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Wow! What a year…
From lockdowns and drawdowns to a crypto boom and the reopening economy, 2021 was another one for the books.
We watched squid games, used our pelotons as clothing racks, got officially tired of Zoom meetings, and adjusted to a much more flexible WFH regime across the world.
We had Biden take office after a mob stormed the capitol, an internet dude named RoaringKitty launched gamestonk to the moon, NFTs became a thing, a ship blocked a canal, no one watched the Olympics, a couple of billionaires shot themselves into space, the CCP had their 100th anniversary, Tesla joined the trillion-dollar market cap club, and COP26 tried to achieve something for climate change.
In a crazy and wacky world, we write this newsletter to try to inform our readers and understand the world around us.
At GRIT, we have grown exponentially through a rapid increase in subscribers (now #1 free finance newsletter on substack) and expanded the team in order to provide a more robust offering in the financial media space. As you know, we write this newsletter with three goals:
-Make you learn
-Make you laugh
-Make you money!
Over the next couple of issues, we’ll first have a look back at themes and names we loved, which will lay the groundwork for a look forward to what we think will be enduring themes over the course of 2022.
This week, in <5 minutes, we’ll look back at the top four themes we loved, the stocks we bought, and two areas we avoided in 2021:
Let’s get started!
Top Four Themes + Summary
1. Bitcoin, Ethereum & the Metaverse (Web 3.0)
In the first GRIT newsletter ever, I came out of the gate hot and wrote about bitcoin back in November 2020, when Bitcoin was $15,342 on the date of publishing. Bitcoin now sits atop a mighty throne north of $48,000, representing more than a 3x return on the original investment.
I went on to write additional bullish pieces, one of them on February 21, 2021 where I dove into all the tailwinds for the asset class (ETFs, institutional adoption, legacy payment provider support, etc…). All these components of the asset class hold true today.
I even went LIVE on Fox News when it hit an all-time high. You can check out the video here.
Bitcoin has been the gateway drug to what the tech-bro Silicon Valley culture is now salivating over: Web 3.0 and the Metaverse. We’ll go into that whole can of worms next week when we talk about themes looking forward, but a company that I highlighted this year was a very straightforward way to gain this exposure: Roblox.
Roblox is a digital sandbox for kids that has an entire economy with monetary incentives structured in. Some teams of developers that create digital worlds within the game are raking in millions per year.
On January 24th, I wrote this piece that covered the IPO at $64 saying that I liked Roblox better than Affirm, Coinbase, and Robinhood, which turned out to be the right call if you bought Roblox shares and are still holding. The stock traded up to a high of $134 but has now settled around the $100 mark.
Under the Radar
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CELLULAR AGRICULTURE. More than one third of global greenhouse gas emissions can be linked directly to the way we produce, process, and package food. This means something has got to change! CULT Food Science is leading the way by giving investors ground floor access to the most disruptive startups in cellular agriculture*!
REVOLUTIONIZING ONLINE GAMING. Online betting and sports & gambling media/entertainment are 2 of the fastest growing segments in the gaming industry. Rivalry is already the most engaged esports betting brand in the world, and now they’re literally creating a new category of online gaming with Rushlane: a Massively Multiplayer Online Gambling Game (MMOGG)*!
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In a year where entire supply chains got thrown for an absolute loop, there had to be a way to make sense of it. While you can’t combat skyrocketing container prices, you can optimize your supply chain process in order to dampen the impact of inflation in everything.
In early December 2020, I wrote this newsletter about how logistics companies were going to be the big winners. The two stocks I mentioned were Descartes Systems and the REIT WPT. Since that article, Descartes is up 41% while WPT got taken out by Blackstone for a gain of 100% since the date of publishing.
Next, we’ll take a look at how Covid acted as a catalyst for widespread digital adoption…
But first, let’s check in with our Outrageous Chartered FinMEME Analyst Dr. Patel!
One of the most prevalent buzz words over Covid was “Digital Transformation.” Numerous research reports came out that touted 10 years of digital adoption brought forward in the span of 10 months all due to the pandemic.
In a world where everyone shifted online quickly – we saw the winner of all winners in Zoom. But what Covid did was also change what work looks like. By cutting out the commute, people suddenly had more time to spend with family, or be even more productive during their workday.
Back in April 2021, I wrote this piece on boring software companies that will make you rich. Despite a November/December sell-off in software, since the date of writing Adobe is up 14%, ServiceNow is up 23%, Microsoft is up 32%, and Salesforce is up 11%.
4. Green Investing: Carbon Credits
This year, in November, we had COP26 which was a much-needed update to the Paris climate meeting all the way back in 2015. The world had to step back and make honest assessments of our current efforts while mapping a feasible path forward that embeds the proper incentive structures for both rational individuals and governments.
While the final hour proved disappointing with China and India walking back commitments to eliminate (now they will “reduce”) coal-powered energy production, the overall takeaways had positive tones.
