The market is taking few prisoners. If you are long (own) stocks, you’re probably losing money. That does NOT mean that your stocks are bad. Two things can make a stock go down:
#1 if the underlying company loses value, or
#2 if there are more people selling than buying (which can admitted occur as a result of #1).
There’s a big difference between these two things.
For example, if I ever ran into deep financial trouble, I might be forced to quickly sell all of my TPCS shares. That would probably cause a big drop in the stock price. However, the actual value of the company would not have changed… just the PRICE of the stock (solely due to my selling).
A smart investor would take advantage of the price drop and be rewarded later when the stock recovered from this temporary supply/demand imbalance.
In fact, a large chunk of my net worth came from buying into a supply/demand imbalance. That’s what we call “buying stocks on sale”.
For my “Starting 5” picks (SMSI, TPCS, VTSI, VWTR, and CTLPP), that’s exactly what’s going on (in my opinion). Yes, SMSI had a disappointing quarter of financial figures and guidance. However, the business continued to make progress (which, as I’ve said many times in my YouTube videos, is the only thing I care about as it pertains to small & relatively-unknown stocks).
This is why I don’t look to sell my favorite stocks, even when I believe the stock market is going to drop (as I’ve been correctly forecasting for the past several months).
Those who have been paying attention, know one of my cardinal rules: “When you hate the market, short the market… do NOT sell your favorite stocks.”
For those who have learned this lesson, here’s an advanced version of that lesson: “When you hate the market, short individual stocks that should underperform the market“.
With that in mind, I recently (my March 8, 2022 YouTube LIVE) provided a list of stocks that I’ve been shorting to profit & protect against losses in my favorite names.
As you can see below, over the past 4 trading days, the Russell 2000 has dropped 1.07% (producing a 1.07% profit for those who have been short the Russell, including yours truly). However, my list of individual picks has fallen more than 4%, thus serving as a more effective hedge (vis a vi the Russell) against losses on longs:
Now, here’s where it gets crazy.
Below you can see the carnage in the names I’ve “endorsed” for purchase.
Led by the awful week for SMSI, the average performance for this basket of picks has been -3.66%.
Remember the losses for the shorts above? 4.05%.
In other words, if you had an equal amount of money in my basket of longs and shorts, you MADE money over the past week!!
To be clear, that hasn’t been my exact call. On my last LIVE, I said that I’m 50% long and 40% short (leaving 10% in cash for the new opportunities that seem to be arising on a daily basis). Not 50/50. However, the charts above clearly illustrate the any amount of shorting has been beneficial toward minimizing losses during this turbulent period in the stock market.
So, I’ll say it yet AGAIN…
If you want to make money “the Money Mark way”, please don’t just buy and hold my long ideas. Make every effort to learn ALL of the lessons.
I know time is short and precious… but so is your money.
After all, we spend nearly half our waking life trying to make it. Doesn’t it makes sense to spend an extra hour per week learning how to protect and increase it?
It’s your call. Stay tuned…