Only The Lonely Can Play

Great investment opportunities are lonely. History shows us the crowd behaviors to avoid and the investment market circumstances to capitalize on. We believe we are at one of the great junctures, where the crowd thinks they unequivocally know the future. Simultaneously, they have left the stocks related to the unknowns for dead. What does history tell us about situations like this? What stocks are mega-cheap based on the unknowns?

History of Sure Things


Disney and Coke were sure things at the end of 1972 in the “Nifty Fifty.” At 80 times and 60 times earnings respectively, their future success seemed like a sure thing. It was lonely to not own them. In 1982, they bottomed at nine- and six-times earnings, even though the future ended up being very bright. Hardly anyone who bought when they were thought to be a sure thing stayed for their success 20 years later.


Peak oil is a repeat sure thing every 10-15 years. It was a sure thing in 1981 at $40 per barrel when energy was 29.5% of the S&P 500 Index. It was dead in 1999 at $11 per barrel and buying was very lonely. It was a sure thing in 2008 and 2014 at $146 and $115 per barrel, respectively. Now it is the deadest it has ever been with energy well less than 3% of the S&P 500 today and oil being given away at settlement recently.

Our favorite measuring tool is to go to investment industry conventions (think Schwab or Morningstar) to see which sponsors were ponying up the most to dominate the center of the floor. In 2011-2014, it was Asia and Peak Oil. Everyone was convinced that nothing could stop China’s new 500 million “middle class” citizens from dominating the world economy for decades. Oil was $115 per barrel in May of 2014 and wide asset allocators sent their clients’ money to die in emerging markets equities under the heading of diversification.

Lastly, the internet would change our life in 1999 and the growth/tech funds hogged up the center of the convention space. The “smart” people avoided the worst of it by buying Cisco, Microsoft, and Intel. They were the internet “pickaxe” companies with real sales and earnings. It did limit losses to 60-90% of their portfolio instead of losing 100% on failed dot-com stocks or 95% on Sun Micro, Lucent, and many others. There are business cycles in tech!

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Disclosure: This article contains information and opinions based on data obtained from reliable sources, which is current as of the publication date, and does not constitute a recommendation ...

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