Now, with the Build Back Better bill finally passed, we have a lot of tailwinds from both the unit economic and policy side that will attract capital to the area.
I first wrote about green investing that you can find here, back at the end of November 2020. In this piece, I mentioned long NEE (+25%), Sold XBC and AQN which I owned, then sold as the company-specific thesis changed. I also spoke about ABXX which paid subscribers would have known I trimmed crystalizing gains from an early financing round. I also discussed carbon credits in the EU which are now up 180%.
I wrote about the green economy again here, in May 2021, where I discussed BAM which is up 24% since the date of writing. In June, I dove more specifically into carbon credits where I discussed a private carbon deal I invested in (this would end up being a massive win Carbon Streaming (NETZ-NEO) – invested at ~$2.50 and it’s trading at $15.50.
Two Over-Hyped Areas I Avoided
Avoiding Losers is just as good if not better as picking winners! Protecting your hard-earned capital gains by continuously compounding can get ruined if you swing for the fences on a hope and a prayer and miss. Here are a couple of topics I avoided:
1. Hot IPOs
I wrote this piece back in January 2021 about overhyped IPOs. Some of the high-flying IPOs are just a way for the large investment banks to reward their highest commission-paying clients that first-day pop before just blowing out all their shares. While the underlying company may have success down the line, valuation had to matter – but it looks like it doesn’t on day 1 as retail piles in…
Coinbase: I was iffy on it and said it but that it might go higher (it did – went as high as $429 from $250 IPO) but that valuation wise Warren Buffett wouldn’t like it (ultimately it’s down 7% from IPO price)
Affirm: I wrote “I know WAY too much about lending to be a fan of this business model.”… those who participated on IPO at $49 are up nicely but it’s essentially flat since IPO (went as high as $176, now trading at $95). I still don’t like this business and I am staying away.
Robinhood: I believe there was growth ahead for them but cautioned they need to become profitable. Stock down to $17 from its $38 IPO price.
SPACs are wack. There is more and more mounting evidence that way too much of the value in each deal accrues to bankers rather than shareholders of the amalgamated company after the de-SPAC process.
I wrote about SPAC companies here, here, and here. The most telling tale of all is in performance. The De-SPAC index, which tracks the 25 largest companies to have completed a blank-check merger, is down around 43% so far this year after touching a record high in mid-February.
A lot of this is due to the nature of the recently de-SPAC’d companies. They have been moonshot (some of them – literally) companies with high growth prospects, but no current earnings. During the great rotation out of riskier assets, these have been hurt, which has been exacerbated by their poor capital structures.
What I Got Wrong
Looking at the JETS US Equity ETF, airlines are an industry that bottomed hard but never really fully recovered.
Sure they had a nice rebound from the pandemic low, but 2021 was a disappointing year overall. We had concerns over a couple more variants and waves shut down a lot more travel. On top of that, we had Oil WTI prices have a strong positive year, raising input costs for airlines that were unhedged.
2. Online Sports Betting (DraftKings)
This one has been a frustrating one. The fundamentals are there – brand affinity lowers CAC which should ultimately lead to improving the bottom line. But when COVID wreaks havoc on every major sports league, the average stimmy goes into the stock market instead of on to sportsbooks. Competition and regulation concerns have also come up. I still believe if Draftkings can weather the storm there’s a point here where it makes sense to step in and start buying.
3. Gene Editing (Crisper)
There’s an old adage in finance that applies to our wrong call on this one, “Getting the timing wrong is the same as being wrong.” We believe we got a bit ahead of the theme on this one, as this still remains a “show me” story.
It’s been a great year of ups and downs as we all collectively try to figure out this wacky wild world of ours. In a finite world of attention these days, I want to thank each and every one of you for taking the time to read this newsletter and for supporting GRIT on the journey to financial education for the masses.
But we are just getting started…
And if you want to read about my 5 BIG PREDICTIONS for 2022 – be sure to subscribe to my PAID newsletter HERE!
Until next time. Always Yours. Incessantly Chasing ROI,
-Genevieve Roch-Decter, CFA
What else we Grittin’ On?
TOP 10 DEALMAKERS. Private equity firms spent $1.3T this year, here's the top 10. P.E. firms accounted for 24% of global deal volume.
S&P > NASDAQ. The S&P 500 outperformed the Nasdaq for the first time since 2016. Investors are staying away from tech stocks.
TALENT MIGRATION. Silicon Valley executives and engineers are quitting big tech for crypto startups. No word yet on whether they will be paid in crypto or USD.
BLOCKBUSTER DAO. Yes, it's exactly what you think it is. Grit DAO coming soon!
CRYPTO HAS REACHED THE MAINSTREAM. According to Pew, about 16% of the U.S. population holds or has held cryptocurrencies. In 2015, it was only 1%!
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