[doctrine]

I have some special cases for you.

COVID test companies like SONA Nanotech on the CSNX, MedMira and THRM on the TSXV.

CloudMD (DOC) on the TSXV

VERY good butchers on the CNSX.

Converge Technology on the TSXV.

 

[doctrine]

I have been in the reflation/re-opening trade since basically last May. This particular bubble has been pushing those stocks down, but it has been coming in waves with 3-4 peaks followed by pullbacks. We are on the cusp of returning to reality with literally billions of vaccines under production today which will virtually eliminate the possibility of serious illness and hospitalization. The bubble fad may continue but I'll stay in my reopening stocks, thanks.

There is great value with stocks still near or below book value. The alternate is sometimes 30-50 times book value. There has rarely been this type of barbell situation occurring. But it did exist in 1999-2000. Value stocks did very well over those next 5-10 years.

 

[doctrine]

Believe it or not but despite 60-80% drops from the high, these Reddit bubble stocks are all still overpriced - GME, BB, AMC, etc. Easily 40-50% more downside just to get to stock prices a few weeks ago.

Meanwhile, markets slowly hitting new highs. Value and growth are both doing okay and moving markets slowly higher. Sucks to be losing 60-80% in a bubble while indexers and generalists are sitting on record portfolios. Valuation and fundamentals matter, sometimes quicker in some names than others.

 

[doctrine]

Crazy market.

How can the absolute beginner that I am make over +70% XIRR in 10 months (over +50% P&L)... I was NOT expecting this. My whole portfolio could crash -35% tomorrow and I would not lose any of the money I invested in 2020...

Market crashes and recoveries are the best because... the market gets bailout...

This will end when the next tightening cycle begins. Monetary stimulus and low interest rates = high liquidity which will eventually drive inflation. Once inflation starts peeking above 3% or so, which is really not that much given how much monetary and fiscal stimulus is out there, that will be the beginning of "The Conversation".

"The Conversation" is likely to end in at a minimum of a correction but more likely touch to bear market status in many markets. Likely many asset classes too negatively correlated with interest rates.

"The Conversation" is when interest rates rise, either or both with the market and central banks. It could also be combined with fiscal restraint. Watch out then. I think this story could start sooner than people think - no more than 18 months, but maybe in the next 12 months. Maybe even in the next 6.

 

[doctrine]

Wow! This also implies that SHOP was, in fact, one of the bubble stocks. To drop like this, it means it was in those portfolios which built up mania stocks.

Or maybe it's a buying opportunity! Many of these have not even yet hit their 200 day moving averages. Maybe this is the buying opportunity of a lifetime... what do you think @MrBlackhill is this just the pause before these double in value again?

Shopify is the original bubble stock of this bull run. It rose to bubble status even before Tesla. It was worth more than Tesla in various periods of 2019.

 

[doctrine]

What do you think @MrBlackhill and @Jimmy maybe the buying opportunity of a lifetime? Time to go in with leverage?

It's a valid question. I saw stocks that I liked going down 50-75% from March til June last year. Really, a lot of them stayed down until early November 2020, when Pfizer announced their COVID vaccine was 95%+ effective. I was scrounging up a lot of spare cash and even punched my LOC to buy shares in the 6+ month sale. So cash plus leverage. Down 75% means you can get 300% if it just returns to where it was.

 

[doctrine]

AMC takes the cake here for bubble stock. Even moreso than GME.

 

[doctrine]

There is some serious unwinding occurring in the bubble space. It is interesting in how a lot of them were immediately identifiable; the Zooms, Palantirs, Peletons, etc; no earnings, rapid growth, we are spending to expand despite not having any real moat or competitive advantage that prevents competitors from eating their lunch. But it takes a while for unwinding to occur. When the stock price drops, and there are no earnings, no substance to support the stock price, and the outlook inevitably turns sour, well its like a fire in a movie theatre.

It hasn't all unwound yet, there is still some crazy valuations out there. But a solid bear market for technology is absolutely a requirement to flush out the garbage and there is probably big opportunities in the profitable companies that remain, especially if they get thrown out with the trash. Apple has always been profitable. Microsoft too. And same with Google - $1B of annual net profit in the year before they went public. Amazon has been threading a needle but perhaps underperforming now because of it, eventually investors will want returns.

 

[doctrine]

Are they? Most CAD banks are at current P/E's of 11-13. Is that expensive?

Fear of crashes aside, a P/E of 11-13 is average to above average. They often trade around 10, which historically also means you get excellent returns just about whenever you buy, because you nearly always have a chance to get in at that 10% shareholder yield, with 5-6% annual growth, giving you long term 13-15% returns, at least over the last 30-40 years. If the P/E drops below 8, they are typically a screaming buy and offer outsized returns above 15%/year. And the P/E could drop below 6 like in March-June 2020 and that is the last time I was buying. The banks are considered cyclical and just do not get to those P/E of 15 or higher multiples because they can record big losses in recessions.