In this article, I want to look at some of the stocks and markets that have been affected by ‘The Big Crash’, however, I want to highlight some of the sectors and markets which are looking positive.
There are many markets and individual stocks that have previously had quite high valuations compared to their balance sheet and you could potentially call this a sort of correction, however, now that they have dropped does that mean that there is potential in some of the stocks because some of their finances may not have changed and are still producing strong profit cashflow.
PLEASE NOTE:
This is not financial advice, if you need financial advice please speak to a competent and qualified advisor. If you do want to ask me any questions, please email me at info@investmentsforexpats.com
Are we settling into reality?
Over the last 2 years, we have seen companies, and assets, with little to no intrinsic value, come to dramatic fall. The chart above illustrates this factor.
Just as a point of reference I am writing this article in November 2022.
Pure optimism has been replaced by a pessimistic attitude in markets as the reality of inflation that is not transitory, a lockdown in China, and a European conflict collides all wanting the top spot.
In the last few weeks, we have seen the fall of what seemed to be the hottest company of the last few years, FTX and this seems to be an end to the crypto fanatics saying to invest in their worthless coins.
Meanwhile, stocks such as Tesla and funds such as ARKK have seen catastrophic falls YTD by failing to do a simple aspect of picking successful businesses that are making a sustained profit.
So, what does this mean for investors?
I will look at the quote above and for the long-term investor actually see this as a good aspect. You have good quality companies with low P.E ratios and can get them 20%-40% less than they were a year ago. However, just because they have dropped doesn’t mean they will go back up to where they were sitting.
This is where research needs to be completed to understand what is good value and what isn’t!
Below, is Meta (Facebook) which analysts predict is trading at 73.1% below it’s fair market value. This is mainly due to investing too much into the non-profitable (yet) Meta verse and how it uses shareholders cash.
Tech companies in 2022 have adopted a more grown-up approach to business. Instead of growth at all costs and not focusing on profits companies like Amazon, Google, and Microsoft have all had job cuts and axed non-profitable business ventures and projects. This is because they have seen their share price fall by 50% YTD in some cases.
Therefore investors have the chance to get good quality companies at a lower value. Although, in the last week we have seen optimism brought into the market with a sign of U.S inflation easing off. This does worry me somewhat about how sensitive the markets have been to positive and negative CPI and non-farm payroll reports.
In Asia, the Hang Seng can go up 5%+ a day on the rumour of China opening up from its lockdowns. This is an idea of how sensitive markets can be, however, they are not like this all the time.
What Investment would I invest in right now?
Personally, I look for value companies (I.E Meta). For sectors, I would personally look at sectors in biotechnology due to more innovation over the next 10-15 years. Again, this is not personal financial advice, this is my opinion and what I am doing. If you need financial advice, please speak to a competent and qualified professional.
When looking at regions, I am currently looking toward Vietnam and China as an investment. I have written about these before and will link them at the bottom of the article.
Vietnam, the HNX is down 58.46% (14/11/2022) respectively YTD.
While the macroeconomics are very different it is looking to grow 6.7% in 2022 and 6.9% in 2023 (with a closed China as well) and be the prime beneficiary of the trade war. Vietnam’s macroeconomics and stock market are going in different directions and now seems a good buy for me.
https://www.focus-economics.com/countries/vietnam
I have written enough on China so will be short on this topic. However, I really do think its such good value right now. I understand it has its problems, but I personally believe that China can overcome its current issues. China will (eventually) re-open and use the simple hypothesis that 5 years from now will China be a better place than it currently is?
- Fidelity on China
Mid-Term Investor
For the mid-term investor looking for stable returns, I would personally look for companies that are stable, have low debt, a high moat, and a good profit margin. JNJ stock is one that comes to mind.
Conclusion
I have spoken to a number of people that have put off investing any money this year due to the turbulence in the markets but I am more optimistic about good investments now than in 2021 especially when record highs in the U.S index were being hit on a weekly basis and everyone wanted in on markets using apps like Robin Hood due to reality setting in and the market being more negative.
I hope this is useful for you and note this is not specific financial advice and will aid you to do your own research or speak to an IFA before investing.
If you have any questions, please email me using info@investmentsforexpats.com.
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