Taiwan Semiconductors is a customer.

The following shows the relative strength of TSM versus ASML.

TSM is stronger when the vertical line is GREEN. ASML is stronger when the vertical line is RED.

It may make an excellent pairs trade. The correlation is very high.

Prices are pre-opening on November 17, 2022.

Berkshire Hathaway and Taiwan Semiconductor Manufacturing

Yesterday WSJ (Nov 16, 2022) noted in its latest filings that Berkshire Hathaway, which in the past had avoided technology, had purchased 60 million shares of TSMC valued at roughly $4.1 billion which is one of Berkshire’s top 10 holdings.

The following graph shows TSM’s price history over the past few months.

Volume is at the bottom.

 

Prices are as of 8:30 on November 17, 2022

 

Hedge against bond market decline

During the 1998 stock market decline of 21%, I was a managing partner of two convertible arbitrage hedge funds. It should have been a home run for the convertible arbitrage community, but there was also a decline in the fixed income market that happened at the same time.

The long side in the convertible arbitrage position is supposed to decline at a much slower rate than the short side equity decline.  That is where the profit comes from. In 1998, as in today’s market, that is not happening. I was not alone. There was a flight from quality, as that was the most liquid part of the market.

This problem led most of the convertible arbitrage community to try and figure out a way to hedge the long side against fixed income decline at the same time as equity declines.

The futures market offered a partial solution, but many of us did not use it because of various reasons. The main reason was that outside counsel advised us that if we were to use futures we had to register as a commodity pool operator with the CFTC, and we were unwilling to put ourselves in another regulatory situation.

TODAY THERE IS A BETTER WAY:

“The Simplify Interest Rate Hedge ETF (PFIX) seeks to hedge interest rate movements arising from rising long-term interest rates and to benefit from market stress when fixed income volatility increases.

T­he fund holds a large position in over-the-counter (OTC) interest rate options intended to provide a direct and transparent convex exposure to large upward moves in interest rates and interest rate volatility.Using OTC derivatives, usually only available to institutional investors, PFIX is designed to be functionally similar to owning a position in long-dated put options on 20-year US Treasury bonds. Since the option position is held for an extended period, the ETF provides a simple and transparent interest rate hedge.”

For more information, go to the Simplify website.

The following graph portrays PFIX in relation to SPY, the ETF of the S&P 500. Close as of the close of Tuesday, September 27, 2022.

The swap from SPY to PFIX is at the Green vertical lines.

The trade would make an interesting momemtum-based pairs trade.

 

 

 

PayPal versus Visa

I am a subscriber to Seeking Alpha which during the day updates its readers with many blurbs about what the Wall Street research is telling their readers.

This morning, September 21, 2022, I received the following:

  • Bank of America has added PayPal Holdings (NASDAQ:PYPL) and removed Visa (NYSE:V) to its US 1 list, which represents the firms best investment ideas from its Buy-rated, U.S.-listed stocks. BofA keeps its buy rating on Visa.

  • In Wednesday premarket trading, PayPal (PYPL) has gained 0.6%, and Visa (V) was up 0.2%.

  • By contrast, SA’s Quant system, which historically outperforms the market, has a Hold rating on PayPal (PYPL) as well as on Visa (V).

I have charted the relative performance of PYPL vs V over the last few monthe with the results below.

The swap between PYPL and V should have happened on July 22, 2022

 

SNAP dissapoints everyone.

SNAP, the provider of Snapchat over the past year has reported negative news after negative news. Now there is some news about its compensation practices which put into question more questions about the future viability of the company.

The attached charts illustrate the stock journey. Prices are as of the close of Monday, August 1, 2022

 

Early Warning Indicator

SHOPify in news

SHOP has been in the news lately regarding the acquisition of a logistic company.

Prices are as of the close of Friday, May 6, 2022.

As in all previous illustrations, Green lines are periods of LONG, Red lines show periods of SHORT, and Blue lines are periods of NO POSITION.

The weekly is the dominant signal. So in this example, the only possible daily position in the year 2022 is SHORT.

 

ARK Innovation ETF ARKK

Like many investors, I was impressed by the incredible upside performance of Cathie Wood’s ETF  ARKK  in 2020.

The holdings include Tesla, Zoom, Roku, Teledoc Health, and Coinbase Global.

With the exception of Telsa, most are down a considerable amount this year.

Despite the large underperformance of ARKK, many investors are staying the course, according to Monday’s (April 25, 2022)  Wall Street Journal.

The following Monthly and Daily chart of ARKK portrays the recent price decline.

Price is as of the close today, Tuesday, April 26, 2022.

AbbVie Earnings coming next week.

“Wall Street expects a year-over-year increase in earnings on higher revenues when AbbVie (ABBV) reports results for the quarter ended March 2022. While this widely-known consensus outlook is important in gauging the company’s earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.

The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on April 29. On the other hand, if they miss, the stock may move lower.” Zacks Equity Research, April 22, 2022

The following pictures of ABBV Daily and Weekly show that some expect lower results than projected. Prices are as of the close of Friday, April 22, 2022.

The weekly chart is the dominant position.  The green line indicates BUY. The RED line indicates SELL, and the BLUE line indicates CLOSE position.

As in all past posts, When and only when the Weekly indicates BUY, then if the daily is also Green, the position should be long. The BLUE line indicates CLOSE position.

SHW revisited. Swing Trading at its best.

As many of my readers know, I have been following Sherwin Williams for many years. It qualifies in most metrics as a solid company financially and has been an outstanding holding in many portfolios.

The caveat is that if you have the ability to adjust your potfolio when certain stocks are not gaining at price but declining, then SHW has been in and out of your portfolio many times in the past few years.

Using the weekly price action as the guide and the daily price action as your trigger, the following charts are a good example of good timing in SHW.

As usual, green lines represent the time of being long on the weekly, if only the daily agrees.

 

Long-only from April of 2020 until the end of January 2021. Then long-only from April of 2021 until Mid January 2022. Short only from February 11, 2022.

The daily charts are the actual trade trigger.

 

This is an example of how swing trading is supposed to work. Prices are as of the close on Friday, March 11, 2022.