This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
Otherwise, enjoy the column!
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FEBRUARY 29, 2020
STOCKS: MSFT, AAPL, ACAD, V, MA, NFLX, TSLA
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN MSFT, AAPL, MA, V, NFLX, ACAD, TSLA
It was a horrible week for anyone invested in the stock market, even for guys like myself, who have been through events like this time and time again. It does get tiring watching a few month’s worths of gains get wiped out in a matter of days. The market always falls much faster than it rises, that will never change.
The speed of the declines has changed dramatically, due to the advent of technology and changes in regulations. It makes the moves more violent and faster. It could take weeks in the past to see the S&P 500 fall from peak to trough; now, it literally can take days. I couldn’t imagine how fast the tech bubble would have unfolded in today’s environment or the financial crisis.
Algo’s ETF, leverage, and the absence of market makers due to limitations on risk-taking are some of the problems today. It means faster declines and negative feedback loops. With Algos searching for the buyers, all chasing each lower, ETF dumping stocks out of their basket to remain in balance.
Anyway, it’s unsettling, and a little trick I do to get myself through the storm is pretty simple and basic. I review my portfolio holdings each morning before the carnage begins and ask myself how the current scenario will affect the long-term health of the company. Will the company be different because of this event in the next 1, 3, and 5 years? If the answer is “no,” then my decision is simple; there is nothing for me to do.
Companies like Apple, Microsoft, Visa, Mastercard, and Tesla, which are all some of my largest holding by weightings, may see struggles in the short-term, six months or so, but are likely to rebound over the longer-term. With Microsoft, delivering the needed software and architecture for the cloud, Apple the services and hardware we have all learned to love, Visa, and Mastercard, which are the backbone for eCommerce. Acadia Pharmaceuticals another long-term holding for me, has nothing to do with the troubles at hand with its drug Nuplazid.
Anyway, doing this has given me the ability to sleep at night, and with no leverage, I don’t have to make any bad sales. There is nothing for me to do at this point, but ride it out and wait. If you are a short-term trader, levered up, or in speculative positions, then moving to the sidelines is where I would have been the last few days waiting for the storm to pass.
My rule with investing is to let the dust settle, whether it be when stocks or markets plunge or rise sharply. Right now, the markets are repricing, and they are more likely to overshoot to the downside in this price discovery period.
So as I have been telling my members all week, it may be tempting, but sometimes sitting on your hands or walking away is the best option. There are several great Netflix shows to watch during the market turmoil. Sometimes the best trade made is the trade not made at all.
All of us are here today because we had a parent or grandparent that somehow managed to survive the Spanish Flu, WWI, the 1929 crash, the great depression, polio, WWII, the Korean War, the Cuban Missile Crisis, the Vietnam war, the watergate scandal, raging inflation, the 1987 stock market crash, the dot.com bubble, the financial crisis, and whole slew of other things. Premium content – How I’m Feeling After A Horrible Day
Somehow the US GDP has managed to do this:
Meanwhile, stocks have endured, and if you look really hard, you can see the little pink circle. To make it easier, I drew in a line so you can see where you are today.
Is the world coming to an end? Probably not.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.