Tactical Trades: Market Crash Shopping List and Investment Opportunities

The speaker's 10% tactical trades aim to find market crash opportunities for short-term investments in various sectors like technology, infrastructure, and commodities.

### Tactical Trades: A Market Crash Shopping List
* 📉  During market volatility, it's important to see pullbacks as **buying opportunities**, reframing sell-offs as **chances to invest in undervalued assets**.
* 📊  The speaker's portfolio consists of **90% in a global equity tracker fund** and **10% for tactical trades**, with the goal of **keeping hands off the core portfolio**.
* 📈  Current holdings include **Scottish Mortgage** (a growth-focused investment trust), **TRX Big Box** (infrastructure for online shopping), and **US small cap stocks** (S&P 600 quality-filtered index).
* 💼  New additions to the shopping list include **private equity investment trusts (e.g., HG Capital Trust)**, **copper-related assets (mining companies and ETFs)**, **quality-focused global equity funds**, and **high-yield corporate bonds**.
* 💰  The speaker emphasizes the importance of **timing these tactical trades correctly**, waiting for market crashes or significant pullbacks to **buy at more attractive prices**.
* 🤝  Community engagement is highlighted as a **valuable resource for investment ideas and discussions**, with the speaker mentioning the **PensionCraft Community** as a helpful platform.
* 🌐  The speaker's approach is to **diversify across various asset classes and themes**, aiming to **capitalize on different market opportunities** while **managing risk**.
* 📈  Performance comparisons are provided for each current holding, showing both **positive and negative returns** relative to the speaker's **core global equity fund (VHG)**.

I have a small fun portfolio where I do tactical trades, and this is to keep my hands busy and away from my core portfolio. When opportunities present themselves, I buy things which I think look cheap, and this is my market crash shopping list. In this video, we'll see how some previous market crash investments are doing, and I'll also show you what's on my list right now. Now, don't forget, if you do enjoy our content, please like this video, and also why not subscribe to our channel. So here's my checklist that we'll go through. There are seven items, three of them I've bought already. We'll see how they're doing, and the remainder are things which aren't attractive yet, but which I think could be, and which I'm certainly interested in buying. Now, why do I have a shopping list in the first place? During a period of market volatility when stock markets fall sharply, there's a big pullback in risk appetite, and nobody wants to invest because they're scared. In fact, the media probably paint

this as some kind of zombie apocalypse. However, it's always the case that things recover. So, I see these as opportunities. So, if you do reframe these Market sell-offs as buying opportunities, I think that encourages the right long-term Behavior, which is to see a bargain and buy as much as you can. And everything I'll be talking about today would fit into my fund portfolio category. So, 90% of my investments are in a single fund, fund a global Equity tracker, and just 10% of my money is for these kind of fun opportunities. These are often shorter term investments, although I could hold some of them for long periods of time. Why is it only 10% of my portfolio? Because I don't think I can beat the market consistently, and it is just to keep my hands off my core portfolio. But who knows, I could spot some opportunities, and we'll see that I have in the past, but I'm not highly confident that I'm going to beat the market by doing this. So, let's start with the stuff I've already bought, and one of

them is Scottish Mortgage. Now, this is an investment trust. It's closed-ended, which means that if it becomes popular, then money doesn't flow into the fund. The pool of capital is actually fixed, so if you want to buy, somebody else has to sell their stake. That also means that if it contains illiquid assets, which it does, then the fund manager, which is Baillie Gifford, doesn't have to run out and buy more stuff. Or if money's flooding out, it doesn't have to sell stuff. Now, what I love about this fund is, because I'm a nerd, it contains a lot of growth companies and also companies which are at the bleeding edge of technology. For example, I love the fact that it can buy SpaceX, which is not a listed company. It buys this in the private market. If SpaceX then does go public, then presumably that would increase its valuation and I'd be a beneficiary. But notice the themes here are ones which I find really compelling. Maybe it's because I'm a nerd, but things like technology meets healthc

