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Buying into a market crash


Uccmal
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I am trying to prepare for purchasing the best of the best companies in the event of a market crash.  I wasn't prepared in 2008/09 with any specific names - I did okay but next time I want to buy and hold really good names.  This time I want a no brainer list to go to when such a crash happens.  Not trying to predict anything BTW.

 

So far:

 

Canada: RY, ENB, BCE, AQN, BEp.un, Restaurant Brands Int.,

 

US: Visa < 50;  Home Depot < 75; Starbucks < 30; Google < dont know yet.  FB < dont know yet

Apple < $30;  Msft < 20

 

Qualifications:

 

1) Us only

2) No US banks - might buy KBW tracker fund.

3) Dont put coke or pepsi since they never go on sale.

4) Suggest a target price.

edit to add:

5) No oil companies

 

Cheers Al

 

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If market crashes like in 2008-2009, the best buys are weak companies, not strong companies. That's how you make 10x or more from bottom or even above-bottom purchases.

 

If AAPL drops to $30, that would be a supercrash. Less than 1.5x book (which is pretty pure cash) and less than 3x FCF...

 

 

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BUD:US

 

We would hopefully capture a good portion of the last 5 years of consolidated growth, beer is not going away, and the cash cycles are fairly short.

The beer itself sucks, but at least we will be able to afford something better.

 

SD

 

lol

 

If market crashes like in 2008-2009, the best buys are weak companies, not strong companies. That's how you make 10x or more from bottom or even above-bottom purchases.

 

If AAPL drops to $30, that would be a supercrash. Less than 1.5x book (which is pretty pure cash) and less than 3x FCF...

 

 

 

I only want strong multinational companies with a history of raising dividends - should have qualified this above.  Agreed on Apple - will probably never own it.  FB doesn't have a dividend yet but it will.  Always exceptions. 

 

My plan is to use this list to rapidly deploy cash. 

 

Well, there's also all the compounders at 1x book or less, but they don't tend to fall that hard and are pretty obvious. 

 

BRK

MKL

FFH

BAM

etc.

 

Might get FFH below book, Hold Bep.un (Bam) already.  Thanks Joel. 

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Well, there's also all the compounders at 1x book or less, but they don't tend to fall that hard and are pretty obvious. 

 

BRK

MKL

FFH

BAM

etc.

 

Sheesh, I would be happy to get some MKL at ~1.3x.

 

They did hit 1.0x book value in 2010 on the Reinsurance acquisition, but not many opportunities like that.

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If market crashes like in 2008-2009, the best buys are weak companies, not strong companies. That's how you make 10x or more from bottom or even above-bottom purchases.

 

If AAPL drops to $30, that would be a supercrash. Less than 1.5x book (which is pretty pure cash) and less than 3x FCF...

 

I was thinking the same thing when I read that.  AAPL under $30, what kind of crash is he preparing for?  Time to buy ammo, gold, and canned goods.

 

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If market crashes like in 2008-2009, the best buys are weak companies, not strong companies. That's how you make 10x or more from bottom or even above-bottom purchases.

 

If AAPL drops to $30, that would be a supercrash. Less than 1.5x book (which is pretty pure cash) and less than 3x FCF...

 

 

 

I only want strong multinational companies with a history of raising dividends - should have qualified this above.  Agreed on Apple - will probably never own it.  FB doesn't have a dividend yet but it will.  Always exceptions. 

 

My plan is to use this list to rapidly deploy cash. 

 

 

My portfolio (signature) has a few stocks which may be beneficial. MMM, NKE, WPP especially come to mind. Probably wouldn't be too hard to determine an attractive price range if you stare at the financials for a bit.

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MCO, FICO, DIS, TDG maybe.

 

CFRUY if you go out of US, Nestle - same.

 

Personally, I'll probably buy Liberties, since they will crash a lot since they are levered.

 

I'm still not sure these lists are useful, but what the heck. More fun than some other threads. ;)

 

Sorry, no price targets, since looking at your prices I'm not sure I can suggest comparatives. ;)

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I think whats more important is identifying (or at least having an educated guess) at which of the blue-chips will continue to compound vs. erode.

 

Depends on what causes supercrash, no?

 

If we are talking about air pocket that drops market 20% or so, most everything "Buffetty" will continue to compound.

 

If we are talking about supercrash that makes Apple go down 70%+, the underlying causes will affect what will come out of the crash fine, what won't. We'll be crapping our pants at that point anyway, so I suggest buying Depends...  ::)

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When a market crashes different stocks will drop at different rates.  You have to see which ones drop the most when it happens. The more important thing I think is ....... how do I prepare the cash to buy them?  And if I am short on cash, which stocks I own now will I be able to sell at a decent price to raise the cash when the crash comes.

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Jokes aside, look closer at BUD.

 

With all these mergers it truly is multi-national, it has a fat $US dividend, and it is anti cyclic to P&C insurance. When the shit hits the fan, folks reach for drink - and when they cant afford spirits, its beer instead. Almost 1 in 2 cans sold around THE GLOBE is now one of their brands, and their cash conversion cycle is on the shorter end.   

 

Hot summers (ie: global warming) are great for beer consumption, driving up earnings. But they suck for P&C, raising the severity of weather related flood and hurricane losses. Very handy for seasonal long-short trades.

