Surviving The Crash Brings The Opportunities To Find Stocks That Go Up 100x
Here’s part of what I sent out to my hedge fund investors in a letter yesterday. The markets yesterday tried to put in the kind of “abrupt ending” to the crash that I mention in the write-up (I wrote this over the weekend and finished up early yesterday when the markets were still tanking). Obviously only time will tell.
“For the last dozen years or so, I continually highlighted how we were in what I called A Bubble-Blowing Bull Market as the forces of Revolutionary technology driving higher profit margins and economic growth along with monetary and fiscal policies that were consistently designed to create higher asset prices and valuations worked to make one of, if not the single largest global asset bubbles in the history of mankind. The one thing I do know is that we are indeed on the other side of that cycle, of that Bubble-Blowing Bull Market dynamic that underpinned the ever higher stock and asset prices that the world had grown accustomed to.
What had appeared to be endless demand for any kind of stock that promised to be “Revolutionary” reached its logical conclusion as every retail and many institutional investors decided they too were going to be Revolutionary Investors — which made it very crowded in the Revolutionary Stocks as I kept saying last year. Wall Street did what it always does: it fed that demand with endless supply of speculative companies that promised to be Revolutionary in their own right but most of which were just average companies making ridiculous promises and justifying their valuations by looking at other bubbled-up companies promising to be Revolutionary trading at what were truly ridiculous valuations.
What a difference a year makes. Almost every tech stock is down double digit percentages from their all-time highs. Most of those speculative stocks that came public (or were already publicly-traded penny stocks) with promises of Revolution are down 80-95% or more. Of course, even the FANG stocks were incredibly crowded at the top last year and now Facebook is down more than 50% Netflix is down more 70% from those heady highs of yesteryear.
While we have not avoided all of the downside as this Bubble of Wannabe Revolutionary Investors has imploded upon itself, we have avoided the kind of blow-ups that all those new wannabes have experienced with many tech fund managers down 50% or more just this year and down 70% or more from their highs last year at the top. That outperformance is in large part to our shorts and puts that have been effective in helping keep us hedged against major downside. But it’s the potential of finding new long ideas that is what sets us up nicely for the next phase, the next cycle when it comes along here (probably sooner rather than later, given the Kurtzweil Rate of Change that our society and system of finance work under).
The idea of investing in new platforms and technologies and innovations that create Revolutionary trillion dollar market places is just as valid today as it has ever been — but we had to let this crash in tech valuations play out in order to get the opportunities that will come as the future and the next cycle takes hold. The vision that some of these companies that came public during that now-popped Bubble are going to be correct and the investors in them will end up being rewarded, just as those who invested in Amazon back in the dot com bubble ended up being well-rewarded as the vision that Jeff Bezos had for the company did indeed end up being correct. My job is to find these companies while they are down and to navigate the moves that the broader markets make as we build positions in them while valuations are more favorable.
The question ahead of us right now is whether the markets correct too far to the downside in this crash and by how much if they do. I think that the crash will end abruptly at one point, but that it won’t be all instant upside in the broader markets and that many of these stocks out there trading down 90% from their (recent) all-time highs are never coming back.
I’ve spent a lot of time in the last few weeks studying business models, profit margins and growth potential for hundreds of wannabe Revolutionary stocks and have found a handful that are compelling and one or two that are truly looking cheap with lots of potential upside. The list of stocks that are starting to look like great investment opportunities is growing slowly and I expect to find several stocks amidst the rubble that we see developing in front us now that can go up 10-100x in coming years. In the private markets in the first quarter, I invested some of our capital into the Helium cryptocurrency token and its parent company’s equity. It’s in times like we are heading into that is when great fortunes are built.
Our largest positions at the time of this writing include FB, Intel, Paypal, Tesla and Uber and we continue to short some of the fundamentally broken businesses that remain at what are likely insane valuations.”
Cody back in real-time, Tuesday May 3 10:05am MT. You can tell that over the last few days as the markets really tanked again, I’ve become less bearish than I have been. But I’m far from pounding the table bullish still. Let’s mostly sit tight as we continue to nibble here and there on our favorite names like those mentioned above and to start scaling into new names like ROKU. Easy does it.
Let’s do this week’s Live Q&A Chat tomorrow (Wednesday) morning at 10:00am ET. We’ll do a zoom call instead of using the chat room on the site. Here’s the link:
https://us02web.zoom.us/j/87932080976?pwd=YXRnN0tyMnpnL3pvZEQ2NGNyRkluQT09
Meeting ID: 879 3208 0976
Passcode: 933730
We also do our weekly SKTLs volunteers zoom call each Wednesday at 2pm ET and you all are welcome to join us for that. It’s our last meeting before the big SKTLs Airdrop this Friday. If you haven’t signed up for the free airdrop on SKTLS.com yet, you better go now! Here’s the link for the SKTLs volunteer zoom call:
https://us02web.zoom.us/j/81202284137?pwd=cGRuNVNFMnhDaG5uWjRVeEt5Zi9Ldz09
Meeting ID: 812 0228 4137
Password: 736076
