Includes 5 Key Success Strategies to put you on the right side of the trade
The recent pullback in many of the hottest stocks on Wall Street is a reminder of two things. If you missed investing in Shoot the Moon stock pics you might be afforded a 2nd chance to invest, particularly if you employ a careful strategy of dollar-cost averaging (not Buy & Hope). The other is the importance of regular rebalancing to capture gains.
Here are some examples of Shoot the Moon stock pics that we’ve identified over the last couple of years. All of the companies listed below are trading at a lower price now than they were in mid-February 2021. FYI: Each of these hot companies were identified at or before their 52-week lows, which are dramatically lower than today’s price.
As you can see in the chart above, Zoom Video soared to a high of $589 on October 19, 2020. At today’s share price was $331, the stock is trading at a 44% discount. Aphria's share price rocketed up to $32/share on February 9, 2021, and is now half that price. This illustrates the importance of all of the key strategies outlined above:
5 Key Success Strategies to put you on the right side of the trade
Purchasing & Profit-Taking
If You Wait for the Headlines, It’s Too Late
Funds or Individual Stocks?
Micro and Macro Trends
Purchasing & Profit-Taking
Should you buy now when you could have purchased Zoom at $112.50 a year ago? Is $330.83 a fair price for the stock, or is the company overvalued in a post-pandemic world? Knowing what to do requires understanding where the company is headed (micro trends), what the market might do (macro trends), and if those factors are already priced in.
What is the recent pullback on Zoom related to? Is it simply investors taking their profits? Is Zoom doomed in a post-pandemic world? Are we all burned out on videoconferences? I examined this in-depth in my recent blog on Zoom and Teladoc videoconferencing platforms.
Zoom is expected to post a stellar 1st quarter 2021 in the first week of June. Revenue is projected to be between $900 and $905 million, compared to $328.20 a year ago. Full year 2021 revenue could increase 43% to $3.78 billion. The U.S. economy is projected to grow at 6.5%. So, you have micro and macro trends offering a tailwind. The only issue is the current valuation of Zoom, which has a price-earnings ratio of 150. The average P/E is 16-17. High growth companies can take a higher multiple. However, Zoom is very pricey.
Rather than just wait, you could put yourself on a dollar-cost averaging plan for Zoom (and other companies with great promise). If your goal is filling up a $10,000 hot slice with Zoom, then you could think about purchasing a small amount now at $331. If the price goes up, your slice is getting filled up on its own. If the share price goes down, you can add more to the slice at a lower price. Give yourself prompts once a quarter to rebalance and continue filling up your slice.
In today’s world of lofty prices for stocks and real estate, and dramatic routs when investor sentiment plummets, regular rebalancing is essential. 1-3X a year rebalancing is a buy low, sell high plan on auto-pilot. If Zoom Video was your large-cap growth slice, and your slice grows to three or four slices, the pie chart system is prompting you to sell high. Trimming back four slices to one slice affords you the opportunity to easily buy low, if the share price goes down, while also capturing your massive gains (instead of losing them in the rout).
When the Zoom Video share price drops from almost $600 to almost $300, your slice becomes half a slice, prompting you to buy more at a lower price. You’re going to feel a lot better about buying low if you have taken your profits and sold high. If you are riding the Wall Street rollercoaster, watching your money balloon and then bust, it’s going to be harder emotionally to buy at half the price. If you were feeling rich a few months ago and didn’t take your profits, by the time the share price bottoms out, you’ll feel like a loser and wonder if there it something fundamentally wrong with the company. A regular rebalancing plan takes the emotions out of your wealth plan.
When you work off of the brokerage statements, your emotions are working against you. When Zoom’s share price soars to almost $600, and you’ve got massive gains highlighted with a plus sign in green, that signals you to keep going, hoping it will shoot the moon even more – even if it has quadrupled already. When the share price drops from $600 to $300, your losses are shown in red, with a minus sign. Red lights signal warning and prompt you to stop, rather than buy low.
That is why it is so important to mark up your holdings into the pie chart format before you do your rebalancing. Do not just work off of your brokerage statements. The pie charts prompt you to do exactly what you should be doing: diversifying, keeping enough safe, and having each slice represented appropriately. This plan works like a charm in today’s world where stocks can drop by 35% or more without warning, or soar to unsustainable multiples without reason.
