Legendary investor Shelby Davis once said, “You make most of your money in a bear market. You just don’t realize at the time.”
Buying beaten and battered stocks when markets are falling apart has been the source of some of the largest fortunes in history.
Hetty Green became the richest woman in the world in the early 19th century because she hoarded cash in good times and bought railroads stocks and New York City real estate when everything was falling apart in a panic.
Richard Rainwater became a legend buying assets when nobody else wanted them and selling them for far more than he paid.
He once said, “Most people invest and then sit around worrying what the next blowup will be, I do the opposite. I wait for the blowup, then invest.”
This time will be no different.
While I think it is early in the cycle, this market collapse is going to result in enormous profits for those willing to buy all the way down and hold on for the next decade.
There is such a wall of bad news in front of us that I think it would be foolish to throw all your money into the pot today.
However, it is time to start putting together the list and starting to dollar cost average into the market.
The list of what to buy is a critical part of the process.
Let’s get right to it…
Don’t Miss Out on This Wildly Profitable, Best-in-Class Bank
Home Bancshares Inc. (NasdaqGS:HOMB) is a bank we have talked about in the past, and it should be at the very top of your list.
Back in 1998, current Chairman John Allison and his partner Robert “Bunny” Adcock started First State Bank in Conway, Arkansas, with about $25 million in assets.
They have made about one smart acquisition every year since, and today the bank has over $15 billion in total assets.
Mr. Allison once told me his plan was to grow earnings to the point that the shares traded at $50 a share, and having followed his career for some time, I would not bet against him.
The smart thing to do is to bet with Johnny Allison. He still owns almost 7 million shares of Home Bancshares stock.
Mr. Adcock owns 1.4 million shares.
All of the bank’s executives have substantial stakes in their bank’s shares.
Simply put, this is probably the best-run bank in the United States, and possibly the world.
They have excellent expense controls. Quarter after quarter, they have one of the highest returns on assets and returns on equity in the banking industry.
Home Bancshares has never done a deal that is not immediately accretive to earnings right away.
They have built the bank by buying underperforming banks and bringing returns on those assets up to the parent company high levels.
How good are they? They were profitable in the first quarter of 2020 when most banks were bleeding cash due to the spread of the coronavirus.
The stock is yielding over 4% right now.
On the last conference call, when asked about the dividend John Allision said his wife owned about 1 million shares of the stock and likes to use the dividend for shopping, so for the sake of the marriage, he thought it best to keep the dividend in place.
On big down days, start accumulating shares of Home Bancshares.
Mr. Allison and his team will make you an enormous amount of money over the next decade.
Two Legendary Investors and a Potent Portfolio for One Low Price
Put Brookfield Asset Management Inc. (NYSE:BAM) at the top of your list as well.
Brookfield invests in real estate, infrastructure, energy, renewable energy, and private equity investments all over the world.
They have proven themselves to be very good at what they do, and the stock has made a lot of people rich over the past few decades. I expect they will continue to do so in the aftermath of the current crisis.
Brookfield bought a majority interest in distressed debt and credit investing firm Oaktree last year and is going to be well-positioned to reap enormous profits as the crisis plays out.
Howard Marks runs Oaktree, and he is a legend in the distressed debt markets having delivered very high returns to his investors for more than 40 years.
Given that Brookfield owns a lot of real estate and energy-related assets, there is headline risk.
However, CEO Bruce Flatt wrote a letter to shareholders last month outlining where Brookfield stood in this mess.
He assures us that Brookfield has plenty of cash, access to even more cash and they staying power to come out the other side of this mess in good shape with the potential for massive gains. He wrote, “We just finished raising our latest funds and co-investments, totaling over $50 billion. These are only 40% invested, so we have a lot of capital to put to work in this environment.”
The stock is probably going to bounce around a lot this year.
Buy on big down days and keep buying.
This is an opportunity to invest in distressed debt, battered real estate assets, and bruised energy assets at fire-sale prices.
As a bonus, you have Bruce Flatt, and Howard Marks, two wildly successful investors with fantastic track records, overseeing the process.
The long term returns from here will be life-changing.
Adopt the Value Investing Mindset
Yes, it is scary right now.
It will probably get scarier before it is all over.
Those who choke back the urge to vomit on big down days to buy stocks that benefit the most when this is over will make a fortune over the next decade.
Do not use cash you will need in the next several years. It will be a very bumpy ride.
Prices are probably going to go lower before they go higher.
Be mentally prepared for that to happen.
Be willing to buy more as prices decline.
Be willing to own these companies for a very long time, possibly even forever.
Home Bancshares and Brookfield Asset Management are two stocks that will survive the crisis and reward courageous investors with gains they never dreamed of achieving.
Not everyone can do this, but those that can are going to make a fortune.
— Tim Melvin
Source: Max Wealth