Update - February 16, 2021
The “Trick” to Triple-Digit Gains
What do the Super Bowl and the stock market have in common?
Well, if you paid attention to the big game a couple of weeks ago, you may have seen at least two of our positions represented during the commercial breaks.
Scotts Miracle-Gro (SMG) shelled out for its first-ever Super Bowl ad. Logitech (LOGI), too, made a first quarter appearance.
They were both part of a bigger trend that has some of the hottest – and youngest – names on Wall Street getting big attention.
DoorDash (DASH) had a big ad. DraftKings (DKNG) also had a spot. And so did Vroom (VRM). All three were fresh IPOs last year.
Even privately owned Robinhood, fresh off quite a controversy, spent some $5.5 million for a spot.
All of these companies were big winners in an economy rocked by a pandemic and filled with free money.
What’s just as interesting is who didn’t advertise during the game.
That list consists of longtime game day mainstays like Coca-Cola (KO), Anheuser-Busch (BUD) and Hyundai. Each canceled their ad plans this year… citing a downturn in business and ongoing uncertainty.
The idea is perfect symbolism for what’s happening all across the stock market and the economy.
“Not Your Ordinary Economy”
Ask an investing traditionalist and they’d surely tell us we’d want to own a company like Coke during a downturn. Well… it’s down 17% from this time last year. The folks behind the iconic Clydesdales aren’t doing much better. Their shares are down 14%.
Critics might say that this downturn is like no other. They’d say that it makes perfect sense two beverage companies are suffering when restaurants and bars are forced to close.
They’re right. But we’d ask them whether any two downturns have ever looked the same.
The savings and loan bust and the stocks that buoyed portfolios looked a lot different from the housing bust and its few winners.
These excuses don’t make up for the fact that these traditional, safe-haven blue chips were anything but rewarding over the past year.
Folks who stuck to them – I’m looking at you, Mr. Buffett – had a lousy year… during one of the best moneymaking periods of our lives.
It’s why I will continue to praise the merits of our Modern Asset Portfolio. It doesn’t use the “wisdom” of what worked during the last crisis to guess what might work during the next. It doesn’t beg us to buy banks because banks rocketed higher after the last crisis.
That’s silly.
Instead, it uses the most powerful force in all of economics – interest rates – as its guiding light.
An “Interesting” Concept
Do you think if interest rates were at 14%, folks would be piling into Robinhood to start new trading accounts?
If auto loans cost 10% a year, would folks be buying cars through an app?
Or, digging deeper, if Logitech were paying 5% on its corporate debt, would it be burning through its cash buying back its own shares?
No way.
And, of course, nowhere is this free-money idea more pervasive than in the realm of cryptocurrency. (Here’s a big prediction for you… We will see three crypto-related ads during next year’s Super Bowl 56.)
While traditional stocks are working to make up for what they lost last year, we’re now up 140% on our crypto pick, Monero (XMR).
As Elon Musk stunned the world last week with news that Tesla (TSLA) now owns $1.5 billion worth of Bitcoin, the crypto market zoomed last week. Bitcoin hit $50K for the first time ever this morning.
Again, if we’d followed a traditional strategy – a strategy that was penned more than 60 years before crypto was devised – we’d have missed out on one of the hottest trades of our lifetimes.
And it’s not just crypto.
Our investing philosophy is rewriting the rules across our portfolios.
Afterpay (ASX.APT), a no-brainer play in a zero interest rate world… is up 70% since December.
Scotts Miracle-Gro, our buyback queen, is up 100%.
Logitech, another aggressive buyback play… is up 80%.
And Alarm.com (ALRM), a leader in deflationary technology… is up 55%.
Some folks may say the Super Bowl and the companies that advertise during it are a good way to judge the economy’s winners and losers.
They’re right… somewhat.
It will show you what’s already doing well.
But the big money comes from knowing what will come next. For that, there’s nothing better than our Modern Asset Portfolio and the theory behind it.
If you want to reread the issue where I debuted it, click here.