5 Best Stocks to Buy, a Market Crash Guide
Do you know what to do when the market goes down a lot? In this video, I'm going to show you how I go about managing my investment portfolio, and what I do when the market gives you opportunities to make money. I'll walk you through my approach and tell you five stocks that I'm buying now, at the end of May 2022, when markets are down.
Also, at the end of the video, I'll give you a bonus stock, my go to stock that I buy every time that the market gives you an opportunity.
Welcome to the Always Be compounding Club, where we share ideas and how to build, grow, and enjoy wealth. For those who are new to the channel, I'm your host, Dennis Chen. I'm a full time investor, entrepreneur, financial book author, Wharton MBA and CFA charter holder. Welcome aboard. Let's get started.
I'm filming this on May 24 2022. The markets have been down in the past month or so. As of yesterday, the S&P 500 is down 18% year to date, and the NASDAQ is down 27% year to date. This is what most call a bear market or a market crash. I think that's a little bit exaggerated. So what do you do when the market is weak? Remember that Mr. Market is manic depressive, I'm gonna take the advantage of the market being depressed, I'm happy to be able to be opportunistic, and to buy great businesses at great prices.
Here are the five stocks that I'm buying now.
- Number one, Simon properties (SPG)
- Two, Alphabet, which is known as Google
- Three, Amazon
- Four, salesforce.com
- And, five, Blackrock
You may go to the timestamps within the video, if you want to jump specifically to each stock, the most important lesson of the video is not the stocks that I'm buying. It's how I got to the decision of buying those stocks.
A friend of mine called me or actually texted me over the weekend and asked me what I was doing with the market crash. I'm not calling it a market crash. I'm just calling, you know, the market giving you opportunities to make money. Well, I basically answered him what I told you. I'm buying salesforce.com, Amazon, Google, or Alphabet, Simon Property Group and Blackrock. And of course, my go to stock, which you may already know, if you don't, I'll be naming my go to stock at the end of the video.
So, my friend calls me back after I sent him the text, he calls me right away and says: hey, wait a minute, how do you come up with these five stocks to buy? And how do you do it so quickly?
The secret is that I keep my shopping list. I do my homework and determine the businesses that I'd like to own, at what price I'm willing to buy it. Keep in mind that this list has been built over time. I've known most of these businesses for more than 10 years. Now, some of them I know for 20 years, the list contains all the businesses that meet a certain criteria. Their criteria that it needs to have to be on my list is that I understand the business model, and how they make money, too. They have a long term competitive advantage. And three, they're managed by competent and honest people. And of course, for I have a very good idea of what's the estimated fair value is, so like that I know how much I'm willing to pay for them when the price moves around, or when it goes down in price.
Let me show you my shopping list. I keep my portfolio in my list all in the same spreadsheet, the price of each stock is dynamically updated. So the information is always almost real time. All I need to do is to look up at my portfolio and then see what's on sale. So you know, of course I allocate fresh money to the stocks, I want to increase your allocations in management, it’s like a football team. The stocks are my players. And so when I get the opportunity to recruit players at a reasonable price, I move quickly. So let's look at this. Go ahead and review the portfolio.
So here's the shopping list. It says “our portfolio’. I will go down the portfolio that's in Excel and identify what's on sale. So I have column G, it’s the weight of that position in my portfolio. H is the total value of the amount of shares I have. J is the current price as of May 24 2022 and
column O was important, which is the fair value estimate that I give to that particular stock and is the price to fair value estimate.
So, basically anything that is below 70%, that means that 30% discount or more will be highlighted by Excel. In this color, I'm colorblind, so I don't really know what color it is, but this color, so we go down and we see in the Read section, I have Simon Property Group at 66% of fair value estimate, that's a great deal. Good deal, I think Simon Property is a premier company.
All the yellows are REIT. So I'm going to put this one on my list. So here, I'm using this little arrow thing to say this, put it on the list to buy.
So let's continue down, we see Facebook 40% plus 44% of the fair value estimate. I have a big position already. I don't think I would add more to my debt right now.
PayPal, PayPal is one I like but it's one of my top 10 Holdings. So at this point, let me just go more down the list and see what else is there. I'll keep that one in mind. I might put it on the list depending on what else is there.
