I’m going to start this piece off with a Tweet from one of our favorite financial commentators here at MyWallSt, Ben Carlson:
Some day this is going to look like a fantastic buying opportunity— Ben Carlson (@awealthofcs) March 12, 2020
I just wish I knew when that day will be
In 106 characters he’s encapsulated the uncertainty of the current market conditions, as well as the engrained optimism that lives within every investor. We wouldn’t be in this game if we didn’t have one eye on the horizon. Unfortunately for us right now, storm clouds and choppy seas are making that horizon pretty difficult to see.
We are essentially looking at a self-imposed, global recession. In a bid to temper the spread of the coronavirus, bars and restaurants are shutting down, people are confined to their homes, companies like Apple (NASDAQ:AAPL) and Nike (NYSE:NKE) are forced to shutter their brick-and-mortar stores; traditional commerce as we know it is essentially sitting this one out. A recession is defined as two successive quarters of negative economic growth. It’s hard to see how the current measures in place will not make that a certainty.
Through all this, how can investors stay optimistic?
I’ve used the word stay, because optimism is a necessity in any investor’s arsenal. When you enter a position you do so based on the presumption that it will appreciate, so if you’ve ever bought a stock, you’re an optimist. I’m sorry if this news has come as a shock to you, but there’s nothing I can do about it. Self-isolation has turned me into a philosopher on Monday, and now a psychologist today, who knew?
So how do we stay optimistic when it seems like everything is falling apart around us?
Simple, we find opportunities. Some can be short-term: Blue Apron (NYSE:APRN), a meal-kit delivery service, became a ten-bagger since the start of the week before giving back some gains this morning.
Some can be medium-term: Amazon (NASDAQ:AMZN) has seen such an increase in demand it’s looking to hire 100,000 new employees. While it’s still taken a 15% hit this past month, that’s almost half that of the S&P 500.
Lastly, you can look for long-term opportunities in companies that are being overly punished by the market sell-off. It’s important to remember that while current conditions are having a severe effect on operations, they remain the same businesses. Disney (NYSE:DIS), Square (NYSE:SQ), and MercadoLibre (NASDAQ:MELI) have lost 38%, 53%, and 39% in value respectively. While they face short-term obstacles, I truly believe that they will all recover and flourish.
These are just three stocks on my watchlist right now, and believe me, there are many more. For those with high risk tolerance, this downturn can be an opportunity to buy great businesses at a discount.
We’ve just bore witness to the fastest bear market in history, circuit-breakers have become a regular occurrence, and the Dow has essentially wiped out all the gains made under the current president. Being optimistic seems like a fool’s errand right about now, but it may be the trick to creating long-term wealth.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Content Manager at MyWallSt
Michael's first and favorite stock is Square, which he sees becoming a massive player in the payments industry and a leader in the war on cash.