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Cyclical Stocks- Be greedy when others are fearful - YouTube
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hi guys this is just a quick um
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video entry on my uh on my blog post
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cyclical stocks be greedy when others
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are fearful
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i'm just going to summarize some of the
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information for you guys if you haven't
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got the time then you can just listen to
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this video
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or you can you know obviously be doing
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it listen to this video while doing
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other things
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so this is all based on my experience um
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i've been investing on a knife since
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about 2006 2007
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and uh i'll talk a little bit about my
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past experience as well as
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um the last 15 16 months
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so basically i was i started getting
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interested in cyclical stocks
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from reading more into peter lynch and
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his work at fidelity investments
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and reading his books on on cyclicals
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and rebounds etc
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and then back in the the the crisis in
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in america
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um i noticed some of the problems with
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ford and gm
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and basically i looked at that and i
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didn't really invest so i didn't
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i didn't read the benefits of um i think
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what turned out to be 20 bagger with um
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with ford yeah went up 2 000
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so i missed out on that unfortunately
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and uh promised myself that i wouldn't
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miss out on that a similar opportunity
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and i'd be a bit bolder
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um so hence being greedy when others are
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fearful
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i'll just take the step and go for it so
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um yeah i sold some stuck so i sold
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some tesco stocks when i saw that the
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housing house builders might
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um were in a similar situation i saw
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that
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summer house builders in the uk were
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selling at the same nasa valley
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as the stock price was selling the same
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prices as the assets so i thought
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well the the the price of the valuations
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of the properties were also
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um depressed because the market and um
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probably weren't one being treated for
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their fair value and also the market had
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kind of um
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decided that they'd never run a profit
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ever again which is kind of ridiculous
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based on the share price
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um so this is what i did i was looking
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around for um
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cyclicals and i chose um because i was
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looking for a rebound stock i chose a
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stock that had the most
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damaged earnings um and
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um low and low margins now that wouldn't
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necessarily be the right opportu
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um outlook or approach for long-term
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investing because
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you know you want a company that's going
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to stick around have stable
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potentially quite fat margins but in
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this case i was looking for
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thin margins so that um then when they
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recovered
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um the recovery would actually boost
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their um
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eps growth even more so i looked at
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um barrett developments and you can see
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in the chart um their earnings went down
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from
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circa 75p right down to
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um five or six pence something like that
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in uh 2010
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i think i started investing about 2011
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and i looked at the fundamentals
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um yeah actually in 2010 it went down to
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minus 2.9
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pence to uh yeah so that's kind of
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ridiculous really they were at 52p in
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2008
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um so yeah the market really killed them
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in terms of the share price
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it went down from i think there's
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something like 900 to
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i don't know 60p or something i think
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i'd start investing around
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uh 130p or something
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anyway so you can see from my statements
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the
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image of the statements um it's gone up
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on that image it's gone up 65 actually
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um since making that blog post it's
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actually gone up
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a further 20 percent so i've done fairly
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well but
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on that but um yeah i just wanted to say
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that um
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it's still risky i mean like right now
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um
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these aren't for the faint-hearted i
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think harder investors because basically
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um
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it wasn't guaranteed that these house
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builders were ever you know ever going
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to reverse the situation barrett
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developments in the uk had some debt
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so um i did split the investments with
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barrier developments
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persimmon which is the market leader and
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he's a market leader
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and um from what i know and taylor wimpy
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and now these had varying levels of debt
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but essentially i was banking on
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um the housing recovery it's kind of
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started now
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you can see trends the home survives um
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scheme which is introduced
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by the uk government in the early part
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of this year
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um some kind of confidence coming back
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into the market
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but that's it really so i was just
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spotted that trend in the moment it's
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done quite well
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in terms of the current situation that
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these stocks are extremely
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um i wouldn't say they're overpriced but
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they're quite expensive now um
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in terms of pes they're in the in the
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high 20s low low 30s range so i think
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the
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the market is banking on these um
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is banking on these stocks um producing
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um growth growth uh a growth back to
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earnings
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up to a similar kind of level i think
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that expectations on various is they've
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i think they've last was ap ap eps and
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now i think
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they're priced in something like 16 to
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17 p or something like that
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so i guess if uh if they don't hit that
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then the stock could fall
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from my calculations i think that if it
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doesn't make that if it only makes
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you know 13 14 p 15 p something like
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that
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and it falls the stock falls by 10 or 20
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percent it's still not bad it would
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still
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only fall back to um to
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to the evaluation that's there would
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still be up 65 percent so it's still
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relatively decent um long term potential
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and i think i'd only
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sell these stocks if the story changes
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which might happen
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okay thanks
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