In order to access Singapore-listed companies for The Snowball Portfolio, I made an account transfer from IBKR LLC to IBKR Singapore in late January. By doing so, the performance return from 1st Jan to 21st Jan was not reflected in the new Singapore account. Hence, the performance returns for this year will be from 22nd Jan onwards.
At the end of Jan 2021, The Snowball Portfolio is down 1.57%. Meanwhile, our benchmark, the Vanguard Total World Stock is down 4.06%, representing an outperformance of 2.49%. The aggregate value of The Snowball Portfolio is S$511,594.88 (Long: S$544,572; Short: S$32,843).
For the breakdown of the individual holdings and respective weights, you can find them at the Portfolio page here.
Notable January Transactions
January was quite a hectic month with many trades. Hence, I will be focusing on the top 3 new trades I've put on in January. If you would like to see all of The Snowball Portfolio's transactions and investment thesis in near-real-time, do consider joining the Snowball Community.
1) Bitcoin and Ethereum
Initiated positions in GBTC (Grayscale Bitcoin Trust) and ETHE ( Grayscale Ethereum Trust) with 5% allocations each, bringing total crypto exposure to 10% of the portfolio. At the time of writing, ETH has reached new all-time-highs of above US$1,500. At the implied market cap of US$174.5bn, I believe we are still in the early innings given the entire DeFi space is building upon ETH as the base layer. I also think that the recent Gamestop and Robinhood fiasco will lead to accelerated adoption of DeFi, pulling forward years into the future.
As for Bitcoin, I have already covered the investment thesis here. Bitcoin's current market cap of US$667.6bn still pales in comparison with gold's US$14tn market cap. More recently, Elon Must replaced his Twitter profile with a Bitcoin emoji, similar to Jack Dorsey's (Founder of Twitter and Square) Twitter profile. Elon then went about making some interesting comments on Bitcoin on the Clubhouse discussion. Make of it what you will.
Later today and tomorrow, MicroStrategy will be hosting their Bitcoin Conference for corporations. CEOs and executives from various industries will be attending in order to learn how to adopt Bitcoin as part of their treasury reserve strategy. If companies decide to participate in Bitcoin in a meaningful way, then the total addressable market of Bitcoin will no longer be just that of gold.
CDON is listed on the Swedish stock exchange, so it's a rather obscure company. CDON is a nordic e-commerce company transitioning from a 1P to 3P market place with take-rates of around 10%. I have been averaging up on this company at the SEK 412 and SEK 500 level, bringing my average cost to SEK 445. This company looks like an early stage OZON/SE/MELI. Given the obscurity of the company, the valuations on the company is significantly below peer comps. If CDON can transition successfully and continue sustaining its high growth, it will be a multi-bagger. I have allocated 5% of the portfolio into CDON.
The company is set to announce its 4Q results this Thursday (4th Feb).
3) Gamestop Puts
I sold Gamestop puts at the strike price of $20 last Friday for $3.85 in order to capitalize on the extremely high implied vol and time decay. Based on the strike price and put price of $20 and $3.85 respectively, my yield on exposure was 19.25% for a duration of 1 month. This set up means that Gamestop has to decline below $16.15 (-80%) before 5th March for this trade to lose money. I sold 20 contracts which mean that if Gamestop stays above $20 by 5th March, I pocket the premiums worth US$7,700 or S$10,250.
In my view, $20 represents an adequate margin of safety given that the entire short squeeze fiasco began on 13th Jan from $20 onwards. Prices need to correct 77% from yesterday's last close to get to $20. Looking at previous short squeezes, the declines tend to be marked by a slower grind down (relative to the price ascension) with occasional short-covering and opportunistic buying. In addition, there is the SEC 201 uptick rule on short selling. These countervailing forces limit the rate of price decline. And since the short interest has been evaporating, it is unlikely that Gamestop's price would be as suppressed as before when the short interest was larger than the actual shares outstanding.
If all else fails, I would still be happy to accumulate Gamestop shares at an average cost of $16.15 (Put strike price $20 - Put premiums gained $3.85) and play this as a digital transformation turnaround play led by Ryan Cohen (he bought 12.9% of Gamestop for $8.44 per share in 2020). I believe there is still fundamental value in Gamestop at $16.15 and that the market would be forgetting about the value of a wide distribution channel (Gamestop has around 4,400 stores...most people thought Walmart would be destroyed by Amazon and forgot about Walmart's distribution channel). The future of retail is not e-commerce, it is omni-commerce.
Heads I win, tails I win.
Thanks for reading,
Disclaimer: This article is not an investment (buy/hold/sell or otherwise) recommendation, this is only for educational and discussion purposes. This article is not tailored to the specific circumstances of any reader. I/we/The Snowball do/does not purport to be in the business of providing financial advice and the contents of the article should not be regarded as such.