History is About to Be Made... (Emergency Update)
Summary
Tom states that the current stock market is experiencing a "bloodbath," with the S&P 500 down 4% and the Nasdaq down 6%, causing most portfolios, including his own (which is 60% in Tesla and Palantir), to be in the red. He identifies the rising performance of defensive stocks (utilities, healthcare, telecom, consumer staples, energy) as a "head fake" for long-term investors, warning against the common retail investor mistake of "buying high and selling low" by selling tech stocks during drops and buying defensive stocks at their peak. Tom's main thesis is that drawdowns are an integral and positive part of investing, presenting opportunities to buy quality assets cheaply. He emphasizes that successful long-term investing requires accepting volatility, especially in high-beta growth portfolios, and avoiding attempts to time the market bottom.
His core strategy involves:
Tom reinforces these points with historical examples, noting that even successful stocks like Tesla (up 1400% since 2019, despite 50% and 70% drops) and Palantir (up 1500% since 2020 DPO at $10, despite 85%, 39%, and 31% drops) have experienced multiple severe drawdowns that were, in hindsight, excellent buying opportunities. He also highlights that 96% of active money managers underperform the S&P 500 over 10 years, advocating for a simpler, disciplined approach. He provides a free list of "15 stocks to buy and hold for the next 20 years" and promotes his research tool, Stock MVP, and his Patreon academy.
Mentioned Stocks
Reasoning: Tom uses Amazon as a historical example of a "greatest company" that delivered 240,000% returns since 2001 but experienced a 90% drawdown in 2001. This illustrates his point that even exceptional businesses face severe corrections, which, in hindsight, become significant buying opportunities for patient long-term investors. He does not provide a specific current recommendation.
Reasoning: Nvidia was added to Tom's "academy top stocks" list in 2020. Since then, it has returned 1100%, despite experiencing six drops of 20% or more. Tom identifies it as a "generational stock," emphasizing its strong performance and the opportunity presented by its drawdowns for long-term investors.
Reasoning: Palantir is currently down 11.5%, and it constitutes a significant portion (with Tesla, 60%) of Tom's personal portfolio. He notes that since its 2020 DPO at $10, it has gained 1500%, despite experiencing major drops of 85%, 39%, and a current 31%. Tom considers it a "generational stock" and argues that its current drop is market-related rather than company-specific, presenting an opportunity for long-term investors to buy.
Reasoning: ASML was added to Tom's "academy top stocks" list in 2021. Since its inclusion, it has returned 134%, despite experiencing five drops of 20% or more. Tom designates it as a "generational stock," highlighting its consistent growth and the opportunity that its significant drawdowns offer for long-term buying.
Reasoning: Tesla is currently down 17%, and along with Palantir, makes up 60% of Tom's portfolio. He highlights its 1400% gain since 2019, despite enduring significant drawdowns of 50% and 70% in the past. Tom uses Tesla as an example of a quality growth stock where previous major drops were ideal times to "double down" or continue buying, implying its current dip offers a similar opportunity.
Reasoning: CrowdStrike was added to Tom's "academy top stocks" list in 2021. It has since generated 126% returns, enduring six drops of 20% or more. Tom classifies it as a "generational stock," underscoring its robust growth and the strategic advantage of buying during its price corrections for patient investors.
Reasoning: Tom states the S&P 500 Index is currently down 4% but emphasizes its historical long-term growth (10% per year average). He advocates for allocating a "big chunk" of one's portfolio to the S&P 500 (or a broad market ETF) as a core investment, highlighting its resilience even in worst-case scenarios with consistent dollar-cost averaging.
Reasoning: Tom mentions the Nasdaq Composite Index is currently down 6%, describing the overall market as a "bloodbath." He uses it as a benchmark to illustrate the current market downturn and the higher volatility of tech and growth stocks, but does not provide a specific recommendation for direct investment in the index itself.