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  • Crypto: Tulip Mania all over again?

    In the previous series of whitepapers, we discussed how to survive the bear market through fundamental investing and financial planning. In this whitepaper, we will discuss the enormous challenges cryptocurrency industry faces and whether or not it will be a good investment. Credit: The Motley Fool The idea of a blockchain has significantly challenged the conventional manner of "transaction" since a report written by developer Satoshi Nakamoto was first published. Over the past decade, Blockchain technology extended its application to various sectors. One major application is cryptocurrency transactions. Although cryptocurrencies have gained significant popularity among investors, their classification as an asset is yet to reach a global consensus. Amid a worldwide economic recession, the cryptocurrency industry faces enormous challenges following the plunge in crypto prices. Many investors are confused about crypto and blockchain; a simple analogy could explain this. Think of crypto as your credit or debit card and blockchain as the banking system that allows transactions to happen. Blockchain is a digital payment system that doesn’t rely on banks to validate transactions, making it decentralized. Peer-to-peer technology makes it possible for anybody, anywhere, to send and receive payments. Various Types of Cryptocurrencies Credit: Blockgeni Payments made using cryptocurrencies are digital entries to an online database that records individual transactions. A public ledger keeps track of all bitcoin transactions that involve money transfers. A Blockchain ledger differs from a typical accounting ledger as it is shared and immutable, meaning transactions cannot be hidden or deleted once they have occurred. Over the past few years, crypto has raised controversial debates about whether it is an asset. We believe crypto is not an asset. An asset, in our view, is an entity that generates cash flow. Since crypto cannot generate cash flow, it has no intrinsic value and cannot be valued. If Bitcoin’s intrinsic value cannot be determined, there’s no telling whether it’s worth $1,000 or $1 Million. To learn more about evaluating an assets’ intrinsic value, access our previous white paper here. People have considered Bitcoin to be digital gold, however, we see several differences between crypto and gold. Gold is considered a stable asset and is viewed as a favorable hedge against inflation. Gold is said to protect the owner from inflation as the value of the dollar erodes, the cost of every ounce of gold will rise as a result. This is because that gold has a rarity component to it, as it’s created inside massive stars when they explode into a supernova and are brought to earth from asteroids. This precious metal is hard to extract and impossible to recreate, holding a strong demand and functioning as a good store of value. Bitcoin, on the other hand, is easily accessible and can be duplicated as a unique coin by anybody. Bitcoin has a limited supply because of mining restrictions, but it is not a rare commodity. To meet market needs, people can always design new kinds of coins. In our view, bitcoin is not an asset that can hold value compared to actual asset like gold. Gold Volatility Hedging Against Inflation Credit: Funds Europe According to our CIO Siddharth Singhai, " We don't know what cash flows Bitcoin produces- it is sort of an exotic car, where you think it's worth a lot and it will hold its value because there are only 100s of it. But it might not be the case as it does not produce any cash flow and is not rare, there are many other cryptocurrency and you can create your own cryptocurreny. It is not like gold or like some alien metal that arrived on Earth and is limited where you can’t produce anymore of it. Saying of this, Hedge funds will embrace it as long as it does well" Click here to watch the full video on a seminar about value-investing with students from Western New England University. There are two key defining features of cryptocurrencies that make it difficult for them to be accepted as a currency; the first is their volatility, and the second is their inability to store value. For instance: If you have one bitcoin and it's currently worth $100,000, you can buy a Tesla with it. Cryptocurrency prices are very volatile; you might wake up the next morning to find that the price of bitcoin has fallen significantly to $80,000. Since the value of the currency just dropped by 20%, a business transacting through bitcoin would suffer a significant $20,000 loss in a single day. Therefore, no company will permanently accept cryptocurrency as a currency due to the volatility stated above. Volatility of Bitcoin Over the Past Decade Credit: Bitcoinist Since cryptocurrencies do not produce cash flow and are not a naturally scarce resource like gold, it is difficult to estimate their worth. From a risk-reward investment perspective, we do not consider cryptocurrency a good option to invest in as there is no real way to identify the upside or downside with this investment. We believe the value of most cryptocurrencies will go to zero or some small notional value in the long run. By: Siddharth Singhai, Darpan Saluja, Emily Yang, John Siguencia Disclaimer: This White Paper expresses the views of the author as of the date indicated and such views are subject to change without notice. Ironhold Capital has no duty or obligation to update the information contained herein. Further, Ironhold makes no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. This White Paper is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Ironhold Capital Fund 1, L.P. (“Ironhold”) believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.

