Guest Post: Chris’ Bear Market Money Makers

Hi, all!  I’m turning the floor over on this final day of 2018 to Wealthy Joe contributor Chris Pascale, who is going to share with us what he’s buying these days.  Take it away, Chris! ~Eric

BEAR MARKET MONEY MAKERS
By Christopher Pascale

If you were following Eric’s advice of buying stocks and holding them, you had huge gains through most of the decade.

2018, however, was a bear year, as you can see in companies like dividend-paying
General Electric (NYSE: GE) and Ford (NYSE: F).

In this article, I’m going to discuss how to get long-term gains of 7% or more.  Then I’m going to talk about four specific stocks that I’m buying right now, and plan to hold through the bear cycle.

The Smart Money: 7% Long-Term Gains

People smarter than me (Eric Milton, JL Collins, and Warren Buffett) will tell you to just invest in the entire US market.

Eric favors wisely chosen single stocks, and offers the service to others practically for free; JL Collins prefers Vanguard’s VTSAX fund, which has historically returned great gains; and Warren Buffett says to “buy a little piece of America,” which means Coca-Cola stock and a house for your family.

And they all agree that you need to avoid things you do not understand, like cryptocurrency in 2016 and websites with no revenue in 1998.

They are right, and you should do those things.  I am doing them, too, by owning a home and investing for retirement. But I’m also investing on the side to try and score bigger returns.

2 Safe Stocks & 2 Gambles

The 4 companies I’m going to discuss, and am investing in, are:

1. Fannie Mae (OTCMKTS: FNMA)
2. Rite Aid (NYSE: RAD)
3. GrowLife, Inc. (OTCMKTS: PHOT)
4. Hemp, Inc. (OTCMKTS: HEMP)

Fannie Mae (OTCMKTS: FNMA)

As a result of taking on the loans for subprime lenders in 2007, Fannie Mae destroyed itself, and should not be in business today.  The stock was well over $60 per share, and had even neared $90 during the tech boom. And then it became a penny stock.

In 2013, it rose from roughly $0.20 to more than $2.00.  In 2014, it went above $5.00, but is now at a 5-year low around $1.00.

If  a) this is truly a bear market, and b) Fannie Mae is not going out of business, you would be wise to invest what you can afford.

I currently have 196 shares of Fannie Mae, and will be buying $200 worth on a bi-monthly basis. If the stock goes down further, then I’ll be happily picking up hundreds of shares at a time that will definitely be worth much more in the coming years.

Having said this, if Fannie Mae goes away, then everything I invest will be gone, which is why we must not invest more than we can afford to lose.

Rite Aid (NYSE: RAD)

Rite Aid has been in the crapper, and the market has taken a giant dump on top of it.

Personally, I think it’s a good thing.  Why?  Because the stockholders aren’t taking any chances, which is why they recently voted to deny the CEO his $3,000,000 bonus and replace the Board of Directors.

Also, according to a Rite Aid employee I spoke to this week, half the company has been purchased by Walgreens, and the other half may be owned by Albertson’s in 2019.  As for the latter, we’ll see.

If a) Rite Aid stays in business through the bear market – on its own, or via corporate takeover – and b) medical marijuana is prescribed through its Walgreens pharmacies, the stock should do very well in 10 years or less.

I currently have 1,100 shares of Rite Aid, which was the result of buying before the recent shareholder vote, then offloading most of that purchase when the stock price jumped afterward. I’m going to do the same thing with Rite Aid that I’m doing with Fannie Mae – invest $200 bi-monthly.

GrowLife, Inc. (OTCMKTS: PHOT)

Before even considering this stock, read Eric’s post Don’t Be Penny Foolish.

This company sells equipment for home and commercial cannabis production. If you think you’d like to start a small business in the marijuana industry, check out their cube product kits.

However, if you want to simply buy some shares and see what happens, you should note a few things.

First, this company has done millions in sales, but has had more millions in losses every year.

Also, the stock is worth less than a penny.  That means that you could buy more than 10,000 shares with $100, but only because the market does not even value a share of this company at more than the coins you step over.

I currently own over 3,400,000 shares of GrowLife, Inc.  On volume trading alone, it should go over $0.015 within the next year as it had in each of the past 3 years.  Also, since the company is making real sales of products that are necessary to an emerging market, it seems to me that the gamble (and it is a gamble, not an investment) should pay off, even if the company is not viable.

Hemp, Inc. (OTCMKTS: HEMP)

Hemp is not marijuana.

It is a high-fiber food with a full amino acid profile that I personally eat every day.  It is also a building material, and not only are homes being built with bricks made of hemp, but the Lotus car company used it in its body, just as Henry Ford once had.

But just because a company is called “Hemp” doesn’t mean that the hemp industry will raise up a company of the same name, so what does Hemp, Inc. do?

First and foremost, they self-promote, which, for me as an investor who wants real news (distribution deals, profitable quarters, etc.), is annoying.

Secondly, they sell their own line of goods, a HazMat absorbent called “Spill-B-Gone,” from in a factory in North Carolina that can also process the crops of other companies and farms.

