Would you rather own NVIDIA?

Or would you rather own…

• Adidas,
• Allianz,
• BASF,
• Bayer,
• BMW,
• Berlin Hannover,
• Beiersdorf,
• Brenntag,
• Continental,
• Covestro,
• Daimler Truck Holding,
• Deutsche Bank,
• Deutsche Börse,
• Deutsche Lufthansa,
• Deutsche Post,
• Deutsche Telekom,
• E.ON,
• Fresenius,
• Hannover Rück,
• HeidelbergCement,
• Henkel,
• Infineon,
• Linde,
• Merck,
• MTU Aero Engines,
• Munich Re,
• Porsche,
• RAL Banken Group, v
• RWE,
• SAP,
• Sartorius,
• Siemens,
• Siemens Energy,
• Symrise,
• Thyssenkrupp,
• Volkswagen,
• Vonovia, and
• Zalando?

You probably need a break just from scrolling through this long list, but our point is this:

Instead of NVIDIA (with a market cap of $2.2 trillion), you could own all these German blue chips (collectively valued at $1.84 trillion)… and still have $400 billion of change left to spare.

Take a look at this chart (h/t @MichaelAArouet)…

We highlighted similar examples in the past.

They might seem absurd on the surface, but they perfectly highlight just how out of whack markets can (and do) get.

On one hand investors get enamored with a narrative or a story (in this case, NVIDIA as the poster boy of the AI boom) while on the other hand the majority shuns entire sectors, asset classes, or geographies (as is the case with our pretzel-eating, beer-drinking friends here).

  EURO BANKS RISING FROM THE DEAD?

While on the topic of Germany…

Curiously, a few days ago and before the above chart first landed on our desk, we talked about Deutsche Bank in The Insider Newsletter as a potential asymmetric opportunity and a play on European interest rates rising from the dead.

Here’s Deutsche Bank…

And here’s a chart with the key ECB interest rate…

Of course, there’s more to investing than the angle of a chart. But is it too naive to think that maybe, just maybe there is a relationship between European interest rates and Deutsche Bank… or European banks in general?

While toying around with this idea, we found an interesting options trade (as an aside, we often find European options markets to be very generous as far as asymmetry) on European banks that could return 7.7x over the next four years.

  ALL THINGS TRANSITORY…

Feels like a lifetime ago, when — back in February 2020 — we started warning that lockdowns will bring about inflation and shortages. Fast forward to today, and this pesky stuff is now part of our daily lives. We recently set up a dedicated inflation channel in our Insider private forum, where members can share their own experiences with all things “transitory”.

We touched on insurance rates creeping up all over the world before. Insider member 13th Gen just shared the following:

I posted about this last year – here’s an update on the true cost of inflation in the US. The stated reason for an increase in the FEMA flood insurance premium is “because of the increased cost of labor and materials required to repair your home after a loss.” I tried to get them to claim “because floods are more likely due to climate change” but they wouldn’t. Anyway, this annual policy cost USD $600 for several years (no increases) until 2022 and has increased more than 50% since then.

Member JG added a good point:

The underwriting and distribution processes are wasteful and slow, but insurance companies are heavily regulated and competition is strong. Most of the rise in premiums is simply due to increased cost of claims

  A LESSON IN PATIENCE

Here’s a million-dollar question: as individual investors, how do we gain an edge over billion-dollar institutional investors? While the pointy shoes sitting in a skyscraper in Manhattan, London, Hong Kong,… might have every tool, research report, etc. at their fingertips, they — for the most part — don’t have one thing: patience. Or at least more patience than everyone else.

For investors patience means a longer time frame.

Here at Capitalist Exploits HQ, we say our time frame is “about five years.” That is code for saying things will take a lot longer to work out than you think.

Holding stocks for at least five years propels you into a time frame that is about 5x longer than the majority of investors.

The average holding period of 10 months? How the hell can a fundamental view play out in just 10 months?

Case in point: Tidewater…

We started buying it in 2018 at about $25 to $30, and it wouldn’t be for some six or seven years before we started making money on those initial trades (though we did add it along the way at levels substantially below $25).

Now, in fairness, we’re pulling out one of the worst trades we can find in terms of how long they’ve taken to pay us, but it is for a purpose.

When the masses are chasing popular stocks (looking at you, NVIDIA) and buying and selling in a few short months, then it’s simply illogical to follow the masses. You’ll have no edge. The edge lies in flipping that short-term focus on its head (easier said than done, we know).

  WEEK’S HUMOUR

First up, some inflationary humour (this one from Insider member Leanne).

And you thought bargains no longer exist, didn’t you?

Sometimes — both in investing and also in life in general — a change of perspective is all you need (courtesy of Insider member JG):

As much as we hate to end this issue on a tragic note, we simply can’t keep this heartbreaking corker away from you…

Have a great start to the new week!