  • Surviving The Bear Market: Planning with Financial Advisor

    In the previous whitepaper, we discussed determining the margin of safety of your holdings, which can reduce risk and improve return simultaneously. In this whitepaper, we will examine the last task for surviving the bear market: planning with a financial advisor. Diversification Investors must plan their asset allocation thoroughly with a professional advisor. The first thing on the table is to ensure that your holdings are sufficiently diversified across asset classes and then within an asset class. Through diversification, one can mitigate unsystematic risk, which is a risk that is associated with a single company or single industry. For example, an investor whose portfolio solely focuses on airline stocks would’ve lost most of his money during the pandemic. However, suppose he decides to diversify his portfolio and build some positions in tech, medical care, and semiconductors. In that case, he may still lose some money but will be in a much better situation. Therefore, it is crucial for investors to have a diversified portfolio during the bear market. Credit:warrior training Leveraged Positions The second item on the checklist is to identify any high leverage positions. When the market is rising, having high leverage positions can lead to lucrative profits. Conversely, in a bearish market, high leverage positions face the risk of forced liquidation, which happens when investors fail to meet the margin call. In the current market, volatility in the foreseeable future would likely increase, which means if the market continues to decline, your positions can be wiped out completely. Therefore, leveraged positions are extremely dangerous, should be handled by financial advisors, and should be avoided if possible in our view. Credit:fvptrade Holding Period The next thing to be discussed is your holding period. For many investors looking to retire, their holding period may only be a year or two. For others who just started investing, their holding period can be decades. Investors near their retirement may have to sell their stocks in a bear market, which is the worst thing to do. Investors in this situation shouldn’t panic but thoroughly prepare for capital allocation with their financial advisor. Investors whose period is more than five years should treat this bear market as a bargain. As mentioned in the previous whitepaper, many tech stocks have taken an unfair beating in the current market correction due to mass psychology. Investors are moving their positions from tech to other sectors like energy because everyone else is selling their positions in tech, scaring away more investors. Nevertheless, many of these tech stocks have not changed in any way fundamentally. Investors should prepare a strategy with financial advisors for buying cheap and high-quality stocks like this. Liquidity Liquidity is another important matter to be discussed. Investors should figure out whether or not they need large amounts of cash in the upcoming future for events such as a wedding or home purchase. If investors have insufficient liquidity, they need to first stop investing more money into the stock market, and perhaps move to safer short-term instruments like T-bills. Last thing that investors would want is to be forced to sell their stocks in a bear market. Strategy After all of the above factors are taken into account with a financial advisor, investors should then have an answer to their strategy: defensive or aggressive. For those that have a short holding period and need liquidity, they need to be defensive. The average bear market has a 16-month duration. Unless investors can wait that long, they have to be defensive with cash instead of “buying the dip”. However, if you already have sufficient liquidity and a long time horizon, you are getting a bargain at the market’s current price, which means you can be aggressive. Buying in the declines often led to good results historically speaking. The average 12-month return after the end of a bear market is 43.4% while the average stock market return is about 10% per year. If one decides to be aggressive, there can be great returns coming out of the bear market. However, investors must discuss the exact strategy with their financial advisors before attempting to size up their positions. Credit: Wells Fargo In conclusion, investors should plan their strategy with their financial advisors after examining the following tasks: diversification and leveraged positions within their holdings, holding period, and needs for liquidity. After all, if your portfolio has been severely affected by the bear market, do not panic. Read our previous whitepaper on the market’s recovery after a crisis. Here Is Why You Shouldn't Sell In May and Go Away By Siddharth Singhai, Yang Peng, Emily Yang Disclaimer: This White Paper expresses the views of the author as of the date indicated and such views are subject to change without notice. Ironhold Capital has no duty or obligation to update the information contained herein. Further, Ironhold makes no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. This White Paper is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Ironhold Capital Fund 1, L.P. (“Ironhold”) believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.

