Imagine a world where people didn’t conform to ‘sheep brain’. Where groupthink was simply, not a thing.
I know, it’s a wonderful fictional idea, but just entertain me for a moment…
A world where everyone made decisions — investment decisions — based on independent thought, analysis, and taking a stand no matter how controversial or unpopular it may be.
Imagine investing in tobacco stocks when the first study came out linking it to things like stroke, lung cancer, and other horrific diseases? For what it’s worth, it didn’t slow them down.
Imagine investing in dirty, brown coal when a teenager decried to the world that old people were killing all the young’uns? Also for what it’s worth, hasn’t killed the industry.
Imagine investing in stocks when the world is reeling from one of the hardest, most brutal market crashes it’s ever seen…
Be ready for the rebound boom
You should ask your friends, your neighbour…your family, what wealth strategies they’ve got ready to roll if you-know-what really hits the fan.
I bet they say, ‘sell into cash, ride it out.’
Well, good in theory, until you realise they crystallise losses immediately. Then what they often forget is that your cash value quickly falls as low rates tax savers. And inflation (which is bound to come at us with fury) will decimate those cash savings too.
When you see the videos of the idiots in Woolies fighting over dunny paper, you’ve got remember they’ll be the financial victims if the whole thing really turns to the crapper.
No amount of dunny roll is going to save them from footloose and free money printing and helicopter money.
It might make them feel better about themselves. But they’ll be the ones left reeling when Australia steps into recession, when the jobs dry up, and when the financial system teeters on another real ‘2008’.
They’ll be left behind when the recovery kicks into gear and they’ve done nothing to seize the opportunity in front of them.
This is the future we may face in the coming months. It’s on the brink of getting worse before it gets better. But it will get better. And if you’re in the right position to move, we could be looking at an investment market ripe for the picking when the Coronavirus Crisis is over.
Drink your way through recession
With such short-term volatility and madness, it’s easy to lose sight of the bigger picture. And it’s very easy to forget your strategy. Remember, it’s only a loss if you sell out.
With that said, sometimes you do need to exit a position. No point flogging a dead horse into oblivion. But sometimes, when you see these kinds of market ‘black swan’ events, well you’ve just got to do what most people would consider unpopular.
It’s times like these that throw up bargains, and what can be the start of real wealth building.
I remember what it was like in March 2009. That was the bottom of the market from the ‘GFC’. People hated stocks. Everything was going to get far worse according to the sheep brains out there. It was real end-of-days stuff.
But it didn’t feel like things were going to get worse. It’s hard to describe. But my overall feeling was the opportunity from a market that had bled 50-odd percent of its value wasn’t too great. And in that sense doing the unpopular thing, buying stocks for the long term, was the right thing to do.
And from March 2009 over the next decade…well you know the story.
However, not everyone came to the party in March 2009. It took the masses a couple of years to realise the trajectory after the last real black swan event.
Now, today, I’m telling you in my view, we sit on the cusp of the same kind of opportunity.
For many stocks on the ASX they’re trading at prices we haven’t seen for three, four, some even 10 years. And most of this capitulation has just come in the last month.
It might be unpopular, and people might criticise us for being unsympathetic, but very soon will be the ideal time to be investing in the market, not hoarding dunny paper from Woolies.
The time isn’t right now, I will point out. There’s a bit more pain to come as the country shuts down and we gallop into a recession that now looks unavoidable.
But soon, very soon, the light switch will flick on and it will be go time!
When it does, there are a few distinct areas of opportunity that I see.
For a start, any company that’s got China as a market focus or already generates revenues from China, should be straight onto the watchlist.
Like a company such as Treasury Wine Estates Ltd [ASX:TWE]. Big wine maker, big focus on China. Last time you could buy TWE at $8.92 (closing price Tuesday, 17 March), the World Health Organization was declaring a global public health emergency over the rapid spread of Zika…
Treasury Wines has been smashed over the COVID-19 hysteria and the market capitulation. It’s one that is definitely worth running the ruler over.
It’s a long, bumpy runway
Dare I say it, but even Qantas Ltd [ASX:QAN] at the right time will be ripe for the picking. Now I’m not one to hunt in the large-cap sector of the ASX. But geez, they’ve taken a haircut since the start of 2020.
And yep, it’s going to get far worse before it gets better.
They’re cutting flights and they may even edge towards the brink of obliteration.
But remember this is the Australian national carrier. It’s as Aussie as Vegemite and Paul Hogan. You think the government will let Qantas die a slow death by a 1,000 cut flights?
I don’t. And when travel bans are lifted and borders re-open — and the ‘sombrero’ gets squashed — Qantas could see the mother of all recoveries. Also remember oil prices have capitulated which is a good thing for airlines. Cheaper jet fuel, more efficient costs to serve.
But now isn’t the time — no, no, no. But Qantas is one company you should be looking at in detail should they still be kicking around as this all unwinds.
And while it might look bleak short term, people won’t stop flying around the world. Not long term at least. This isn’t going to kill all airlines. It will kill the weak ones, like Flybe in the UK.
But for national carriers, we’ll see. I think it’s unlikely.
Surviving the apocalypse
Also a company like Village Roadshow Ltd [ASX:VRL]. They’re not quite at GFC low levels…yet. And they’re keeping open their parks…for now.
But soon, maybe even this week, they’ll be forced to close the parks, close the cinemas, close it all. That’s going to cripple the stock. And maybe even send them to the brink of collapse.
That’s why now isn’t the time for a company like Village Roadshow. Wait, watch, and let the drama unfold. And if they survive and are also kicking around when this passes, they might also be in for the mother of all rebounds.
What do you think people will want to do as soon as they’re lifted from quarantine and lockdown? They’ll want to go out, enjoy themselves. Go to the cinema, go to the theme parks.
But until that happens, it’s a no, no, no on Village Roadshow. They are however ripe should things turn better and they’re not about to call in the administrators.
What you should be doing right now is adding stocks like these to your ‘Coronavirus Crisis Watchlist’. Getting ready to pounce at the right time, on the right stocks that come out the other side of this still intact.
These are just three ideas of many you could be looking at. They’re unpopular, and they’re copping a beating right now. But they could be the best investment decisions of the year — of the decade — if they survive.
Editor, Money Morning
PS: This is not a time to panic. It’s a time for ACTION. Click here to download a two-pronged plan to help you deal with the financial implications of COVID-19.