As some of you know, the Italian experienced Venture Capitalist and options trader Antonio Velardo is the Chief Investment Analyst at Moat Investing, where a group of analysts are in the hazardous task of seeking investment opportunities in the stock markets worldwide especially in the USA markets.
The last few years have probably been the most exciting of the decade. The pandemic has unleashed an absolute madness in the investment world, and the rise of the retail investor, due in part to social trading trends, has changed the game forever. Of course, cryptocurrencies have played a significant role in this revolution as many young people of all nations and backgrounds are in the task of seeking financial freedom, which is the new millennial dream.
When it comes to the markets, we are all constantly trying not just to beat the indexes but to build an ever-wining portfolio full of stocks with substantial competitive advantages that keep growing and adding value to the shareholder. 2021 was a complicated yet electrifying year where some great investors shared fantastic ideas and also some regrets for us to learn from. In our first meeting of 2022, Antonio Velardo reviewed what he considered the best and worst stocks of his portfolio in 2021, and we would like to share them with you. As you will notice, this is not mainly about which stocks delivered the more significant growth percentage. These stocks are the most remarkable and most regrettable from an analyst’s perspective, considering the reward or punishment felt after the story developed in one way or another.
About Antonio Velardo
Antonio Velardo is an experienced Italian Venture Capitalist and options trader. He is an early Bitcoin and Ethereum adopter who has grown his passion and knowledge after pursuing the Blockchain Strategy Programme at Oxford University and a Master’s degree in Digital Currency at Nicosia University.
On the side of the financial markets, Velardo has a unique combination. He was a real estate entrepreneur that developed several projects in Tunisia, Miami, Italy, the UK, and many other countries and cities. But he has always been passionate about options trading. Still, contrary to the volatility player and quant trading, he always had a value investing touch in his blood. Antonio studied Value Investing at Buffet’s famous business school at Columbia University. Even though the central concepts of value investing are antagonists to the venture capital pillars, Antonio’s approach tries to bridge elements of both worlds in order to seek alpha. Antonio Velardo has learned the importance of spotting pure growth stories and taking advantage of their S-Curve position. This is an essential element at Moat Investing as we are always looking forward to embracing great tech stories at the right time of the adoption cycle. This applies to stocks but also to blockchain projects, as we have shared multiple times on our different channels.
While most value investors do not believe in the level of forecasting involved in the growth investment approach and instead look for undervalued companies, Antonio goes for a mixed portfolio without forgetting the in-depth fundamental and strategic analysis to his positions, always prioritizing companies with strong moats.
Let’s start with the bad one
As Antonio explained in his blog, equity stories shouldn’t be an endless marriage. We need to constantly keep track of our held companies in order to assess major changes in both the industry and the company itself. However, the most critical element is the willingness to accept one’s mistakes and fully recognize that we were just wrong. The sooner we do this, the better. This is especially important when we either manage other people’s money or when we influence others to invest in certain companies.
The regret case of 2021 was Aterian inc (ATER). Antonio Velardo covered the story under Moat Investing for the first time in February 2021 when we published our first view of the stock on seeking alpha and then reviewed it two more times in March and May. Even though Velardo spotted some of the risks, as you can read on our last bullish report on the story, the valuation seemed compelling as we compared the valuation of the company to other private deals, but the most serious mistake was to misunderstand the actual potential of their so-called Artificial Intelligence software.
As soon as Antonio realized that the company’s valuation assumptions were not correctly assessed and that its leading software “AIMEE” was not a real competitive advantage, he called out to everyone to exit the story, and two new reports were published on Seeking Alpha, the first one in September. Moreover, Velardo published an article in the form of a letter that you can read on his personal blog. Still, by the time the now bearish report was released, many FinTwit gurus kept trying to pump the failed story, which Velardo alerted as well.
The beauty of mistakes is that they bring the opportunity of moving forward with a new mindset for the future. It is always good to remember that a company could hide their organic growth slowing down but keep growing revenue by buying companies at high prices and higher multiples; if you don’t break down the different companies, you could miss it. The lack of proper due diligence is behind most analysts’ mistakes. In-depth research and analysis are not negotiable when it comes to adding new stocks to your portfolio. If there is not enough information is better to have the stomach to let it go.
Antonio’s favorite stock of 2021
In January, Antonio published a combined valuation report on John Menzies (MNZS), and something very important arose at the moment of the publication: the different valuations converged. MNZS is the holding company of Menzies Aviation, which provides aviation services in more than 30 countries. The main catalyst for the investment thesis was clearly the pandemic, but also the renegotiation of the debt at that time was an essential element on the strategic analysis.
On the value investing side, Antonio performed an Asset Value and Earning Power Value on the stock. This valuation converged with the DCF model and the EV/EBITDA ratio, which is the most common metric for the industry. By that time, Antonio’s valuation showed a 76% to 94% upside potential which turned out to be correct. In June, we published another valuation report of the stock on seeking alpha.
How to follow Antonio Velardo’s portfolio in 2022
Antonio manages an 8-figure portfolio of his investment company with a team of analysts; he is a sort of FinTweet mentor, people interact with him online, and he has more than 40,000 followers after his tweets. He has built a fortune in the great tech years and put together a tail strategy during the pandemic that allowed him to take advantage of the market drop. “I did not time the market, and I did not think this was even a black sworn,” he says.
“I was just hedged and started to increment the put and reduce the stock exposure once I saw the pandemic going up. Also, the market was already heating up, so I was comfortable with some valuations anyway.” Antonio was among the firsts to call to buy the dip at the end of March 2020, as you can see on his blog and Twitter profile.
He explains the logic behind his strategy by stating that “Finance and the real economy works as antagonists. So, when the economy goes wrong, and the Fed needs to print money and lower the interest rate, it’s the best time for a specific type of stock, and that’s the time to go all-in”. Antonio went all in and leveraged OTM calls on $QQQ, clearly stating his position. He also started to apply his value investing methodology in finding undervalued stocks. He believed in the recovery from covid and re-stabilization of the economy, even before the vaccine news.
Probably he took some additional risk, but it was a well-analyzed risk. He did publish a few reports and recommendations and took a big shoot on $PK (a hotel REIT) and Menzies (a UK-based aviation services company), as you can see on his blog and tweets. After a few months, both $PK and Menzies tripled.
Apart from following his blog and Twitter account, In July 2020, he opened a portfolio on eToro, which is social trading brokerage company from Israel that focuses on providing financial and copy trading services that, however, does not allow to copy options strategy or to copy some of the smaller microcaps that Antonio and his team dig for, but his track record his as totally outstanding. He did beat up Berkshire, ARKK, and S&P 500 by far, as you can see in the chart below. You can find him on eToro under the pseudonym of “woodpupil”.
As you can see here, anyone who copied Antonio’s portfolio with $10,000 would have been producing $36,000. Those who have more than tripled their money with his trades on eToro are always commenting and interacting with him on the platform.