Transcription
Millionaires will be made in the next 19 days. And the more the market drops, the bigger the opportunity, especially if you know which stocks to buy and how to be greedy when others are fearful. That's the best way to get rich without getting lucky. So in this video, I'll show you exactly how to take advantage of this market downturn before it's too late. Your time is valuable, so let's get right into it.
First of all, being greedy when others are fearful does not mean blindly buying the dip. If you think "buy the dip" is a solid investing strategy, you need to watch the rest of this video. The first step to being greedy when others are fearful is understanding what investors are afraid of in the first place. Step two is finding the mistakes that they're making by being so fearful—specifically, the mismatches between a stock's price and the underlying company's value. Step three is making a plan to take advantage of those mistakes: if everything is on sale, which stocks am I actually going to buy? And step four is updating the plan because things are always changing, which brings us right back to step one. That means long-term investing isn't just something to rush into as prices keep falling; it's a process that starts with understanding the overall market landscape. So let's start there.
During an interview on economic policy earlier this week, President Trump said the US economy would see a period of transition as tariffs take effect, and he refused to rule out the possibility of a recession. If you didn't know, the Trump Administration announced 25% tariffs on imports from Canada and Mexico, but then delayed them until April 2nd. April 2nd is 19 days away, which is why I'm saying millionaires will be made in the next 19 days. He also raised tariffs on all Chinese imports from 10% to 20%, as well as imposed 25% tariffs on all steel and aluminum imported into the US. These tariffs went into effect on Wednesday, March 12th, with more huge tariffs potentially still on the table—from a 250% tariff on dairy products from Canada to up to 100% tariffs on computer chips made in Taiwan. Like I said in my previous video, there are two ways for Trump's tariffs to potentially backfire. On the manufacturing side, companies might move their factories out of China, but instead of coming to the US, they'll just move to another country with lower costs of operations. But the second option is even worse for the economy and much more likely to happen: which is that companies will simply pass these added costs onto their customers. That's worse because rising prices mean lower spending, which means lower earnings for these companies and ultimately lower stock prices. That's why stocks keep falling whenever new tariffs get announced.
The reason that this is much more likely is that the Trump Administration has actually been pretty back and forth on tariffs overall, imposing and then delaying them multiple times over the last few months as he uses them as a negotiation tactic. This back and forth makes it much harder for companies to make long-term plans, like moving factories and changing their suppliers, which makes raising prices their best option. That's what's putting downward pressure on the stock market right now, which means it could reverse if Trump goes back on some or all of these tariffs before the deadline in 19 days.
Now that we understand what investors are afraid of, we should see how afraid they actually are, because the bigger the panic, the bigger the opportunity. In my opinion, the better, best way to track market sentiment is with CNN's Fear and Greed Index, which I'll leave a link to for you below. Right after President Trump's interview, the stock market fell deep into extreme fear territory. The Fear and Greed Index goes from 0 to 100, and a 14 isn't just a one-year low; it's also one of the lowest ratings I've ever seen, which means the market was as fearful as it gets, and it's still sitting at a 16 at the time of this recording. That's good information for investors that want to be greedy when others are fearful. In my previous video, I talked a bit about the seven market indicators that get averaged together to make up this Fear and Greed Index—things like stock price momentum, the ratio of puts to call options, and market volatility—but there's one indicator in particular that makes me think that this is a serious opportunity right now. Safe haven demand measures the difference in returns between stocks and bonds over the past 20 trading days. Stocks are riskier than bonds, but they usually generate higher returns. On the flip side, there's more demand for bonds when investors are scared of risk, and currently bonds are outperforming stocks by one of the biggest margins that I've seen. Said another way, safe haven demand measures the money moving into and out of stocks, and a massive amount of money just left the stock market. As you can see, the last time this happened was in August of last year, but check out what happened to stocks right after this massive flight to safety.
