16th Sep '23 by Edmund Shing

7 comments 1699 reads

Market Musings 160923
The hidden cost of fashion

Following the latest fad can be bad for your financial health

Summary

Pandemic lessons: The rise and fall of ARK
Collapse on online retail stocks, food delivery, connected fitness, fake meat
Back to the old economy: Retail, Professional Media, Oil & Gas, Latin America

Podcast
Tackling the obesity epidemic

In today’s podcast, Edmund Shing, Chief Investment Officer of BNP Paribas Wealth Management, discusses the causes and consequences of obesity and its treatments.

Factors causing obesity
Related health conditions
So-called wonder drugs on the market
How to invest in this essential medical/health segment?

On Fads and Fashions: a Health Warning

The global COVID-19 pandemic has proved a very interesting case study in financial bubbles and busts. Of course, the widespread economic shutdown triggered by lockdowns, and the subsequent economic stimulus responses from governments and central banks were unprecedented in size.

We also saw the inflation of a number of investment bubbles, most notably centred around technology linked to the necessity of staying and working from home during the pandemic. Of course, there have been structural changes to our daily lives as a result of the pandemic, including a much higher percentage of white collar work which is now done on a mixed or work-from-home basis today.

Perhaps the best illustration of the pandemic-linked technology bubble and subsequent bust (echoing to some extent the 2000 technology bubble) can be found in the incredible rise and fall of the house of ARK - the ETF issuer led by Cathie Woods that championed all manner of new, high-growth technology stocks and themes.

The rise and fall of the ARK

Source: tradingview.com

Today, the ARK Innovation ETF sits some way below its pre-pandemic levels, 73% below its early 2021 peak level.

One of the stocks ARK favoured was Peloton, who offered us the Peloton bike with connected fitness classes. This online fitness fashion seems to have faded in popularity once reopening occurred - Peloton stock has lost 97% from peak and shows little sign of recovering.

Pandemic-era: The Peloton fitness fad

Source: tradingview.com

Similar can be said for food delivery stocks such as…

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jonno

16th Sep '23

Hi Edmund,

Where can I find your podcasts please?

I fully agree with the sentiments expressed above that echo the thoughts of two of the great investors.

Peter Lynch, who when asked what stocks to avoid said that he would avoid the hottest stocks in hot markets.

Howard Marks makes the point that very highly valued stocks, where investors chase prices to unsustainable heights are often accompanied by something new and exciting. The dot com bubble being an obvious example, where investors paid astronomical prices for companies that had no earnings, but were in some, often very tenuous way related to the internet.

Today, Nvidia and Arm are likely candidates for the above descriptors.

As I have commented in previous posts (apologies to fellow Stockopedia readers) valuation matters. If you are clever or lucky enough not to be holding the 'baby' when the music stops it is possible to make a handsome profit., but I know that I am not.

I wish investors in Nvidia and ARM well and they are no doubt very good companies, but would I pay a PE in excess of 100 for a stock, in short no. They are not for me.

William K

17th Sep '23

Thanks Edmund. Yes, Yellow Cake (LON:YCA) has done pretty well over the last couple of weeks (I hold). It's now at an all time high and looks like going higher. Worth a punt on the next pullback. Your earlier post about energy stocks was influential in my decision to invest so much appreciated.

TEIN

Just click on the blue heading under the word 'Podcast' at the top of the article.

Edmund Shing

18th Sep '23

Hi jonno

you can find our podcasts on the major podcast platforms - Apple podcasts, Spotify, Podcast Addict etc. searching for "BNP Paribas Wealth".

Alternatively, they are all here as well!

https://wealthmanagement.bnpparibas/vow/en.html

All the best

Edmund

Thank you Edmund.

Cheers Tein.

Mark Carter

I'm not disagreeing with you. When Arm was listed in the UK it was on a punchy rating, although not on its current US rating. I did hear of a UK guy who 10-bagged on Arm, mind. It was a long-term holding, and you would have had to have kept your nerve on its rating.

One potential problem I've seen with Arm is a relatively recent change in its licensing model. It's something like royalties being due not on the cost of the chip, but on the price of the finished device. This bumps up royalties, of course, but people have queried if this is a short-term move to aid in the flotation, rather than sustainable in the long term .

RISC-V is a license-free alternative to Arm that is gaining a lot of traction. (Technically license-free, although third-party designers are likely to charge royalties for custom "IP blocks").

A few years ago Arm introduced a good licensing scheme for its lower-end MCUs (microcontrollers). It enabled small fry like Raspberry Pi to gain a foothold in designing their own silicon.

Arm possibly did this to counter the threat of RISC-V.

I've probably got some of the details wrong. But not too wrong, I trust.

It will be interesting to see it all pans out.

Market Musings 160923: The hidden cost of fashion

Market Musings 160923
The hidden cost of fashion

Summary

Podcast
Tackling the obesity epidemic

On Fads and Fashions: a Health Warning

Unlock the rest of this article with a 14 day trial

About the Author

Edmund Shing

7 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...

Market Musings 160923: The hidden cost of fashion

Market Musings 160923The hidden cost of fashion

Summary

PodcastTackling the obesity epidemic

On Fads and Fashions: a Health Warning

Unlock the rest of this article with a 14 day trial

About the Author

Edmund Shing

7 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...

Market Musings 160923
The hidden cost of fashion

Podcast
Tackling the obesity epidemic