Crazy Market Update: Staples Could Be the Key to Major Returns
Can you believe the start of 2023? I’m talking about 109% returns and 160% returns since January 1st. I’m not talking about some obscure companies that are listed on the pink sheets or initial public offerings. No, I’m talking about two of the largest capitalized companies in the world.
Hello again, Dave Duley here with Georgia Advisory Group, a full-service fiduciary firm leading the way with innovative ways to grow wealth and income, and more importantly, showing you how to hold on to what you have.
The great thing about videos for you as the consumer is that you have the ability to go back and verify exactly what the advisor predicted or advised for the future. Here, I’m going to walk you through exactly what we predicted and the moves we made to be able to capture these types of returns.
Now, the two companies I’m speaking about are Meta and Nvidia, two of the largest capitalized companies in the world. Meta, today formerly Facebook, is trading at $252 a share, and less than five months ago, was trading at $125 a share. Meta today has a market cap of $650 billion and has cash on hand of over $43 million.
Nvidia has a market cap today of over $949 billion, that’s right, almost one trillion dollars. It began in January of 2023 at a price of $150, and today is trading at $380. They have over $14 billion in cash.
Now, why does this matter? Because these companies, as well as several others, are exactly what we preached about back in December of 2022 before the first of the year. To keep an eye on and to begin to dip your toe in. Warren Buffett said it best, and I continue to pound the table, that owning great companies that are undervalued at prices, who have great management and high demand for their products, with tons of cash on hand, is the place to be.
These were just two companies we’d spent a lot of time talking about before the year even began. Many times we would get comments that these companies that we were recognizing as buys were primarily technology. I absolutely agree. We are heavy in technology and don’t see any slowing down in the foreseeable future.
Now, the primary reason is these companies matter. Nvidia, Apple, Microsoft, Amazon, Google, and many more are tech companies. But that is exactly the society we live in today—technology. So, the reality is these companies and many more are now considered staples.
What is the definition of so-called staples? Well, consumer staple stocks represent companies that are non-cyclical because they produce or sell goods or services that are always in demand. There you have it. Is your phone in demand? Are chips for every vehicle driven in the world in demand? Is there anyone you know that doesn’t spend time posting or selling goods on Meta? Who do you know who doesn’t order from Amazon or spend hours on YouTube, like this one owned by Google? These, my friend, today are companies that are staples in our society today. No different than 200 years ago when corn, eggs, milk, and flour were staples. Shoot, I know most people would give up any of those items for a month if they were told their iPhones would be taken away.
My point is simple, and so are Warren Buffett’s and Charlie Munger’s. Own staples. Great companies you use every day. Buy them when the opportunity presents itself and hold on.
After Meta and Nvidia both had lost half of their value in less than 18 months, your advisor had to be blind not to see these were great companies and great opportunities. For a year, they continued to drop in value, not based on overall revenue decreasing. Just the opposite was taking place. Revenue continued to increase, but margins or net income were slower. Why? We’re in a recession, and it had been since March of last year. I don’t care what anybody tells you, but this is good for staple companies that are now tightening their prospective belts by getting rid of excess fat built up over 10 years of exponential growth. They have realized with high-interest rates now, and slow supply chains getting back to normal, that running a tighter ship and getting back to each of their core businesses is now paying off.
Oh yes, there are issues, but great management knows how to overcome them. They know how to adapt and get the rudder in the right position to move forward. Great advisors know how to recognize these trends and make bold moves to capture these opportunities. And most importantly, how to protect those positions from outside factors such as political turmoil or natural disasters that nobody can predict.
Even after these major run-ups in these particular stocks, we set parameters to exit our positions and replace options in place to protect our gains. In addition, we continue to create income from these positions while trying to accumulate more of them.
We believe now is a great time to begin to look at narrow ETFs going forward called spiders that focus specifically on positions we mentioned earlier. Once the FED says no more rate increases, we’re going to see another run on companies focused on applying artificial intelligence platforms to their marketing and core businesses. And in another 10 years, artificial intelligence too will be considered just a staple.
If your former advisor is just sitting back hoping for the best and not actively managing your portfolio, then it’s time to take a look somewhere else.
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