Opportunities In the Stock Market
Where I'm looking for long-term stock market buys
We’re in what we will look back on historically as another of those great times to have bought in the stock market. You’ll say it numerous times, “I wish I had bought more.” We say it about the COVID crash of 2020, Subprime Mortgage crisis in 2008, Dot-com bubble burst of 2000. You see the point. At the lowest and most fearful points turned out to be some of the best times historically to have bought.
That leads us to today. Only three times since World War II has seen the S&P 500 fall by more than 20%. 2022 is on pace to be the 4th.
The Nasdaq is in the midst of an over 30% drawdown. It has neared the historic 42% drawdown it saw in 2008.
My view on things has not changed from what I said on October 1st in my Investing Update: Are Midterms the Catalyst?;
The midterms in the United States are on November 8th. I plan to be positioned for a midterms stock market spike, followed by the annual Santa Clause rally into year-end.
I try not to call bottoms and always practice what I call ABB (Always Be Buying). But my outlook with the market being discounted and many stocks significantly oversold, there will come an end of the on sale period. It’s possible many stocks never see these low of prices again. Stocks will go up over the long-term. Nobody knows exactly forsure when that will be. I believe we see a market rally soon and that’s just my educated guess.
My friend Sam Ro who writes the TKer by Sam Ro had a great section in his Sunday newsletter speaking directly into my line of thinking.
When markets are as volatile as they have been, it’s easy to get caught up in all the things that are going right or wrong at the moment.
And while there’s nothing wrong with keeping current on the present, this is not the right mindset for long-term investors in stocks.
"Do not invest in the present,” Stanley Druckenmiller, the legendary hedge fund manager currently running Duquesne Family Office, said. “The present is not what moves stock prices."
Druckenmiller noted that this is his No. 1 piece of advice for new investors.
Then two points that I’ve learned over time were mentioned by Brad Gerstner of Altimeter Capital Friday on the All-In Podcast.
Not all good companies are good investments. Price of entry matters.
I highlight the above because it’s hard to see months or years down the line in times like this. When all the news seems to be negative and the stock market being down what seems like everyday. It’s a struggle to try and see the other side. But you rely on history and use that to focus on the long-term and not the near-term.
My long-term strategy is to buy things with a two years or longer outlook. I’ll put in stop losses to limit my downside on new positions, but anything I buy, it’s with the goal of owning it for the long-term.
My strategy isn’t YouTube or TikTok entertainment worthy. I don’t day trade, I don’t trade bitcoin, crypto coins or NFTs. Everyone aims to get rich quick. That isn’t investing, that’s trading or gambling.
With this in mind, I wanted to share what I currently have on my watchlist. Some of these I already have positions in and do note what I currently own. This is a look into what I’m watching.
Indicies
If I didn’t have the time or didn’t find it fun investing in individual stocks, I would only own the S&P 500 index and the Nasdaq. These broad exposures would be as far as I would go. I do invest a significant amount of my overall investment portfolio solely in an S&P 500 index fund.
S&P 500 VOO 0.00%↑ YTD -20%
Nasdaq QQQ 0.00%↑ YTD -29%
Specific Sectors
Sometimes instead of trying to find an individual name in a certain sector that I like, I will try to invest in the entire sector.
For instance, I recently bought the VanEck Semiconductor ETF SMH 0.00%↑ YTD -40% and discussed this in my last Investing Update: What's Priced In? I already have a significant position in Nvidia NVDA 0.00%↑ YTD -56%, but wanted to get more exposure to the semiconductor space. I feel they’re drastically oversold, similar to the oil sector in 2020. I didn’t want to add anymore to my Nvidia position and couldn’t find another semi stock I really loved. So that’s why I just bought the SMH.
In addition to semis, two other sectors I really like and am watching is real estate and cybersecurity.
Real Estate/Housing: The ETF I’m watching is the Vanguard Real Estate Index Fund VNQ 0.00%↑ YTD -29%. Two stocks I'm also watching with direct connection is Home Depot HD 0.00%↑ YTD -29% and Lowe's LOW 0.00%↑ YTD -24%.
Cybersecurity: I’m watching the Global X Cybersecurity ETF BUG 0.00%↑ YTD -20%. I already own CrowdStrike CRWD 0.00%↑ YTD -18% but think this is a growing sector with a lot of upside. I'm also watching Zscaler ZS 0.00%↑ YTD -48% and Palo Alto Networks PANW 0.00%↑ YTD -8%.
Individual Stocks
This is the list of all the individual stocks that I have my eye on and watch everyday. If I’ve mentioned one above they’re not below. My list does change and some companies get added while others get removed. The stories and outlooks for these companies and many others is always changing. I make sure my watchlist does also. (Any stocks with * indicates I’m currently long this company).
Airbnb ABNB 0.00%↑ YTD -31%
Alphabet* GOOGL 0.00%↑ YTD -28%
Amazon* AMZN 0.00%↑ YTD -29%
Apple* AAPL 0.00%↑ YTD -17%
Berkshire Hathaway $BRKB YTD -13%
Cleveland-Cliffs CLF 0.00%↑ YTD -34%
DraftKings DKNG 0.00%↑ YTD -49%
Deere DE 0.00%↑ YTD +12%
Generac GNRC 0.00%↑ YTD -65%
Goldman Sachs GS 0.00%↑ YTD -16%
Lululemon LULU 0.00%↑ YTD -17%
Meta Platforms META 0.00%↑ YTD -59%
Microsoft MSFT 0.00%↑ YTD -25%
Moderna MRNA 0.00%↑ YTD -42%
Netflix NFLX 0.00%↑ YTD -51%
Peloton PTON 0.00%↑ YTD -79%
Salesforce CRM 0.00%↑ YTD -35%
Snowflake SNOW 0.00%↑ YTD -45%
Target TGT 0.00%↑ YTD -29%
Tesla* TSLA 0.00%↑ YTD -44%
Uber* UBER 0.00%↑ YTD -35%
If I make any investment decisions they’re always shared in my Investing Updates which comes out every other Saturday morning. Check it out this coming Saturday 10/29 to see if I’ve made any moves.
The Coffee Table ☕
Thomas Kopelman’s piece The Best Retirement Accounts For Business Owners is very helpful in giving a brief overview of the different types of retirement account options that business owners have available to them.
Darius Foroux wrote The Perfect Time to Start Investing: When Prices are Low. He shares a similar view as me on buying when prices are down and how it isn’t a comfortable time to be buying.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion. Do your own research.