care decarbonization, a digitalized world, and yes, things like space exploration all really ring my bell. Now, this is the UK's answer to Kathy Wood's Ark fund, and I think it's got better governance than Cathy Wood's fund, certainly more discipline around the process of investing. And yet, it did follow the profile of Kathy Wood's fund in the post-pandemic investment craze. Growth stocks in the US just went crazy, and so did the returns on Scottish Mortgage. So, you can see it surged and then it crashed in 2022 with the tech wreck. The dash yellow line you can see here is when I bought the fund after it had crashed. Now, I should have perhaps waited a bit longer because you can see that the fund continued to fall a bit further, and it languished for a while before it started to pick up. And I've plotted it here against a developed world xuk fund. Now, over this period since 2009, you can see that Scottish Mortgage has outperformed. It's generated returns of 17% versus

133% for that Global Equity Fund. And certainly, since I've bought it, you can see the cumulative return here versus my core Equity holding, which is VHG. It hasn't yet outperformed. So, my Global Equity Fund is up 28% over that period, and Scottish Mortgage is only up 18%. But I'm not going to sell it because I still believe in this fund. It also has an element of leverage, so even if it just tracked markets, it's going to outperform. So, this is definitely on my list to hold for a long period of time because I believe in a lot of these themes. And in order for the value of these themes to be realized, you've just got to be patient. Another theme which I like is infrastructure, particularly for online shopping. And that's why I bought TRX Big Box. Now, as the name suggests, it owns very large warehouses, big boxes, which you'll see scattered across the UK. They're often near to motorways because this is why they exist, online shopping.

companies will store their stuff in these warehouses, and that means they can get it to you very quickly via the motorway Network. So, apart from the theme, which is more of Us shopping online, which I think will continue into the future, the reason why I like this company is that it has a good Revenue model. It tends to have long-term leases, usually for large companies, and as long as UK growth holds up reasonably well, I expect that this company will carry on reaping the reward. Now, notice these are tactical trades; they've got to be timed correctly, and in this case, I waited until ttax crashed. However, there was another crash that came just after I bought, and in fact, that crash was actually bigger. So, this is one example of bad timing on my part, but still, the valuation I bought out was okay. But as a consequence, it means my holding is underperforming relative to vhg. So, if we track since I bought in May 2022, you can see that TRX is down 18%, whereas V hvg

was up 32, but again, this is what I'm going to hold on to because I believe in this company and the business model. Plus, Trac gives a fairly high dividend yield, so the income is certainly boosting my return on my holding. Now, if you are interested in learning more about investing, then I think these videos are a good place to start. However, I think it's better to be part of a community because then you've got accountability, plus you can talk to other people who are in the same situation as you. We try to share information in our PensionCraft Community as much as possible, and I think you'll find the other people in the community very helpful indeed. Plus, we've got lots of other goodies. We have members-only videos, and we also have a suite of tools which allow you to keep track of markets and also economics. So, if you want to learn more about joining us, just go to our website, PensionCraft, and small caps that I really noticed how undervalued US small caps really were. So, if you look at the forward price to

earnings multiple. That's how many dollars you pay today for every dollar of forecast future profits of a given index. Notice how the S&P 500 looks pretty expensive. It's trading at 21 times forward earnings, whereas US small caps are at less than 15 times forward earnings. And also, the dispersion between large caps and small caps is at a very wide level. What I'd expect is that that's going to snap shut at some point in time. So again, this is a long-term holding. I've got to be patient with this one. Now, there's more than one US small cap index. There's a Russell 2000 Index, and there's also the S&P 600. I went for the S&P 600 because it also has some quality filters. For example, companies have to be profitable, which I also like. A large proportion of the Russell 2000 Index is unprofitable company. So here's the fund I chose, which is USML. And as usual, the dash yellow line is when I bought the fund. So I bought in.

