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How do you think wealth is created?
Wealth is created when Mr. Market offers you wonderful companies at a fair price.
This is definitely the case for some stocks in our Buy-Hold-Sell list today.
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World War II
In September 1939, the world was falling apart.
World War II was starting.
Newspapers predicted an economic collapse and stock markets were falling.
Most investors were paralyzed with fear.
But John Templeton picked up the phone and placed one of the boldest trades in investing history.
He borrowed $10,000 and bought 100 shares of every single stock trading below $1 on the New York Stock Exchange.
In total, he bought 104 companies. 34 of them were in the process of going through a bankruptcy.
His friends thought he’d lost his mind.
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Four years later, Templeton had turned that $10,000 into $40,000.
He quadrupled his money while the world was literally at war.
He didn’t invest in hot stocks. He didn’t chase the headlines.
He bought boring, beaten-down businesses when everyone else was selling.
That’s the thing about looking dull in a bull market.
It feels embarrassing. It feels like you’re missing out.
The investors who look the most boring today are often the ones who make history tomorrow.
As the famous Warren Buffett quote goes:
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Quality stocks are selling cheap
The most volatile, speculative stocks are hitting all-time highs.
The most fundamentally sound companies are sitting near multi-year valuation lows.
Sound familiar right?
Mr Market is rewarding momentum while it is punishing patience.
History tells a clear story: every period of quality underperformance has eventually been followed by a sharp reversal.
When the rotation comes, it comes fast.
We have already seen this over the past few weeks.
In the past month:
Interparfums: +35.1%
Brown & Brown: +26.9%
Medpace: +23.7%
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Templeton once said: The time of maximum pessimism is the best time to buy.
We’re not at maximum pessimism.
But we are at a maximum discrepancy (the difference between quality and momentum).
That’s almost as good.