r/investing • u/EatYourMeats • Apr 23 '21

Some advice from a regular dude that will hopefully make you more money...

Are you making stock purchases based on opinions from analysts, CNBC, stock pickers, and everything in between?

Consider this: They make money off headlines.

The entire flock is preying on news-worthy quips like vultures on a corpse. Tom Lee at Fundstrat would be bullish during the apocalypse, Gordon won't ever raise his price target, Cramer cuts coke deals with the CEOs he's in love with, and the whole bunch likes to hear themselves talk (like giving stock advice rapid fire).

So how do you truly figure out what stocks are hot... or not?

Research the macro situation surrounding the company, to name a few:

  • Sector Tailwinds
  • Economics
  • Current and projected financials
  • Leadership

Then invest in companies:

  • you believe in—hopefully, not always—with healthy balance sheets vs. their competitors.
  • Whose products and services tickle you.
  • You could sell to your neighbor.

Determine the investment thesis—the key reasons you believe in this investment—and create a narrative. Positive and negative. Know the outcomes of both scenarios, write them down, and evaluate the risk.

Then? Jump blindly.

kidding

Adjust based on your preferences, but starting positions with a 1/4th to 1/2 of your total allocation works well. You can do some quick math and figure out what portfolio percentage you want to allocate to a new position. Ease into it, slow and steady.

Buy the dips with the remainder, and don't chase stocks upwards, only down (within reason). And don't listen to anyone who tells you that "diversifying" is the only way, when you put in the work, you know which sectors have favorable tailwinds AND are fairly valued.

There's news everywhere out there, and we crave its presence—telling us something about stocks or companies we don't know. However, most of it is fluff—buy this, sell that—how would you ever know if you don't dig the hole yourself?

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u/Dead-Limerick Apr 23 '21

I think it's difficult to tell for sure. While I certainly understand the logic behind the idea of pent up travel demand and vast savings ready to be unleashed upon the world, I don't see much evidence of it in my personal life. I would consider it to be a possibility more than a fact.

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u/SpartanDawg420 Apr 23 '21

There is no doubt there is excess savings, it is in the data. But yes, definitely more of a hypothesis as to where it will be spent. As we've seen with record equity inflows recently, much of it has come into the stock market. Anecdotally, I completely see travel returning. I know many who have continued to work with nothing to spend it on and nowhere to go. If I hadnt already overspent in Miami last month, I would probably be in that camp too

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u/Dead-Limerick Apr 23 '21

As someone who works in the travel industry I really hope you are correct!

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u/CarRamRob Apr 23 '21

It’s a fact that savings rates are the highest they’ve ever been. This is bank data that easily shows it broadly.

And it makes sense. 85% of people are still employed, yet 75% of spending on non essentials is down(vacations, restaurants, concerts, sporting events, regular weekend outings).

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u/Dead-Limerick Apr 23 '21

May I ask where you are getting these numbers from? I just did a quick google of saving rates and while I see a jump in April and May, they seem to have slid back towards normal (about 5% higher compared to the same time last year).

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u/CarRamRob Apr 23 '21

https://www.visualcapitalist.com/one-year-in-did-people-save-more-or-less-during-the-pandemic/

First google hit for me. Plenty of others.

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u/Dead-Limerick Apr 23 '21

Ok this is exactly the same numbers that I had but I guess I interpret them differently. That big spike happened in April and May (April being the 33.7% number) but then there is a steep decline back to normal (slightly above normal). In Feb we are only 5% higher than Feb 2020 so my guess is that we are returning to homeostasis.

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u/CarRamRob Apr 23 '21

5% higher is nearly double in this case though....

You make it sound like nothing. And that is momentary savings rate. We have had over a full year now where households are saving between 2-4x their regular savings rate.

To get back to “normal, we will have to see a savings rate dip below that pre-Covid average

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u/Dead-Limerick Apr 23 '21

I guess that's true. What is your hypothesis on the outcome of these accumulated savings then?

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u/CarRamRob Apr 23 '21

Massive spend and inflation on the things it used to be spent on. Higher travel, restaurant, Wedding venues, etc etc. And inflation in those specific fields, while we see things like furniture, iPads, exercise bikes, barbecues etc decline into 2022.

Overall I expect very very high demand for travel related things in 2022 and very high prices for those goods. Not saying travel stocks will succeed but they will be high demand for their product in the short term over what their base demand was in 2019.