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All right, let's look at what happened the last time that investors moved so much money from stocks to bonds. That flight to safety happened over about 3 weeks, beginning on July 15th and bottoming on August 5th before taking another 3 weeks to completely reverse and even swing all the way to extreme greed. Now let's look at how stocks performed over that same time period. Here's a one-year chart of the S&P 500 from July 15th to August 5th. The S&P 500 fell by about 8%, marking its single biggest decline over the last year besides the one we're in right now. But then, from August 5th to August 30th, the S&P 500 completely recovered before going up another 7% over the rest of the year. So all we had to do was not panic sell like everyone else, and we'd be up by 7% in just a few months. Not bad. But the whole point of this video is to be greedy when others are fearful, so instead of doing nothing, what if we bought the S&P 500 instead? Well, it turns out we'd be up by 177% in 4 months, and that's on the S&P 500, which is one of the lowest-risk funds on the market. Nvidia stock fell by 22% from July 15th to August 5th before immediately recovering by 30% and going on to make new all-time highs, ultimately going up by 50% from the bottom. The same thing with Amazon stock: it fell 16% as investors panic sold before rocketing up by 50% over the rest of the year as those investors realized their mistakes. Like I said, millionaires are going to be made over the next 19 days, and now you can see why.
So let's fast forward back to today. Step one: we already know why investors are afraid—tariffs increase prices, which leads to lower spending, which means less earnings for companies, which means lower stock prices. Step two: we've seen this mistake before—people panic sold stocks to buy bonds, leading to an 8% drawdown in the S&P 500 and even bigger drawdowns in some of the best stocks on the planet—drawdowns which turned into massive opportunities over the next few months. Step three is making a plan to take advantage of those mistakes. And like I said at the start of the video, blindly buying the dip is not a plan. Let me show you why with a quick example, and then I'll show you exactly which stocks are in my personal plan. Nvidia stock is down roughly 20% over the 2 months since President Trump took office. By the way, I'm using the inauguration as my reference point since that's when the tariff talk really ramped up, and I want to stay consistent with all the data that I'm sharing. I'm here to cover price action, not personal politics. AMD is Nvidia's only real competitor in the GPU market, and they're also down around 20% over the last 2 months. Except AMD is 20 times smaller than Nvidia, so it has a lot more upside. That means we should be buying AMD over Nvidia, right? Wrong. And it's really important to understand why. AMD's earnings per share have been dropping—going down, down 38% quarter over quarter and 29% year-over-year. As a result, AMD's price-to-earnings ratio is close to 100, even after going down 20% over the last couple of months. On the other hand, Nvidia's earnings per share are up 14% quarter over quarter and a whopping 82% year-over-year. So Nvidia's PE ratio is close to 40, since its price also went down 20%. Two high-profile semiconductor companies, both down 20% over the last 2 months, but the actual investments couldn't be more different. Even though Nvidia is 20 times bigger by market cap, it's 60% cheaper than AMD based on their earnings. That's just one simplified example, but hopefully you can see why you still need to understand the fundamentals of these companies even when their stocks are on massive sales.
But also remember how we got here. Institutional investors are being fearful; they're selling stocks and buying bonds. That means they're not going to turn around and invest in hidden gems or small-cap companies or any other high-risk assets. When they turn back to stocks, they're going to buy companies with high free cash flows, great balance sheets, diversified business units across multiple high-growth markets, and product roadmaps that can withstand tariffs and trade wars. So my plan is to invest in those same companies before institutions change their minds, which could happen over the next 19 days. So let me show you exactly which stocks I'm talking about. And if you feel I've earned it, consider hitting the like button and subscribing to the channel. That lets me know to make more content like this, and it's a great way for you to see my deep dives on all the stocks that I'm about to highlight. Thanks. And with that out of the way, there are three major tech sectors that I think Trump's tariffs will affect the most: semiconductors, e-commerce, and advertising. So I want to find big, safe companies with high earnings growth in those three areas.
