If you’re of a certain age you’ll likely agree that one of the things that offered a much-needed dose of humor to the economic doldrums of the 1970s – and the ho-hum to harmful nature of the market which included two bear markets and one near-bear market – was “streaking.” Much different than the 56-game hitting streak authored by DiMaggio in 1941, the Celtics eight straight NBA titles (1958-1959 to 1965-1966), or Ripken’s 2,632 consecutive games started (1982 – 1998), the 1970s version had its genesis on college campuses whereby college students would strip naked and then make a public sprint often with police or security personnel in hot pursuit. The sensation even made a surprise appearance on the stage during the 1974 Academy Awards!
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Our work suggests that the skies are getting friendlier for Norwegian Air (NAS MO). The stock completed its 4th bear market decline (-87% this time) in September 2019 and has been slowly repairing itself since. And enough repair has occurred for us to get interested on the long-side.
Astroball, published in 2018, was the idea of author Ben Reiter who, in a June 2014 cover story for Sports Illustrated, said the Houston Astros would win the World Series in 2017. While in Las Vegas in July 2017 I placed a legal bet with the sports book at The Bellagio that the Astros would win the World Series. It’s safe to say that Ben Reiter in 2014 did not (nor did I in 2017) have any idea about the Astros “extra-curricular” efforts to gain an edge over their opponents that would, eventually, help them win in 2017.
Trying to identify successful short candidates is always a difficult task, but one where your odds of success can be enhanced when the bearish thesis is confirmed by three distinct investment disciplines. This is the 6th Wolfe Fusion Short Basket, which marries the best of our macro franchises (Accounting/Strategy, Quant and Technical), and the results have been encouraging, with 4 of the previous 5 baskets generating alpha on the short-side (not an easy task given this one way market). While last quarter’s basket was our first losing quarter, trailing the S&P 500 by 0.6%, the strategy has averaged 450 basis points of outperformance since our initial basket in September of ’18.
16-months since their peak in the summer of ‘18, small caps stubbornly remain 5% off those August highs. Underperforming their larger cap peers by ~1700 basis points over this time frame (S&P +12%), signs are emerging that this longer-term underperformance is attempting to turn. The middle pane on the second chart below highlights how the Russell’s relative performance vs. the SPX has broken out from its 18-month downtrend and is starting to carve out a potential base. Plenty of work still has to be done, but a welcomed development nonetheless
It was wholly appropriate to use the line from the movie City Slickers – “If hate were people I’d be China” – to describe the hate we heard, starting in summer 2019, when we first went with the “buy the SX7E” idea. This hate then grew into King Kong-sized hate when we offered the “buy Deutsche Bank” idea in mid-December 2019.
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