April 16, 2020
Whitney Tilson made his mark on Wall Street over the past 20 years by starting his first hedge fund with just $1 million… which he ultimately grew into a series of funds worth more than 200 times that amount.
Along the way, he met presidents… has been asked to speak at some of the most prestigious business schools like Harvard, Columbia, and Wharton… and identified some of the best investments in the world in the very early stages, including…
- Netflix when it was $7.78 a share (today it’s worth 5,000% more)
- Apple at $1.42 (it’s up 20,000% since then)
- Amazon at $48 (it’s up 4,000% since then)
In fact, he made a string of such startlingly accurate market predictions over two decades that CNBC nicknamed him “The Prophet.”
And now, he and his team have found what they believe could be the next big tech trend that will make investors rich.
It’s called TaaS – and if you haven’t yet heard of this technological breakthrough, you soon will…
Over the next few years, TaaS will change the way you eat, shop, work, and travel. It will change the value of our homes and where we live. It will radically alter prices for airline and train tickets, gas, and even household goods. It could even help slow the spread of the coronavirus… and help get the American economy moving again.
Along the way, it could make you a small fortune.
Look, this is going to be the biggest trend affecting you and your money over the next few years – yet most Americans don’t have a clue.
That’s why Whitney recently went public with the full story… He has traveled around America and the world in recent months (more than a dozen trips in the past six months), talking to every expert he can find.
And he has put everything you need to know in a simple presentation – where you’ll even learn the name and stock symbol of his favorite TaaS investment in the world today. Click here to see his brand-new analysis.
Then read on for why he believes the stock-market decline is over… and why you’d better start buying before you get left behind.
The Five Reasons We’re Bullish on Stocks Right Now
By Whitney Tilson
I’m cautiously optimistic that the measures we’ve ramped up over the past couple of weeks to fight the spread of the coronavirus are having their desired effect, sharply reducing its replication rate.
At this point, in the absence of sufficient testing, there can be no certainty… But my educated guess is that the growth in the number of newly infected Americans has already slowed dramatically and is likely now in decline.
As it becomes clear that we’ve controlled the spread of the virus and know exactly where the outbreaks are, we can start bringing our economy back to life.
This, combined with the huge decline in the stock markets, which happened with unprecedented speed, has created a unique and perhaps fleeting opportunity: I’m convinced that it’s the best time to buy stocks since the major indexes fell more than 50% during the global financial crisis of 2008 to 2009.
To borrow a phrase from one of my friends, I’m “trembling with greed” right now.
Yes, stocks have rallied hard off their lows from a few weeks ago, but I think there’s more room to run for the many reasons I outline below.
One Note of Caution
I am very bullish on stocks right now, and not because the coronavirus is to be taken lightly – but the opposite: because the American people have recognized how dangerous this virus is and are doing what they need to do to stop it. That’s why we’ll get through these terrible times quicker than almost anyone thinks… and with less damage than most investors fear, which has already started to lead to a big surge in stock prices.
But let’s be clear: The economic damage will be serious. Millions of businesses have seen their revenues plunge. But their costs didn’t – they are still paying rent, interest on debt, salaries, and so forth. This will bankrupt many of them. As for the survivors, even if we’re lucky and see a V-shaped recovery, movie theaters can’t make up for lost Friday and Saturday nights… Retailers missed the big Easter shopping period… All the spring break travel is lost for hotels and related companies… Analysts think that the economy could contract 20% to 30% in the second quarter.
And governments at all levels will be strained as well, with lower tax revenue and higher costs for things like cash payments to every American, bailouts of major industries like airlines, and surging unemployment claims.
Even in the best-case scenario, we will be in a recession for a good chunk of this year, and we will be feeling the effects for many years to come.
In light of all of this grim news, it’s natural to feel demoralized and afraid.
But it’s precisely during times like these that the best investment opportunities present themselves – the type that can quickly make you back the money you’ve lost and, in the long run, give you the financial security you desire.
The Big Reasons I’m Bullish
The first reason why I’m bullish right now is the progress we’ve made in stopping the spread of the coronavirus, which I think is now in retreat.
That by itself, however, doesn’t mean that stocks will do well. It’s necessary, to be sure, but not sufficient.
Four other factors make me bullish:
- Many macro factors are favorable.
- Every bit of historical evidence tells me that now is a great time to buy.
- My bottom-up analysis of dozens of stocks is turning up screaming bargains.
- And the conditions are right for stocks to skyrocket.
Let’s look at each of these in turn…
Macro Factors Are Favorable
To be clear, as I noted earlier, we’re surely already in a recession and the damage is already significant.
But our economy is gigantic and was doing quite well on the eve of this crisis…
American households have the least leverage since 1984 (measured by total liabilities divided by total assets)…
Interest rates are at all-time lows, providing unprecedented monetary stimulus…
Congress passed a $2 trillion stimulus bill that President Donald Trump signed into law, which will provide unprecedented fiscal stimulus. And if that proves to be insufficient, the government can easily borrow trillions more at minimal rates…
The Federal Reserve has dusted off the playbook it implemented during the global financial crisis and is injecting massive amounts of liquidity into the financial system. In particular, the stimulus bill includes $454 billion in funds for the Treasury to backstop emergency actions by the Fed. Since every dollar from the Treasury can stand behind $10 lent by the Fed, this translates into $4.5 trillion to keep credit flowing and make direct loans to U.S. businesses, in effect doubling the Fed’s current $4.7 trillion balance sheet…
And don’t forget that Trump views a recovery in stock prices as critical to his reelection hopes.