  • Surviving the Bear Market: Why "Margin of Safety" Is The Most Important Thing In Investing

    In the previous whitepaper, we discussed calculating the intrinsic value of holdings, allowing investors to make better buy, hold, or sell decisions. However, the next step after finding the intrinsic value is determining the Margin of Safety of your holdings. Using the Margin of Safety, investors can buy a company at a market value much less than its intrinsic value, which can reduce risk and improve return simultaneously. Credit:Samco The concept of Margin of Safety was first introduced by the renowned value investor Benjamin Graham and his pupil Warren Buffet. It was soon popularized as investors find it effective as a cushion against errors in analyst judgment or calculation. As Warren Buffett says: “You don’t try to buy businesses worth $83 million for $80 million. You leave yourself an enormous margin. When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000-pound trucks across it. And that same principle works in investing.” The Margin of Safety is essentially a buffer zone for human error, bad luck, or unexpected events such as Covid-19. Take the McDonald’s store from our previous whitepaper, for example. We valued the store to be around $5.1 million, and the store will be sold at the end of year 5 for $1,000,000. If an investor buys the store at $4.5 million and all assumptions are accurate, they will get a 15% return after five years. The return is calculated by adding all the future cash flows that are discounted at the proper rate, subtracting the cost of the store, and divided by the cost of the store. However, the return may decrease if significant changes happen in the future that affect the store’s profitability or the neighborhood in which the store is located. For example, if people move out of the neighborhood around the store due to unexpected policy changes, and five new fast food restaurants with lower prices are built near the McDonald’s store, the assumption would completely change. As customers decrease, the store could shrink at -30% annually. The valuation of this store would change as well. Worst Case Scenario If the investors bought the store at $4.5 million, they would’ve experienced a 36% loss. However, suppose they use the Margin of Safety of 50% and buy the store for around $2.5 million through a bargain. In that case, the investor will still profit and make around a 14% return on investment even if the pessimistic scenario plays out. If everything is held steady and the optimistic scenario occurs, the investor will make a 106% return on the investment, almost ten times the return if they buy the store at $4.5 million. The Margin of Safety is often calculated by utilizing the market price as a point of comparison, and depending on risk preferences, it can vary among investors. In the previous example, the Margin of Safety is derived from the following equation A Margin of Safety of 50% can be considered to be very safe as it is very difficult for any high-quality business to lose more than 50% of its value. If a business is making $100 million each year, losing more than 50% of its value means that the business is only making $50 million or less each year throughout its lifetime. A 30% shrinkage in the previous example only led to a 44% decline in the store’s intrinsic value. Under this situation, the investor would still make money if they buy the store with a Margin of Safety. Therefore, it is very unlikely for a high quality business to lose half of its intrinsic value. Thus, risk-averse investors should always strive for a 50% margin of safety when analyzing new potential investments. Furthermore, once the stock reaches its deemed margin of safety investors should be cautious about the reasoning behind the drop. For example, many tech stocks have taken an unfair beating in the current market correction due to mass psychology. Investors are moving their positions from tech to other sectors like energy because everyone else is selling their positions in tech, scaring away more investors. Nevertheless, many of these tech stocks have not changed in any way fundamentally. This would be a special opportunity for intelligent investors who understand that the long-term demand in the tech market has not changed and the current short-term fluctuation is temporary. However, suppose the company’s price drop is driven by permanent, fundamental change such as emerging competitors, an adjustment in government regulations, or a complete change of management team. In that case, the short-term fluctuation would not be temporary. In conclusion, investors can be certain to achieve the Margin of Safety by buying businesses at a significant discount to their intrinsic value, and understanding the reasons behind the declines in a given stock price. In the next article, we will discuss the final task in surviving the bear market: strategizing with your financial advisors. By Siddharth Singhai, Yang Peng, Jake Glatz Disclaimer: This White Paper expresses the views of the author as of the date indicated and such views are subject to change without notice. Ironhold Capital has no duty or obligation to update the information contained herein. Further, Ironhold makes no representation, and it should not be assumed that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss. This White Paper is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Ironhold Capital Fund 1, L.P. (“Ironhold”) believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based

