The Five Biggest Investing Takeaways of November 2022
1970s flashbacks, small-cap stocks, and more...
The Five Biggest Investing Takeaways of November 2022
With 2023 right around the corner, the TradeSmith team has been hard at work, making sure we can save you time by putting opportunities to invest in — and avoid — on your radar.
Throughout the month of November we had a little bit of everything to help you get ready for the new year:
What a flashback from the 1970s can teach us about where to put our money in 2023.
Why this one company could be the Amazon of gene-editing stocks.
What to make of cryptocurrencies after the collapse of FTX.
The rejuvenation of experience-enabling stocks, with one to buy and one to avoid.
And three small-cap stocks flashing buy signals.
Whether you missed these TradeSmith Daily stories or just want to review a particular topic, I hope today's issue is a valuable addition to your investing week preparation.
I'll let the team take it from here.
Enjoy your Wednesday — Keith Kaplan, CEO, TradeSmith
Takeaway No. 1: 1970s Flashback: History Is Starting to Rhyme, Offering a Road Map of How to Profit
Mark Twain is credited with sharing the wisdom that history doesn't repeat itself but often rhymes.
It's a folksy way of saying that while history can't literally reoccur, mistakes and issues in the present can put us in situations that are similar to ones that have happened in the past.
And to borrow from what Mr. Twain said, we believe this year's stock market has rhymed an awful lot with the stock market of the 1970s.
Just think about it. When was the last time we dealt with these issues all at the same time?
A war (the Arab-Israeli conflict of the 1970s, the Russia-Ukraine war today) that roiled global markets and spiked energy prices
Accelerating inflation due to excessive money printing and government spending
Growth stock valuations getting crushed while value stocks outperform
And with the parallels between then and now as striking as they are, you've also got a possible road map for what lies ahead — not just for the next year or two, but for the rest of the decade.
Takeaway No. 2: This Could Be the Amazon of Gene-Editing Stocks – and We're Going to Show You Why
Cancer, blood disorders, blindness, AIDS, cystic fibrosis, muscular dystrophy — those are just some of the first diseases CRISPR could cure.
It's a complicated technology, but investors can think of CRISPR as a genetic engineering tool that allows scientists to replace disease-causing mutations.
It's also a very new technology and a small, risky market, only valued at $1.09 billion in 2021.
In comparison, the global biotechnology market was valued at $1.02 trillion.
But it pays to be informed, prepared, and ready to pounce on upcoming opportunities.
Like the folks who invested in an unassuming online bookseller run by a 33-year-old CEO on May 15, 1997.
Amazon.com Inc. (AMZN) started out selling just one type of product, but in 2019, it surpassed Walmart as the world's largest retailer.
It lit the fuse for the e-commerce boom and established the now ubiquitous expectation of two-day shipping. As of 2019, 44% of people go directly to Amazon to start searching for products, bypassing search engines.
And the retail investors who recognized Amazon's potential and invested early became millionaires.
That's right.
One thousand dollars invested in Amazon's IPO would have been worth over $2 million by July 2, 2021.
What's even more mind-boggling is that the wealth Amazon created for shareholders came from online shopping.
Imagine how much money could be made by investing in companies that could provide lifelong cures to genetic conditions.
Takeaway No. 4: Buy This, Not That: Experience-Enabling Stocks
The Sunday after Thanksgiving, 2.5 million passengers passed through U.S. airport checkpoints, the highest daily amount since Christmas 2019.
One of the reasons for the increase in travel — aside from the desire to overindulge in turkey and pie — is that people value the whole Thanksgiving experience.
It's a time to enjoy the company of family and friends, to make new memories and rehash old ones.
In a recent Airbnb Inc. (ABNB) investors call, CEO Brian Chesky captured that sentiment when sharing why his company recently had a strong quarter that exceeded expectations:
"Because many people are now working from home, the mall is now Amazon, the movie theater is now Netflix, people still want to get out of the house. They still want to have meaningful experiences."
In this edition of Buy This, Not That, we look at two companies that facilitate experiences — one that is considered a "buy" and one that you should avoid.
If you read the first takeaway in this issue of TradeSmith Daily, you'll see that one of the areas Mike says to invest in for 2023 is small-cap stocks.
These are companies with market caps between $300 million and $2 billion, and we can look to how small-cap stocks performed after the 1973 to 1975 recession as a guide to how they might fare today.
When the economy began to recover in the spring of 1975, it was small-cap stocks that led the way one year later. While large-cap stocks offered a 28% return, small-cap stocks offered more than double that return at 58%.
Putting our Health Indicator to work, we uncovered three companies in our Green Zone, classifying them as current "buys."
TradeSmith is not registered as an investment adviser and operates under the publishers' exemption of the Investment Advisers Act of 1940. The investments and strategies discussed in TradeSmith's content do not constitute personalized investment advice. Any trading or investment decisions you take are in reliance on your own analysis and judgment and not in reliance on TradeSmith. There are risks inherent in investing and past investment performance is not indicative of future results.
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