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Here we go again.
Let's be clear: We're already in the middle of a deep recession. The market's Thursday sell-off, fueled by concerns about reopening the economy and a resurgence of COVID-19 infections, simply brings stocks more in line with an unpleasant economic reality.
The resurgence of fear and uncertainty will push investors to the sidelines again. This will create new opportunities for "smart money" - investors who know how to play the long- and short-term impacts to maximize our gains.
Today we're going to look at a little-understood industry positioned to reap massive gains because of the Coronavirus Recession...
This Sector Will Thrive After COVID-19
Until Thursday, the stock market had been skyrocketing. But that upward surge hid the steep decline in many businesses in struggling sectors like media and entertainment, and real estate.
Private equity (PE) firms have been rushing in to buy businesses on the cheap with the intention of restructuring and supporting these companies until the economy improves. They can be sold then for multiples of the prices PE firms have paid for them.
Private equity funds formed during difficult years like 2002 and 2008 enjoy much higher long-term returns than those PE firms that formed during boom times.
That's no coincidence.
Now, while it's true that most of us lack the liquidity required to directly invest with the giants of private equity, anyone can make a lot of money by aligning their capital with private equity.
What's more, there are several publicly traded private equity firms where we can buy shares.
These firms will earn a percentage of the profits earned by the funds as well as management fees every year the fund exists.
So we'll take part in those gains by owning the stock. The higher returns will generate higher fees, which will help drive the stock price of these firms a lot higher over the next several years...
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.