Transcript:
Easan Arulanantham:
Are there any stocks that have shown resiliency in this downturn?
Tom Vaughan:
Any stocks that have shown resiliency, okay? So this downturn has been a little bit different in some regards. And because technically speaking in downturns, you look towards utilities, you look towards health care, mainly because you know, people still need both right, I still goes on. And they look cards, consumer staples, so consumer discretionary things theoretically, that we don’t need right away. And then consumer staples, or something, you know, like toilet paper, or cereal, or certain basic food items and such, too. So we did find a really, really cool chart here that I’ll share with you. This came from a Reddit user, who basically made this chart out of data from Yahoo Finance, and this is a video I’ll play it, it’s kind of fascinating. If you look at the top, you can see the date changing. So this is year to date. So here’s January, and you can see the bubble size shows how big the company is. And you know, the motion up and down kind of shows you know how it’s done. We’re up to March now see that energy is going up in March, technologies down a little bit there, you can see some you know, motion and communication services, there’s, you know, meta, down there at the bottom of the communication surfaces, energy continue to go up here, you know, it’s this is after the invasion, look at how far up energy it’s all collecting at the very top, and then look at this collapse. In June, boom, it’s really coming down. And so there it is June 30. That’s the first half of the year. Okay. So now, if we look at this chart, for the first half of this year, so first of all, energy is coming off of that really high point. It is not always an area that you would look at during a recession, because theoretically, the use of energy goes down if the economy slows down. And that’s what they’re associating this downturn for this month with higher probabilities, that recession. And that would slow down, you know, the use of energy worldwide. So I don’t know, that’s not what I’d be looking at. You can bottom fish here.
There’s different things, but they’re asking the question is resiliency? Well, if I go over to health care, that’s a pretty big spread. There are some big health care stocks in there, Johnson and Johnson, and such that are, you know, above the zero line that have shown some resiliency so far, and historically, healthcare has shown some decent resiliency, right? So it’s something to look at. Maybe if you look at that spread, though, it might not work in an index basis, because you’ve got that whole spread, maybe it makes sense to look at that from a individual stock basis and see what’s held up right. next one over is consumer staples. And that’s the purple one right in between Eason and I. And if you look at that, it’s got a decent spread around zero. But if you look really closely, there’s a lot of bigger bubbles below zero, that’s a little bit unusual. And that’s where I would be careful with consumer staples in this market. It’s just because in a higher inflationary environment, this is kind of these are staples, they don’t have as much room to run up the price when their costs start to go up. And so we’re seeing some issues here with the possible compression of earnings. And that’s not a normal scenario, because then on the last few recessions, we didn’t have any inflation like this, that’s for sure. And so that’s, that’s kind of now if you look at utilities, that looks pretty good. Yep. And I would think a utility index might be good. So maybe individual stocks in the right area inside of, you know, healthcare, utilities as an index, those would be the two that jumped out at me that say, okay, these are areas that work, the rest is all possible bottom fishing, maybe a bottom fish energy, maybe bought a fish technology, you know, I you know, we have been holding an Apple, Microsoft, we can see where those are, you know, so not so great this year, but I still like to buy those at that point, for example. So, you know, anyway, that’s, that’s a great chart, whoever made this chart, it’s really, really fascinating.
Easan Arulanantham:
Maybe it’s a chance like with all these, you know, quality stocks that you think are they’re good, and we’ll be around for five, you know, 10 years, or are going to be those quality stocks that we have that name recognition, maybe this time that you want to be bottom fishing for those.
Tom Vaughan:
There’s Apple, Microsoft, there’s Google, Amazon. Tesla’s kind of an interesting one, you know, definitely Home Depot right above that. So those are the biggies that you See that are below that 20% line, you know, Metas got this weird transition or doing? I don’t know, you know, there’s some possibilities there. Actually one of the bigger bubbles there at the bottom of that green section with technologies in Vidya. And that’s down, you know, 50% I love and Vidya just as a company. So yeah, maybe not the most resilient things other than the fact that they could be down a lot already. And maybe if there’s a continued recession, they don’t come down as much invidious, still fairly high priced, I know the multiples have compressed, but maybe that goes down more. But you know, maybe that’s not true with an Amazon or Google or something, we’ll see how that plays out. But the true defensive resilient pieces are going to be those selected health care and utility indexes and the rest you’re just looking to kind of pick and choose and hope that they’re down as much as they’re going to be down or close to it as far as that goes. And on our process to dollar cost average into some of those things, you know, is kind of the but this is a great concept, a good way to look at it as far as that goes.