If the conflicting news about the markets and economy have you a bit up in the air, you are not alone.
Fact is, with the first quarter now in the rear-view mirror, the headlines are all over the place.
We’re seeing stories that suggest a possible recession, rising inflation, and slowing growth, not to mention the prospect of more trade conflicts with China.
I’ve been in the market for 40 years now, and even I sometimes find my head spinning from information overload. Fortunately, I’m a disciplined and focused investor who has learned to tune out all that noise.
This is on my mind these days because I recently returned from Money Map Press’ Black Diamond conference for our elite members.
As savvy as this group of folks are, many of them had the same types of burning questions millions of other people who are in the markets have. I was glad to answer as many as I could.
And that got me to thinking… many Strategic Tech Investor readers probably have the exact same questions.
That’s why today, I’d like to do the same with you. I’ve pulled out some of the popular questions I received at the conference, and am answering them for you now.
Take a look…
Q. I read recently that we’re looking at what they call an earnings recession for the first quarter. What’s your take on that in general, and for tech stocks in particular?
MR: I do think earnings for the first quarter could be on a slower growth track, and may even be off a bit. But bear in mind that’s because earnings were so strong in the similar period last year.
This is the key takeaway right now. There’s no sense getting all worked up about a single quarter’s results. We’ve seen off quarters a couple of times in recent years, and yet the market kept marching higher, with the S&P 500 up nearly 15% so far this year.
While stocks may get volatile once again, I still believe we’re in the midst of a generational bull market driven in no small measure by the huge gains in high tech. You just have to take the long view, and not let the media’s negative headlines throw you off your stride.
Q. Elon Musk and Tesla Inc. (Nasdaq:TSLA) sure seem to be having a lot of problems lately. Should I short the stock?
MR. To be totally candid, options plays like that are beyond the scope of this service, which is designed to help average retail investors improve their net worth through the wealth machine that is high tech stocks.
I believe shorting Tesla by buying put options is fraught with risk. Musk hates short sellers, and has a way of sending out a tweet or coming up with a press release that causes a rally in the stock – and the value of put options to drop dramatically, as they did April 5.
Since Jan. 23, TSLA has had three rallies of roughly 10% or more. It’s also fallen by more than 9% three times. It had an additional 8% drop on April 4, followed by a 2% rally the next day. In other words, these wild short-term swings makes it difficult to get the timing right.
Having said that, the stock is deeply troubled. It could fall as low at $200 by the end of this year, from $274 today. But if you decide to short the stock, make sure you spend no more than 2% of your risk capital so you don’t get wiped out.
Q. I have $10,000 to invest. If I were to put it all in one stock, what would you recommend?
MR: Not doing that… LOL. No, I’m not trying to be flip. But I would never suggest you put all your risk capital into a single trade, no matter how conservative it might be.
I understand that folks with limited time or funds to invest don’t want to spread themselves too thin by owning too many stocks. And that’s a valid concern.
However, over the long haul, it pays to have some diversification. In a case like this, I would look to have at least three but no more than five items in the portfolio, maybe an ETF or two, and some best-of-breed tech winners, like the ones we talk about here.
Q. Lately, I’ve been hearing a lot about something called the inverted yield curve, and that it is signaling a recession. Should I be concerned?
MR: The inverted yield curve refers to a situation in which interest rates on key short-term bonds rise above the 10-year rate for notes of the same quality.
It signals a recession because it means investors don’t have faith in the economy remaining strong longer than a couple of years.
While it is closely associated with a recession, there’s nothing to worry about at this point. I say that because the last time we saw an inverted curve was back in early 2005, more than two years before the 2007 financial crisis.
In other words, you’ll have plenty of time to batten down the hatches and use your portfolio management tools to protect capital and profits. It’s our mission to make money here no matter what the market throws our way.
Q. You’ve been a long-time Apple Inc. (Nasdaq:AAPL) bull. Do you still like the stock?
MR: I do indeed. Apple has staged a dramatic comeback this year that has gotten little attention. It’s up 25% since trading began on Jan. 2, handily crushing the broader market.
Here’s the thing. While sales of iPhones do appear to be slowing, the company is working to make up for that in its services business. In 2012, it had zero sales in this category. Today, services bring in $40 billion.
Apple was late to streaming music but already has more U.S. subscribers than Spotify. It counts 50 million global users of its music subscription service. I use it daily, and love it.
The firm sees the same opportunities in streaming video and gaming, both areas it recently targeted. Remember, it has nearly 1 billion devices out there. That’s a terrific sales platform for its burgeoning services unit.
Now then, I hope this Q/A helped shed some light on what’s happening with the market, the economy, and some high-profile tech names in the news lately.
The takeaway from all this should be: I still see no signs of a recession this year. And we will have lots of opportunities to make money from great tech plays in the meantime!
So I hope you will continue to check back on our twice-weekly chats. That way I can share tips and strategies designed to help you become independently wealthy.
Cheers and good investing,
Michael A. Robinson