October of 2022. And if we track the return of this fund versus my core fund, which is VHG, it hasn't caught up yet. But notice the huge surge recently. And this is the big rotation that we've seen away from Mega cap tech stocks in the US towards small caps, partly perhaps because inflation numbers in the US have fallen quite sharply recently. And if the Fed does cut interest rates, that would favor small caps over large caps. Probably whatever the reason, large caps remain overvalued in the US. So I'm very happy to keep on with this trade. And as I say, I can hold this one for a long period of time. Now, if you look at the bottom of this graphic, you can see the composition of my returns due to currency movements and due to the change in the US small cap index. And what's unfortunately happened is that Sterling's been strengthening versus the dollar and removing some of my returns. So overall, I've made 6% on this trade so far, but that's due to these two things.

pulling in opposite directions. Sterling has dragged down my return by 11%, while the US small-cap index has risen by 177%. However, because this is a long-term trade, I'd expect the stock price movements to more than outweigh the currency movements because currency doesn't tend to drift long term. Plus, there isn't a currency hedge version of this index anyway, so this is one I'm going to stick with. A new item on my list is private equity investment trusts. Now, I first came across these because some of the members of PensionCraft were discussing it on our chat application, and several of them actually bought private equity. But in the UK, you can buy it via investment trusts like Scottish Mortgage. Now, this is a good structure to buy illiquid things like private equity because money doesn't flow in and out of the fund, so there isn't forced buying and selling of what is an illiquid investment. So what these companies do is they buy unlisted companies, companies like SpaceX, for example. Now, the one I've got my eye on.

is a company that buys software companies and service companies, and that's called HG Capital Trust. Now, these will be companies you've probably never heard of, so here's their website. You can see their investment theses, and you can also see their specialty, which is software and services companies. Now, if we look at some of those companies, you'll see that they aren't the ones you usually hear about. There are no Amazons, there are no Netflix's here, but these are the companies that essentially make industry work. Plus, the investment managers which work for HG Capital Trust have got 30 years' experience, so you've got to trust them to choose the right companies. And their track record is pretty good if you look at their returns since 2009. And here again, I've compared it with the Vanguard Footsie Developed UK fund. They're roughly running neck and neck, although if you look at their returns, they really took a leg up in 2016 and started accelerating at that point. Now, one way you can measure the value of an

investment trust is to compare its price with its net asset value. If it's overpriced, it'll be trading at a premium to its net asset value. If it's unpopular, it'll be trading at a discount. Unfortunately, at the moment, everyone's noticed the really good returns on this fund, so it's trading actually at a premium compared to its history. So, the time when I'll buy this fund is when there's a general pullback in markets, when there's a market crash, because then I can get exposure to it at a much more reasonable price. Now, there are a couple of other investment trusts which I've got my eye on, which I've also been told about by members of our community, such as HarborVest and Oakley Capital Investments. So, those are the ones I'll be keeping an eye on. Another theme which I really like is copper. Now, of course, this is because of the energy transition. And if we move to things like electric cars, solar energy generation, wind-powered energy generation, which of course we are doing already, that's much

more copper intensive. Copper is quite special as an element because it's very conductive, so you can't really substitute it with another metal. And if you look at something like an internal combustion engine car, it contains about 20 kg of copper, whereas an electric car will contain four times as much, 80 kg on average. Plus, if you build offshore wind farms, you've got to pipe that electrical power back on shore, so you need really thick copper cables to do that. So, that's also very copper intensive, as are solar panels. And of course, if you've got electric cars, you have to have an electric car network, and a lot of infrastructure has to be built across the world in order to plumb those charging networks into existing electricity grids. So, all of these factors will drive up demand for copper, while the actual places where copper can be produced, mines across the world, remain fairly restricted. Plus, it takes a long time to get new supply of copper via new mines online. So, high demand, limited supply, and that should paint a

fairly good picture for the copper price. Now you can either buy that directly via an exchange-traded commodity fund like copper Copa from Wisdom Tree. There aren't many choices here in the UK, certainly, but if I was going to get exposure via that fund, then I'd do it via copb, which is the Sterling-denominated version of the fund. But another way of getting exposure is by buying stocks of companies which mine copper. You can see six of them here, and these are on my shopping list. So why would I go for the miners rather than buying copper directly? Well, that's because they generate a dividend. Even if the copper price goes down, you'll carry on receiving that dividend, and that boosts your total return. You get the copper return plus the dividend paid out by the mining company. So it's kind of interesting to see the correlation between copper mining companies and the price of copper on this graph. The price of copper is in yellow, and notice how some of the prices of these mining companies, their share prices, are very

