On Monday, Dan Niles, the founder of the Satori Fund, joined CNBC’s ‘Squawk Box’ to discuss the current condition of the market.
What Happened: Niles called for the S&P 500 to reach a low of 3,000, which he noted that his fund has been saying this since May 2022.
Although Niles thinks the market is headed lower, the Satori Fund covered its short positions Monday and was likely to add to its long positions.
Niles mentioned that the Satori Fund is now sitting on 50% of its cash, and he went into the year thinking cash was the best investment for retail investors unless they can day-trade.
If there is a bear market rally, Niles suggested investing in companies with strong fundamentals, adding that the fund has started to nibble at the energy sector.
As the SPDR Select Sector Fund - Energy Select Sector XLE is down roughly 15% over the past month, it may be an opportune time to scoop up energy shares ahead of winter.
Additionally, Niles mentioned buying into defensive names such as Walmart WMT since people tend to continue shopping for necessities during recessions.
During the 2008 Financial Crisis, Walmart was up 18% while the S&P 500 was down 38%.
Another defensive area that Niles likes is the health care sector as well as the online sports betting space, citing that the fund owns shares in DraftKings DKNG and purchased shares in PENN Entertainment PENN last Friday.
The Satori Fund’s Strategy: Investors need to be willing to trade daily, meaning if you get a temporary bounce in the stock price you should look to sell, then look to short again, Niles reported.
Niles explained that the reason why his fund is up this year is due to its short positions and not its longs.
Furthermore, everything that benefited from the pandemic, Niles said that investors should “reshore” these positions, as he expects PC and smartphone sales to be revised for the year.
Also, Niles is expecting enterprise software to struggle in 2023 as the pandemic is over, and more people will be getting out, hence the reason for less software demand.
Finally, Walt Disney DIS and Netflix NFLX will be looking to launch their ad-supoorted tiers which will take money away from smaller media companies, Niles added that this is an area they are looking to short.
Recent Trades: After analyzing the Satori Fund’s 13F filings, Benzinga found that Niles sold roughly 27,000 shares of Disney, during the second quarter, which was his fourth top position, and still owns a small stake in the entertainment conglomerate.
Additionally, Niles sold his entire stake in California-based technology firm Lumentum Holdings LITE during the second quarter, accounting for 64,200 shares, the fund's third-largest holding, as of the first quarter.
Lastly, it appears that the fund is bullish on online betting stocks, as it opened a stake in DraftKings in the second quarter. The Satori Fund purchased over 99,000 shares, making it the third-largest holding, accounting for 4.1% of the total portfolio.
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