Another stock market crash could be just beyond the horizon. No one knows how long the economic recovery will take. Meanwhile, the growing threat of a second wave of COVID-19 cases and the prospect of a renewed lockdown have made businesses and consumers more reluctant to spend money.
If the growing concerns turn into another panic-driven market crash, I want to be well prepared. Here’s how I would deploy $10,000 to mitigate the downside risks.
Gold’s ability to retain its value is legendary. The precious metal lost some value during this recent crash but has quickly rebounded and actually created wealth for investors since then. The iShares S&P/TSX Global Gold Index, an exchange-traded fund that tracks gold, is up a whopping 38% year-to-date. Meanwhile, the stock market has lost 12% over the same period.
Gold mining giant Barrick Gold has had a much more impressive run. The stock is up 59% year to date.
For investors worried about inflation, the central bank’s relentless money printing policies and the risk of another market crash, gold is the ideal hedge. In fact, a number of noteworthy hedge fund managers have been betting on gold recently, which bolsters the thesis further.
The ongoing crisis has made it clear that some businesses are simply too “essential” to suspend. Grocery chains, medical centres and utilities are absolutely crucial no matter what happens to the economy.
I believe defensive stocks such as Fortis and Dollarama should be on every cautious investor’s watch list. Both stocks have retained their value this year despite the market crash.
Market crashes are immensely destructive, but they also present opportunities for savvy investors. When the market punishes high-quality stocks, it enhances the long-term growth potential for investors willing to take the plunge.
For instance, if you bet on Shopify or Facedrive stocks in mid-March, at the height of the crisis, you could have doubled or quadrupled your investment.
Keeping some cash on the sidelines is the best way to stay prepared for such opportunities. Parking cash in a liquid fund could generate a high yield for your money while it lays dormant. Consider adding exchange-traded funds such as the CI First Asset High Interest Savings ETF to your portfolio.
For cautious investors, cash acts as a buffer during crises. The world’s most successful investor, Warren Buffett, has always kept a substantial portion of his portfolio in liquid cash. His cash pile is currently worth a whopping US$137 billion (C$190 billion). If the strategy works for Buffett, it should work for ordinary investors like us.
If you’re worried about another market crash in 2020, there are three ways to protect yourself. You could deploy funds in defensive sectors such as healthcare and consumer staples or add gold to the portfolio. However, for contrarian investors like me, cash in a liquid ETF is probably the best option.
Having cash on hand allows you to move quickly and secure great deals if (when) the market collapses. Betting on growth stocks or high-quality brands when they’re beaten down is the ultimate path to riches.
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The post Here’s How I Would Invest $10,000 if the Market Crashes Again appeared first on The Motley Fool Canada.
GNUS – Some Thoughts
With this company running up like crazy, I figured I would dig through some old news and financials to see what's going on. I'll preface this by saying that I have no position in this company, and I'm just throwing ideas out there in order to determine if people really believe in this company in the long-term, or alternatively are capitalizing on the short-term volatility. It seems pretty clear that the latter is true, but I'm bored at work and would like to hear some of your thoughts, so here it goes.
Right now this company is trading at ~$6.00 per share, with a market cap of ~$590M or roughly 100x 2019 revenue of 5.9M. They have also never posted a profitable year.
The historical financials are not looking good: https://imgur.com/gallery/ef0uEV1.
I dug through some old 10-K's and it looks like the elevated revenue in 2012/2013 (6.6 million and 2.6 million) was due to physical media sales such as DVDs in addition to physical products, think merchandise. Revenue then drops to 0.9M for several years until 2017 where they sold Llama Llama to Netflix for what I'm assuming was in the ballpark of $4M based on the huge bump, was too lazy to find the actual sale amount. Revenue drops back down in 2018, then bumps in 2019 due to the sale of Llama Llama season 2 and Rainbow Rangers Season 1, which was in the ballpark of $4M+ again.