So Young China 48%, almost 50% discount to fair value. It's a large position. I have it, it's my one of my top 20s. Given the stuff with China and Biden and all this, this put it on the back burner for now.
Qualcomm. Qualcomm is a good company, it's one of my top 20 positions with a 70% discount. It's not that great to have a discount. I mean, 22% discount, it's okay. Let's keep on going.
Boing is interesting. 50% discount. Let's continue. I think I have some stuff that are on my smaller side that I like to prove. Paramount, Alibaba. Alibaba, same thing as Yum, China related. Comcast, Cheesecake Factory. I have a lot of food related stuff right now. I put a hold on that for now.
This one is good. Your Tires 65%. It's okay. Let's keep on going. Amazon. Amazon is a very small position. Only have 0.48%. I missed the boat on Amazon, and I think I'd like to add some more. So let's put that one in as a potential, or as I put it on the list by Google.
Also small position, 0.6 4% of my portfolio. It's at a 40% discount. I'm going to put it on the list. So let's continue, I have Gil Gilead. It's been at the discount for more than 10 years. Let's leave it there. LabCorp 30% discount, Interesting. But Starbucks impacted by China CDX bank have a lot of financials already.
Cisco a 20% discount. Cinemark way too small. Schwab. I like Schwab, but at 71% I think there's probably better stuff down there. It's C carnival. Maybe the next, go around 10 cent media Disney, at 60%, 40% discount this seems interesting. Mercado Libre CRM. Oh, here we go. I think this is probably very beaten down. And Blackrock. Blackrock, I have a very small position, 3.3% of our portfolio. It's a premier financial asset manager. I'd like to have it. I'd like to add more to that position too. S
o there's five. So we have Blackrock, salesforce.com, Google, or aAphabet, Amazon, and Simon Property Group, which are hard assets, real estate. There you go. Those are defied picks for now. So here we have Simon Property Group at a price of $108. Google, or alphabet, the price of $20, $119. Amazon is very cheap. CRM salesforce.com $157 and Blackrock $618. They're all at over 30% discount each. So these are the five that we're going to talk about, and I'll give you more details on them. So let's review each of the five stocks on the buy list.
Simon Property Group, symbol SPG is the second largest real estate investment trust in the world. Here in Florida they own sawgrass mills in South Florida and Premium Outlets in Orlando. They own 207 properties, which include 190 malls, 69, premium prop Premium Outlets, 14 mills centers, they also have positions internationally, its average sales per square feet is about $693 pre pandemic, which is very high, their premium locations. I think a lot of retail malls will be repurposed, but some of them will still exist. And Simon property has very good locations, and they are the ones that will survive. Simon property currently is paying a dividend of around 6.25%, which is higher than the S&P average. And so it's a dividend payer, it's good for your retirement portfolio. I'm buying it in my retirement portfolio at this point, given that it owns hard assets, and the rents adjust for inflation. It's a good hedge against inflation. I have that as one of my positions in a real estate investment trust, and I'll be adding to it in my retirement accounts.
Our next company is off of it. ticker symbol, GOOG Alphabet is the parent company of Google. Google is like 99% of the revenue of the Alphabet. Google is the premier search engine and online advertising platform in the world, it generates a consistent net profit of over 25%. And also the return on invested capital is over 25%. Also, that means that your money is growing or is returning 25% a year in Google. So it also has an authorized buyback of $70 billion. If you recall, in one of our previous episodes, there are good buybacks and bad buybacks. In this case, Google is a really good buyback because it's buying back shares. At a current rate, we're current price, which is below intrinsic value. So it's very beneficial to us, to shareholders.
Alphabet also owns YouTube, which you guys are familiar with, since you're watching this video. YouTube is the biggest platform of content and video in the world. It has 2 billion monthly active users. That's 2 billion monthly active users just to give context, I think the world population is about 7 billion. So yes, think about it. Over 20% or 25% of the world watches YouTube, and its YouTube shorts attract about 30 billion views per day. That's 30 billion views per day. That's, that's incredible. So as I said, Google, a great company, I have you see it's a small position in my portfolio, I'm going to be increasing it right now. We're buying it at 65% of the fair value estimate, which is a steal. So I'm buying a 2100 or below. So I'm very happy to have this opportunity to increase my position in Google or Alphabet, as we call it.
