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In the 3rd week of March, retail investors began ENVISIONING BIBLICAL DOOMSDAY prophecies and sold both stocks and bonds with the most UNMATCHED force ever witnessed in market history.
They were literally getting out of all the equities they could liquidate, and on the other end of the trade, INSIDERS and hedge funds were BUYING.
They weren’t only buying; they were TRIPLING-DOWN!
Governments and central banks realized that the SYSTEM ITSELF was at risk of FALLING APART. You know what happened next: a trillion here, a trillion there, and ALL OF A SUDDEN, you’re talking about real money.
In the stock market, the public does the selling. Pension funds and sovereign wealth funds either buy or hold, but they RARELY SELL.
Once the retail public realized MONSTROUS LOSSES, the bailouts bounced stocks higher and hedge funds, insiders, and CONTRARIANS made money. Some will take profits this week and the next, so we MIGHT get a second chance to BUY LOW.
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During the panic, I personally monitored shares of Parker-Hannifin (PH), which went from $215/share to $97 at the lows. When the top-to-bottom was 50%, it was an ideal entry point, for instance, since the position is up around 35% already. The same thing occurred with Starbucks (SBUX), which went from $90 to $56. Although it’s a restaurant chain, it’s GLOBALLY diversified with thousands of European and CHINESE locations and is already above $70.
Another interesting trade I was researching was with Travelers (TRV), which is an insurance giant. Shares SUNK BADLY from $140 to $89 and the price is now over $105.
These are the type of businesses that rarely trade at STEEP DISCOUNTS.
The Federal Reserve is now ALL-IN and you really need to INTERNALIZE what this means.
You can’t go back from this. The FED now openly monetizes debt. Any delays in opening up the country and they will PRINT ANOTHER $1T – it’s all FUGAZI at this point.
The business world will use this crisis as a GIANT SLAP in the face. No longer will KEY COMPONENTS be manufactured across the ocean while relying solely on other countries. Things will be done in-house.
The trillions printed will go into drug research, robotics, worker education and training, construction, technology, and logistics, among other things.
In light of this, I have compiled the following list of 4 companies that CONSTITUTE part 1 of 3 of the shopping list:
- Parker-Hannifin (PH): Though it’s a relatively UNKNOWN blue-chip, the company has been around for 103 years. It is a fantastic business that employs over 55,000 people and provides value around the globe.
It’s one of the best businesses in the world and has returned over 8,000% since 1980, including dividends!
My limit price is $120, which means that I’m currently not willing to pay more than that.
- Travelers (TRV): This company is the 2nd-largest underwriter of commercial property casualty insurance in America and the 6th-largest in personal insurance via their independent agents.
The company has been in business since the 1850s!
0% interest rates make it very difficult for insurance companies to operate, and ONLY the strong thrive and EXPAND.
83% of the company is owned by institutions, such as the world’s largest pension funds and sovereign wealth funds.
My limit price is $95.
- Starbucks (SBUX): Three years ago, I visited the original branch in Seattle. The company is building a new branch in China every 24 hours and is loved all over the world. It is also in the business of PROVIDING AN ADDICTIVE, repetitive product: caffeine.
Hedge funds have BOUGHT THE DIP on this stock and its business is pretty recession-proof due to its endless prime locations.
My limit price is $63.
- Archer Daniels Midland (ADM): This is one of my FAVORITE companies for so many different reasons; one being that it is a DOMINATING food processor, which is an inflationary-hedged business.
It’s also had an ICEBERG SUPPORT for its price at around $30-$32 FOR YEARS, so it’s potentially easier to know WHEN buyers are going to come in.
In the past, I’ve bought at the low $30s and sold at over $40 multiple times for QUICK +30% gains on rebounds.
This is my plan again.
My limit price is $32.
The markets MAY NOT end up going down to these LIMIT ORDERS, so use them as guidelines as to where I personally believe fair value is. In Parts 2 and 3, I will revise them if needed.
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