Buy the Dip in Growth Stock Correction
America 2.0 is inevitable.
What you’re seeing right now is a growth stock correction.
After the run we saw, it’s easy to think stocks can only go up. But stocks — especially our America 2.0 growth stocks — are volatile.
I’ll tell you, I see this as a great buying opportunity.
This is where the real money is made … in the dips. You gotta have Strong Hands. As Paul always says: If you have that courage and tenacity, the payoff could be huge.
Living through it is one thing, but in the long term, you’ll look back and kick yourself for missing out.
“Hold the line,” as they say. And check out IanCast to see what you can do in today’s market for 300% to 400% gains when stocks rebound:
Growth Stocks Take Another Tumble
Paul: Small talk aside, there’s lots going on. As you know, the growth stock correction took another big tumble. I am being hammered on Twitter. I thought we would start there. Thomas Lee is a pretty good strategist. Generally my opinion of strategists is that I try to ignore the vast majority of what I say.
He was on Twitter and said, “Please stop hating on @CathieWood. She has done more for spotlighting ideas than anyone I know.” Then various other folks chimed in to say great things about Cathie. You and I are fans.
Ian: For sure.
Paul: We are huge fans of Cathie Wood. She shines a light on great ideas. We sometimes use her ideas to build our own ideas ourselves. We are very grateful she has the guts, conviction, courage and belief to go out there and invest the way she does.
Ian: She has put up with a lot, especially when she saying Tesla would get to $4,000 a share. That was before the split. I think at the time it was around $300 or $400. She said it would hit $4,000 within a couple years. It ended up happening in a year and a half.
She has taken a lot, but she’s been right a lot. You can see that in her performance in ARKK. Over the past couple of years it’s still way outperforming the big indices.
Paul: She takes big, huge positions on big calls. ARKK has destroyed every index. Pretty much every hedge fund, Warren Buffett, everybody. No one has come close. Yet, people are accusing her of all kinds of stuff. We just wanted to say, Cathie, we are fans. We believe in you.
Thank you for being so generous and sharing your research and viewpoints. It’s awesome. Various people tweeted good things. Somebody wrote,
“Beautiful, timely reminder. I worry about folks like Ms. Wood who graciously share, bring light to that which requires attention. I fear a world in which they shy away from such do to the seemingly unwavering bloodthirst of misled people.”
I agree. To move this into where things are, I have been hammered on Twitter. People feel that somehow, even though they agree with us and America 2.0 and the Fourth Industrial Revolution are inevitable, they can’t stand to wait for this correction to end. Somehow they are entitled to gains.
Ian: After the run we saw from May to this past February it’s easy to think stocks only go up, especially when you see your stocks go up hundreds of percent. Then you can get caught off guard when the correction happens. There’s always going to be volatility in these kinds of stocks.
I see it as a buying opportunity when they drop this much. So does Cathie Wood. I have seen multiple things about her buying a lot of these stocks that have gotten crushed and then even harder hit after they report earnings. Things like Teladoc, Palantir and others are down more than 50%.
She is making these some of her biggest holdings. She owns multiple percent of these billion-dollar companies. This is where real money is made in these big dips. It’s painful. You have to have a wider viewpoint. You have to zoom out and realize these stocks are still way outperforming the big stocks and the indices.
I believe they will continue to do so, despite the volatility we have seen.
Paul: I 100% agree. I wrote on Twitter that I can recall in the 1990s Microsoft and other companies having moments like this. Today, if you went back and looked at a chart you can’t even find it. In other words, people are so focused on wanting daily returns and seeing their accounts move up.
It seems like a combination of having this massive rally last year and their idea the market would relentlessly rise day after day and week after week and never have a drop of significant magnitude that was never going to happen. I have no idea where this comes from.
If you look at any chart there are always dips, some of them significant.
Now is the Time to Buy Stocks! Don’t Miss the Buying Opportunity
Ian: To continue what you were saying about not noticing the drops, you will look back at a monthly chart of this quick dip — it’s only been three months. It feels like an eternity, but it’s only been three months. You will see that and say, “Wow, that was a good buying opportunity.”
But living through it is a different story because you are seeing your account go down. You don’t want to see that, you want to get out and avoid losses. In reality, for the long term this is a good time to buy.
