In a bull market, cheap stocks are rare but they are easy to find. In a bear market, there's a plethora of stocks at bargain prices. How do we pick them? There are four steps which I'm using to pick stocks in this bear market.
1. Look for stocks in your own portfolio
These are the stocks you know the best. If you can buy more of these stocks, you should take the opportunity to do so. For example, Skyworks Solutions was 12% of my portfolio. The stock was not cheap enough for me to buy more and I didn't want to go beyond 12%. The bear market came, the stock was cheap again and now only 10% of my portfolio, so I took the opportunity to buy more. Recession or not, 5G is the future. I am betting on 5G and, therefore, on Skyworks Solutions. I did the same thing with JPMorgan Chase. But that doesn't mean that you need to buy everything in your portfolio. Apple $AAPL is not cheap enough for me to buy more but I'm holding on the company since I first bought the shares in 2016 when they were really cheap.
2. Look on your watchlist
The stocks you know the best after your portfolio are those on your watchlist. I took the opportunity to buy China Mobile and Alaska Air Group. Again, you should not buy at any price. Dexcomm is on my watchlist but unfortunately, the stock is not cheap enough for me to buy.
3. Look at the most affected sectors
In 2008, the most affected sector was banking. If you had invested in Citigroup in March 2009, you would have made 400% in a few months. In 2000, the most affected sector was the tech sector, Amazon $AMZN crashed by more than 90% while Microsoft crashed by more than 60%. If you had invested $10 000 in Amazon, you would have $2.3 million. In this bear market, the most affected sectors are airlines (I bought Alaska Air Group), the hotels, cruise lines, oil stocks. I would have invested in $Oil but I already have enough exposure, so I'm not investing more.
4. Invest in companies/economies that will do great in the next economic season
There are four economic seasons: expansion, recession, inflation, deflation. Right now, we have recession and deflation. What's coming next is expansion and inflation. Because of the all the money printing, there will be higher inflation. This is a good time to invest in commodity stocks. For example, next expansion, EV will be a big thing. You could invest in a Copper miner since an EV uses more Copper than an ICE vehicle. You could also look at Nickel, Lithium miners. You can also look at economies that will do great. For example, China and South Korea are expected to have greater than average growth in the next expansion. You could look for stocks there. I'm investing in the South Korean ETF EWY.
The investments you're going to make in this bear market will determine your returns in the next bull market. That's why it is important for you to make the best possible investments right now. You need to invest in what you know, that's why I tell you to focus on your own portfolio and watchlist first. And then take your time to do your research before investing.
Watch the full video on YouTube and Subscribe:
https://www.youtube.com/watch?v=_iSfzMWezH0&list=UUPO3uUyoXSaFWG-Ldq1mqEQ
If you want to read my analysis of the metal commodities, here it is:
https://ishfaaqpeerally.teachable.com/courses/662813/lectures/15495396
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