closely linked to the price of copper, they're highly correlated. So if we look at the actual correlation as a number, remember it's minus one if they're anti-correlated, move in opposite directions, zero if they're not related at all, and one if they move in lockstep. The column to focus on in this Matrix, and also the row, is HG Mt. That's the ticker which my app SharePad uses for copper. And in yellow, I've highlighted the correlations with those copper companies. And three companies really stand out, and those are Southern Copper. The ticker for that is SCCO. Freeport-McMoRan Copper and Gold Company. The ticker there is FCX. And finally, Antofagasta. The ticker there is ANTO. If we look at the price of copper, notice how it has been falling recently. And that's usually because China's economic growth is floundering. The reason for that is that China buys about 60% of the global production of copper. And when growth there is weak, then demand for copper reduces, and inventories of copper build.

up in China, and that's exactly what's happening right now. Also, we've just had the Chinese Communist Party's third plenum where the Communist Party discusses its long-term plan, and what was noticeable is that President Xi refrained from signaling specific stimulus measures to boost domestic consumption in the near term. That, in turn, suggests poor factory demand from Chinese companies from their manufacturing sector, and that'll reduce the demand for copper. So, certainly, the copper price is falling, but I expect it'll fall further. And when it's really down in the dumps, that's when I'm going to buy some of these copper miners or maybe direct copper exposure, or maybe some combination of those two. Now, another thing I really like is quality. In order to get global equity exposure, what does quality mean? Well, it just means that you buy companies which have strong fundamentals. According to MSCI's definition, it means they've got steadily increasing profits. Furthermore, the return on equity, the amount of profit they generate for every dollar of equity capital in the company, is

high, and they haven't got too much leverage. They haven't borrowed a lot, which is a risk to the company. Unfortunately, the companies which score really well on this quality measure are the ones which are already super expensive. So these are the Magnificent 7, for example. And if we look at the weighting of the MSCI Quality Index, you can see them here compared to their parent index, which is MSCI World, the developed market index. Notice how all of the Magnificent 7 have an even higher weighting than they do in a global equity index. And again, if we look at the fact sheet for MSCI World Quality, notice that one of the factor weightings, apart from quality, of course, is that it's underweight value. And that's because these are really expensive companies. So this is not one which I think is attractive right now. However, I love the index and its tilt towards good fundamentals. So I'm not going to buy this while it's expensive. I'm going to wait until there's a pullback in global

Equity markets, and then buy exposure more cheaply. And there are several quality funds out there to choose from. I'll probably just choose the cheapest ETF which is available. My last item on the shopping list is High Yield Corporate bonds, or junk bonds as they're sometimes called. So these are risky investments because they're not quite as safe as government bonds, because they carry a lot of corporate credit risk. When there's a cooling of the economy, a lot of these poor quality credits which go into the junk bond space, those companies go into default. And when that happens, the credit spread, the additional income you're paid to buy these company bonds, actually widens a lot. So their yield increases, the prices fall, and the prices of the funds crash. You can see this happen during the global financial crisis in this top panel next to me, and it also happened in 2020 during the pandemic crash. Now, notice if we look at the income on these funds, that's the middle panel, while the price was crashing, the income didn't, and that's

because these are diversified funds. And if we look at the ratio of the two, in other words, the income it's paid over the last 12 months divided by the price. Notice how that spikes because the price has fallen. So when the yield spikes, those are the good buying opportunities, which I've highlighted on this graph. Now, at the moment, the yield has been gradually increasing, and the price is falling for these funds because the risk-free rates, the government bond yields, have been gradually increasing. What we haven't got the additional icing on the cake would be extra compensation for taking the credit risk. The credit spread that remains very tight. So what I'm really waiting for here is for that icing on the cake to be added to the cake. So that's something I'm also looking out for, and I'm looking for a crash in this junk bond space to really buy some good exposure to these high-yield corporate bonds. Now, if there is a big pullback in markets, you can bet I'll make another video about this crash.