Looking down towards their bottom line, they've run up significant losses over the past 8 years, not posting a single profitable year in the time horizon I evaluated. The 8 years of revenue totals $24.1M while the losses total -$55.7M. This is concerning from a long-term viability standpoint as it seems Genius is unable to generate any money for shareholders. While they have created several very successful programs in recent years, it seems that they are unable to profitably deliver content.
Financials aside, I decided to look into this newly announced Kartoon Channel! to learn more about the actual product. I found YouTube channels for Kartoon Channel!, Kartoon Channel! Jr., Rainbow Rangers, and Llama Llama as I figured this would be a somewhat useful proxy for popularity and viewership. KC and RR videos averaged several thousand views per video while KC Jr and LL videos averaged in the low ten thousand views per video. Maybe GNUS is hoping to monetize on ads and turn a profit on that revenue stream, but given their current viewership (proxied from YouTube), it doesn't seem that they are going to generate much money. I'm also not very well versed in advertising revenue, so thoughts on this component from more experienced people would be great.
I'd like some more information on the Kartoon Channel launch on June 15th, I can't tell if this will be a stand-alone streaming application, or simply a combination and rebranding of their existing content. Hoping that some of you who are smarter than me can dig into this and provide some clarity. Reddit won't let me link the press release, so I'm copying it below:
TL;DR: GNUS seems like a pump and dump stock and I'm failing to see any long-term prospects for the company. I'm staying on the sidelines, but I hope you all make plenty of money on this one.
Canada’s Top Tech Stock Is Now on Sale
You might be surprised to hear that BlackBerry Ltd (TSX:BB)(NYSE:BB) is alive and well. In fact, it still garners a multi-billion dollar valuation. And in many ways, it looks like Canada’s next top tech stock.
But what exactly does BlackBerry do these days? The company is more than a decade removed from its 2008 highs, where it controlled 20% of the global smartphone market. Today, the firm doesn’t manufacture a single phone. Rather, it’s focused completely on cybersecurity software.
BlackBerry’s products target some of the largest growth opportunities this decade, including autonomous vehicles and the internet-of-things. This is a long-term story that should persist for years, giving patient investors a chance to capitalize on short-term gyrations in the stock price.
Since the year began, BlackBerry shares have lost 24% of their value, compared to an 11% loss for the S&P/TSX Composite Index. If you’re willing to buy and hold, this tech stock could be the best purchase you ever make.
Here’s the good news
BlackBerry’s new tagline is “Intelligent Security. Everywhere.” That’s a perfect summation of what the company has built.
It’s taken years to stage the turnaround, but the BlackBerry of today looks primed to take the global cybersecurity market by storm. That’s an intriguing prospects given that many of its peers trade at five to 10 times the company’s latest valuation.
What exactly has this tech stock built? The first thing to understand is that its legacy business has been completely wound-down. Its finances are now completely driven by software revenue. BlackBerry’s software products span a wide variety of industries, but they are all built to secure endpoints from vulnerabilities.
Consider the global vehicle market, one of the biggest industries in existence by sales dollars. The cars and trucks of today are closer to computers than they are to machines. The more connected our vehicles get, the more easily they can be hacked. That’s frightening news, particular as we accelerate toward fully-autonomous vehicles.
BlackBerry’s QNX platform is already the market leader for securing vehicle systems. It’s installed in more than 150 million cars worldwide, with 90% of the world’s top ten automakers incorporating the technology.
BlackBerry has emulated this success in many other fields including healthcare, big data, and industrial manufacturing.
Bet on this tech stock?
The bigger this tech stock gets, the faster it can grow. That’s because BlackBerry’s cybersecurity software relies on artificial intelligence. The more data points it receives, the better it becomes at detecting and thwarting threats. We’re still in the early innings, but BlackBerry’s lead should only grow over time.
Software products are particularly profitable, with high margins and near-zero costs of deployment. These revenues are sticky too, creating a growing recurring revenue base that generates gobs of cash flow.
Because BlackBerry is just exiting its business transformation phase, it doesn’t garner the premium that other tech stocks have. Crowdstrike Holdings Inc, for example, trades at 36 times sales. BlackBerry stock trades at just three times sales.
