What To Do When The Market – Or Your Stock – Crashes?

What To Do When The Market – Or Your Stock – Crashes?

Sooooo…

Not sure if you noticed but the stock market dropped by more than 1,000 points twice last week – two of the market’s single day point drops ever – and a lot of people are freaking out.

Should you be?

No.

If you have disciplined investment processes you stick to, If you know what you’re doing, and if you own mostly good to great businesses, no you shouldn’t panic.

Or in many cases even do anything.

I answer the original question above in multiple different ways in the 13-minute video below. And I elaborate on these thoughts below the video.

In the video above, you learned why you should almost never panic in these kinds of situations.

Markets rise, markets fall, and in general, the market will continue to rise over time, barring a worldwide economic collapse. And if this happens, we will all have a lot more to worry about than our portfolios.

If you can ignore the market and continue doing disciplined research and you follow your processes for what worked for you in the past, you’ll do fine no matter what the market is doing.

That is, if you can keep your emotions in check.

This is the major potential problem every investor faces when a crash of any kind happens.

Why?

Because if you can’t keep your emotions in check, it doesn’t matter how much knowledge or skill you have as a value investor… If you can’t keep your emotions in check you will fail.

So what can you do about this?

Ignore the news, ignore the panic, stick to your processes, and learn how to control your emotions.

And keep in mind…

Even though most of the headlines said something like “Biggest One Day Crash In The Market’s History”, on a percentage basis these falls aren’t even in the top 20 biggest daily percentage losses. But the media doesn’t say that because it’s not as juicy of a headline.

Largest Percentage Daily Declines In US Stock Market History – The two ~4% Drops From Last Week Aren’t Even In The Top 20 Above

Am I saying you don’t need to be careful and reassess your portfolio to see if you should sell something or possibly to get more into cash? No.

I’ve said the market is overvalued for the last 5 years and it’s continued to go straight up. And it could continue to go straight up.

Or it could continue to crash…

No one knows when the next crash is going to happen.

If someone tries to tell you they know when the market or stock is going to crash, they’re full of shit and you need to run from them.

All I can tell you is the above…

If you continue to follow your disciplined processes and keep your emotions in check, long-term you’ll be fine.

In the short-term, your portfolio may get hammered in a crash, but if you’re concentrated on the long-term and are in mostly good to great businesses or cash you’ll be fine.

Get ready, learn as much as possible, continue to improve every day, and go with the flow like I talk about in the video above.

These are the best things you can do in these kinds of situations.

The WORST thing you can do is panic like the media, make emotional decisions, and watch the news on a minute by minute basis which will make your emotions go even crazier.

In the video above I mentioned many things I’ve done to get my mind out of the market. Things like learning and improving myself, my businesses, and my team.

What are some things you do to get rid of your emotions when the stock market or a stock you own crashes?

I’d love to hear some of them in the comments below.

P.S. If you’d like all future posts like this, make sure to sign up to our mailing list for FREE here. You’ll also gain access to free gifts that will help you become a better value investor as well just for signing up.

P.P.S. If you want to learn more info like this to become a great value investor fast and at a fraction of the cost of a normal university, check out our new Value Investing 6 Week MasterclassThe entire first week of the course is all about developing the proper value investing mindset.

Announcing The Launch of The Value Investing Training Vault

Announcing The Launch of The Value Investing Training Vault

I’ve said this several times in the past months and its true again today…

Today, I’m announcing something I’ve wanted to do for years. But until recently – with my team coming on board – haven’t had the time to work on.

Today, we’re announcing the release of the Value Investing Journey Training Vault.

I know that more people out there want to learn how to become great value investors but can’t afford the $10,000 coaching programs available.

And I want to help people across ALL financial spectrums learn the ultra-valuable skill of value investing and business analysis.

So in light of all this, this training vault will have exclusive – and never released – training sessions from past clients.

And yes, this includes video sessions from my $10,000 coaching programs.

In just 6 weeks of these training sessions, this particular client went from minimal value investing knowledge to being able to find companies he wants to research further, to doing full preliminary analysis on these companies, to reading ALL financial statements and valuing these companies by himself.

This is only after 10 sessions over 6 weeks of time.

And I’m releasing these and many more exclusive video training sessions today so you can do the same.

All at a fraction of the cost of this $ 10,000 year-long training program.

But I’m doing even better than that.

