What a year 2022 has been so far.
To be clear: I of course do not know if we’ve hit market bottom. But after the last several days of very harsh, near-panic selling across nearly all industries, today was a small bounce the other way. I really don’t think these conditions will last much longer.
“Be fearful when others are greedy, and be greedy when others are fearful,” Buffett says. So I’m getting greedy and doing some bargain shopping.
Shopify, DocuSign, PayPal, Moderna, Block (Square). What do these businesses have in common? Each is a hot tech business which leads or co-leads its industry; each offers a low-cost/low-debt operating structure; each is highly profitable. Most are household names, established brands with loyal customers. And as of end-of market today, May 10, they’re all over 70% below their 52-week high price. Shopify is 80% down. So even if these names were overpriced before— even if they were priced at double their ‘real’ value last year— then they’re still at a substantial discount today.
Moving down the list a little, there are more excellent businesses at clearance prices. Match.com, Nvidia, Ford, Volkswagen, Salesforce, Adobe, and AirBnB are known, firmly-entrenched market leaders. They are all profitable, growing, and capably run. And they’re all priced at 40-60% off their 2021 market highs.
Moving down the list a little, there are more excellent businesses at clearance prices. Match.com, Nvidia, Ford, Volkswagen, Salesforce, Adobe, and AirBnB are known, firmly-entrenched market leaders. They are all profitable, growing, and capably run. And they’re all priced at 40-60% off their 2021 market highs.
Have a taste for more risk? Netflix is off 75%, and Zoom is off 78%. I’m not a huge advocate of either at the moment, but neither do I think there’s anything fundamentally wrong with them and I don’t think they’re going anywhere.
Given what’s happening, buying shares in almost any business right now feels very very scary. What if the price continues to fall? What if these companies don’t turn it around? What if, because they’re so cheap, they get absorbed by another, larger business? The process of stock investing is never smooth, never easy. But if we lean into value when things look grimmest, facing down our fear of loss, and we are patient— the hardest thing to be— then we are rewarded handsomely.
As always, we’re talking about investment of cash you can’t imagine needing for 5 years. Because while the current market free fall can’t continue forever, we don’t know when it will reverse direction,or how bumpy the path back up might be.
I’m trying to be bold. And I am steadfast.