While that discount is partially warranted, if the company gains traction, there could be 1,000% upside. This tech stock is just too cheap to ignore.
Here’s an even better tech stock.
One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting…
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago – before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!
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The Motley Fool owns shares of CrowdStrike Holdings, Inc. The Motley Fool recommends BlackBerry and BlackBerry. Fool contributor Ryan Vanzo has no position in any stocks mentioned.
Are There Any Safe Alternative Investments?
The stock market is famous for its volatility, so it’s not too surprising that risk-averse investors are keen to find safer ways to invest money. Traditional stocks and shares are vulnerable to fluctuations in the market, and this can cause major losses that can wreak havoc in any investor’s portfolio. It’s no wonder, then, that alternative investments are becoming more popular as those who are investing for the first time, as well as those who are seasoned investors, look for options that will give them a reliable and secure source of ongoing income without so many risks.
So, what are alternative investments? It’s a term that is used to describe any type of investment outside the standard three asset classes of cash, bonds, and stocks. While these more unusual investment options have a role to play in any investor’s portfolio, it’s important to be aware that these investments can’t take over from traditional assets. As an investor, you shouldn’t sell your stocks, or take your cash out of your savings account and put it all into untraditional options. In fact, the majority of financial experts believe alternative investments can be put to best use when it comes to portfolio diversification. Rather than putting all your money into stocks, it makes more sense to put some into stocks, some into bonds, and some into alternative investments such as fine art, wine, private equity, or hedge funds. This is one of the best ways to protect your portfolio.
Alternative investments have long been popular with institutional investors and high net-worth individuals, and this is because many of them require a bigger initial investment when compared to bonds and stocks. Also, in many cases, alternative investments have less liquidity than more traditional ones, so they are harder to cash in easily and quickly. Nevertheless, don’t be put off just yet. There are several benefits to making alternative investments.
Investing In Fine Art
Historically, price fluctuations within the fine art market do not reflect the standard fluctuations reflected in the traditional stock market. On the other hand, though, the art market has shifts of its own that may make investing more risky. Although buying sculptures and paintings in top auction houses and galleries will cost you a minimum of $10,000, it’s possible to enter this market with lower amounts of around $500 – $1,000 if you’re willing to gamble on undiscovered, smaller artists, or cheaper media such as lithography or photography.
Investing In Wine
You may never have considered investing in wine, but in fact, it’s possible to make steady returns of 6-15% each year in the long-term. The prices of some vintages will fluctuate year-to-year, however, the price of wine from the most popular vintages and vineyards will usually eventually increase when the supply becomes more scarce. On the downside, though, since wine collectors and connoisseurs are picky, you’ll need to do your research to choose vintages that represent a good investment, and you’ll need to invest in a large quantity to ensure sizeable returns.
Investing In Commodities
Livestock, crops, precious metals, and fossil fuels are all commodities. Their marketplace is extremely volatile since unpredictable world events and natural disasters can have direct impacts on prices. If there’s a drought in one year, the price of a certain crop may soar, but then the following year there may be a surplus that causes that commodity’s price to drop dramatically. Since commodities are unpredictable, they are better long-term investments than short-term ones. The safest way to benefit from commodities’ rising prices is to purchase ETFs. These mutual funds buy several commodities instead of just focusing on a single one. This eliminates a little of the uncertainty involved in choosing which commodity could fall or rise at any given time.
Investing In Real Estate
Real estate has long been an extremely popular form of alternative investment. Yet, even this long-standing option is subject to market fluctuations. The potential of crashes in the real estate market makes some investors nervous and wary about making investments in property. However, purchasing rental property usually provides a reliable and steady income as long as the right tenants can be found. It’s important, though, to remember other expenses such as general upkeep and property taxes that may limit profits together with major investments of effort and time.
Choosing The Right Alternative Investments
If you’re keen to make alternative investments, the key is to add them to an expanding portfolio of options. If you choose the right alternative investment for you, whether than be in wine, fine art, rental property or commodities, you should ensure that it forms part of a larger series of investments to protect you from potential risks. This way, you can enjoy greater financial security as well as maximum money-making potential.
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