Lost Decade? My Top 3 Stocks to Outperform
Stanley Druckenmiller Recently Mentioned He Thinks Odds are High for a Lost Decade
From 2010 - 2014, I served active duty in the United States Marine Corps. This is typically something I rarely tout or advertise about myself, even in every day life. Although it is something I am very proud of accomplishing, it’s not something I wish to be primarily judged as. The reason why I bring this up today, I wish to discuss mental/emotional lessons I learned during my time. Then, apply them to today’s environment.
Adversity, challenge and uncertainty have a way of shaping our character. During times of extreme pain, once you make it through, you have a tendency of realizing how small life’s day to day obstacles are. In this particular case, I, of course, am talking about our present day bear market.
The experiences and lessons that I learned during my time in the USMC are rooted in times of chaos, uncertainty and panic. Fear of which is a dominating emotion. Fear in this case, is a very powerful emotion when applied to today’s market cycle. Fear causes us to make poor choices, think irrationally, doubt ourselves and question our entire strategy all together. Many will melt in the face of this emotion alone.
You could imagine, to my dismay, the panic I am seeing on Twitter, YouTube and the broader market as a whole is confusing. Are we experiencing uncertain times? Absolutely we are. Is the Fed raising rates which can lead to broader economic uncertainty? Absolutely, it doesn’t take a significant amount of thought to see/identify that the Fed has this incredible track record of breaking something before they finally stop.
But, with times of fear, uncertainty, and panic always comes enormous opportunity
I often find myself more comfortable during uncertain periods like these because risk is being priced into all productive assets. Investors, traders, gamblers, speculators and institutions will simply sell a high quality (productive) asset for reasons that have NOTHING to do with the business model. They will sell because they are scared it could fall another couple points. These time periods turn investors into traders, trying to time the markets movements. The “long term investor” is dead during these periods because they all “preserve mental capital”. I have often found that these same investors will buy the same stock they sold at a higher price than what they originally sold it at.
Do I believe there’s opportunity in hedging? Absolutely, I am not saying ‘not’ to manage downside or even exploit the opportunity of the ‘elevator’ down. What I am saying today is that, as investors and portfolio managers, there is no usefulness in being afraid.
Instead, we must exploit the opportunity that presents itself in the form of other investors fear. This is why I think it’s useful to discuss the individual business models of which I am holding. First, I will start by my top three and why I am extremely bullish on these businesses. Then, fill in the cracks of the other businesses I own.
My Top Three Stocks that Are Buys Now
First, let’s talk about the market opportunity ahead of many of the businesses I own. Then, with each business, I will structure it in the following:
Business model and why this macro does NOT matter
Valuation
Financial metrics (income statement, balance sheet and cash flows)
The Market Opportunity
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