The Businesses You Want to Consider Now
Friday, 27 March 2020
By Bernd Struben
EDITOR’S NOTE: Last chance to see the Metronomic Trading Workshop…For the final time today, Murray Dawes and Simon Munton demonstrate how you can trade volatile stocks in a choppy, nervy market with greater predictability and more confidence. This is being taken offline tonight…so if you’re the kind of person who sees opportunity in crisis, this is your very last chance to see this super-smart strategy in action. Go here now: The Metronomic Trading Workshop — closes today.
Now, here’s Murray with today’s Insider…
Let’s face it. We’re all rattled.
We know the crash in markets is going to present some huge opportunities. But we also know it might not be over.
Italian coronavirus numbers appear to be nearing some sort of peak, but we can’t be sure. Meanwhile, Spanish and US numbers are going through the roof.
Trump has been mumbling about starting things up again before the virus is fully contained because he’s scared of a plunging economy risking his chances of re-election. He might be eating his words in a few weeks if the death rate soars.
Australia seems only days away from a full shutdown, but the equity markets have been marching higher this week as a result of QE forever and a zillion dollar US fiscal stimulus.
Hope springs eternal, so it is natural to see every up day as the precursor to the next bull run.
But let me warn you right now; the next steps you take are the most important steps you will make in the next decade.
Jump into the market all guns blazing too early and you will be chewed up and spat out before you can say ‘but it was so oversold’.
Bide your time and do your homework looking for solid stocks with a market dominance that will ensure their existence for the next decade, and you could set yourself up in a portfolio that will spit money out for you year after year.
This is important. You need to keep your head and think about this very deeply.
Would you like to own a business that has a natural monopoly? One that sees the whole population walk through its doors multiple times a year?
Would you like to own a business that clips the ticket every time you drive to the city? One that owns toll roads all over the world?
What if you could pick these stocks up for half price?
Before I answer that, let’s take a look at the markets…
Overnight, the Dow Jones Industrial Average closed up 1,351.62 points, or 6.38%.
The S&P 500 closed up 154.51 points, or 6.24%.
The Euro Stoxx 50 Index closed up 47.64 points, or 1.70%. Meanwhile, the FTSE 100 gained 2.24%, and Germany’s DAX closed up 126.70 points, or 1.28%.
In Asian markets Japan’s Nikkei 225 is down 339.81 points, or 1.82%. China’s CSI 300 is down 1.60%.
The S&P/ASX 200 is down 116.80 points, or 2.28%.
West Texas Intermediate crude oil is US$22.98. Brent crude is US$26.54 per barrel.
Turning to gold, the yellow metal is trading for US$1,626.00 (AU$2,661.65) per troy ounce. Silver is US$14.56 (AU$23.84) per troy ounce.
One bitcoin is worth US$6,814.57.
The Aussie dollar is worth 61.07 US cents.
The best businesses exist at the core of our everyday lives and, silently, they take a little money from every one of us day after day.
In Australia, we have a small population and lots of regulation. It lends itself to corporate oligopolies. A few key businesses that own a great bulk of the market. Think of Coles Group Ltd [ASX:COL] and Woolworths Group Ltd [ASX:WOW]. Or Wesfarmers Ltd [ASX:WES], Qantas Airways Ltd [ASX:QAN] and the banks.
In a crash, timing your entry into the strongest stocks on the market is a good way to set yourself up for a comfortable retirement.
But timing the market is impossible you say!
No, it’s not.
Everyone bought a stock at a certain price. As prices move around, they are either making money or losing money based on the price they paid.
It’s as simple as that.
When prices jump all over the place, different traders and investors have different pain points when they give up on their trade. Some will dump their position after going in and out of the money for many months/years. Others will panic out of a position if a support level doesn’t hold.
Everything is relative. If you paid 50 cents for a stock and it is at $1.00, you will say it’s trending up. If you paid $2.00, you’ll say it’s trending down. How you feel about the price at $1.00 will depend on the price you paid.
How you behave will depend on the price you paid and the actions you took to lower your stress and risk along the way.
Most traders and investors aren’t aware of how they will behave when push comes to shove. But after many years of observation, I can say I’ve worked out how most of them behave.
If you managed your risk well, you will not care what the price does. You’ll have a clear set of rules and a plan of action no matter what happens.
If you bought too many shares and you didn’t take any profit when you had the chance, you will be waking up in a cold sweat hoping the S&P 500 isn’t selling-off yet again.
Timing your entry into stocks involves capitalising on the mistakes made by other traders to enter into trades where you can lower your risk as quickly as possible to create a payoff similar to a free call option.
If you don’t understand that last sentence, let me direct you to the series of videos I recently made with my friend and colleague Simon Munton.
In The Metronomic Trading Workshop, we delve deeply into the model I use to analyse price action and the method I use to enter trades.
This series is going offline at midnight tonight. If you have any interest in learning how to enter trades and investments in volatile markets using a proprietary technical trading system, I would urge you to take a look at our workshop today.
The coronavirus is causing absolute havoc. Volatility is immense and a wrong step could be your last. But if you play your cards right, you could look back in years to come knowing that despite the chaos, you kept a level head and set you and your family up in solid investments.
Now is the time to be thinking seriously about these issues. The mainstream media won’t give you anything but panic based on the previous day’s trading range. But my workshop shows you how to ignore all that, in favour of a strategy based on levels. A strategy I’ve been honing for more than 20 years…in ALL kinds of markets.
Does it work?
And I shared a video in Monday’s Insider, showing you how my portfolio was weighted heavily towards gold stocks…a day before the biggest rally in gold in years.
If you want to understand how I managed to get those calls right, go here before midnight.
Editor, Pivot Trader