I’m giving you $3,991 worth of value in 14 days for FREE just to get you to try this.

In the first 14 days after you sign up for the Training Vault you’ll have access to ALL the following things…

  • 23 video training sessions with more than 3 hours of content which I value at more than $2,500.
  • The majority of these videos are from the $10,000 coaching session.
  • The rest are from other video training sessions with past clients.
  • Plus you’ll gain access to my exclusive preliminary analysis checklist which I value at $597.
  • You’ll also gain access to my exclusive research procedure document valued at $597.
  • And also the Value Investing Journey Glossary of Terms valued at $297.

And this is just in the first 14-day trial period of owning the Training Vault.

Before you have to pay anything.

If you decide to keep your subscription after the 14 days, you’ll gain access to ALL past, present, and future training sessions as new ones become available for as little as $97 a month.

Plus, you’ll gain access to new videos as they become available, along with new resources and exclusive training sessions.

In other words, I’m giving you $3,991 worth of valuable knowledge, skills, and resources today that you can keep even if you don’t continue after the first 14 days.

Plus, you’ll gain access to more exclusive sessions, resources, and videos after the 14-day period as they become available.

Your credit card WILL NOT be charged until the 14-day trial is up.

Below is a quick video detailing all of what you’re going to get during this 14-day FREE trial and some of the other resources and videos you’ll gain access to after the 14-day trial is up.

The total value of JUST the current content in the Training Vault is worth well north of $10,000 and you get this all for only $97 per month. Plus, we’re going to add more exclusive training sessions and videos as time goes.

To gain access to these resources worth $3,991 and begin your 14-day FREE trial today, go here.

Value Investing Journey Logo

P.S. To learn more about our Coaching Programgo here.

P.P.S. To learn more about The Value Investing Journey Masterclassgo here.

The Next GE – Interview #2 With Eric Schleien of The Intelligent Investing Podcast

The Next GE – Interview #2 With Eric Schleien of The Intelligent Investing Podcast

In the first interview I did with Eric Schleien of The Intelligent Investing Podcast in 2016, we talked about more general value investing concepts, mindsets and processes.

In today’s interview, we talk about an investment I made in 2015 that I called ‘The Next GE’.

In the 27 – minute interview linked below, we go over this investment case study style that I recommended in October 2015 exclusively to Press On Research subscribers.

We do this to figure out a couple of things…

  • Why I titled this company’s recommendation issue ‘The Next GE’
  • Why they’re now up 460% as of this writing since I recommended them

Some of the other things we also talk about in the interview are…

  • Valuation
  • How this company compared to its competition
  • Where I found this company
  • How I found this company
  • How you can find extreme value in the small cap OTC and ADR arenas
  • And more

Here is the description of the interview from Eric’s podcast site…

In this interview, Eric Schleien goes through an investment case study Jason Rivera recommended to his subscribers and for the portfolios he manages about a small and obscure company that has almost tripled since 2015.

When he recommended them, he titled the issue The Next GE and in this interview we go over why he thought that.

His podcast has interviews with other great up and coming value investors as well so make sure to listen to them.

You can listen to the interview here if you don’t have iTunes.

Or you can listen here if you do have iTunes.

Make sure to follow Eric on Twitter, and subscribe to his great podcast when listening to either of the above places.

I hope you enjoy and find some great value in the interview.

Oh, and by the way…

If you listen to the interview, you also get a couple of free resources to learn from that I provided exclusively to listeners of this interview.

One I’ve never released before other than to paying subscribers.

I hope you enjoy 🙂 and let me know your thoughts on this company in the comments below once you listen to the interview and download the FREE resources.

P.S. The analysis I did on this – and EVERY company I evaluate – is based on the preliminary analysis template I developed over the last 11 years, and after evaluating thousands of companies. If you’d like a copy of this to do your own preliminary analysis, you can get yours for free here.

P.P.S. I put on a FREE webinar last Thursday teaching The 3 Secrets That Have Helped Me Beat Buffett In The Stock Market, so you can possibly do the same. If you’d like to sign up for FREE to view the replay of the webinar, you can do so here.

Throwback Thursday – 10 Tips To Becoming A World Class Investment Analyst

Throwback Thursday – 10 Tips To Becoming A World Class Investment Analyst

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This is the fourth post in our new Throwback Thursday’s Series, where we share with you posts from the past blogs to bring you as much value as possible.

