STOCK MARKET CRASH: MORE PAIN for GOOG (Google Stock), SHOP (Shopify stock) & SBUX? How much LOWER?

Is the bull market really dead? Sure feels like it as investor favorite stocks like Google stock (GOOG), Shopify stock (SHOP) and Starbucks stock (SBUX) are getting crushed! Could the S&P 500 drop 40%+ from here?

Is the bull market that you’ve come to know and love officially over it’s starting to sure feel like it i mean earlier today you saw the major u.s indices down something like three percent it feels like the death of a bull market and you look at fan favorites like google or alphabet stock leading the way down four percent decline another investor favorite shopify

Down 30 just this past month also down four percent today and you have folks coming out of the woodworks like michael bury saying look at least i tried i tried to warn you effectively about this downturn that we’re facing and the question is how much downside is there you know you’re looking down and you’re trying to figure out is there a lot more pain you know

To this bloodbath and you know if this is your first time tuning in my name is daniel you’re watching unrivaled investing this is no hype mission focus channel trying to find you exceptional companies and unrivaled investments and so i’m going to try to take a realistic outlook looking at one company’s financials to sort of give a good example of what some of

These companies like google like shopify even starbucks could do in the years ahead so let’s let’s sort of talk about that framework real quick if this is your first time tuning in please make a point of hitting that thumbs up hit that subscribe button and so you know as we’re potentially looking down let’s look at this example company where over time it’s been

Around for a long time it’s pretty much tied to the economy it’s grown at a steady clip for for many years i mean it does have its you know lumps when the economy turns but by and large it has gone up for a very long period of time and since the economy last peaked in let’s say 2006 it’s been growing earnings fairly steadily you know around three four percent a

Year under four percent plus it pays around one to two percent dividend and so it does make you wonder you know what would you pay for this sort of steady business really tied to the economy what’s what’s this business worth and you know you start thinking about these different components so okay you it currently has around 205 dollars in earnings you know given

That it has let’s say fairly slow growth you’re not really sure what the interest rate environment looks like five years from now let’s say maybe somewhere between 15 times earnings and 25 times earnings so that would get somewhere around three thousand dollars and around five thousand dollars because it currently has 200 dollars 205 dollars in earnings and so

Let’s also imagine that you know because arguably the economy is running hot even have the federal reserve talk about that which we’ll talk about in a second let’s imagine that there could be pressures in the future maybe that’s you know maybe you have some sort of pressure from you know inflation where if effectively you have input costs moving higher or you

Potentially even have a downturn where you know all of a sudden there’s less demand for things and so prices decline so there’s a lot of different ways earnings can fall you know part of it’s from operational leverage if there’s a little hit to demand sometimes your costs stay the same as you don’t fire people let’s say right away and so your earnings fall really

Fast if you know if demand starts to take a hit and so looking at this you know where it is maybe maybe assuming a 20 decline to earnings it’s currently around 205 dollars earnings you know maybe maybe in a downside it’s a 20 decline in earnings so you get around 165 164 in earnings once again that 15 to 25 times multiple because we know it’s fairly slow growth

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Long term gets you around 24 2500 versus 4 000 you know price and so this is a ballpark figure for this sample company you know regular viewers might have guessed by now this is no ordinary company we’re actually talking about the s p 500 here which recently closed just shy of 4300 and so using this back of the envelope math it would suggest oh wow the price if

You were to value it today could really be anywhere from up 20 to down 40 percent from here assuming hey if there was a bad scenario play out where you could have let’s say much lower earnings you know could you have this sort of fear of earnings declining by 20 we’re going to talk about that risk you know in a second but even if earnings let’s say stay flat but

You have some sort of multiple compression then you’re looking at down nearly 30 so this does sort of show you can get a double whammy when times get rough where you not only look at lower earnings but you can also look at a lower earnings multiple that really drive stock prices significantly lower and so looking at an example of starbucks for example starbucks a

Lot of people love the stock very steady you know i’ve talked about it that it used to be a very fast grower you’ve had some challenges recently but even starbucks which was previously growing very quickly and used to be an investor favorite trading somewhere between 30 and 40 times earnings well now when it what ended up happening during the financial crisis it

Fell down to like eight times earnings it just completely got slaughtered and that’s why it’s important to understand that when times get tough when you have economic downturns valuations can really come under the gun and so look i’ve talked about google but look it’s important to understand google has a very strong advertising business and advertising is ultimately

Tied to the economy so if the economy starts slowing down google will definitely take a hit it’s also much bigger than when it was during the last great financial crisis so you know arguably it’s going to be harder for them to really hold up the ship if the economy starts to turn they’re much more sensitive to the economy at this stage in the game so yes i do own

Google but i look at it and i look at its valuation here it is price to sales i think this the valuation is very very reasonable you know i i have called it out that i do own it in full disclosure and read the disclosure you know disclaimer in in the description of this video but the reality is if you look at the history of google’s valuation you’ll see that by

No means in the last decade is it anywhere near its low it could easily be much much lower just based on word previously traded you know back in 2013 not even looking at the great financial crisis back in 2020 you know looking at this it could easily trade much lower how about shopify another company that i’ve called out that i like and own once again you know it’s

Important not only to recognize that someone can say they own something but you always want to understand well how much of your portfolio is it and it’s when i own these things that’s that’s part of the reason why i share with unrivaled investing subscribers you know i share my portfolio and you’d see oh this is how much he’s actually betting on these things so

Whenever you hear youtubers say like oh yeah like i love this stock you need to understand and think about well wait a second is how much of this is your portfolio and so i’m looking at shopify and google and it’s not like they’re my biggest positions i like them but i haven’t made them like outsized positions in my own portfolio and i do you know i do like their