Our next stock is Amazon, a ticker symbol AMZN. This is a stock that got away. I've been an Amazon client for more than 20 years now. And they've never owned the stock until now. It’s a stock that got away from Warren Buffett. He always says that he wishes he would have bought Amazon when he saw it. It made a lot of sense. And he did that. I did the same. You know, I've known Amazon for over 20 years and never bought the stock. Now I finally had the opportunity to buy it. This business has a wide moat and it's still growing. It's growing at around 20% per year. Amazingly, it has Amazon Web Services embedded, which posted a growth rate of 37%. Recently and going forward, analysts are projecting that Amazon Web Services annual growth is going to be around 25% over the next five years. However, retail business is 80% of the revenues, and it's getting hit by inflation, higher cost, higher costs of labor and all that due to inflation. And it isn't making money right now. The cloud business which is Amazon Web Services is the one that makes money and keeps Amazon or the rest of Amazon afloat. Retail is a cyclical business, and Amazon will make it profitable at some point. They have already closed Amazon stores in the malls, which were making money in Amazon, currently selling at around 60% of fair value estimate. I intend to increase my position in this business, what else?
Can I say it's a good business. I mean, I am very happy that the market has given us the opportunity to purchase Amazon at this time.
The next topic we're going to talk about that I'm interested in is salesforce.com. Symbol CRM, salesforce.com is the granddaddy of software as a service providers. They provide cloud based solutions to businesses as a subscription service. Once a client signs up, ihe receives a lot of value, and he hardly ever leaves. Its customer retention for Salesforce is above 92%. It has a very wide moat. And it's very scalable. They recently bought slack and Tableau and it has a lot of cross selling potential. It still has a long runway, its revenue growth is still above 20% per year, and I think it's a good business to invest in, it’s return on investment capital is averaging at 17% per year over the last three years. And it's expected annual growth rate of earnings per share is around 15%. It's selling at around 60% of fair value for estimated value. So I think it's a great opportunity to increase my position. So I'm gonna go ahead and buy some more salesforce.com.
final stock is Blackrock. BLK is the symbol for Blackrock, it’s one of the premier asset managers in the world. It has $9.6 trillion of assets under management, it owns iShares, which is the ETF market leader with 34% of the ETF market in the US. Its CEO Larry Fink has been very vocal on building sustainable businesses. I think he's well known. You can look him up. And Blackrock”s return on invested capital has been between 12 and 13% over the last three years. Right now Blackrock is selling below 70% of firm value. And it's rare to get this opportunity to buy this really well managed business with a big moat, because of the economies of scale at this time. So I'm buying shares at around $600. It's a tremendous opportunity to be able to buy this gem of a business at this price. So I'm very happy to have this opportunity to buy Blackrock.
So there you have it. Those are the five stocks I'm buying right now, at the end of May 2022. When the markets are weak, and people are thinking a market crash is coming. Or we're in a bear market. I think it's a gift that the market is giving us and we are able to buy really great companies at great prices.
If this video was useful, please hit the like button and post any questions you may have in the comment section. Oh, I almost forgot to go to stock. My go to stock is, drumroll please. Berkshire Hathaway! I think most of you knew the answer. I think Berkshire it's a very well managed company. And it's very well positioned for bear market. It has over $100 billion in cash ready to deploy. And Warren Buffett and his lieutenants are ready and willing to allocate this money to making good buys. Its operations are consistent earners. And you can count on a return of capital of around 8% per year. So currently selling at around 15% discount to fair value estimate. And I think it's still a better risk than the S&P 500. It has a very wide moat in all of its businesses. And it's run by very honest and capable managers. And it's selling at a reasonable price. I wish it were cheaper, but it's not overly expensive. So it's a fairly nice position in my portfolio. I have around 15% of my portfolio allocated to Berkshire Hathaway, and every time I can and have some spare cash around, I'll allocate a little bit more to it. It's one of these stocks that I feel very comfortable owning in my portfolio. So thank you very much. Thanks for watching the video. And remember, always be compounding so long. Take care.