One of the best ways to make money in a market over-saturated with fear is to invest like a billionaire, like Buffett, Rothschild, and Templeton.
After all, fear can attractive to smart investors
Buffett still advises that a “climate of fear is your friend when investing; a euphoric world is your enemy.” And of course, we all remember his advice to “be fearful when others are greedy and greedy when others are fearful.”
Sir John Templeton bought excessive pessimism.
Instead of relying on a forecasting model, he’d rely on extreme fear among investors.
The best example was in 1939. Europe was just about decimated. So, Templeton bought every European stock trading below $1.00 a share and made a fortune. He would buy shares in 104 companies for about $10,400. Four years later, his account balance topped $40,000.
Baron Rothschild once told investors, “The time to buy is when there’s blood in the streets, even if the blood is your own.”
Some of the very stocks that have become “blood in the streets” opportunities include:
The stock wilted a bit after its fourth quarter showed a net loss of $8.3 million, or 13 cents per share, after a loss of $8.2 million, or 13 cents per share, the previous year.
Revenue of $259.4 million was up from $229.9 last year.
However, those numbers don’t justify a drop from $20 to $14 a share, though. In fact, we’re viewing the pullback as another overreaction. From here, we strongly believe the stock will refill its bearish gap around $20 a share. We also have to consider the stock has a history of moving higher in the last quarter of the year, especially with holidays around the corner.
Plus, going forward, the company sees revenue growth of 8% to 9%.
Adverum Biotechnologies (NASDAQ: ADVM)
Unfortunately, it just got caught up in the trade war pullback.
But here’s why we still like the stock. For one, the U.S. FDA just lifted its hold on the trials allowing dose escalation to 2 x 10^12 vg/eye. And two, the company will present 24-week data from the first cohort of patients in the OPTIC phase 1 clinical trial of ADVM-022 intravitreal injection gene therapy in wet AMD will be presented at the Retina Subspecialty Day Program of the American Academy of Ophthalmology (AAO) 2019 Annual Meeting in San Francisco, CA on Friday, October 11, 2019.
“Wet AMD is an aggressive disease that often requires frequent anti-VEGF injections over the long-term in order to reduce vision loss,” said Aaron Osborne, MBBS, MRCOphth, chief medical officer of Adverum Biotechnologies. “ADVM-022 is administered utilizing a single, standard-of-care intravitreal injection, which we believe has the potential to significantly reduce treatment burden and improve real-world vision outcomes for patients with wet AMD. We look forward to presenting 24-week data from the first cohort of patients in the OPTIC trial at the upcoming AAO meeting.”
The presentation is expected to provide significant insight into the therapy’s safety and efficacy, and could send the stock even higher.
Action to take: ADVM is a buy at $10.65. Initial target is $20. Consider a stop at $8.
General Electric Co. (NYSE:GE)
General Electric plunged the other week on damaging allegations.
You may remember Harry Markopolos claimed the company was hiding its financial problems and would need to significantly raise insurance reserves. However, it appears Wall Street isn’t taking those claims too seriously.
The allegations of fraud at General Electric are “at best disingenuous”, and, “at worst highly inaccurate,” according to Nick Heymann with the William Blair firm, as quoted by CNBC. “You got the stock on sale yesterday for absolutely no basis.”
Even Deutsche Bank just noted, “We find ourselves in the unenviable position of having to defend the reserve adequacy of a business about whose future claim projections we have very deep concerns,” they said, as quoted by Barron’s. “However, the logic put forth in this presentation appears largely poorly reasoned, in many places mismatching accounting treatments, making comparisons based on data sets too small from which to draw conclusions and rendering conclusions with no factual basis.” While Deutsche Bank does note that GE’s long-term care insurance is a troubled businesses, that shouldn’t come as a shock to investors.
Analysts at Wolfe Research also weighed in, noting, “We are comfortable that GE’s LTC insurance reserves are well grounded and certainly not fraudulent.” At the moment, the firm has a buy rating on the stock with a price target of $14 a share.