Historical Evidence Says Now Is a Great Time to Buy
Every bit of historical evidence tells me that now is a great time to buy.
The market has never fallen so far, so fast as it did from February 19 to its bottom on March 23. It was unprecedented. But if you look at other, slower declines, the historical record is clear: The more the market falls, the better the subsequent returns earned by investors.
Take a look at this table, which shows the average return of the S&P 500 Index over different time periods, based on how far the index is from its high:
As you can see, the returns start to get super-compelling after declines of 30% or more.
And even if you look at the worst returns ever, including the Great Depression when the Dow Jones Industrial Average fell by 89%, investors have never once lost money if they bought after a 30% decline and they held on for at least three years…
In the past 94 years, the S&P 500 has only fallen more than 20% six times – in 1930, 1931, 1937, 1974, 2002, and 2008. And the 11 prior times that the S&P 500 fell as much as it did in the first 20 days of this decline (all during the Great Depression, the 1987 Black Monday crash, and the Global Financial Crisis), over the next 30, 90, and 252 trading days later (the latter is one calendar year), it has been higher nine, six, and seven times, respectively, as this chart shows:
Here’s another bit of relevant history. There have been many epidemics in recent decades… SARS, MERS, Ebola, swine flu, bird flu, Zika… they all shook the markets to one degree or another. Yet when they ended – and the coronavirus will eventually – stocks took off, as you can see in this table…
Turning to the Volatility Index, the market’s “fear indicator,” the only two times it has been anywhere close to the levels it hit recently – during the Black Monday crash in 1987 and the global financial crisis in late 2008 – it was a fabulous time to buy stocks.
During the sell-off on March 16 – when the Dow Jones Industrial Average had its second-worst day in its 124-year history – not one of the 3,000 NYSE-listed stocks traded at an all-time high. That’s the first time that has happened in 30 years. And only eight days later, it had its best day in 87 years. Go figure…
Lastly, we’ve studied how economies have recovered after military conflicts like the U.S. after the Civil War and Europe after World War II. It’s remarkable how quickly those economies rebounded, even though infrastructure was decimated and factories were burnt to the ground. Today, we’re not dealing with anything that looks like that!
Many Stocks Have Been Crushed, and I’m Finding Screaming Bargains
Stocks are cheaper – many are a lot cheaper – than they were only a short while ago. The decline in the major indexes is bad enough, but these primarily reflect the performance of large-cap, blue-chip stocks, which is masking absolute carnage across thousands of smaller stocks. Most of the stocks I follow were down 40% to 50%, sometimes more. While these sharp declines have been painful, many of these stocks are now incredibly cheap in my opinion.
The Conditions Are Right for Stocks to Go Nuts
If I’m right with my controversial and contrarian view that the number of new coronavirus cases flattens within weeks and we see the light at the end of this dark tunnel by sometime next month, the conditions are right for stocks to go absolutely nuts.
We have 0% short-term rates and $2 trillion in stimulus running through the system (a massive 9% of GDP), so we’re awash in liquidity. And there’s immense pent-up demand going into the second half of the year.
That’s a scary bullish mix of factors.
If this plays out the way I think it might, the S&P 500 could hit a new all-time high by the end of the year.
What I’m Doing With My Own Money
When I closed my hedge funds two and half years ago, I took the same big cash distribution that all of my investors received. And I had been sitting on it ever since, feeling like a total fool as the market went up and up… But I just didn’t like the valuations and the amount of speculation I was seeing, so I patiently waited.
I had no idea how this bull market might end, but I knew they always do.
The recent downturn was the opportunity I’d been so patiently waiting for. As the market fell 10%, then 20%, then 30%, I steadily put my “dry powder” to work… typically on big down days and mostly in the S&P 500.
Every scientist and researcher, medical and pharmaceutical company, and government around the world is focused on nothing but beating back the coronavirus.
I think there’s a good chance of an effective treatment that meaningfully cuts the mortality rate emerging and perhaps even a vaccine sooner than expected.
If you asked me to take a bet on whether humanity, collectively, can figure this out, I’m going to bet big on humanity!
Editor’s note: There’s a huge shift taking place in the markets right now. Yet most investors don’t have a clue.
The smart money – including many of the hedge fund colleagues that Whitney Tilson has been speaking with in Manhattan this week – is on one side of this shift. On the other… well, unfortunately… that describes most regular investors.
Please don’t let it be you on that other side. Whitney recently put his entire investment thesis into a simple presentation… explaining exactly what he thinks you should be doing with your money today, and even giving you the name and stock symbol of his favorite stock to profit from this trend – no subscription or credit card required. You can watch his latest presentation by clicking right here.