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Buffett Is Missing This Massive Next-Gen Opportunity

Buffett Is Missing This Massive Next-Gen Opportunity

Seasoned stock-pickers like Warren Buffett welcome bear markets.

His fund spent $51 billion to snatch up stocks in the first quarter of 2022.

I’m not surprised Buffett has such conviction.

After all, he shelled out $34 billion in 2009 to acquire a railroad company.

The investment nearly doubled in value over the next four years.

So I’m sure he’ll do OK with his latest trades.

But looking at historical returns, Buffett is off the mark.

I have a chart for you that shows one next-gen sector is the place to be right now.

You’ll be shocked when you see how massive its gains were after previous bear markets…

Focus on the Rebounds — They’ve Been Huge

Bear markets aren’t created equal.

The magnitude and duration of the drawdown in a bear market can vary greatly.

Since bear markets can occur from a variety of factors, it’s not always clear when they’ll end … or what to buy when they do.

Some declines can take years before the market settles at a low. This happened during the early 1980s, the dot-com crash and the global financial crisis.

Other times, the market bottoms in just a matter of months. This played out in 1987, 1990, 1998, 2018 and, most recently, in 2020.

So if anyone tells you that a bear market has to last a certain period of time before rebounding, they’re mistaken.

Below is data ranging back to 1980 for every bear market in the Russell 3000 Index.

The Russell 3000 is a good proxy for the U.S. stock market, since it measures the performance of 97% of investible U.S. stocks.

The Russell 3000

(Source: Bloomberg.)

As you can see, each bear market looks a bit different. But the most interesting story from the data lies in the rebound, or what turns out to be the following bull market.

Bull markets have lasted much longer than their preceding bear markets.

Since 1980, every single new bull market took longer than a year before reaching its next peak. In most instances, the rebounds were huge.

Now, keep in mind this data is only looking at the Russell 3000, a large basket of stocks.

Upside in specific stocks can be much, much higher.

Big Returns Are Ahead for Next-Gen Stocks

Warren Buffett’s recent investments were heavy in industrials and energy.

But as you can see below, the S&P 500 Information Technology Index has generally been one of the top-performing sector indices coming out of bear markets.

In the longest two bull markets in recent history, it rallied over 500%.

top-performing sector in various groups

(Source: Bloomberg.)

Size and style are other considerations to consider as you pick stocks for the next bull market.

Small-cap growth stocks (Russell 2000) and large- and mid-cap growth stocks (Russell 3000) are often top performers as new bull markets unfold.

These indices are full of next-gen companies with huge growth trajectories.

The data supporting tech and growth stocks makes me confident that the stocks in Strategic Fortunes have massive gains in store.

Ian King and I have recommended many innovative companies that are set to surge thanks to tipping-point trends.

And the bear market we’re in now is giving us great opportunities to buy at low prices.

This opens the door for big returns as the new bull market takes shape.

Regards,

a black and white drawing of a hand with a long pointy point

Steve Fernandez

Research Analyst, Strategic Fortunes

Morning Movers

From open till noon Eastern time.

DiDi Global Inc. (NYSE: DIDI), the Chinese ride-hailing company, is up 36% today. It is one of several Chinese companies that is up today on the news that Chinese regulators are preparing to end their months-long investigations into these companies.

 

Cerberus Cyber Sentinel Corp. (Nasdaq: CISO) is a cybersecurity company that is up 33% this morning. The move is related to its acquisition of Creatrix, a cybersecurity and information technology company, late last week.

 

FTC Solar Inc. (Nasdaq: FTCI) provides solar tracker systems, technology, software and engineering services. It is one of the solar stocks that is up 26% today on the news that the Biden administration is waving an import tariff on solar products from four Southeast-Asian countries.

 

Kanzhun Ltd. (Nasdaq: BZ) operates a recruitment and hiring platform in China. The stock is up 22% today because it is another company that Chinese regulators are ending their investigations into, allowing it to return to Chinese app stores.

 

Shoals Technologies Group Inc. (Nasdaq: SHLS) provides electrical balance of system solutions for solar energy projects. It is another solar stock that is up 22% today after President Joe Biden suspended an import tariff on solar products for two years.

 

Aspen Aerogels Inc. (NYSE: ASPN) designs, develops and sells aerogel insulation products primarily for use in the energy infrastructure and building materials markets. The stock rose 18% after the company raised its revenue outlook for 2022 due to growth in demand in the EV market.

 

Futu Holdings Ltd. (Nasdaq: FUTU) operates an online brokerage and wealth management platform in Hong Kong and internationally. The stock climbed 18% after the company posted better-than-expected results for the first quarter despite market volatility during the period.

 

Array Technologies Inc. (Nasdaq: ARRY) manufactures and supplies solar tracking systems and related products. It is yet another solar company that is up 16% today on the news of the Biden administration pausing tariffs on solar products.

 

Arcellx Inc. (Nasdaq: ACLX) develops various immunotherapies for patients with cancer and other incurable diseases. It is up 14% after reporting positive data from its Phase 1 study of its novel treatment for patients with relapsed or refractory multiple myeloma.

 

Li Auto Inc. (Nasdaq: LI) develops, manufactures and sells new energy vehicles in China. It is up 12% today as part of a broader move in Chinese auto stocks after the latest electric vehicle market data showed positive monthly sales numbers and expectations of rising demand.

 

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