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  • Home | Ironhold Capital

    A PREMIER GLOBAL INVESTMENT FIRM Ironhold Capital ​We employ a disciplined investment approach with the aim of delivering strong risk-adjusted returns for our investors across market cycles. Get in Touch Contrarian Mindset We aim to identify and capitalize on low-risk, high-reward asymmetric opportunities that arise due to temporary dislocations in the market, to compound our investors’ wealth safely over time while leveraging tax efficiency. We seek to deploy capital in the highest quality businesses around the globe — businesses that can earn exceptionally high returns on equity over long periods while using modest to no leverage, businesses with sustainable competitive advantages or wide moats. High Quality Assets Long Term Horizon We believe that markets in the short term swing between over-optimism and over-pessimism and that these fluctuations are random and to be ignored. On the other hand, markets are weighing machines — businesses’ market value and fundamental value are the same over the long term. We diversify market risk through global diversification in Global Equities to yield lower than average correlation to the U.S markets. In addition, we apply a proprietary rigorous 4-layer risk management process that prioritizes capital protection over everything else. 4 Layers of Risk Management Shareholder Friendly Management We believe in partnering with a high-quality, ethical management team that not only has a fantastic operational track record but also has skin in the game and the right incentive scheme to ensure optimal alignment between the management and minority shareholders. MEDIA SECTION VIDEO Ironhold Capital CIO Siddharth Singhai discusses effects of rate hikes and his favorite sectors on Benzinga TV WHITE PAPER Here Is Why You Shouldn't Sell In May and Go Away WHITE PAPER Don't Miss This Historic Opportunity in the Housing Sector See All Research FEATURED NEWS REUTERS Fed will keep tightening until inflation controlled: Powell 26 August 2022 REUTERS Citigroup says will close Russian consumer, commercial business 25 August 2022 CNBC Citigroup says it will close Russian consumer business 25 August 2022 KIPLINGER Stock Market Today: Markets Edge Higher in Quiet Session 24 August 2022 See All News History of IronHold Capital The Ironhold Capital Partnership was originally formed to provide exceptional risk-adjusted returns for large institutional and select high-net-worth investors. The Founders of Ironhold Capital set out to satisfy the global investment community’s need for unique opportunities not already exhausted and covered by today’s Wall Street analysts. Leveraging the unique experience of Ironhold Capital’s Chief Investment Officer, Mr. Siddharth Singhai, Ironhold Capital delivers opportunities on a global scale in regions that are often poorly understood and widely overlooked by Wall Street counterparts. Utilizing the proprietary and confidential Global Deep Value (GDV) Investment Strategy, the Ironhold Capital Investment Committee can seize the immense growth potential that exists in today’s emerging markets while harnessing the stability of the United States. Furthermore, as an investment firm, Ironhold Capital strives for excellence by fostering a community that embraces rigorous research and analysis while promoting an environment full of independent thinking, openness, and inclusion. Our Leadership Paul Gray Chief Executive Officer Bio Siddharth Singhai Chief Investment Officer Bio Brokers & Custodian Tax & Accounting Admin Auditor Interactive Brokers LLC , Broker, New York, US ​ First Republic Bank , Custodian, New York, US ​ Kotak Bank , Custodian, Mumbai , India ​ Kotak Securities , Broker, Mumbai, India ​ A Private Organization for Affluent Investors The Iron100 is a private network of prominent high-net worth individuals who mutually collaborate with one another in order to expand business and investment acumen. Learn More CAREERS Ironhold and You Working at Ironhold means becoming part of a collaborative, results-oriented team. Learn More Sign Up to get our Latest Research First Name Last Name Email Code arrow&v Phone Accredited Investor Code arrow&v Phone Accredited Investor Submit

  • Featured News | Ironhold Capital

    Featured News VIEW BY arrow&v REUTERS 26 August 2022 Fed will keep tightening until inflation controlled: Powell REUTERS 25 August 2022 Citigroup says will close Russian consumer, commercial business CNBC 25 August 2022 Citigroup says it will close Russian consumer business KIPLINGER 24 August 2022 Stock Market Today: Markets Edge Higher in Quiet Session BARRON'S 20 August 2022 Bitcoin and Stocks Are Falling Together Again. What’s to Blame. REUTERS 17 August 2022 Bed Bath & Beyond slides after investor Ryan Cohen files for stake sale Load More

  • | Ironhold Capital

    Paul Gray Chief Executive Officer Paul Gray is the CEO and Co-Founder of the global value-based hedge fund IronHold Capital Management headquartered in New York City. Paul spent the majority of his career building product, managing teams and scaling operations and systems. During his tenure on Wall Street, Paul realized much of his success stemmed from the wise mentorship he received from affluent individuals he met along the way. Believing such an experience was essential for every entrepreneur, he set out to help launch a community for industry leaders to share best ideas and practices with each other in areas spanning business, investing and personal life. Today Iron100 is one of the leading private membership groups in the country and boasts some of the nation's top professionals across dozens of industries.

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