SecularStars Trading Strategy

Monthly Performance

Benchmark Performance

Performance Note
Performance is as of November 30, 2018

Strategy Type
Discretionary

Benchmark
SPY - SPDR S&P 500 ETF Trust

Holding Period
Long Term - for multiple months and years.

Strategy Advisor
Stephen Aniston

Active Period
Jan 1st, 2016 - present

Risk Profile
This is a high-risk and high-volatility growth strategy best suited for qualified high net-worth investors with high risk tolerance due to the significant volatility of monthly returns and high annual drawdowns. This strategy should have at most 10% allocation of overall liquid investments.

Strategy Description
The portfolio manager brings a background as a technologist having spent a decade in the IT departments of major financial giants (Goldman Sachs, Royal Bank of Scotland) and as such he has expertise in up and coming hardware and software technologies and long term fintech initiatives. This portfolio tries to identify new technology and financial technology providers with secular growth potential (10 baggers). The focus is on small cap companies that have some significant technological advantage whether a patent or strong developer network that is still in early stage of adoption by corporate America and Fortune 500. Examples are companies that are poised to benefit from the worldwide adoption of cloud computing and distributed software, from the rise of social networks or online education for the masses. Occasionally, the portfolio may invest in some non-tech companies that the manager understands well that benefit from long lasting cyclical, economic recovery trends (such spikes in energy prices). But by and large the portfolio will have technology and fintech bent.

Since most of the companies are emerging, high growth companies they will feature high price to sales multiples and many times will be losing companies at the time of investment. The idea is that companies growing revenues 40-50% per year get cheaper as time goes by and as they mature into their market and achieve great profitability. We try to look for companies with excellent, visionary management teams which are also fiscally responsible and have a track record of making carefully considered product investments. Since these companies are in the extreme end of growth and valuations, they will feature abnormal volatility. The portfolio manager will try to avoid excessive volatility shocks during difficult macroeconomic periods (recessions, rising discount rates periods) by selling investments and going to cash. Outside of recessions and periods of rising dicount rates, investments in these companies will have a long time horizon and we will handle a lot of volatility so long as the fundamental prospects of the companies haven't changed and the economy and stock markets have positive forward prospects. It will not be unusual for companies in this portfolio to gain 200% in a year only to give back 40-50% before going on another big run during good economic conditions. We expect wild volatility in these names. Hopefully, more often than not the volatility will be to the upside. We are not looking to profit from the volatility profile of the names (even though occassionally we will do just that). Our main purpose is to benefit from secular technological trends.

This portfolio is managed like a venture capital portfolio. It is assumed that only a few of winners need to be spotted to achieve above average market returns. There is a certain amount of initial money allotted to an investment which we call a "lot". The core "lot" of this portfolio is $10,000. Legging into investments happens at most in 2 steps - 2 50% purchases or 1 100% purchase. If an investment is down significantly - say -50% or more, we might consider doubling down if the fundamental story is intact. As investments double and triple in value, some shares might be sold in order to invest in new opportunities. We are big fans of the rule "sell half on a double" which release capital continuously and allows us to pursue an increasing number of very well selected opportunities.

Trading Account Considerations
The strategy targets basic 401(k) trading account without margin. Because multiple buys and sells don't happen on the same day, we assume buy and sells can be immediate and are not subject to a 3 day settlement. No slippage is assumed. A trading fee of $7.50 per transaction is assumed. Any portfolio cash is assumed to generate 0% return even though that is often not the case in practice. The initial amount for the strategy is $10,000 but as opportunities are identified, additional contributions may be requested at later stages.

Disclaimer
Prior performance does not guarantee future returns. There are no backtests for this strategy as it is a discretionary strategy.

Black Peak Ventures does not provide professional financial investment advice specific to your life situation. UltimateSavings is an investment strategy that may not be suitable for your life situation.