Shopping list

How to build your shopping list for when the markets are “on sale”

Earlier this week, Mark Gardner of Maqro Capital told me that the stock market is ‘the only place in the world where people get angry when things suddenly go on sale.

And to be fair to the rest of us, he is hard to get into the mood when the phone is ringing non-stop and everyone you know and love is sweating bullets.

We don’t tend to hit the air and massage the wallet when the headlines scream Black Mondays, The crashes of the coronavirus Where Just horrible Bloody Thursdays.

So Mark says a kinder, healthier The approach should be to view it in the same way as any other garden variety sale. In a way, “give the iPad to the kids and go get a good deal”.

As savvy retail fanatics – the darling consumers that we are – everyone is already familiar with the usual and familiar cycles:

Christmas sales, EOFY sales, Easter for the chocky… The Other Black Monday (the shopping one) is definitely in vogue.

China’s quietly insane singles day is more of a beginner, actual shopping holiday dedicated to celebrating singleness (and the gifts singles feel they truly deserve).

This one was imagined in 1993 by Lonely students from Nanjing Uni. As the ironic popularity of Singles Day grew among uncoupled young Chinese, e-commerce giant Alibaba stepped in, shrewdly adopting it as its flagship day of madness in 2009 and off we went.

So I thought I’d pin Mark, Head of Investments at Maqro Capital and senior adviser to private clients on how to approach the equity sell cycle, how to plug in and how to keep the best of your money in the most places secure, ready for the next extra-a-thon.

Initially, Mark said:

“Don’t get the whole forest for the trees when it all comes crashing down. Buying on some of the 10 worst down days in 2008 and 2020 has actually been the top 10 buying opportunities of the last 20 years.

What follows is Mark G, verbatim, except for the italics and the part about Mariah Carey…

Mark Gardner goes shopping

Hi. So the best way to handle a market downturn is to prepare as you would before you go and do your Christmas shopping – know where you’ve stashed the money over the year, make a clear list to advance and avoid any improvised decisions.

The first thing you need to do is figure out how you want to allocate your money, dividing the equity into what I’ll call Baskets that not only sound great, but have time limit and return on investment expectations.

Basket 1 – All the boring stuff. The long term; strong returns; low PE; colossal balance sheets; strong track record; and stellar management.

Basket 2 – Thematic professions. These ideally target a time horizon of 1 to 2 years. They cover broader emerging trends; start-ups; stocks with high potential in the growth phase.

Basket 3 – The quick wins. We become active here. A period of one week to one month; oversold opportunities; companies with decent fundamentals; but by applying very strict entry price commercial parameters; storage at a target price; and above all, stop-loss.

Once you’ve decided how much you want to allocate to each basket, start making your stock selections, they break down pretty nicely from here:

Basket 1: Is a bit of a no-brainer.

In the ASX 200, there’s a well-trodden, well-trodden path for good reason: you can choose from the most reliable:

BHP (ASX:BHP), CSL (ASX:CSL), Macquarie Bank (ASX:MQG), Wesfarmers (ASX:WES), Computershare ASX:CPU)

Basket 2: Your choice of early stage themes and opportunities (here I went with a few easily identifiable current themes):

Basket 3: The ccompanies that you believe were heavily oversold in the fall. The good deals. If you are unsure of the pedigree, refer to stocks you know and trust from those above. Go ahead and make overweight short-term allocations.

Opt for the nuclear option

Thematic trades like uranium are difficult to play because they are based on sentiment and not results, which makes them vulnerable to the downside in times of high volatility. Many uranium names ASX, PDN, BOE, BMN and AGE, fell 40% to 60% during the rout from May to June this year, then quickly reversed, returned to highs and lie now somewhere in the middle.

This makes it difficult for those without “diamond hands” to hold their own as the market swings back and forth.

The move is because prices have been high on promised future earning power, rather than being profitable now and the promises aren’t good enough in a bear market and on the ASX we’re lucky to have many options of companies that “will produce” with BOE probably first at a turn in 12 months and PDN coming in second, but not so much in the producer category.

For those who want to dip their toes in the water, Betashares has a solution with the recently launched URNM ETF.

Normally I’m not a fan of thematic ETFs but in this case the lack of producers on the ASX makes this product a good option for those who want exposure to the trend, but not the volatility.

The ETF is 50% made up of three of the world’s largest producers, NAC Kazatomprom JSC, Cameco and Uranium energy, as well as physical uranium hoarder, Sprott. The remaining 50% is then a who’s who of subsequent producers Paladin, Boss Energy and emerging explorers Alligator (ASX:AGE), Bannerman ASX:BNM), Elevate (ASX:EL8)…the list goes on.

As the market has historically high volatility and geopolitical situations cause energy issues, having diversified exposure is a good way to play it safe in the space and then diversify into individual stocks when things calm down. and that names like BOE and PDN are getting closer to their first production. Appointment.

Choose your levels, in advance

The key to planning a shopping list is to be organized in advance. Don’t walk up to the record store and then wonder what your daughter’s favorite band is. This is how Mariah Carey finds herself.

Not (At least try) not to leave and be reagent. The problem with being reactive is that you are a bag of emotions in a country that exploits them. Half of the reactions you have are emotional and you don’t even know it. Like being stubborn, stubborn, angry, FOMO, tired, and/or freaked out. This way you are selling relatively low and missing a buying opportunity because you are still caught up in the widespread fear that is inflating the market.

Now, if you’re confident in your thematics, but can’t make up your mind on individual stocks – there are a lot of them – or maybe the market is too fast, fickle or volatile for you to manage with confidence – and there are quite a few balls in the air, remember (like all orders, target prices, rate of movement during a session), then there is a quick fix for what may help you out.

The simplest solution

Yeah. Go the ETF. And why not?

ETFs are a smart play, if not the glamorous option and I’m certainly not against the occasional exchange traded fund. ETFs provide a little thematic insurance – you like your idea, you’re sure it has legs (i.e. EVs are coming) but you’re not absolutely sure about the granular detail.

The ETF takes a low-cost route and provides your basket with a basket of stocks and therefore increased diversification.

For most of us individual investors, ETFs are a small crack asset for a diversified portfolio where you can always try to take advantage of a dip, then sell your ETF and buy your individual picks later when the market calms down.

Make a real plan, get ahead of the trouble

Like I said, buying on some of the worst 10 down days in 2008 and 2020 has actually been the top 10 buying opportunities over the past 20 years, but you’ll only profit if you’re organized and well plannedso make a list, stick to your plan, and ignore the noise and you might start looking forward to backing off rather than fearing them.

Via JP Morgan

Mark Gardner is all about active investing and trading recommendations for Australia’s leading investment research, trading and advisory firm, Capital of Maqro. He sits on the investment committee of Maqro and has over 25 years of experience in the financial markets, beginning his career on the trading floor of the SFE as a broker, before spending the last 16 years as a professional trader. Mark previously owned proprietary trading companies, Genesis and Aliom Trading. He was also the founding chairman of the Australian Securities Traders Association (ASTA) for 10 years.

This article contains general unsolicited information only, without regard to an investor’s individual goals, financial situation or needs. It is not specific advice for any particular investor. Before making any decision on the information provided, you must assess the appropriateness of the information contained in this document with regard to your objectives, your financial situation and your needs and consult your adviser. Investing in financial products involves risks. Past performance of financial products is not indicative of future performance.

Any views, information or opinions expressed in the interview for this article are solely those of the interviewee and do not represent the views of Stockhead.

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