Back when the pandemic wasn't even a thing.
Timothy Springer understood the danger of viruses and the damage they could cause.
So a decade ago, when he came across a biotech company in Massachusetts called Moderna, he
decided to invest in it.
The company focused on developing drugs and finding new methods to create vaccines.
It wasn't as exciting as electric cars or online shopping, but as a biology professor,
he understood the importance of vaccines, so when the pandemic hit the world, the valuation
of Moderna skyrocketed, and his 3.5% stake in the company now quals to 2.1 billion dollars.
That is probably one of the best investments ever.
But how do you find such companies way before
they get popular?
How do you find investments that can turn you into a billionaire?
One book that can help us to answer these questions is the intelligent investor.
In fact Warren Buffett has said multiples times that this book had the biggest impact
on his investing philosophy.
By applying the rules and the principles of the intelligent investor, Warren Buffett went
from nothing to 90 billion dollars.
So lets find out the five most important lessons out of this book.
Discover patterns
Before you buy a single stock or throw a dime into the stock market, it's not enough to
look at the stock's history.
What's more important is to look at the history of the stock market itself.
No matter how great a certain company is, every stock is driven by regular stock market
ups and downs.
Amazon has clearly been one of the greatest companies out there, but in the 2000s, when
the dot com bubble burst, amazon's stock price fell from 107 dollars to a little over $7
in less than two years.
Even if you have made your fundamental analysis and purchased amazon stocks, you would have
lost 90% of your investment in just two years.
But if you had understood stock markets' overall history, you could have predicted the crash
as many other professional investors did and could have saved a fortune.
Of course, amazon got back on its knees and turned out to be widely successful, but most
companies didn't.
In 2008, the exact same thing happened with mortgage securities.
At the end of 2017, cryptocurrencies had their astronomical rise and a dramatic dip.
In fact, we made an entire video warning everyone not to invest at the peak and wait until prices
crash.
As an intelligent investor, you should not speculate but rather understand stock markets
history and discover patterns to find out what is the best time invest.
2.
Chose an investing strategy that fits you
Apple is one of the companies that made a lot of investors millionaires and even billionaires.
But if you would have invested a thousand dollars in Apple in June 2008, how much do
you think you would have made by January 2009?
Negative 50 percent.
If you weren't risk-tolerant, you would have sold your stake, afraid you might lose more
if you do not exist, but if you have kept it, it would have increased by 3650 percent
by December 2020.
Economic crashes like 2008 or 1929 are a fact of life and happen from time to time.
Thus you need to ensure that you can take a big hit and survive.
This means that you should have a diverse stock portfolio so your investments don't
all get hit at once.
If you are too emotional, then consider investing in low risk securities such as government
bonds or ETFs.
If you think you can handle stock markets daily ups and downs, then you might be able
to take slightly higher risks and invest in tech companies for example and expect higher
returns.
Once you’ve found a stock that you’ve determined to be safe and sound, you’ll
want to set your investments on autopilot.
Start by committing yourself to a certain amount of money, like $50, which you will
invest every month.
3.
Don't trust the crowd or the market.
If the stock market was a human, he would
be the most emotional person on the planet, let's call him Mr. Market.
Mr. Market is easily influenced, and this causes him to have major mood swings.
You can see this in practice in the way the market always swings back and forth between
unsustainable optimism to unjustified pessimism.
As a result, when the market is too optimistic about future growth, stock prices rise and
become too expensive.
On the other hand, sometimes the market is too pessimistic about the future like it was
in February 2020, and might push you to sell at the wrong time forcing to make significant
losses.
When Apple came out with iPhone XR, a lot of people were unsatisfied with this phone,
so the stock price dropped, but a few months later, when Apple reported good revenue for
the quarter, the stock price jumped back.
In fact, it has grown significantly since then.
As an intelligent investor, you need to be a realist and stop yourself from following
the crowd and ignore the mood swings of Mr. Market.
The market normally undervalues the stocks of companies which are either temporarily
unpopular or are suffering economic losses.
Berkshire Hathaway’s stock price dropped by 30 percent in February like the rest of
the market but didn't recover instantly like the rest because it had huge stakes in airlines
but once it sold its airline stocks and made a few other good invemsnets and reported good
profits by September, the stock price jumped back.
