The goal of the Satori Fund is to be an “all weather fund” that can protect capital or generate positive returns even during severe market declines. As such, I believe in good RISK ADJUSTED returns. This is one of the reasons why our Fund was able to produce positive returns in 2022. Additionally, and for the record, we are up this year (2023) including the months of August and September (month-to-date through 9/12) while the S&P 500 finished negative in August and is down again in September.
INTC - Intel
Our plan with all trims made to a position due to risk management reasons and NOT due to fundamental reasons, is to buy some of it back when it is no longer oversold and back at an interesting technical level. This is the case again with INTC which we trimmed yesterday.
ORCL - Oracle
We sold most of our ORCL position on 9/11 prior to them reporting earnings and hated doing it given our belief that it would be a beat and raise quarter (we were wrong.) But we try to stay disciplined to our risk management principles above which have served us well over the nearly 20 years of running the fund.
When ORCL, reported revenues a touch below consensus, we sold the rest of our position in the aftermarket down roughly 5%. This slight revenue miss was fundamentally NOT what we expected. Then on the conference call later that day they guided both revenue and EPS below expectations for the upcoming quarter and the stock went down further. Finally, yesterday (9/12) the stock closed down 13.5%.
Our risk management principles, though we hated doing it at the time, saved us from losing much of the substantial gains we had achieved. In investing, it is a batting average and over-time, our risk management principles have improved that average.
At this point, our plan is to do more research including data from ORCL CloudWorld next week before deciding what our next move will be on the stock. At a market PE of 20x, ORCL is appealing to us versus the 32x PE for Microsoft (MSFT) for what we still believe should be somewhat similar earnings growth over the next few years. We still believe that ORCL is becoming a credible #4 cloud provider behind Amazon ($AMZN), Microsoft ($MSFT) and Google ($GOOGL) but Oracle’s recent guidance below the street expectations for both revenue and EPS for their upcoming quarter does not fit well with that belief. In the technology industry especially, things are always changing and for us, facts always trump beliefs.
“When the facts change, I change my mind - what do you do, sir?”
― John Maynard Keynes
Dan Niles is founder and portfolio manager for the Satori Fund, a tech-focused hedge fund.