It’s been a rough few weeks for investors in the stock market and cryptocurrency, to put it mildly. I have some actions steps to offer in this episode. Tune in for one of the stock picks I’m buying during the dip, and other action steps to consider as we ride this one out.
Do you have a question you would like me to answer on the podcast? Follow me on IG: @indestructiblewealth and send a message, or visit me at www.myindestructiblewealth.com for more resources.
About Indestructible Wealth: I’m Jack Gibson. I’m your wealth strategist and I’m here to help you make some money. The Indestructible Wealth Podcast is for young entrepreneurs who want to make, keep and grow wealth to enjoy now, and for years to come.
Episode #79 – Why the Markets are Crashing, and What to Do Right Now
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Let’s cut right to it and get to the BIG question: What should we do, right now, with markets crashing?
Sell everything and run for the hills?
Hold on for dear life?
Nope. Neither.
Right now we should be buying.
Carefully. But buying, nevertheless.
The key to building long term sustainable wealth is to buy great assets and hold them.
Typically, with at least a five year time frame. Sometimes, forever.
The key to building long term sustainable wealth faster is to buy great assets at fantastic prices and hold them.
Right now assets are on sale. Not just regular assets. Great assets.
There are great companies that are gushing free cash flow and have amazing growth prospects over the next decade in hyper growth industries, that are 50% off. Some even 80% off. In this week’s podcast, I’ll give you my #1, favorite buy right now. I’m putting in $20,000 just into this single stock, which is rare for me to go that big on one stock. I’ll send you an email when it publishes so you can take action right away.
Think back to 2008, and then remind yourself that you have said to yourself many times since then: “Why didn’t I buy more stocks when they dropped so low?”
We didn’t buy because we were scared. Uncertainty was the major theme. And maybe you tried to time the bottom, and then you missed it and it bounced back.
That happened to me in the March 2020 Covid induced sell off. I was locked and loaded ready to fire at great companies that weren’t going anywhere that were 50% off.
Companies like Ford and Sysco who survived and thrived following the 2008 crash, were on sale half off.
I just knew the market was going to go a bit lower. So I waited. And waited. And missed it.
Are we at the bottom?
Honestly, probably not. I think we have more room to drop.
But after today’s enormous drop, I was busy putting buy orders in. I’m buying incredible, future oriented companies that I’ve been researching for months.
I put a research report together that outlines 15 stocks that I’m buying, right now. With exactly why, so you can make come to your own conclusion. That report will be released with my new book, due to launch by next week.
I’ll also share how I’m dollar cost averaging, and placing limit orders to protect myself. You’ll definitely want to do the same two things.
Look, if you follow my platform at all, listen to any of my podcasts (58 five star reviews out of 58), then you know it’s been rare when I’ve talked about or promoted stocks.
I simply didn’t like the risk/reward ratio. Stocks were priced pretty high compared to earnings, and some were even priced at 100x annual sales. No surprise, those stocks came crashing down really hard.
But now is different.
We can scoop up great companies that five years from now we’ll be celebrating our courage to buy into market weakness, and sell into market strength.
So let’s dive into my #1 pick for a stock to buy on the dip.
Have you sold a home before?
If yes, then you know that it’s probably one of the worst processes in the world.
It takes forever – usually about three months to close a sale. It costs a lot. Agent fees, staging and closing costs and selling concession fees often take more than 10% of the home’s sale price.
It’s overly complex, with an average of six counterparties per one home sale.
And it’s terribly volatile. About 20% of potential transactions fall through due to inflexible timelines, financing delays, and buyer backouts.
I’d venture to say that selling a home is the single most inefficient retail process in the world today.
Why is it so inefficient?
The real estate market is stuck in the stone age.
If you remember, buying electronics also used to be inefficient. You had to get in your car. Drive down to Circuit City. Fight through crowds of people. Talk to a sales rep. Sit in a checkout line. Pay for the item. Go back home.
Then along came Amazon – a company that centralized, streamlined, and simplified the shopping process with a single e-commerce platform. And buying an electronics item became as easy as opening an app, searching for a product, and tapping “Buy.”
Amazon leapfrogged shopping into the digital era and in so doing, dramatically improved the experience.
Wayfair (W) has done the same in the home goods sector. Carvana (CVNA) has done the same in the automobile world. And Chewy (CHWY) is doing the same thing for pet care.
Across all verticals, retail shopping processes are being modernized, digitized, and optimized for consumer convenience.
Except in the home-shopping world… where less than 0.1% of homes sold are sold online.
Alas, the real estate market is trapped in archaism. But it won’t be forever.
One small, emerging tech company is on the verge of pioneering a breakthrough e-commerce solution for the entire U.S. real estate market. And it will finally catapult this $1.6 trillion industry into the digital era.