Let's start with semiconductors. Broadcom (ticker symbol AVGO) is a massive company with a wide range of AI software and hardware solutions. They make high-performance switches, network interface cards, wireless networking solutions, and custom application-specific integrated circuits, or ASICs, for the big hyperscalers. For example, Broadcom was involved in designing every generation of Google's Tensor Processing Units, or TPUs, and it's estimated that 99% of all internet traffic touches at least one Broadcom device today. Broadcom stock is down by around 20% since the inauguration 2 months ago, but their revenues are up by 25%, and their earnings per share are up by over 300% year-over-year. Talk about a huge mismatch between the stock's price and the company's underlying value.
The next stock on my list is Nvidia, since it's also down by around 20% over the last 2 months, even though revenues are up 78% and earnings are up 84% year-over-year. Here, not to mention that Nvidia GTC is next week. GTC is Nvidia's massive developer conference where they announce their latest chips and their latest AI innovations in every major market—from generative AI and video games to robotics and self-driving cars—the same science behind the stocks that I always talk about. I'll be there next week to cover it live, and I expect there to be a lot of news that isn't currently priced into the stock.
The third semiconductor company on my list is TSMC, which makes 9% of all advanced chips on Earth, including Tesla's chips for full self-driving, the A-series and M-series chips in Apple's iPhones and MacBooks, and of course, Nvidia's GPUs. Like I mentioned earlier, President Trump recently floated tariffs on chips made in Taiwan that could reach as high as 100%, even though I think this is a negotiating tactic to get TSMC to make more chips on US soil. TSM stock is down by 20% over the last 2 months, meanwhile their revenues are up by 39%, and their earnings per share are up by 57% year-over-year.
On the e-commerce side, Amazon stock is down 17% since the inauguration, while revenues are up 10% and earnings per share are up 84% over the last year. One thing that most investors still don't realize is that Amazon Web Services is the single biggest cloud service provider in the world, with a market share as big as Microsoft Azure and Google Cloud put together, by some estimates. AWS powers roughly 1/3 of the entire internet at a time where cloud infrastructure revenues are growing by roughly 23% per year thanks to AI. AWS is also Amazon's most profitable business unit by far, generating more operating income than their online store and their subscription services put together. On top of that, Amazon is the third biggest advertising platform on Earth, only behind Google and Meta Platforms, except Amazon's ads business is growing much faster than Google's and Meta put together. In fact, advertising is Amazon's fastest-growing business unit, with revenues of over $17 billion last quarter and a compound annual growth rate of 34% over the last 5 years. And like I pointed out in my previous video, discounted cash flow models like Simply Wall St now show Amazon as being 44% undervalued compared to consensus analyst estimates. That means that Amazon stock would now have to go up by 79% to hit its fair value today. That's the kind of pricing mistake that happens when there's extreme fear in the market. And again, I'm purposely not picking small-cap companies or hidden gems. Remember, when institutions sell their bonds to get back into the stock market, they're going to make safe bets because they need their own quarterly numbers to look good. That's why the next two companies on my list are Meta Platforms and Google. Both stocks are down by around 20% over the last few weeks. Google peaked on February 3rd, and Meta Platforms peaked on February 14th, and both stocks are 34% undervalued according to Simply Wall St's DCF models, which means they both have over a 50% upside to hit their current fair value. Meanwhile, Google's revenues are up 12%, and their earnings per share are up 31% year-over-year, and Meta's revenues are up 21% while their earnings per share are up 51% since last year.
I know this video is a little long, but I wanted to be thorough since there's a lot of panic on both sides of the market right now. Institutions are panic selling stocks to buy bonds, and retail investors are rushing to buy the dip without taking the time to understand the big picture—checking the fundamentals to find mistakes in stock prices versus a company's actual value and making a clear plan of action based on data, not their emotions—all of which we covered in this video. I'm excited to see what happens over the next 19 days leading up to the next tariff deadline, but I'm still being patient, dollar-cost averaging in slowly, staying safe, and reassessing my plan as new data and new tariffs come into play. That's the best way to get rich without getting lucky. And if you want to see what else I'm buying to get rich without getting lucky, check out this video next. Thanks for watching to the end, even though I gave you everything upfront, and until next time, this is Ticker Symbol U. My name is Alex, reminding you that the best investment you can make is in you.