By Matt McCallMay 20, 2020
“The time to buy is when there’s blood in the streets.”
That sounds harsh, but it is an often-quoted investing axiom credited to Baron Rothschild.
Maybe he could have put it a little more gently, but history tells us he’s right. When there is crisis in the markets, there is also great opportunity.
The member of the wealthy Rothschild family made a fortune in the early 19th century when he bought investments during the famous Battle of Waterloo that ended Napoleon’s reign.
That very same strategy of buying when everyone else is selling helped mint many millionaires and even billionaires over the years.
I had that in mind seven weeks ago when I started a portfolio that’s up 23.4% since, and I’m convinced there’s a lot more to come. That’s why we just added our newest stock moments ago…
In the last 20 years, two great buying opportunities were created by crises.
The first was the tech bubble in the early 2000s, which provided fantastic chances to buy some of the biggest winners of the last 20 years at deep discounts. Even the strongest and most stable technology companies were crushed as the bubble burst, and many of them went on to gain thousands of percent.
Then there was the 2008-2009 financial crisis that saw the S&P 500 lose more than half its value. Investors panicked and priced many companies as if they were going bankrupt, only to see them come back stronger than before.
A great example is Jazz Pharmaceuticals (JAZZ). This biotech stock fell to a low of $0.55 in April 2009, and things looked dire as the company cut jobs to stay afloat. Eleven years later, Jazz has several approved drugs on the market along with a robust pipeline of new candidates. From the low in late April 2009 to the high in July 2015, the stock gained 35,000%.
This brings me to today. The world is dealing with another crisis – the COVID-19 pandemic.
Just like every other crisis in the last 20 years, this is another great opportunity. And that is why I launched my Crisis and Opportunity Portfolio on April 1. We’re filling it with quality stocks that got way oversold in the panic and are positioned to thrive in the recovery and as life starts to return to normal.
We started with three picks and have since added four more. One of those stocks become a double for us… in just five weeks. The stocks are up 23.4% on average, and after a deep research dive, I decided to add the seventh stock to the Crisis and Opportunity Portfolio today.
History shows that not only is there an opportunity to buy during a crisis, but that the best performers are the small caps. I see the same thing happening this time, and all the stocks in the Crisis and Opportunity Portfolio have market caps under $5 billion. Six of the seven are under $1.5 billion.
Similar to Jazz Pharmaceuticals, the stock I just added today is also a small cap biotech with a market valuation of $1.1 billion. This company could easily triple over the next few years, and I expect more upside than that as its newly approved drug reaches blockbuster status.
This drug treats a widespread and important need, and it’s the first such drug approved. In fact, I expect it will be the only available treatment option for the foreseeable future.
The roll out was just beginning when the pandemic hit, and stay-at-home orders forced patients with all but life-threatening emergencies to delay treatment. Revenue expectations for this year have come down, but growth should really kick in next year and continue for a few years, taking the drug to the blockbuster $1 billion in annual sales milestone.
With a clear addressable market and no competition, this stock is one of the best low-risk biotech investments today. And if you’re a regular reader of MoneyWire, you know that I see biotech as the sector of the year… and the decade.
Even though the market has rallied off its March lows, expect more volatility for stocks. As a long-term investor, you want a strategy to continue buying and use the volatility to your favor. That is our plan with the Crisis and Opportunity Portfolio.
History is clear: Every time a major sell-off happens, it creates great long-term buying opportunities. Smaller, largely unknown companies often get hit harder, even if they are operating in major hypergrowth trends. That makes them some of the best opportunities out there right now on the road back.
P.S. The latest Crisis and Opportunity Portfolio recommendation is our first in what I’m calling the “social proximity” trade.
Social distancing has helped with the pandemic, but businesses that thrive thanks to social proximity have plummeted. With encouraging trends in other countries as well as more states, it’s time to look ahead.
Making the social proximity trade means buying high-quality businesses that have gotten hammered but can thrive as we start getting back together. The rewards for doing so could be huge.
Click here to learn more about my latest research and how you can be among the first to find out all about this just-released recommendation.
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