It’s that time of the year when market volume tends to dry up and economic data takes a backseat. Because of the typical August slowdown, we’re keeping this week’s update brief. That said, our portfolio has been performing exceptionally well over the last couple of weeks. We’ve fully recovered from the earlier drawdowns—specifically the drag from Alibaba and Tencent, both of which have bounced back impressively from their recent lows. Overall, we are in a very strong position heading into the back half of August.
Current Positions & Strategy
Our positions are in great shape, and we are largely in "hold" mode. Recently, we took a short put position in AstraZeneca, which has been doing quite well. We are also maintaining our short put positions on Meta. These puts have an October expiration date, giving us roughly two months of runway. With every passing day, time decay (theta) works in our favor, bleeding premium out of these contracts. Combined with the underlying stock recovery, there is absolutely no need to adjust our course right now. We hold and let the math do the work.
Week 33 Outlook: CPI and Major Tech Earnings
While it’s a relatively quiet week overall, there are a few major events we are keeping a close eye on:
- US CPI Print: The July inflation data drops on August 12. This is a crucial data point as it heavily influences the Fed's September rate cut decision. Cooling inflation reinforces the macro tailwinds we want to see for equities.
- Tech Earnings: Tencent reports their quarterly earnings on August 12. We are also eagerly looking forward to Alibaba’s upcoming earnings report on August 20.
The Alibaba AI Hyperscaler Thesis
Alibaba’s upcoming earnings report on August 20 is our primary focus. We are incredibly bullish on Alibaba’s ongoing transformation from its traditional e-commerce roots into an AI hyperscaler.
There are several tailwinds supporting this thesis. The release of their newest Qwen models has been a massive step forward, firmly establishing them as a leader in open-source AI. Furthermore, recent reports regarding Alibaba partnering with Apple to power AI features for Apple devices in China further validate their technological moat.
We understand that heavy spending on AI and data center infrastructure might weigh on short-term cash flows, but we fully expect these investments to pay off. As cloud monetization ramps up and we inevitably see future price hikes for enterprise AI model usage, Alibaba’s revenue streams will reflect this AI pivot. The long-term upside remains highly compelling.
Bottom Line
There is no need to overcomplicate things right now. We are well-positioned, our short premiums are decaying as planned, and our core equities are recovering. Unless something materially negative happens on the earnings front, we will continue to hold steady, react only if necessary, and let our strategies play out through the remainder of the summer.