Dear readers, since our last market and trade update on the 16th of June 2022 there has been a number of macro events which we will summarize with our comments below:
We note that since our post on the 20th of May 2022 where we publicly announced that we had gone 60 % cash and hedged our portfolio with a large stake in vaccine producer Bavarian Nordic the ESGFIRE portfolio has performed considerably better than all global indexes, although ofcourse many of our portfolio companies themselves have decreased in market cap for different reasons.
As we have pointed out on many occasions the World Health Organization (WHO) appears to be making the same mistake as they did in the beginning of the COVID-19 pandemic. Their reaction to the Monkeypox threat has by all accounts been slow and very poor so far. WHO had convened an emergency meeting on Friday the 24th of June only to days later announce that they did not view Monkeypox as a Public Health threat despite the virus having reached over 4000 cases in over 60 countries. A few days later WHO announced that they would have a new emergency meeting over the development of Monkeypox.
The new reason for an emergency meeting so quickly after the first was apparently that the virus is potentially poised to “move into high-risk groups including children, the immunocompromised, and pregnant women.”
We remain long in our position of Bavarian Nordic (tickers $BAVA , $BVNRY) which has the only approved Vaccine for Monkeypox.
The ECB hikes rates
The European Cental Bank ( ECB) is determined to hike rates in July by atleast 0.25 % and potentially even by 0,5 % .
Several Euro countries are showing an alarming inflation rate which the ECB can ignore no longer. An alarming event is the spread in borrowing rates between Germany and Italy (and other highly in debt Euro Countries).
Consumer-price growth is running at more than 8%, driven to large extent by energy and food as a result of Russia’s attack on Ukraine. Economists expect data Friday to show another acceleration in June, to 8.5%
Many experts think that the ECB has been very slow to raise rates to tackle inflation however it is prudent to point out that most of the rising inflation is in Food and Energy and that this has its origin from Russias unlawful invasion of Ukraine.
There is a considerable risk that the FED may hike their rate by another 0.75 % at their July meeting. This is especially likely if inflation numbers do not come down from record highs.
Consumer confidence numbers were a main reason for a big dump in stocks on tuesday the 28th of june 2022.
The market will definately want to see inflation numbers come down to settle its nerves. If we do not see lower inflation numbers in June we can surely expect more turbulent market conditions AND a 0,75 % rate hike during the next FED meeting.
Our stance on the new investment climate
Companies with financing needs will face a harsher investment climate. This can be demonstrated by the latest crash in the stock price of our high confidence investment Earthrenew that have seen its shares drop from 0.3 CAD to 0.18 CAD following a large private placement. It will be increasingly more important to select companies that can sustain themselves in this harsh investment climate.
Revised portfolio strategy for ESGFIRE
Following the turbulent markets and the transitioning from a low interest environment to a more normalized and possibly even high interest rate market we will be making changes to our investment strategy. Those of our Portfolio companies that are far from revenues and in which we do not have rock hard confidence in will soon be liquidated and removed from the ESGFIRE portfolio. We will also be applying a more profit based approach meaning we will be looking for new portfolio companies in the ESG sector that are already profitable. This revised strategy may lead to fewer 10 baggers however in this market sentiment it is more important to preserve capital than to chase potential 10 baggers. All changes will of course be announced in our portolio update.
Finally we want to urge our readers to reach out to us if you have any questions, concerns or if there are specific topics you would like us to write about. You can reach us either on Discord, twitter, instagram or Email at firstname.lastname@example.org.
Investing in stocks is combined with certain risks and it is possible to lose your entire investment. Our posts are made for Educational purposes only and are not to be interpreted as tips , financial advice or recommendations of any kind to either buy or sell any stocks.
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