Three Steps to Finding Value in Today’s Market
Andy Snyder|January 10, 2022
“You’re bullish on real estate, right?” a good friend asked us the other day. “I mean, you’ve been buying a ton of it.”
She’s right. Over the last five years or so, we’ve bought more than a million dollars’ worth of the stuff.
But, oddly enough, we’re not particularly bullish on the sector. We certainly wouldn’t tell our readers to go out and blindly buy real estate… not at these prices.
The key to our story is that we didn’t pay anywhere close to a million bucks for what we got.
Nope… we made a buck or two by looking for value and taking advantage of it when we saw it.
While we think real estate is a fine long-term (ideally, generational) asset, we’re certainly not willing to buy just any ol’ property.
There’s a big difference between buying an investment property and buying much of the stuff on the market today.
That idea, of course, begs a very biting question. It’s a question all investors ask… and must be asking as the Fed is once again tinkering with tightening.
“What’s a good value?”
It doesn’t matter if we’re talking about raw land or fresh IPOs… it’s a question we must ask.
Even more importantly, we must understand and heed the answer.
We’ve always said a good deal is a lot like pornography. We know it when we see it.
But it goes deeper than that.
In our case, we strategically bought properties that border our existing land. And, even more importantly, we bought each of them under unique circumstances that created a fair – but bargain-priced – deal for both sides.
We won’t detail the specifics because there’s no use.
No two truly good real estate deals are alike. But we can liken the process to buying assets (stocks, bonds… even real estate) on the public markets and show you how to spot a good bargain among the masses of “For Sale” signs.
Step No. 1
First, know your timeline.
This is huge.
If you’re buying for the next generation, your job is much easier than if you’re buying to make a buck that you’ll need for your groceries next week. It’s a lot easier to invest for a decades-off retirement than it is to turn a buck into two by the time the next rent check is due.
This is especially important in a crowded market, which we’re seeing in almost every sector of the economy today. Home prices and even many stock prices are likely to drop as the economy slows. That’s trouble for the short-term buyer, but it’s not all that bad for the long-term buyer.
A long-term timeline offers us the freedom to buy what might not be for sale again, even if the price is a bit high. Or in the case of stocks, it allows us to buy without worrying about getting our timing perfectly right. The stock may sink tomorrow, or it may shoot up 10 points. The disciplined long-term buyer doesn’t much care. He sees a much bigger price tag in the future.
If you’re a short-term investor, you’re not looking for value – at least, not in the classical sense. You’re looking for an immediate catalyst that will send prices higher. You’re looking for a disconnect between today and tomorrow.
That takes us to the other factor in finding a good value…
Step No. 2
When we were younger, we missed a big opportunity for a fast paycheck on a real estate deal. We found a property we liked. The only problem was that a man had recently killed himself in the living room.
Because it led to an insurance claim, it had to be disclosed.
It slashed the value of the home.
But the next person who bought the home didn’t have to disclose it when they sold. Only the owner with the insurance claim was obligated.
We didn’t have the stomach for such things. It was skeevy. But a colder-hearted fella could have easily made 50 grand from the deal.
That’s a pretty specific example. We hope there aren’t many situations like it. But similar pricing disconnects exist all over the place. Perhaps a sewer line is slated to come through a neighborhood soon. Maybe a new employer is moving to town. Both would create a near-term opportunity that should disconnect the pricing action of local markets from the larger average.
It’s the same in stocks.
Devote a few hours to research and we’re sure you can create a list of a half dozen or more “suicide stocks” – listings that are down and out because of a one-time issue. With the Fed’s rhetoric pulling the bottom out of many stocks in the last few weeks, there are more examples now than at any other time in the last few years.
This is an ideal time to look for oversold stocks. Scanning the market for stocks with an RSI (relative strength index) below 40 is a good place to start.
Step No. 3
Finally, what looks valuable to you may look different to us. Again, in our recent land grabs, we strategically grabbed parcels that not only increase the overall value of our farm but also add to its income potential.
In this case, one plus one truly equals three (or a whole lot more).
In the realm of stocks, owning one stock doesn’t make another worth more. But when it comes to strategic diversification and putting together a healthy, balanced portfolio, value starts to take another form.
Tech investors right now would be smart to buy some blue chips as a balancing tool. Yes, multiples are higher than the long-term average, but owning blue chips in a slowdown is a wise portfolio-saving idea.
The price tag doesn’t quite matter as much if you’re buying as a way to insure your portfolio.
Bottom line… value is far more than a price-to-earnings (P/E) ratio or the price tag on an asset.
We must know what the asset can do for us over the long and short terms – and how it balances out our portfolio. And ideally, we must know something the overall market doesn’t.
There’s a lot of value on the market right now. And there’s a lot more to come.
It’s a good time to hone your value-seeking skills.
They’ll treat you very well.
Note: We hope you took advantage of what we said about the banking sector last week. Over in Venture Fortunes, we made good on our bullishness on the banking sector and locked in partial option gains of more than 300%… in a play we held for just a bit more than two weeks. The sector is flush with profit potential. We’ve got some very big things coming for Venture Fortunes… so stay tuned.
Andy Snyder is the founder of Manward Press, the nation’s premier source of unfiltered, unorthodox views on money and what it means for a free society. An American author, investor and serial entrepreneur, Andy cut his teeth at an esteemed financial firm with nearly $100 billion in assets under management. Andy and his ideas have been featured on Fox News, on countless radio stations, and in numerous print and online outlets. He’s been a keynote speaker and panelist at events all over the world, from four-star ballrooms to Senate hearing rooms. Today, Andy’s dissident thoughts on life, liberty and investing can be found in his popular daily newsletter, Manward Financial Digest.