I’m reposting this article today because now that we’re at the beginning of a new year I wanted to post this to help you achieve anything you want in 2018.

The things I talk about below can be used to become great at any skill, not just value investing.

Other than some minor edits and updates, this is the same exact post as originally published in 2016.

Oh and sorry about the numbering… It got mixed up in the transfer and I can’t figure out how to fix it.

Jason

***

10 Tips To Becoming A World Class Investment Analyst

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This post is written in conjunction with Quandl as part of a series on how to become great investment analysts.

Quandl provides access to data and information useful to us as investment analysts.  So if you’re looking for specific data to make your analysis pop make sure to check out their site linked above.

***

Are you sure you want to be great?

No one admits they’re fine being average.  But our actions show otherwise.

Most of us would rather watch TV or random YouTube cat videos instead of working on improving and learning the skills necessary to improve and reach our goals.

The ones who do work towards greatness are often labeled antisocial hermits for not hanging out with friends and partying more…  Especially when young.

This social stigma keeps many of us from doing what we really want to do…

If you want to achieve greatness you must do things different than everyone.

If you want to improve fast you must endure short-term pain.  And sometimes ridicule from peers when you’re not doing what they expect you do to.

If you’re willing to do the work necessary to become a world class investment analyst below are the top ten things you have to do every day.

  1. Be Patient

Are you fine searching through thousands of companies only to invest in a few of them?  Are you fine going months or years without buying a new investment?

If you answer no to either you won’t be a great analyst.

I invest in less than 1 out of every 500 companies I research.  You need to have extreme patience and enjoy the hunt of buried treasure as much as actually finding it.

  1. You need to be an autodidact

Do you rely only on your degrees and certifications to get you by? Do you seek out new and sometimes contradictory information to continue to learn and improve processes?

To be a world class investment analyst you have to love learning, reading, and gaining knowledge on your own.

Degrees and certifications have nothing to do with how great of an investment analyst you are or can become.

If you’re not willing to read and continue learning you won’t become a world class investment analyst.  Because people like me who constantly read, learn, and work to improve will always be ahead of you.

  1. You must have strict and disciplined processes

If you can’t make unemotional decisions based on how your analysis plays out you won’t be great.

You can’t rely on preconceived notions, hearsay, emotion, or what Mr. Market’s doing.  Let your analysis take you where it does.

If you spend 100+ hours researching a company only to find at the end it’s not one you want to invest in don’t invest in it.

Just because you spend a lot of time evaluating a company doesn’t mean you need to invest in it.

If you have strict processes and have the discipline to stick to these processes you’ll invest in a fraction of the companies you research as mentioned above.

Don’t be average be great.  Again, this requires you do things different than everyone else.  Be selective in your investments to produce greater returns.

  1. Practice everything you learn as you learn it

When I started investing I would read everything but not practice anything I learned.  This led to years of wasted time as I had to go back and relearn things as I came across them and needed to know what they meant.

Don’t do this.

And when I say practice I don’t mean the normal practice most people do.  I mean deliberate practice.

  1. You need the fundamentals down pat

If you can’t explain what free cash flow, operating margin, and return on invested capital mean in terms a 6th grader can understand you don’t understand it well enough yourself.

You need to understand the basics better than other analysts to have an advantage over them.

  1. Be selfish with your time

If your friends are doing something you don’t want to do don’t do it.

This sounds easy but it’s not…  Remember the social stigma I talked about above?

If you want to improve fast be selfish with your time and find any spaces of time you have to learn.

As an example if your significant other’s taking forever getting ready to go out, instead of getting mad and anxious about them wasting your time read something.  Even if it’s only for five minutes.

The more you learn the faster you’ll improve.  Knowledge like money compounds over time.

Note on above quote: Most people – including me – can’t reach the 500 pages every day goal because of kids, significant others, family, work, relaxing so you don’t burn out, and life.  But it’s a goal to reach towards.

Read as much as you can every day.

  1. Don’t get complacent

There’s always more to learn.  Always an investment or thought process you can improve.  There are always more companies to look through.  Etc.

“The thing that amazes me about him {Nick Saban} is that he doesn’t let up,” says retired Florida State coach Bobby Bowden. “People start winning, they slack off. But he just keeps jumping on ‘complacency, complacency, complacency.’ Most coaches don’t think like that.”