If you would have trusted the crowd, you probably have avoided Berkshire Hathaway, but if you
were an intelligent investor, you would have jumped in and invested.
In fact, I invested in Berkshire back then and posted on my Patreon why investing in
Berkshire back then was a good investment and those who listened to my advice made a
lot of money.
In fact, I also predicted that Diney’s stock would signifncayly rise, and I listed all
the reasons why that will happen on my Patreon page back in September.
And guess what happened a few months later, the stock price rose by 33 percent for the
exact reasons that I have told my patreons, If you want to join my Patreon page and be
the first to know about my future investments, you will find the link in the description.
https://www.cnbc.com/2020/12/11/disney-stock-had-its-best-day-since-march-jumping-14percent-to-a-record.html https://variety.com/2020/digital/news/disney-stock-all-time-high-investor-day-streaming-1234851639/
4.
Learn How to analyze stocks
It's easy to assume that investing is complicated when you look at all these complicated charts
but Investing at its essence is simple.
You have to find out the value of a certain company and compare it to the price that its
traded in the market.
If it's traded at a lower price, then its a good investment since it's undervalued,
and if it's higher, then it's a bad investment since the stock is overvalued because at some
point in the future, the price will rise or drop to is real value.
The challenge is to learn to analyze the stock.
for example, there is price to earnings ratio, which we have covered in a previous video,
how much you will be paying for each dollar that the company earns if you buy that stock
or price to book ratio, to compare a firm's market capitalization to its book value to
find out how much the company is going to earn if it sold all of its assets and paid
off its debts.
Or debt to equity ratio to find out to what degree the company is financing its operations
through debt versus its own funds.
If the company is debt-free, then its not
taking full advantage out of its resources.
Tesla, for example, has the technology to build electric cars, but it can only build
a limited number of cars since it has only a certain amount of cash, but it can borrow
money at a very low rate of 2 or 3 percent and have rate of return of 10 or 15 percent
on that borrowed money by building and selling more cars.
So, if it’s not ding that, its clearly missing an opportunity.
But there is just so much demand in the market, so if it borrows too much, it might not be
able to sell enough cars to make interest payments and might default on its loan.
But it's not enough to look at the financial statements; the management that runs the company
is equally important.
How the company is planning to double or triple its valuation is one of the factors you should
be looking at.
So before buying a stock, you have to analyze it from top to bottom.
5.
Number 5, Know when to exist.
The nature of any business is to rise and fall.
Even Jeff Bezos said that he expects amazon one day to fail.
The world is constantly changing.
Just because a certain company has dominated an industry today doesn't mean it's going
to stay there forever, so you have to know when to sell your stocks.
Should you sell Just because the stock increased by 10 or 20 percent, should you exist and
realize your gains?
Not really?
As soon as you realize that one of the companies in your portfolio is overrated and its stock
prices is growing without any relation to its true value, then it's better to sell before
it crashes.
Warren Buffett invested half a billion dollars in Petrochina when it had a valuation of 30
billion dollars and wasn't popular yet.
The stock price surged a few years later, when oil prices rose.
First, it crossed 100 billion dollars, then 200, then 300, and crossed a trillion-dollar
valuation.
But Warren Buffett sold his stake when the company crossed a valuation of 275 billion
dollars.
Many have criticised him for selling too early, but Warren Buffett did the right thing.
Since the stock price was rising for no intrinsic reasons, it was overvalued and would crash
at any moment.
And like every other investor, Warren Buffett didn't know when that crash will happen, so
he sold his take.
The stock price, of course crashed once it crossed the trillion-dollar mark and is now
traded at just 112 billion dollars.
You don't have to follow each of your stocks every single day but you have to keep in mind
that whenever one of the companies you have invested in dramatically rises for no real
reason, then it's better to sell before it crashes.
And finally if you want to start investing with 4 free stocks, you can do that by just
signing up to webull by using the link in the description and depositing 100 bucks.
2 of these stocks can be valued as much as 1600 dollars.
Consider it as your Christmas gift.
And now its time e to give it a thumbs up and if you are new around and want to know
more about the stock market, then his that subscribe button and the bell besides it.
And if you want to know more about my investments, then checkout my Patreon page.
Thanks for watching and until next time.