The Marau Journal

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My Portfolio

My investment Thesis(s)

US SMALL CAPS - LONG

It's 2024, and your pet dog is probably long NVDA right now. 

In fact screw your pet dog ( no, not like that ), even your cat, parrot and the rabbit that died 10yrs ago is long NVDA.

Heck there are probably more investors in GME than IWM right now. Certainly more idiots. Sorry, that slipped out.

You could tell the guy in the pub that you are buying small caps aggressively and even he is going to laugh at you, he will tell you interest rates are too high, and not likely to go down, and that even if they do go down, rate cuts are bearish events, and that the whole of the RTY index is filled with zombie companies that are unprofitable.

Right..ok mate. Go back to your cider.

Unprofitable? So? Small caps have always been relatively more speculative and less profitable than large caps. That's why they are "small caps". It's like saying "why invest in your local corner shop when you can invest in TESCO". 

Well, you don't invest in specific companies. You should invest in the index.

So you buy a part of every corner shop or you buy a part of every big supermarket.

You will find that the corner shops generate more profit, and employ more people, thus are a better representation of the economy vs some large multi billion dollar corporations that have huge cash balances and actually enjoy higher interest rates.

Rates wont decline? I can only laugh. They will. Perhaps not in the next FOMC, perhaps not in the one after. But they will eventually decline, and until then small caps trade cheaply.

Rate cuts aren't bearish events either. I am not really sure who made this stat up, but it seems everyone has flipped from "rate cuts won't happen" to "oh they are bearish anyway". Next the argument will be "small caps are being manipulated upwards to profit hedge funds and they will collapse". Just watch. The world is a simulation.

In my article https://aiden-hawkins.webnode.co.uk/l/the-plan/, I have detailed reasons you should be paying attention to small caps.

My portfolio is currently very heavily invested into :

XBI ETF (biotech exposure)

Leveraged ETF for IWM (direct leveraged exposure to a broad small cap index)

TAN ETF (solar exposure)

RDFN (real estate exposure)

And some smaller positions :

SPWR (Squeeze play on solar)

TSLA (Play on an oversold large cap EV)

OPRA (My only AI play and a homage to the best browser on Earth )

My 2024 OUTLOOK

Here are some quick pointers for what I expect in 2024 ;

1. At some point interest rates will decline. I expect 1-2 cuts this year, assuming we do not enter a recession. I don't expect a recession and believe that economic indicators such as the inverted yield curve are outdated, which has so far proven correct.

2. In the run up to a rate cut, the FED will begin to hint further at such a decision, and the SOFR pricing of the probability of a cut will near 90% - This is already true for November odds. But  I am more leaning to a cut between July and September.

3. The increase in probability of a cut will lead to a spur in rallies across the small cap and speculative sectors - this is already being seen in some speculative areas such as GME, AMC, SPWR and so on. Companies in high debt are gaining a flurry of interest. This isn't sustainable in the long run but is a sign of investors beginning to price in a more risk-on market.

4. I expect RTY to outperform tech stocks this year. Unfortunately so far that is not at all true. The NASDAQ100 alone is up almost 20%, almost 3* the average annual return. RTY is flat for the year and has been trading within a  very tight and admittedly frustrating range for 5 months. At some point I believe this needs to catch up and we will see a new ATH. My portfolio is poised for this event.

5. I believe bonds have bottomed, particularly TLT and yields have topped, particularly US10Y & TNX. This will further aid my thesis for long small caps and speculative assets. 

Aiden Hawkins

 Just typing my life into the Internet, because that is sensible.

Etoro : @marau2021

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