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Bar-bell rationale

Updated: Oct 31, 2023

How things have changed, What to own in this environment and how to think about valuation today is just SO important.

The TAM, EV/Sales charade is finally dying. Now it is Replacement value of assets, Book value, FCF & Discount Rates that really now matter again.

Nutstuff portfolio is still + 1% in £ YTD because of a discipline like this ( with the odd spec-sit exception!) and a skew to “Recovery possibilities” vs big exposure to “Lazy over-owned Index-Heavy Digital Names”.

The backdrop to markets here is 13 years of “free” money printing and ruinous "green" energy policies.

A “Locked-out russia and locked-in china” now adding to insane covid responses which destroyed global supply chains and productivity.

The Ukraine conflict and China lockdowns are now cutting off food, commodities and manufactured goods at source. 1.7bn people will face food security issues here in next 12mths. One in five container ships is now stuck at ports worldwide, with 30% of the backlog coming from China.

Then look at markets, honestly if the Fed can do this much damage to the markets just by talking about raising interest rates (25bp’s so far!) and shrinking its balance

sheet, what will happen if it actually does it. Then imagine what will happen when investors find out it wont meaningfully reduce inflation!

Nutstuff has continually reminded about Crowding and again its now clearer than ever that the S&P in military terms is very “General heavy” and the market is starting to torture and murder their Generals. FB was first, then NFLX last week.

Wait for GOOGL and AMZN this! AAPL has also held in, but if China is going to role-play

pandemic, who’s going to build all the iPhones? AMZN also looks like it is breaking down from a 2-year top. (See OCADO in Europe!)

YTD: AMAZON -15.29%, APPLE -11.11%, ALPHABET -17.49%, META -45.62%, SNAP -36.12%, NETFLIX -63.92%, MICROSOFT -18.14%. TWITTER +14.70%.

The tech sector has an undertow to it. It started slowly in 2021, but as more names get swept out to sea, the strength of the undertow only grows.

Remember that 1 down quarter is a tragedy for a fund. Two in a row and the redemptions start. Thus far, all we’ve seen is the first wave of selling, the wave that loosens the float enough to have actual price discovery.

With a nasty start to Q2, the redemption notices are starting to pile up. Avoid the

undertow in tech...(thx Kuppy).

All this said cash has to go somewhere and any cessation of higher rate chat and moderating inflation expectations and being short / UW some growth will hurt.

The US Mkt World is now crowded in Consumer Staples REITS and Utilities, Walmart and

Dollar stores. Here is how 30% of the Crowded SPY index looks as of last week. YES I’d be hedging this! Why my Bar-bell feels right.

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What we are seeing clearly now is the US trying hard to goad China in Taiwan, a diversionary tactic or a new game to play from the Washington bunkers. I suspect Xi plays the calm and longer game here.


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