If You Wait for the Headlines, It’s Too Late
Most people get excited when they read or hear about things in the news. Sometimes, people will read a blog of mine about Shoot the Moon stock pics, which have already racked up the gains, and buy high. Price matters! When bad news happens, stock prices can drop like a knife. When great news happens, prices can soar before you get a slice of your heaven. So, read the dates on my blogs and cross-reference the right price. Don’t just jump in at any price.
If you are tempted to invest in an individual company, whether it’s Apple, Nvidia, Netflix, Tesla or Aphria/Tilray, then you must do a much more in-depth analysis than one headline provides, if you want to be on the right side of the trade. Whatever news you’re reading might be one piece of a 100-piece puzzle.
Also, in today’s world that headline might be coming from a blogger who just started writing about stocks this year. With rare exceptions,do not read blogs for your information. (Grade your guru before you read anything!) Learn to read data. (It’s as easy to find and read as the blog.) It’s important to know where and how to access real time data to inform your decisions if you are going to invest in individual companies. Trading on headlines is almost guaranteed to put you on the wrong side of the trade.
Funds or Individual Stocks?
Investing in funds instead of stocks means you don’t have to do the research. A fund has a lot of different companies in it, taking the risk and the work out of investing. For most people this is going to be appropriate, although in today’s Debt World, you have to be very picky about the company you buy your fund from and what kind of fund you are buying.
Micro and Macro Trends
The economy has been predicted to grow at 6.5% this year! That’s better than it has grown in decades.
The sad news is that the amazing growth is already priced into most assets, including real estate and stocks. 2021’s growth is a bounce off of the worst economy that we have seen in a generation. Read my Spring Rally and Real Estate blogs for additional information. (Click to access.)
So why are stock prices in the strongest companies with the greatest potential lower today than they were just a few months ago? It’s largely a product of valuation issues.
Should Tesla be worth $600 billion, or $848 billion as it was at its high in January of this year, when the company makes less than $1 billion in net income annually? With Zoom, the company’s price earnings ratio is 150. When rumors began that no one was going to need Zoom after we all return to the office, investors wanted to lock in their profits. Is that rational, or did this false perception create a buying opportunity? I examined that premise in depth in my most recent blog on Zoom.
When deciding on whether to buy or sell, you want to know what the company will do going forward, which requires careful analysis, using the Stock Report Card, 4 Questions, forward outlook and other helpful tools. Once you know what the company is expected to do, then consider the general stock market.
Although the companies listed above should have a great future, their share prices were under attack because of the general market valuation being too high. That remains the case as you can see in the CAPE Ratio chart below, provided by Professor Robert Shiller, a Nobel Prize winning economist. The average P/E is 16 or 17. The only time the CAPE ratio has been higher than today (at 33) is in 2000 (before the devastating Dot Com Recession) and 1929 (before the Great Depression).
We have four hot slices in the nest egg pie chart for a reason. Adding performance to your portfolio will increase your wealth, and expose you to the best companies with the brightest future. Learning a few tricks of the trade and applying a Nest Egg Pie Chart Investing Strategy with regular rebalancing is key to increasing your wealth now and going forward.
2021 is projected to be a strong recovery year. However, we remain in the most challenging economy of our lifetime. Stock and real estate prices are very lofty. In other words, the recovery is already built into the prices. As I discussed in my Spring Rally blog, this could put a damper on stock market and real estate market performance going forward. Check out my interview with Lawrence Yun, the chief economist of the National Association of Realtors, where we talk about where real estate prices are headed.
Join us for our April 24-26, 2021 Financial Empowerment Retreat. (Click to learn more.) In 3 days, you'll learn how to pick great companies (like Zoom Video, Tesla, Aphria, Veritone and Nio), incorporate them into a well-diversified wealth plan, receive a complete Money Makeover and transform your life forever! Bring your friends, family and teens for an unbelievably low group rate. Call 310-430-2397 or email info@NataliePace.com to learn more now.
Other Blogs of Interest
Videoconferencing in a Post-Pandemic World (featuring Zoom & Teladoc).
Sanctuary Sandwich Home. Multigenerational Housing. Interview with Lawrence Yun, the chief economist of the National Association of Realtors.
10 Budget Leaks That Cost $10,000 or More Each Year.
The Stimulus Check. Party Like It's 1999.
Kushner's Times Square Building Plunges 80% in Value.
Will There be a Spring Rally?
Cannabis and the Road to Decriminalization in the U.S.
Hot ETFs Return Up to 50% Since October.
Investor IQ Test 2021.
Investor IQ Test Answers
Shoot the Moon Stock Picks
2021 Crystal Ball.
Would You Pay $50 for a Cafe Latte? Is Your Tesla Stock Overpriced?
