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2020!

100 years back, decade of 20's was called roaring 20's till depression started in 1929. Looking at markets in 2019, it feels like repeat of 90's or start of another decade of roaring 20's? Well - we have to wait few years to see how this decade rolls.
Since this is first blog of the new year, it's time to look back and see how the recommendations of "BEST" of New Year 2019 did?

BEST represented Biotech, Energy, Social/Streaming/Semi and Technology. Looking at companies I recommended, if one has invested equal amount of money at prices recommended and held till end of 2019, the portfolio collectively would have returned close to 60% (which is twice of S&P return). Did I just got lucky in identifying 75% winners like ROKU (360%), AAPL (100%), MSFT (60%), DIS (40%), AMD (180%) and so on. There were losers mostly in energy sector like OAS (-36%), RIG (6%), NKTR (-36%). However winners did much better than losers to create a combined return of over 60%. I think it was partially timing, picking up stocks in beaten down sectors like semi and overall out performance by technology and of course some luck. I am sure it would be very difficult to repeat this in 2020 or for that matter for any other year.

On Macro fronts, my predictions were less on the mark - partially due to changing of stance by Fed. 
Let's look at new year 2020 macro predictions and 20 stock recommendations.

Macro predictions:
  • US GDP growth of 1.75 to 2.5% (so no recession in 2020)
  • 10 year interest rates: 1.6 to 2.4% (2% seems to be new normal)
  • US Unemployment rate: 3.3 to 4.4% (lowest unemployment trend continue)
  • No interest rate changes by Fed all year (Fed can go on long vacation)
  • S&P: 3400 to 3450 
  • US China trade was subsiding with phase 1 done and phase 2 discussions ongoing
  • US-Iran geo-political war-of-words continue without actual war
  • Biden or Bloomberg becoming democrat nominee but President Trump winning 2nd term
Stock recommendations:
I am sticking with BEST theme with small changes: Biotech, Entertainment, Software/Semi and Turnaround
  • Biotech: With personalized medicines, advance of gene therapies to treat rare diseases and finally some breakthrough for Alzheimer are the themes while picking up these
    • CLVS ($10), SAGE ($70), BIIB ($280), MYGN ($25), NKTR ($19)
  • Entertainment: Last decade started the journey of streaming which has led to most media companies finally adopting it. Entertainment is going thru profound changes and right now is the time to take long view. Also the lines between media and technology are blurring.
    • NFLX ($300), DIS ($140), AAPL ($280), ROKU ($125)
  • ETF: ETF is good way to get exposure to BEST sectors. So here are few worth considering.
    • Software: IGV ($225)
    • Biotech: XBI ($90)
    • Semi: SMH ($130)
    • Defense and Aerospace: ITA ($220)
  • Software/Semi: Cloud based software hosting and delivery has been big theme last decade and it's only gaining more momentum. Semis continue their record run and has more room to run. Cloud based security is going to be another big theme.
    • AMZN ($1800), MSFT ($145), ZS ($43), AMD ($44)
  • Turnaround: This is a new category in BEST but worth considering. Many marquee names have been beaten down due to company specific issues. As long as these companies survive, there is good case to be made to invest
    • GE ($11), NTNX ($30), NIO ($3.3)
Note that I have intentionally provided target buy prices which are lower than what they are trading  because I strongly believe that markets are frothy right now and in first quarter, there would be enough opportunities to buy these recommendations at prices mentioned. So one has to be just patient   and disciplined in his/her investing strategy. As always, usual disclaimers apply. Do your own due diligence before investing.

That's all for now. Now when it comes to Super Bowl, I am happy that 49ers are in playoffs and have very good shot in making all the way.

Happy New Year 2020!
/Shyam




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