Paul: Well said, Ian. It’s quite easy when prices are rising to repeat what we talk about: strong hands. The Reddit folks call themselves apes. This is not me being derogatory. If you go to r/WallStreetBets, they call themselves apes. They say to hold the line and diamond hands.
These are all things that are quite easy to say when prices are rising and it doesn’t take any work to be strong hands. But when prices are falling and people around you are hammering you daily, this is the moment when strong hands matter. Prices are cheap.
The future is, in my opinion — I already said this on the Profits Unlimited update. For those of you who are new to us on YouTube, that’s our flagship newsletter. Go to the link at ProfitsUnlimited.com. We focus on these growth stocks. We call them Fourth Industrial Revolution and America 2.0 stocks.
The future is so insanely bright. It’s crazy to me the short-term focus so many people have.
Ian: I agree. Again, it has to do with seeing your account go down and seeing the balance go down. It’s painful for a lot of people. I think long term these will go back up, they will make new highs. New highs for these stocks is like a 300% or 400% gain.
While a lot of people are selling, you see people like Cathie Wood who know what they are doing and have had success continue to buy these dips. You have to ignore the short-term pain for the long-term benefit.
Paul: We would tell you that if you are following us or a subscriber to our services, I think most people following the facts would agree America 2.0 is inevitable. These things are no longer speculative in their benefit. We know they all work.
Many of the stocks, while I would like to claim I’m a genius, the stocks are obvious. Would you agree?
Ian: Definitely. Things like alternative energy, which at one point it went through a bubble in the early 2010s, 3D printing did the same thing. A lot of these industries have had their hype cycles and huge crashes. This isn’t a huge speculative crash. This is a correction after a very big run.
We will see these companies continue to thrive. Their earnings reports this quarter were amazing and the market didn’t reflect that. We will continue to see people come back into these stocks. It’s just a matter of time. Like you said, these are a sure thing now.
These industries aren’t going away. They are cemented in people’s everyday lives. The stock prices will reflect that in the long term.
Paul: But here’s the magic question: When? I have been asked this on Twitter several times. Last week we felt it was the bottom. The Nasdaq Composite has made a tiny new low since. I look at Profits Unlimited. It is our flagship newsletter and we track it on an equal-weighted basis.
Ian: I think between this earnings season and next earnings season we will see demand come back in. I think there was a lot of capitulation with these earnings reactions we saw in growth stocks over the past few weeks. That’s when the most damage was done.
Usually you see an evening out in between earnings reports. I think over the next couple of months people are going to see that these companies are still growing at their fastest pave in their history and they are going to buy back into these companies.
Paul: I would be even more optimistic than that. I believe we are 99% done through this. This last week in particular I saw what you tend to see at bottoms: Ugly selling. This is people selling not because they no longer believe, but they are just tired. Investing is an emotional exercise.
You have to be in some place of discomfort to get long-term gains. You used the word capitulation. Someone I follow pointed out that we had a 90% day where 90% of these growth stocks were down. That represents 90% capitulation. Also, the sentiment now is the mirror opposite now of what is was in January and February.
Ian: Right. That’s how you know a lot of the people who bought in at the top are now completely gone. I would assume there is an overwhelming amount of supply on the market maker side. They have bought in cheap and they are going to want to see where the bottom is.
They have a lot of stock to now begin to sell themselves. They of course want to get a higher price. So when that demand comes in I believe it will be a fast ride up.
Paul: That’s the usual dynamic that many folks on the outside don’t get. Wall Street is a dealer-mediated market. When you go to buy or sell, especially anything beyond a certain size, there’s not natural buyer or seller. You’re selling to a middle man who is the market maker.
They have an inventory position that is sometimes full and sometimes empty. When it’s empty, that’s generally a bad time to go along with what it is. They are going to let the market find its natural demand and supply. If there’s no natural market and someone comes with 10 million shares to sell, it’s going to find a new price level.
Ian: Exactly. That’s what we saw after earnings.
Paul: Ultimately, as you mentioned, you felt earnings this quarter were excellent. What else have you seen that tells folks who want a message that things are going to get better and soon.