shopping list, and I'll talk about the ones which I'm buying. Sometimes it's just limited to one market. It could just be the copper market, for example, or the junk bond market. But often it's the case that things fall together, so sometimes I'm very busy with this shopping list. But if you are going to go down this route, just be careful not to get too large an exposure to these tactical trades because, as we saw, the timing has to be just right in order to really beat a global index, say. And also, don't forget our membership. If you do want to learn more about investing, I learned all about private equity, remember, via our chat forum. Then you can learn more about joining our community. Just go to our website, pensioncraft.com, to learn more. And as always, thank you for listening.

My Market Crash Shopping List - 2024

My name is Ramin Nakisa and I started PensionCraft in 2016 as I felt strongly that I wanted to teach people how to invest well for themselves so they could stop making costly mistakes and losing their money through having to pay unnecessarily high fees.

Before starting PensionCraft, I worked in investment banking as a strategist and I was a frequent contributor on CNBC and Bloomberg TV. I have written two books about finance and investment: one for professional investors and one that explains how to buy and sell volatility using exchange-traded products.

I publish a new video on YouTube every Saturday and you can join me for a live Q&A on the 1st Thursday of every month at 7pm UK time.

If you want to learn how to become a better investor then why not join our friendly membership at pensioncraft.com?


PensionCraft

Tactical Trades for Market Crashes: A Fun Portfolio Approach

A financial expert discusses their small fun portfolio for tactical trades during market crashes, making up 10% of their investments.

They highlight Scottish Mortgage as one of their bought investments, emphasizing its growth companies and technology focus.

The expert sees market sell-offs as buying opportunities and uses this portfolio to keep busy and away from their core investments.

Long-Term Investment Strategies and Themes

An investor is holding onto a Global Equity Fund despite its underperformance, believing in its long-term potential and leverage.

They have also invested in TRX Big Box for its revenue model and high dividend yield, despite its current underperformance.

The investor emphasizes the importance of patience and timing in tactical trades, and also highlights the undervaluation of US small caps as a long-term holding opportunity.

A shift from mega-cap tech stocks to small caps is driven by the sharp decrease in US inflation numbers and the potential interest rate cut by the Fed.

The strengthening of the Sterling versus the dollar has impacted returns, but the long-term outlook for the US small-cap index remains positive.

Investment trusts like HG Capital Trust offer a unique structure for buying illiquid assets such as software and service companies, providing an opportunity to invest in lesser-known but impactful businesses with a strong track record.

Investment Opportunities: Trusts, Copper, and Mining Companies

Investment trusts' prices compared to their net asset value indicate if they are trading at a premium or discount, with the current one trading at a premium.

The speaker plans to buy this trust during a market pullback and is also keeping an eye on other trusts like HarborVest and Oakley Capital Investments.

The increasing demand for copper due to its essential role in electric cars, solar energy, and wind power, coupled with limited supply, presents a promising investment opportunity either through an exchange-traded commodity fund or by buying stocks of copper mining companies for their dividend-generating potential.

The Correlation Between Copper Prices and Copper Companies

Copper prices are highly correlated with Southern Copper (SCCO), Freeport-McMoRan Copper and Gold Company (FCX), and Antofagasta (ANTO).

The falling copper prices are attributed to China's weak economic growth and lack of specific stimulus measures, leading to reduced demand for copper.

The plan is to invest in copper miners or direct copper exposure when the prices are low, while also considering companies with strong fundamentals when there is a pullback in global markets.

Tips for Investing in High-Yield Corporate Bonds

High-yield corporate bonds, or junk bonds, are risky investments due to their corporate credit risk, but when their yield spikes, it can be a good buying opportunity.

Waiting for a crash in the junk bond space can provide a chance to buy good exposure to these bonds.

It's important to be cautious not to have too much exposure to tactical trades and to consider seeking further investment advice.