Can Medmen Avoid Bankruptcy?
Bitcoin is Back, Baby!
Real Estate Prices are Going Up. And Down.
Movie Theaters are in Trouble
Airbnb Should Have a Spectacular IPO Today.
Cannabis is Decriminalized. Stocks Triple.
Airbnb's IPO. Should Hosts Invest?
Gifts Under $5 and Free.
Thanksgiving in a Pandemic. The Sustainability Silver Lining.
Secretary Mnuchin Halts Bailouts
Money Stress Killed My Friend
Real Estate and Housing 2021. Challenges & Opportunities
Real Estate in a Pandemic. Interview with Mike Fratantoni, the Chief Economist of the Mortgage Bankers Association.
Bonds are Illiquid & Negative-Yielding.
Annual Rebalancing is a Buy Low, Sell High Plan on Auto-Pilot.
5 Red Flags of a Financial Implosion
Will Regeneron Be Approved Before the Election?
Tesla Will Have an Outstanding Earnings Report
Should You Wait Until After the Election to Fix Your Wealth Plan?
The October Surprise
Is Your Bank a Junk Bond
Do Stocks Fare Better Under Democrats or Republicans?
Put Your Money Where Your Heart Is.
Crystal Ball for the Remainder of 2020 (Including the Election).
Microcap Gaming Company Doubles 2Q 2020 Revenue.
Apple & Tesla Stock Splits.
Schwab's Chief Fixed Income Strategist on What's Safe.
China's Tesla (Nio). 2Q Sales Soar.
Why Are You Still Renting? (Errr. There is More Than This to Consider!)
MedMen's Turnaround Plan Attracts A-List Board Members.
Wealth Myths That Keep You Poor. Prosperity Truths That Make You Rich.
Protecting Your Wealth and Home in a Recession.
Technology and Silver are Golden.
The Economy Contracts 32.9% in the 2nd Quarter of 2020.
Real Estate: Feeling Equity Rich? Make Sure That Feeling Isn't Fleeting.
Airline Revenue Plunges 86%.
10 Questions for College Success
Bank Earnings Season. Crimes. Cronyism. Speculation.
Real Estate Solutions for a Post-Pandemic World.
Copper and Chile Update.
Gold Soars. Some Gold Funds Tank.
Will the Facebook Ad Boycott De-FANG Stocks?
Why Did My Cannabis Stock Go Down?
Which Countries Are Hot in a Global Pandemic?
Is Your Financial Advisor Good at Navigating Stormy Seas?
$10 Avocados, Lies, Damn Lies, Statistics & Wall Street Secrets.
It's Never a Crash.
Work From Home and Intergenerational Housing.
Biotech Races for a Coronavirus Cure.
Are You Worried About Money?
May is a Good Time for Rebalancing.
Is FDIC-Insured Cash at Risk of a Bank Bail-in Plan?
Why Did my Bonds Lose Money?
Recession Proof Your Life. Free Videocon Monday, May 10, 2020.
The Recession will be Announced on July 30, 2020.
Apple Reports Terrible Earnings.
We Are in a Recession.
Unemployment, Rising Stocks. What's Going On?
8 Money Myths, Money Pits, Scams and Conspiracy Theories.
21st Century Solutions for Protecting Your Home, Nest Egg & Job.
Wall Street Insiders are Selling Like There is No Tomorrow.
Why Are My Bonds Losing Money?
Tomorrow is Going to be Another Tough Day.
Price Matters. Stock Prices are Still Too High.
Should You Ride Things Out?
7 Recession Indicators
Corona Virus Update.
The Bank Bail-in Plan on Your Dime.
NASDAQ is Up 6X.
CoronaVirus: Which Companies and Countries Will be Most Impacted.
Is Tesla Worth GM and Ford Combined.
Artificial Intelligence is on Fire. Is it Time to Buy S'More?
Take the Retirement Challenge.
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.
ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.
Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.
About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 4th edition of The ABCs of Money was released on October 17, 2020.
Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.
Natalie Pace is the co-creator of the Earth Gratitude Project and the author of The ABCs of Money, The ABCs of Money for College, The Gratitude Game and Put Your Money Where Your Heart Is. She blogs on Huffington Post and Medium, and is a frequent guest contributor to national news shows and magazines. She has been ranked the No. 1 stock picker, above over 830 A-list pundits, by an independent tracking agency, and has been saving homes and nest eggs since 1999.