Will the buyback kick in?, page-8

There are several stocks that are or were in LSF's long portfolio that have not performed well, not just the flutterers. There are many stocks in LSF's portfolio. The majority of the published info about LSF's portfolio is now a year old. LSF seems to adapt to changing markets much better than some other funds, so it is likely that their long portfolio today may be quite different from a year ago. And nothing at all is known about LSF's current shorts. As far as shorts go, LSF rarely names any of their shorted stocks unless they have already closed the position.

For these reasons, estimating NTA movements by using watchlists cannot produce accurate results. However, there is some evidence that LSF adapts to changing markets. For example, based on watchlists, I had expected today's NTA announcement to show a decrease but it turned out to be an increase of nearly one cent.

During the last fortnight, many stocks in the overall market have experienced serious declines. Media hacks have fuelled the falls by trying to justify their existence by scare-mongering about a likely looming recession as if it would be a monumental crisis. In reality, the economy is booming and interest rates are nowhere near a normal level but are still ridiculously low. In any case, the definition of a recession is two consecutive quarters with negative growth. So, if the economy declined by one quarter of a percent for two consecutive quarters then this half percent decline would be a recession. Not exactly the end of the world.

There is certainly something unusual influencing markets at the moment. For example, Australia-based goldies are getting hammered today even though the price of gold in AUD rose overnight. Another example is that many resources stocks that have good prospects have been hammered recently. It appears that many players are expecting commodity prices to fall significantly in the near future. Now this can only happen if there is a severe recession - which appears to be highly unlikely. It seems likely that the imminent EOFY may have something to do with falling stocks in the Australian market, so I am expecting another week of much the same before the local market might reset itself. Meanwhile, USA markets remain volatile and unpredictable so who knows if they have further to fall. Maybe the only rationale for remaining invested is not to miss out on the initial big rise when markets do eventually turn upwards again.

All this may discourage investors, but in my opinion LSF offers a much better track record than most stocks and most funds. Also, if investor enthusiasm remains insufficient across the whole market, at least LSF is different because there is the prospect of SP support from the buyback if the NTA-SP gap remains elevated. As the gap is currently already in buyback territory, the risks of investing in LSF are much lower than investing in most other stocks. When the current correction does end, I expect that LSF will rocket upwards. Even just closing the NTA-SP gap would add 35 cents to the SP.