Betting Against Craft Beer

Published on
August 22nd, 2019
Duration
19 minutes

Betting Against Craft Beer

Technical Trader ·
Featuring Louis Llanes

Published on: August 22nd, 2019 • Duration: 19 minutes

Louis Llanes, CFA, CMT, founder of Wealthnet Investments, approaches trading by combining deep fundamental research with technical analysis. In this episode, Llanes breaks down the fundamental backdrop for the four components of a pairs trade comprised of two longs and two shorts in the brewing industry. He also analyzes the long-term chart patterns for each company, sizes the positions for market neutrality by comparing the volatility of each component, and addresses the risks to the trade. Filmed on August 19, 2019 in Denver.

Comments

Transcript

  • LL
    Louis L. | Contributor
    11 September 2019 @ 20:27
    The pairs trade is working out. From the close on the date recorded, its up over 8% using the weights described. The S&P 500 is up only 2.61%. See below: Pairs Trade Performance As of 9/11/2019 Price Price Ticker Position 19-Aug 11-Sep % Chg. Wgt Return Impact BUD Long 95.92 94.25 -1.7% 31% -0.54% TAP Long 51.91 56.37 8.6% 23% 1.98% SAM Short 422.71 390.6 -7.6% -30% 2.28% BREW Short 12.85 9.32 -27.5% -16% 4.40% Total Return of Pairs 8.11% SPY Long 292.62 300.25 2.6% 100% 2.61%
  • DB
    Doug B.
    31 August 2019 @ 23:05
    Nice vid, thanks! I, however, don't understand your risk/reward calcs. With a $5200 entry and stop at $4200, isn't that a loss of $1000/$5200 = 19%, not the 5% you quote?
    • LL
      Louis L. | Contributor
      11 September 2019 @ 20:29
      Thank you for your kind comments. To answer your question, the return is based on total capital employed, not on net long minus short. Always look at it from resources utilized. Sorry for confusion.
  • JA
    Jernej A.
    30 August 2019 @ 08:36
    Great video. I hope we see more stuff from Louis. He has a good way of explaining things
  • DK
    David K.
    28 August 2019 @ 00:26
    I was wonderign how do you actualy get to the value of the basket of $5200? Isn't it more like $1800 givne the prices and positions in your table?
  • LL
    Louis L.
    24 August 2019 @ 23:11
    This trade went profitable as the market fell. $BREW fell well over 20% while BUD held up well. Hope some subscribers took trade. So far so good.
  • AR
    Anthony R.
    23 August 2019 @ 01:00
    One thing I don't believe you mentioned is a bit of 'macro' overlay. Per some voices, 80% of returns are macro driven. In short, (pun intended) if this economy rolls over as many think it will, folks are going to be drinking a lot more cheaper beer than not. And the fru fru stuff goes bye bye. But nice pairings and analysis. Thanks!
    • LL
      Louis L.
      23 August 2019 @ 01:59
      You’re right. I was thinking about that as well. The luxury goods versus lower priced. A flight to value and recession resistance is part of the play! Thanks for comments.
  • JW
    Joel W.
    22 August 2019 @ 22:19
    Well presented, with plenty of detail. Thanks Louis! I just got a teeny bit smarter....
    • PD
      Paul D.
      24 August 2019 @ 19:30
      t
    • PD
      Paul D.
      24 August 2019 @ 19:30
      mhm4h3
    • PD
      Paul D.
      24 August 2019 @ 19:30
      m4h4t
    • PD
      Paul D.
      24 August 2019 @ 19:30
      4hm
    • PD
      Paul D.
      24 August 2019 @ 19:30
      .ttm
  • RH
    Rick H.
    22 August 2019 @ 20:01
    Love the breakdown and thoroughly explanation
  • TO
    Tal O.
    22 August 2019 @ 19:29
    I was wondering why you want 4 stocks in the basket? Would long BUD and short BREW also work? That SAM chart looks so scary for a short!?
    • LL
      Louis L.
      22 August 2019 @ 19:36
      Good point. If I had to pick a single pair that would be it. However, I selected 2 pairs for the diversification. I agree that $SAM is scary. Some of my best shorts have looked scary. Size smaller on weakness. Entry sell stops below market. Let the market confirm weakness when finessing the entry of shorts.
  • PU
    Peter U.
    22 August 2019 @ 12:44
    good analysis and trade construction
    • LL
      Louis L.
      22 August 2019 @ 14:08
      Thank you