Supply Chain Issues Finally Getting Resolved
Ian: With the lockdowns there were some supply constraints. Obviously these companies had to shut down operations because they work in a number of countries around the world and have a wide area there. They had some supply chain issues. They are getting those resolved.
I saw a lot of companies in alternative energy, semiconductors and components say things are getting way better this year and we are seeing the end of constraints and everything is pretty much back online now.
Not only did I see they reported sales that were higher than expected and relatively high growth to where they were before, but their estimates for the future went up. They said they are going to make even more than they expected. I think that’s a good sign that they are seeing things start to improve.
Meanwhile, the stocks have tanked and I think that’s going to start to correct itself.
Paul: In the meantime, the other side is that these stocks that are destined for zero are rocketing up like they have massive growth ahead. They have very little going on. Yes, the post pandemic period is creating a one or two quarter period of growth for the ExxonMobils and WellsFargos of the world.
People are piling into these. To me, these seem like incredibly dangerous stocks to own.
Ian: I agree, but it’s demand at a higher price angle. People see a rally in something and see the stocks that were going up are cratering. They want to get into what’s going up. We have seen bank stocks go crazy over the past month. Consumer staples, big food companies and big oil companies have gone up quite a bit.
There’s been a big rebound in travel stocks now that things are starting to open up around the world. I think people are going to take profits on these. I don’t think many people just bought into bank stocks for a long-term hold considering they are being disrupted on a big scale in multiple areas.
Same thing with oil. I think we will see the money come back out these stocks relatively soon.
Paul: Bank stocks? Between fintech and crypto these will be the Macy’s and Sears of the near future. ExxonMobil or energy stocks? It’s so clear we are transitioning at rising speeds away from carbon energy. The way market makers generate demand for stock is to lift prices higher.
Many people ask how it’s possible and if it’s legal. The truth is, it’s actually something you can do by taking in certain orders that might go against the price you want that can either depress or increase demand. People seeing a price rise will join in and continue to bid it higher.
There are ways that this can happen. It’s not guaranteed to work every time. Nonetheless, if you have enough of a balance sheet you understand how to do this. You understand what people’s desires are on some level and how they think. It can be done.
Ian: Just keep holding on. Big gains require sitting through big volatility.
Volatility is Hard to Sit Through, But Keep Holding On
Paul: The Fourth Industrial Revolution is unfolding. In fact, it’s speeding up. Our stocks, yes, they went through a huge rally and they have gone down. I understand volatility is hard to sit through.
Nonetheless, as Ian says, if you want big gains you are going to have to sit through volatility. There’s no making big gains without sitting through volatility. I understand that if you want short-term gains, stable gains and dividends, we are wrong for you.
So what got the crypto market all riled up?
Elon being Elon sends a tweet:
“Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.
Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.
Tesla will not be selling any Bitcoin and we intend to use it for transactions as soon as mining transitions to more sustainable energy.
We are also looking at other cryptocurrencies that use <1% of Bitcoin’s energy transactions.”
Ian: I was confused when I saw this tweet. Number one, he just bought in after talking about crypto for a while. He had to have known about the proof of work structure of mining bitcoin. It does create a lot of energy. I think he’s flat out wrong in this tweet.
From what I have seen, a lot of mining companies are now starting to transition to alternative energy. There’s a huge push for that. There was even a rumor Tesla was looking to setup their own mining through alternative energy technology. I don’t know whether that is substantiated.
It’s possible they could do that. Having all that knowledge, I don’t see why Elon would tweet that. It does create a lot of energy, but there is a shift to using alternative energy. There’s even some companies like Hut8 who just finalized a deal to capture excess heat from their operations and use it for energy.
There’s a town in Tennessee that is looking at doing the same thing and using BTC mining operations to power homes and businesses in their town. There is a lot of good that can come through BTC mining and the energy produced through it. I think he might walk that back in the future.
Paul: Not throwing Elon under the bus, but I think Doge might use a lot of energy. In all seriousness, you and I have read multiple papers, and I believe Cathie Wood released something, talking about BTC mining being one of the most environmentally friendly activities out there.
I want to ask how much energy we use to produce cars, casinos, take any activity. Why is BTC being singled out for this?