To learn more about what it takes to be great read my post: Greatness According to Nick Saban.

  1. You need confidence in your abilities

“You need to balance arrogance and humility…when you buy anything, it’s an arrogant act. You are saying the markets are gyrating and somebody wants to sell this to me and I know more than everybody else so I am going to stand here and buy it. I am going to pay an 1/8th more than the next guy wants to pay and buy it. That’s arrogant. And you need the humility to say ‘but I might be wrong.’ And you have to do that on everything.” Seth Klarman

This doesn’t mean being overconfident.

You need to be humble enough to spot and fix any mistakes you make in your analysis that may only come out after you invest in or recommend something.

But if you’re not confident in yourself and judgments you make why should anyone else be?

  1. You can’t be afraid of mistakes.

No matter how great of an investment analyst you are you’re still going to make mistakes.  Investing isn’t something anyone can perfect.  Even Buffett, Munger, Klarman, and the other greats in our business make mistakes.

As investment analysts were doing great things if we’re right four to six times out of 10.  No one is right 10 out of 10 times in this business.  Leave your perfectionism at the door.

You need to be comfortable making mistakes.  And be humble enough to learn from them so you don’t repeat them going forward…  Hopefully.

If you’re stubborn like I am this may be a hard learned long-term lesson you need to work correcting every day.

  1. Be obsessive.

No one starts life as a great investor or thinker.  You need to train yourself to become great.  And the faster you learn the faster you’ll become great.

If you’re obsessive about learning the craft of becoming a world class investment analyst nothing can stop you.

High IQ isn’t necessary in this field.  It will be a hindrance if high IQ comes with overconfidence and not being humble.  So the only thing stopping you from becoming a great analyst is the amount of time you’re willing to put in.

Note the reading of 500 pages quote from Buffett above.

Are you obsessive enough about investing and analyzing businesses to work towards that goal?

Do you love learning, reading, and constant improvement enough in this field to continue to work even on days you don’t want to?

Bonus – Write your analysis down and let others critique your work.

Most of us hate being critiqued.  When we put dozen, hundreds, or thousands of hours into something over days, weeks, or years it’s natural that we don’t want people to point out the flaws in what we’re doing.

Fight this urge…

If you want to become great write your investment analysis down and have others critique it.  A great way to do this is to start a blog.

When I started my blog Value Investing Journey and began getting feedback my improvement as an analyst jumped into hyper speed.

I went from this “analysis” when I started the blog less than four years ago to being told a version of the following on a regular basis:

“If I were to go to anyone else in the entire company to get a second opinion valuing and analyzing an investment… I would go to you first.”

The above quote is what a former colleague told me upon leaving my job.

The company had around 50 employees.  And every other analyst had an MBA.  Decades of experience investing.  And ran or helped run billions of dollars at various hedge funds and firms before joining the investment newsletter we worked for.

I get told a version of the above on a regular basis but I’m not telling you this to brag.

I’m telling you this because if I can achieve this without any formal education and severe health issues while beginning my investment journey imagine what you can achieve with your formal training, degrees, mentors, and certifications.

If you don’t already have a or want to start a blog post articles on places like Seeking Alpha and Guru Focus to get feedback.

If you take this route beware of haters making personal attacks though.  Ignore these people and pay attention to the constructive feedback.

Conclusion

If you paid attention above you’ll notice many of the above tips go together.  And a lot of it revolves around how you choose to spend your time.

The choice is now yours… Are you willing to put in the time to become great?  Or are you fine being average and producing average returns and recommendations?

Time is the only thing keeping you from becoming a world class investment analyst.

So what are you going to do next?

***

Let me know some of your 2018 goals in the comments below.

P.S  If you want to get every post like this in the future please subscribe for free here.

P.P.S. I put on a FREE webinar last Thursday teaching The 3 Secrets That Have Helped Me Beat Buffett In The Stock Market, so you can possibly do the same. If you’d like to sign up for FREE to view the replay of the webinar, you can do so here.

Preliminary Analysis Case Study #1 Part 10 – Final Part

Preliminary Analysis Case Study #1 Part 10 – Final Part – Inventory, Footnotes, And How To Evaluate Management

Last week I announced we were going to begin doing a real-world case study on Constellation Brands – Stock Ticker STZ.

