If you own Boeing Co. (NYSE: BA), the last month has clearly been an "intestinally challenging" ride: 10% straight down after two of the company's new 737 Max 8 aircraft crashed in Indonesia and Ethiopia. It's down around 16% from its all-time highs...
The Max 8 fleet is grounded for now; Garuda Indonesia (Persero) Tbk PT (IDX: GIAA) is the first major carrier to cancel its Max 8 orders - $6.9 billion worth - and there's no telling who could follow. It may be a good long while before they can start flying, let alone selling, these planes again. So obviously, Boeing has taken a reputational hit as well.
Unsurprisingly, I've listened to a couple of Boeing investors lamenting their losses in recent weeks.
To them, I'd say: Look, I have no idea how all the investigations will end, or when they will end, but I suspect Boeing survives just fine.
And I have one solid piece of advice for them - and you - and anyone who's ever watched one of their favorite, hard-won stocks tank...
Relax!
There's more than a little upside in doing just that...
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These Slides Make Headlines, but They're No Big Deal
This bears repeating - a lot: Even the very best stocks will have massive drawdowns along the way.
Amazon.com Inc. (NASDAQ: AMZN) has been a powerhouse stock, but it has had double-digit drawdowns pretty much every year including one of 30% in 2018. During the 1990s collapse of the Internet bubble, the stock fell by over 90%!
It's time to shake things up a bit - The Most Interesting Man in Finance has an important message...
Microsoft Corp. (NASDAQ: MSFT) has delivered annualized returns of 25% a year for over three decades now. Investors who bought the stock and held on for dear life are rich now. Really rich. But along the way, the stock has fallen by 20% or more in more years than it hasn't. From 1999 to 2009, the stock declined by over 70%.
Stocks, even the shares of the most excellent companies, fluctuate. According to my friends at Webster's, fluctuate means "to rise and fall in or as if in waves."
Up until last year, stocks only fluctuated one way: up. But stocks don't just go up, they also fall. The most successful (read: richest) investors not only understand but embrace this fact.
Just so you know I'm putting my money where my mouth is, I'll tell you what happened to me.
I have lost track of how many stocks I have seen take a dive and the recover to bring me rich, wallet-fattening gains.
I used to own Atlas Pipeline Partners LP back in 2008. That puppy fell from almost $20 a share to less than $5 during the market meltdown.
Instead of crying about the stock price, I focused on the real dollars-and-cents value of the business.
My key finding: Well, the share price fell through the floor - along with everything else in those days - but the actual business, the case for buying and owning the company, hadn't changed all that much.
The stock would eventually do just "fine," and by "fine," I mean, "Atlas would get scooped up in a rich takeover handing investors ultimate gains of nearly 1,000% from those lows."
The gains were well worth the stomach-churning ride. But this is far from an isolated case.
Texas-based department store Conn's Inc. (NYSE: CONN) shares fell from $10 to about $5 in the crash.
Of course, the value of the company didn't change that much. In fact, the business case for owning it improved the minute the economy stopped collapsing. The stock "improved," too, from crisis-level lows of less than $5 to more than $70 a share, around 1,300% in profits.
At the end of the day, it's the value of the business, not the price of the stock, that matters.
How to Play This If You Own Boeing - or If You Don't
Do the air disasters and subsequent investigations change the real value of Boeing's business? I doubt it. I don't know for sure, as I don't own the stock. Even at the December lows, Boeing was trading at 15 times earnings before interest and taxes and had a P/E ratio of almost 20.
A great business, but still too rich for my blood. I've always believed buying great businesses at unreasonably good prices is the way to get rich in the stock market.
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That said, it's a great business, so if it trades down to genuine bargain levels (right around where it was from the end of 2010 to mid-2013), per my tried and true "Heatseekers" metrics, I'll look again.
By the way, as my colleague Bill Patalon would tell you, folks who've owned the stock since the end of 2010 have made around five times their money, not including dividends. That's more than enough to compensate for this latest dip.
On the other hand, if you bought the stock last month or did so based on some squiggly lines on a chart, consider this a valuable learning experience - then get back on the horse.
Investors who can't stomach a 10% price decline... Well, there's always investing in tin... to make a big can out of it... to bury cash in the backyard.
Drawdowns happen. If you buy good businesses at great prices, you won't care... unless the drawdown hands you the golden opportunity to own a good business at a bargain price.
Then you'll learn to really love drawdowns.
These 3 Stocks Are the Key to 2019's Greatest Profits
The 2018 midterm election was a turning point for the cannabis industry.
We expect nothing short of historic profits by the end of the year.
But not all pot stocks will hand you life-changing wins. In fact, often the companies making headlines are least likely to see the biggest gains.
These three stocks, on the other hand, are flying under the radar... for now. Each of them could see exponential stock price acceleration at any moment, and if you get in before that happens, you could turn a token stake into a lifetime of wealth.
I don't know of any other sector providing anywhere near this level of growth now.
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About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.