Ian: I wish I knew. I would love to hear reasons for that. I don’t know why it’s being singled out. Maybe because it’s something new. It’s caused a lot of fear in people because of the volatility. Maybe people are wary because it’s new and digital.
Paul: It seems weird to me. We’re going to apply this special standard for BTC. Beyond food, shelter and air and the human basics, a lot of it is optional. So we should be calculating this for everything we do.
Ian: If you are going to make the case for BTC, you have to make it for everything else too.
Paul: We consume energy in everything we do. As you said and our research suggests, BTC miners are often using alternative energy like hydropower and solar power. They recycle the heat the mining rigs generate. I’m with you, I have no idea what Elon is talking about.
Then there’s the second issue which is that Tesla may have gone and actually bought $100 million either before or after this tweet. It’s unclear to me. What do you know about this?
Ian: Not a lot. IT’s a rumor. I’m not sure if it’s been confirmed. It wouldn’t surprise me. A lot of companies like to play the FUD game and cause fear, uncertainty and doubt and then buy in lower. You’ll see headlines all the time used to create liquidity so they can buy or sell. That’s my theory on that.
It’s kind of nefarious but I think it’s probably the most likely reason if they did buy $100 million.
Paul: I will give Elon the benefit of the doubt. His mind goes in 75 different directions all at once. Probably in hindsight it might come across that way. He has made it clear they are not selling BTC. It would be difficult for them to dump that in the market. It leads me to a different discussion.
I got tweets saying, “All the other crypto folks have given their viewpoint on this selloff.” Let’s transition from Elon’s tweet to the selloff it caused. Does it change anything, whether it be BTC, alt coins, DeFi?
Ian: I saw Michael Saylor at MicroStrategy bought during this dip. I am certain other investment firms did too. We will see when they report balance sheets. I think it’s a great buying opportunity. It caused a marketwide selloff, which for some things I think was due anyway.
BTC maybe not because it had been flat for a while, but I think it was good anyway. There has been a ton of demand. I think miners are now hoarding BTC, whereas they were selling it earlier this year while it was going up and making new highs when it broke over $20,000.
Now they are buying and it creates another level of demand because they are the ones who provide it to the public and they don’t want to sell it. That tells me something. There’s still a huge supply and demand imbalance. As long as that goes on, I think it’s a great time to buy.
Paul: What do you think of this idea that I had with you on Slack? Largely we have seen BTC stay flat for a couple months. Meanwhile, Ethereum and DeFi coins have been on fire. What do you think of this idea that BTC is due a big run? If ETH can triple in the space of three months, then something similar can happen in BTC.
Ian: I think the strength in ETH is actually a good thing for the crypto market because it shows even when BTC is going sideways there are still buyers of other coins and ETH. I do agree that BTC is due for a rally. I still hold my price target of $115,000 by August.
I think it’s totally possible. It had that huge run late last year into February. It topped out in February around $50,000. IT’s been flat since. It’s made some new highs but hasn’t taken off yet. During that big run, BTC went straight up and the market was in a correction.
I think we could see that. When money flows into BTC it usually takes away from the rest of the market. I think we could see BTC absorb some of that market cap that has come into other coins.
Paul: Before we got on I was looking. The total market cap is now up to about $2.5 trillion. BTC is about $1 trillion of that. ETH is about $450 billion. The rest of these DeFi coins have taken off. We now have substantial coins that were about the size of BTC a few years ago.
Ian: During the end of the sideways bearish market which ended last fall, BTC was around 70% of the market cap of all crypto. It’s fallen down to below 40% at this point. It has lost a lot of ground. I think it will take some of that back. I can’t see it losing share much longer at the rate it has.
It’s definitely due for a run.
Paul: I believe it’s right at 40%. EHT is about 20% of the crypto market. This is a healthy thing. Over time the cryptoconomy is booming.
Ian: We have seen a ton of coins over the past year go up 1,000%. Some are warranted, some are not as much. It’s been an “everything go up time” in crypto. I think we could see some sorting out. Obviously BTC and the major coins like Chainlink and Uniswap are great investments that will not have a big crash.
I don’t know, maybe Dogecoin could lose some ground here. I think it is still in the top 6 or 7 cryptos.