Maybe the Best Stock to Buy for the 2020s?
The single best stock to buy for the entire 2020s may be Opendoor (OPEN).
For those who are unfamiliar, Opendoor is the world’s largest iBuyer. The company uses technology and data science to virtually buy homes from sellers. It then uses that same approach to sell those homes to prospective buyers.
We love this business model. We think it’s genius because it dramatically improves the hated, archaic home-shopping model. Specifically, Opendoor makes the experience:
Cheaper: It axes out profit-taking middlemen (real estate agents) and replaces their often-flexible 6% commission with a 5% flat transaction fee.
Faster: Opendoor’s advanced data science methods can accurately price a home in minutes, and sellers can close a sale super fast
Easier: Opendoor allows folks to literally sell their home from their mobile phone with just a few clicks.
Simpler: Home-selling process is taken from a disjointed process with multiple counterparties to a unified means between just the seller and Opendoor.
More convenient: Opendoor allows sellers to choose their closing dates and escrow periods, thereby enabling them the flexibility to move in their own time.
More reliable: Opendoor’s offers are all-cash, and the transactions never fall through because Opendoor “fails to qualify” – something that happens quite often in the home-selling process.
From a consumer advantage perspective, Opendoor is creating a superior way to buy and sell homes. It’s the future of home shopping. By 2030, we believe a majority of home-sellers and buyers will use Opendoor for home purchases – much like shoppers today use Amazon to buy goods instead of going into Walmart or Target.
To that end, we view Opendoor as an early-stage “Amazon of Houses.”
For those that are concerned about profits, worry not. Opendoor already has positive gross and EBITDA margins, and the company is still in its early days of growth. It takes a 5% commission on every transaction and earns money on home price appreciation through its typical 90-day holding period.
Even in a down market, Opendoor has enough liquidity (over $2.5 billion in cash on the balance sheet) to weather some near-term turbulence. It’s also worth mentioning that the housing market has a strong upward bias. It tends to go up. About once a decade, it goes down – and when it does, the downturns tend to be very short-lived. They also take forever to play out, so Opendoor won’t ever be holding the bag.
Net-net, a bad housing market will not stop Opendoor.
Lastly, the team here is stellar.
More than 30 of the company’s employees hail from Amazon. Nearly 30 come from Alphabet. Over 20 are from Apple (AAPL). About 20 come from Meta (FB), and six come from Square. About a dozen are from Microsoft (MSFT), and another dozen are from Twitter.
In other words, Opendoor is run by former engineers, data scientists, and execs of the world’s biggest and most successful tech companies. This team is truly second to none.
Big picture: We love Opendoor as a long-term investment. This company is building the future of the real estate market, with a genius business model that should produce enormous profits at scale. And, perhaps most importantly, the company has the talent and resources to navigate turbulent housing markets and out-execute competitors.
Long-term, we see this as a $100-plus billion company under conservative modeling assumptions of 5% market share, 6% EBITDA margins, and a 20X exit P/E multiple.
And today, you have an opportunity to buy that future $100-plus billion company for less than $5 billion…
Now, when it comes to divergence, the short-term return potential is enormous. This stock has deviated about as far as possible from its fundamentals.
What comes next could be an enormous rally in Opendoor stock back to $20. We wouldn’t be surprised to be at those levels by the end of the year.
If someone were to put a gun to our head and force us to buy and hold one stock for the next five years, we’d pick Opendoor stock without hesitation.
Now, how to protect yourself buying into a crazy bear market that keeps dropping.
Use a limit order. This is essentially a way to put in the maximum price you will pay for the stock. If you use market order, you will always pay the highest price.
So let’s look at Opendoor. Right now as I record it’s trading for 5.28. It’s already dropped 12% just today. I’d put in a limit order for $5 and see if there is a seller that wants to sell to you for $5. If you put in market price, you’ll pay 5.30 – 5.40 per share almost certainly. IF the stock doesn’t fall further and there are no willing sellers at 5, then it will just expire at the end of the trading day. OR, you can set it to be good until cancelled, which means it will be an offer on the table that won’t go away unless you cancel it yourself.
The other play I recommend is dollar cost averaging. This is essential in a market with downward momentum. You are saying to yourself, I will commit $5,000 to buying this stock. But, I’m going to break it up into multiple purchases, so if the stock should continue to drop after I purchase it, I’m going to continue buying at lower prices, which will lower my average cost per share. We do this because we cannot time the bottom of the market, and it protects us should we buy and then it drops further.
If I buy with half of my funds right now at a price of $5.25, and Opendoor falls to 4.25, then if I buy the other half to be all in with my $5,000, I now own the stock at an average price of $4.75, which that lower price helps protect my downside and when the market recovers, I will be that much more in profit.