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Prospects like my previous video on google i’m talking about things like i think their artificial intelligence will change the world it has immense potential but going back to shopify look this is a business that enables a bunch of small businesses they will definitely get hurt in an economic pullback where they you know those small businesses might feel feel the

Pinch in which case that flows to shopify now historically you do have you know some businesses start opening up you know new business launches during downturns which could help shopify but shopify is tied to the economy in the sense that they are leveraging the growth of their merchants so if their merchants take a hit so will shopify and so you know looking at

Shopify which i once again i own you know the valuation has come down so significantly in short order it the stock has just gotten completely crushed but the reality is if you look back to warriors trading in 2016 2017 you know it’s still lower than where it was where it is today so you could argue yeah i mean it could potentially get even lower from here just

Based on raw valuation that’s not even factoring in if there’s like an economic recession and so that raises the question of like okay how much lower can all this get what is the odds that you get that sort of bloodbath the elevator doors open and just blood is pouring out this is like what’s the odds of that recession what’s what’s the odds and so here it is and

This is the key thing that everyone’s focusing on the bond markets the equity markets is what is the federal reserve doing because they’re ultimately the power player that decides what happens to the economy and here it is just this past week you have jerome powell effectively saying yeah he’s taking a harder outlook on inflation making sure they crack down on

It and they’re they’re looking at half point moves so raising by a half a percentage potentially a couple of them looking to front and load the policy saying hey we need to tighten this economy given how unsustainable this economy is and this does create the concern of like wait a second you have larry summers former treasury secretary effectively call out like

Look when you have super tight jobs market if you think you’re going to be able to get a smooth landing think again the odds are that you are going to get a hard landing from here with economic monetary tightening quantitative tightening you know raising interest rates this is a much tougher picture this is not a goldilocks picture that you’re looking at so how

Am i personally playing it and once again this is not financial advice how am i personally considering it you know i i share this all on a weekly update at unrivaled investing but there’s a couple a couple of key things you know in terms of how i personally play it first of all i have a large cash position yeah i know inflation’s high but the reality is seeing a

Stock price drop 30 percent is even worse than let’s say you know even with inflation being what it is that’s much worse than than just sitting on cash and losing that 5 or 10 a year so i’m very cognizant of that that said i would absolutely love to deploy my capital my personal cash into stocks at just crazy cheap valuation and once again i’m trying to channel

You know warren buffet i got a picture of him over my shoulder and what’s he do he’s constantly looking for great deals and he only swings the bat when it’s just super compelling so when he sees a company that is given no credit for future growth trades at 10 times earnings then he makes a big bet or he sees a commodity company trading at two times earnings or

Three times earnings then he makes a sizable bet and that’s what you’ve seen with the occidental you know the commodity company trading it effectively two to three times when he was loading up shares and apple you know back in 2018 he was trading at 10 times so he looks for things where the valuation is just so compelling that the odds are more favorable that you

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Get this great return so i’m looking at the investment horizons saying yeah these valuations aren’t crazy some of them are pretty good they’re not crazy though so i’m for the most part sitting tight waiting for just big fat pitches because when i ultimately plug that last bit of capital that i have you know to plow it into the market you know 30 plus my portfolio

Cash waiting to plow it into the market when i do that i want to put it in in just crazy high upside potential situations things where it’s like oh yeah i really i think that the upside is 300 400 500 easily from here recognizing that it might be hard to see it because maybe at that time you’re in a recession and the the results are currently going down but it’s

It’s taking a view that oh i think they’ll actually start growing again and that goes back to that that you know prior example with s p 500 you get this double whammy during recessions where not only earnings go down but you get this this hit because folks want to give them an even lower valuation because they go i don’t know when things will get better and so

You know i’m looking at this i’m waiting for the big fat pitches and i’m just not seeing you know i’m just not seeing it i’m not i’m not swinging yet um you know at that at that big pitch if you think you have a couple of you know interesting ideas where you’re like daniel this has immense free cash flow it has a ton of growth potential and it’s not getting at that

Crazy valuation i’d love to hear it but the formula for finding those potential multibaggers is pretty simple it’s like hey do you do you have a ton of growth going forward and are you paying a very reasonable valuation for it are you paying a cheap valuation and will it have significant free cash flow with that and if you have those different components where it’s

Like a cheap valuation significant free cash flow lots of growth that’s that’s the recipe for happiness with the stock market and i i see a couple of those things where it’s a lot of growth potential potential free cash flow but the valuation isn’t necessarily there uh so i i want to find that that trifecta that the triple triple bar on the slot machine with those

Potential multibaggers and i also i i do call this out you know with when i share my my portfolio with unrivaled investing subscribers you know i do share you know showing hey not only do i have some long position i do have some shorts and hedges you know betting against the market and you know arguably i called it out uh two subscribers um you know a few weeks

Ago effectively saying yeah a lot of these sectors started turning a lot of these economically sensitive sectors started turning lower in the last few weeks sort of articulating to the market yeah like hey there might be a problem here you saw it with transportation stocks turn lower you saw it with semiconductor stocks turn lower you even saw it with financial

Stocks turn lower and oftentimes some of these more economically sensitive you know sectors turn lower first and that might be a signal that might be a price signal to investors saying hey there might be a problem coming up and looking at what the federal reserve’s looking to do it’s the story is starting the puzzle pieces are starting to fit together anywho if

This video has been helpful for you please make point of hitting that thumbs up hit that subscribe button and thanks so much for tuning in

Transcribed from video
STOCK MARKET CRASH: MORE PAIN for GOOG (Google Stock), SHOP (Shopify stock) & SBUX? How much LOWER? By UNRIVALED INVESTING