Paul: There are definitely coins that have very clear utility, very clear activity and purpose. Then, there are a lot of coins that have a lot of market cap but we struggle to see what their purpose is. It could happen in the future, but we have gone back and forth on this.
Most big projects show their utility pretty quickly.
Ian: Exactly. BTC and ETH still are the flatout leaders of the market. DeFi is right behind. DeFi is all based on ETH. That’s part of what has created this run for ETH, huge adoption for DeFi.
Paul: Let’s give folks an update on our crypto trading service, which we promise we are working on. We had a number of issues to deal with. One is that our publisher requires us to not own things we recommend. That has been an issue for us to resolve
Also, understand that we are a publishing company. We have a publisher. Ian and I don’t own this publishing company. We are employees. It has to be a commercially viable venture for them. They have to create market, operations and it takes setup time.
This has run into a number of issues. We appreciate your patience. Ian and I made a number of videos in terms of how to open a Coinbase account. We are going to try to do more of these educational videos and send them out. We have a list nearing 10,000 who signed up to get information.
If you are interested in signing up to know when we launch the service and get you updates, there’s a link. Please sign up for it.
Quickly, you mentioned a deal in cannabis and I want to mention a piece of legislation.
Ian: There was a $2.1 billion acquisition. Trulieve is a company in the U.S. which has the entirety of the Florida cannabis market which is the number three or four most lucrative in the U.S. and it only had medical cannabis. So Truelieve has been doing very well.
They just decided to buy another company called Harvest for $2.1 billion. It’s the biggest ever acquisition in the marijuana market. I think that’s a bullish sign. These stocks have gone down quite a bit. Not only are people starting to buy them, but cannabis companies are starting to make acquisitions.
They are seeing what they can find for cheap. We usually see big acquisitions right near the bottom of a correction or crash. I think this is a good sign that it’s the bottom for pot stocks.
Paul: Deals coming in is a commitment of capital. It’s also a show of confidence from the folks who are buying. You are putting yourself out and paying a high price. I found something else interesting. It’s this article from a website called Marijuana Moment.
It says “Congressional Bill to Legalize Marijuana Filed by Republican Lawmakers.” Generally it’s perceived that Democrats are in favor of federal legalization and Republicans are neutral or negative. This is a bit of a surprise. I think it suggests this is going to really happen this year.
Ian: I agree. It depends on how fast they can get these bills through Congress. Sometimes that takes a while. I do believe we are getting close. This is the most momentum I have ever seen. I think it will come to a deal soon. Also, Alabama is about to become the 39th state to legalize.
It’s up to their governor now. He has to sign off on it. Their Congress agrees and they signed the bill. That’s pretty big news because Alabama was pretty much vehemently against it for a while. They have done a 180 on this. I think it’s encouraging for national legalization.
Paul: That website, which is Marijuana Moment, actually has a lot of news stories on so many states. Even though they are not at the point of legalization, there are bills being introduced in every state. If you want a good source of information we recommend that website.
The last thing before we end the IanCast is Tesla stock. A friend texted me the other day and said “Hey, it’s under $600. What do you think?”
Ian: With the correction in growth stocks obviously Tesla got hit. I see Tesla as the Apple of growth stocks. It’s a bellwether for the entire America 2.0 market. When that is struggling you will see other stocks struggle. The smaller alternative energy, ecommerce and biotech, when they are struggling, you might see Tesla start to turn bearish.
They all have an effect on one another. I do believe when money comes back into America 2.0 stocks, Tesla is going to soar back up and make new highs. I still believe it could hit $1,500 a share by yearend.
Paul: I 100% agree with that. Tesla is a bellwether. Growth buyers are the same. They copy each other. I feel good that Tesla is going to go up huge and be a significantly larger company and one day be the largest company in the U.S. stock market.
Until next time,
Editor, Rapid Profit Trader
Editor’s Note: Paul and Ian mentioned the inevitable shift to America 2.0. And the old-world disruption that we could see in oil … to new energy. This could be a big one. So big, Paul believes it could lead to a “12 million mile battery” and a market 10X bigger than electric vehicles… And for investors? Think 5X more new millionaires than cryptos, pot stocks and all of the Big Tech giants — COMBINED. Click here for the full story now.