 

SD

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Al I think about it exactly the same way: crashes are for loading up on forever companies at no-brainer valuations, not for buying crap that will be levered off the bottom, because that crap can die.

 

I would second MMM, an absolutely outstanding company, and I would add JNJ, BASF, Svenska Handelsbanken, GE, and PX.  All of these are over 100 years old so they've survived varied macro crises, and they have incredible corporate DNA.  Some of them are quite cyclical though, and one or two are levered.  For me that's perfect: they're likely to get hammered in a crisis, but almost certain to survive and thrive.  I have stub holdings in most of these to remind me to load up next time everyone's terrified.

 

KO and PEP - you say they never go on sale, but that depends on your definition of sale.  I got KO at 12.5x in March of 2009.  Looked like a sale to me ;)

 

If you ever get MSFT below $20 put your entire net worth into it.  Sell your kids and put that in too.  Last time it went there it took not just the crash but a general feeling that it couldn't live in the cloud.  Today it looks like a cloud leader.  I think it's one of the best businesses in the world.  I'll be deliriously happy if I can ever buy it below $20 again.

 

PS: no price targets attached because I don't slavishly adhere to them.  I think about where I'd like a small position, a medium one, a big one, a levered one, etc.  Also, my risk tolerance and desired return are different to yours.

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crashes are for loading up on forever companies at no-brainer valuations, not for buying crap that will be levered off the bottom, because that crap can die.

 

Best year ever 2009, around 3-digit percentage returns buying crap. And the crap wasn't even 100% of my portfolio.

http://www.siliconinvestor.com/readmsg.aspx?msgid=26212212

 

But, yeah, there is some risk. Buying crap oil in 2015-2016 so far has lead to losses.  ::)

 

Peace.

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Thanks LC, Ourkid, Jurgis, and SD.  Some I am not so familiar with I will look into once I compile a list. 

 

Al I think about it exactly the same way: crashes are for loading up on forever companies at no-brainer valuations, not for buying crap that will be levered off the bottom, because that crap can die.

 

I would second MMM, an absolutely outstanding company, and I would add JNJ, BASF, Svenska Handelsbanken, GE, and PX.  All of these are over 100 years old so they've survived varied macro crises, and they have incredible corporate DNA.  Some of them are quite cyclical though, and one or two are levered.  For me that's perfect: they're likely to get hammered in a crisis, but almost certain to survive and thrive.  I have stub holdings in most of these to remind me to load up next time everyone's terrified.

 

KO and PEP - you say they never go on sale, but that depends on your definition of sale.  I got KO at 12.5x in March of 2009.  Looked like a sale to me ;)

 

If you ever get MSFT below $20 put your entire net worth into it.  Sell your kids and put that in too.  Last time it went there it took not just the crash but a general feeling that it couldn't live in the cloud.  Today it looks like a cloud leader.  I think it's one of the best businesses in the world.  I'll be deliriously happy if I can ever buy it below $20 again.

 

PS: no price targets attached because I don't slavishly adhere to them.  I think about where I'd like a small position, a medium one, a big one, a levered one, etc.  Also, my risk tolerance and desired return are different to yours.

 

Hi Pete,

 

I dont slavishly adhere to the price targets I have set.  When the time comes I will generally know it and load up.  You know - blood on the streets, death of equities talk.  The obvious death knell will be when Vanguards index funds report significant redemptions.  That is where all the weak money is sitting these days.  Just invest in the index fund young grasshopper and never sell - Oops. 

 

I have regreted buying many crap companies, but my major regret is not holding some of the positions I bought in spring 2009, namely Sbux, Home Depot, GE, and Amex.  Just owning these would have saved me alot of mistakes trying to get value elsewhere going forward.  Had I held these I would have been further ahead over the last 7 years rather than dodging in and out of middling stuff. 

 

I didn't have the experience then of watching blue chips rise from the ashes and then just keep on ticking upward.  I have now seen this happen, and I am seeing it happen in real time in Canada this year. 

 

This year I have watched MTL, RUS, WCP, ENB, RY, and FN rise 20% or more in some cases, from their lows - all directly, or peripherally related to oil, and several have a long way to go yet.  Not including Pwt in this.  It was more of a special situation.

 

I want to duplicate this with US stocks.  The tracking stock idea is a good one. 

 

I have been raising cash for 2 months to leave available ammo, and am fully hedged on the downside.  I dont want to derail the thread with my speculations on catalysts.  Perhaps another thread is in order.

 

Cheers, Al.

 

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Jurgis/Scorpion - I think my "crap" comment was lazily worded.  I'm not saying don't do it, I'm saying *I* don't do it.  I am a big fan of stress-adjusted returns.  You'll make money quicker off the bottom in lower quality stuff, but I wouldn't sleep as well.  And, of course, there's the chance that the next one is a 1930s or a 1970s style event, in which case crap might not bounce so high so fast. 

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Jurgis/Scorpion - I think my "crap" comment was lazily worded.  I'm not saying don't do it, I'm saying *I* don't do it.  I am a big fan of stress-adjusted returns.  You'll make money quicker off the bottom in lower quality stuff, but I wouldn't sleep as well.  And, of course, there's the chance that the next one is a 1930s or a 1970s style event, in which case crap might not bounce so high so fast.

 

Sure. Makes sense. Thanks for posting. ;)

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