Trafalgar Partners LLC

While we know what the human costs of the virus are well known, for investors it has been a mixed bag. It has depended on sector selection.

Investors in the Dow are up about 3% year to date while Nasdaq 100 investors are up 37% as demand for technology to weather the crisis has skyrocketed. We are up just over 70%.

A fair question to ask is whether some large pull back is once again in the offing. Our sense is the answer is No. Free cash flow and total asset growth have averaged about 24% among the companies we invest in so the base has increased substantially. We have been in a consolidation period since early September and another break out to new highs normally won't occur until the end of December has the market digests the gains that we have had.

At least at the start of trading Monday morning, the Nasdaq 100 looks to hit a new all time high on the current election results. What happens if by chance the courts found enough malfeasance to overturn the result. Wouldn't that be interesting...

So as both news of the pandemic and the election played out, beginning in early April, we began aggressively buying and leveraging our technology investments. Every time we had a 10% pull back we added to our positions and with the recent pull back we did the same. Fully leveraged out at almost 4 to 1 investments to equities, we bet the House.

And it worked. Buying during market panics, even modest ones, has resulted in Trafalgar being up 202% year to date with almost two months left in the year.

We figured that demand for technology would ratchet up each time Corona Virus cases counts rose and whether rightly or wrongly bet that conditions would worsen. They have. To a fair degree, this period reminds us of the Financial Crisis in 2007-2009 where we sold short the market, profiting on the banks failing as many did. We didn't gain many friends during that period, but we made a tremendous amount of money. The same goes for today.

Markets climb a wall of worry and there is no shortage of that right now. We expect new highs in the Nasdaq 100 in the near term, freaking out the market pundits.