These are both great things, but the financials stink.

Hemp, Inc. isn’t making many sales, and while the US has been very slow to legalize the crop, some states have, and hemp-based products have been in grocery stores for a couple years now.

I own 100,000 shares of Hemp, Inc.

If Hemp, Inc. a) stays in business through the bear cycle, and b) posts a profit ever, those who own even 100,000 shares (currently $3,300 worth) will become at least a little rich.

On the other hand, if c) Hemp, Inc. stays in business through the bear cycle, and d) just hangs in there with the next bull market, then it’s possible to at least double your money or more for the same reason you could with GrowLife – volume-based fluctuations.

My Current Positions in These Companies

As noted above, my current holdings in these stocks are:
 FNMA: 196 shares
 RAD: 1,100 shares
 PHOT: 3,421,695 shares
 HEMP: 100,000 shares

While this portfolio is worth over $30,000 right now, I have more than that invested in real estate and retirement funds {Roth IRA, 403(b), and a Thrift Savings Plan}.  Also, my passive income is fairly significant.

This is important to know because if you do what I am doing (gambling with stocks), it should be kept in perspective.

Eric Milton and Warren Buffett might pick up shares of the first two, but they would definitely not buy the second two, because the companies have repeatedly lost money, and revenues are not even going up every year, even though the market is emerging out of prohibition.  And as for JL Collins, he thinks single stocks are dumb and a waste of time.

Christopher Pascale is an author, accountant and adjunct professor from Long Island. He is the former CFO of Portfolios with Purpose, and is a current member of the IRS’ Office of the Chief Counsel.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

 

 

Guest Post: The Gap Used to Be a Penny Stock, by Chris Pascale

Good evening, Joes and Janes!  Tonight I’d like to once again turn the floor over to Chris Pascale, author, accountant, former CFO of Portfolios with Purpose, and current member of the IRS’ Office of the Chief Counsel.  Take it away, Chris! 

The Gap Used to Be a Penny Stock: More Proof That Eric Is Right

As I mentioned in a previous guest post, I’m working with my children so that they can learn about the stock market. My main goal is that they start saving young. If they become savvy investors, that would be an incredible bonus.

Recently, my 12-year-old asked me what the stock market is. Apparently, it’s mentioned on her news-feed. So, adapting the definition Eric gave us in his book The Stock Market Is for Everyone, I told her:

“Just as you can buy pieces of produce at the farmers market, you can buy pieces of businesses at the stock market.”

We were at Old Navy while having this discussion, so I looked up the stock to show her what it would cost to own a piece of the business. What I found was that Old Navy is owned by Gap, and that in 1980, you could have bought shares for as little as 5 cents!

1,000 Shares of The Gap for $50

Yes, if you were 18 or older you could have owned Gap shares for just 5 cents each. And that would have been expensive because they went as low as 3 cents that year!

Knowing this, let’s explore just how rich Baby Boomers could be if they had slowly bought shares from 1980 through 1985, spending only enough to buy 1,000 shares a month. This math will only account for average-ish prices, noting the cost of 12,000 shares each year.

·         1980: 12,000 shares for $600
·         1981: 12,000 shares for $1,000
·         1982: 12,000 shares for $1,500
·         1983: 12,000 shares for $3,100
·         1984: 12,000 shares for $1,900
·         1985: 12,000 shares for $3,000

The Cost v. The Reward

Now, to be fair, I was born in 1982, so I have no idea what kind of income I could have made during this time. But we can all agree that every working person could have figured a way to come up with $50 once a year, if not once a month.

Had someone executed the above purchases, he would have spent $11,100 for 72,000 shares of Gap stock.

Today, that investment would be worth over $2,300,000. And for those who only could have bought 1,000 shares a year, they would have about $192,000 after only risking about $1,000.

Applying This to Today’s Market

Why not find good companies with products and services you use all the time, and slowly acquire shares?

For example, do you use Facebook (FB) every day? Well, if you would have gotten in at the IPO, you’d have more than a 500% gain (just 6 years later!). And if you bought more shares after it slumped to its low in August, 2012, that money would have grown by 1,000%.

Am I saying that Facebook stock will keep going up? No. But history indicates that companies like Facebook have.

It’s the reason why every dollar invested into Johnson & Johnson (JNJ) in 1979 has grown by about 90-100x. The same can be said for Pepsi (PEP). Had you bought Microsoft (MSFT) shares in 1986, they would have only cost you 10 cents each, meaning that $1,000 invested 32 years ago would be worth $900,000 today.

We all want to get rich fast, but could you settle for getting rich within your own lifetime? Because you can.

RECAP

$1 of Gap stock from 1980 is now worth over $300,
$1 of Facebook stock from August, 2012 is worth $10,
and
$1 of Johnson & Johnson and Pepsi stock from 1979 is worth about $95.

Eric here.  Thanks, Chris, for this powerful illustration of what your wealth could be if you had invested years ago!  Please, folks, don’t wait another day – get in the market NOW!

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)