Well, after releasing this post, my team reminded me that there was actually a preliminary analysis my client did before this one. So before we get to the STZ case study, we’re doing to take a detour to talk about Canopy Growth Corp –  Stock Ticker WEED.

I didn’t want to skip this one because there’s a lot of context and talk in this discussion that we don’t necessarily go over in the later training sessions because we’ve already talked about them.

This post is a continuation of the prior posts in this ongoing case study. All parts thus far are below.

Below is his unedited preliminary analysis for reference – without any of my comments – for you to get a  look at.

Canopy Growth Corp – WEED

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WEED – Canopy Growth Corp (Canadian Company)

All numbers are in millions of CAD unless noted otherwise.

  • FY Ends March 31st, 2017
  • 3,404 market cap (medium)
  • N/A dividend yield.
  • P/B TTM = 4.92
  • TTM Operating Margin is -39.2 and has somewhat increased over last 2 years.
    • 5 year average OM is N/A
  • Share count has done increased from 77 to 119 from FY16 to FY17. Current TTM is 149m.  Statement of shareholder’s equity??
  • Book value per share has increased from 1.34 to 1.55 from FY16 to FY17. Current TTM is 3.73.
  • Morningstar ROIC TTM is -6.58 and a little higher than the last 2 FY’s
    • 5 year average Morningstar ROIC is N/A
  • TTM ROE is -6.45 and a little higher than the last 2 FY’s
    • 5 year average ROE is N/A
  • TTM FCF/sales is -151 and we can’t tell any pattern. See con note on FCF
    • 5 year average FCF/sales is N/A
  • CCC: No info on the payable period (assume the product is cheap to grow) but DIO exploded on FY2017 to 5,494 days (FY2016 and 2015 avg is about 650 days). Research online says cannabis takes up to ½ year to grow so I would need much more investigation on why inventory takes so long to turnover.
  • EV=3,312
  • EV/EBIT is -73.6
  • EV/FCF is -37.6
  • EBIT/EV (earnings yield) -1.3%
  • FCF/EV (earnings yield) -2.6%

Cons

  • Young company – only about 3 years old after name change (used to be Tweed)
  • Note only balance sheet on Morningstar has FY2015 so we need to look at 10K for data.  We cannot really tell any direction with a 2/3 year old history
  • SG&A & Other are over 163% of Revenue
  • SG&A roughly decreasing and “Other” is increasing
  • Op Income and Margin are (-) but are generally decreasing over time
  • Outstanding shares are significantly increasing over time
  • FCF is increasingly negative as both op cash flow and CapEx are also both increasingly negative
  • Not much experience with Canadian companies
  • Goodwill and intangible assets exploded on FY2017
  • Regulation laws in Canada and USA
  • They bought a lot of companies in FY2016

Pros

  • Cash exploded in FY2017
  • FY2017 Cash & Equiv – Total Liabilities = $39m
  • Book value/share is generally increasing but only for last 3 years
  • Low Debt (also reflected by the ROE and ROIC being similar numbers)
  • Revenue is increasing over time
  • STZ bought about 10% interest in WEED.  Industry took notice and WEED most likely gained some legitimacy with large companies
  • COGS is only 23% of Revenue (doesn’t take much cost to grow product?)
  • High Working Capital Ratio = 9.8 but this high typically suggests either too much inventory or not investing excess cash…

***

In this video, we talked more about the inventory, how they’re accounting for inventory in the footnotes, a major issue in its inventory, how to evaluate management, and more.

For some reason, when I talk, the audio cuts out so I’ve added narration to the video above for context.

If you have any comments or questions, please post them in the comments section below and I’ll answer them.

I’d also love to see your preliminary analysis as well, so feel free to post these in the comments below.

If you’d like more information about the coaching program this client is in, go to this page.

For reference, he’s in the $ 10,000, year-long program, and this is only after 1 month of coaching, doing nine 1-hour training sessions via Skype.

P.S. This analysis is based on the preliminary analysis template I developed over a number of years, and after evaluating thousands of companies. If you’d like a copy of this to do your own preliminary analysis, you can get yours for free here.

P.P.S. I put on a FREE webinar last Thursday teaching The 3 Secrets That Have Helped Me Beat Buffett In The Stock Market, so you can possibly do the same. If you’d like to sign up for FREE to view the replay of the webinar, you can do so here.