Take A Flyer?

Mark Cuban invested $20 million into 85 companies on Shark Tank. Mr. Cuban recently tweeted, “On a cash basis, I’m down on my Shark Tank Investments.”[1] He joined the show in 2011, and if he had invested in the Vanguard S&P 500 Index Fund instead, he could have made 214%! However, that’s not the point. Mr. Cuban’s net worth is $4.7 billion. The Shark Tank investments represent about a half percent of his total net worth or $5 per $1,000. Big whoop. If one of the companies turned into the next Amazon, Microsoft, etc., his investment would have increased significantly.

Global markets continue to trade down, looking for a bottom. In the carnage, there are several companies worth buying today, but you won’t know if you got a bargain until many years from now. You will miss excellent opportunities if you wait until the market recovers or the economy improves. So, the ideal time to buy great companies is when everyone else runs for the hills.

Are you ready to take a flyer? Can you invest a half percent of your net worth to buy a few beaten-down companies? Can you spare $5 from your $1,000 nest egg?

Here are a few suggestions to help you find a few diamonds in the rough.

  • Identify companies that are trading well below their 52-week high. The market has decimated many great companies, including Amazon, Disney, Medtronic, MMM, Nike, eBay, Starbucks, and  FedEx. It’s possible to find stocks trading down 20%, 30%, or more from their all-time highs.
  • Look for companies with solid balance sheets, consistent earnings, revenue, free cash flow, and low debt. In addition, locate companies with robust profit margins and return on invested capital. A few stocks in this category are Apple, Microsoft, Coca-Cola, Lululemon, Fastenal, and Tractor Supply.
  • Screen for companies with robust dividends and a history of increasing their payouts. Abbvie, Amgen, Home Depot, Lockheed Martin, and T.Rowe Price are a few stocks to make this list.
  • Try to find new companies destroyed in the downturn. Zoom, Docusign, Pinterest, Doordash, Snowflake, and Yeti are down significantly this past year but could rebound in the future.
  • Do you have any hobbies – hiking, cars, travel? Several stocks like Garmin, Ferrari, Etsy, or Booking Holdings can fuel your pursuits.

A well-balanced portfolio diversified across asset classes and countries is an excellent way to create generational wealth. Saving money regularly while reducing spending is a blueprint for a profitable future. Investing in low-cost mutual funds or ETFs has proven successful. But taking a flyer now and then or speculating with a few dollars could produce significant gains if you choose wisely. If you strike out or miss the mark, your venture won’t destroy your financial foundation.

Are you ready?

Life all comes down to a few moments. This is one of them. ~ Bud Fox

July 26, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so you can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. I like watching Shark Tank, and Wall Street was one of my favorite movies.

[1] https://www.cnbc.com/2022/07/26/mark-cuban-shark-tank-investing-strategy-isnt-always-making-money.html, Tom Huddleston, Jr. July 26, 2022

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