Today, I’m putting that strategy to work in solar. I’ve done my analysis, I think the solar market will be huge and I think SunPower Corporation (NASDAQ:SPWR) will be the biggest winner on the market. The company makes a high-quality product with industry-leading efficiency, and as system costs come down, SunPower’s more efficient panels will be attractive to buyers. My instincts have been right in 2013, and we’ll see if they continue to be right for the next few years.
There tends to be a lot of noise when stocks fall, so I learned to stick to the fundamentals and trust my instincts when the market is going crazy.
When everyone is freaking out, get aggressive
We often mention the Buffett-ism “Be greedy when others are fearful,” but it’s harder than most people think. I’ve learned that this is one quality I can leverage to make money in down markets.
Before working at The Motley Fool I helped a friend open a brokerage account and pick stocks. The problem was that he started his account at the peak and experienced the market at its worst early in his own investing tenure.
In early 2009, I was wildly bullish on Las Vegas Sands Corp. (NYSE:LVS) , even as many thought the company would go bankrupt. Majority owner and CEO Sheldon Adelson had already put about $1 billion into the company in 2008, and in a conference call when he was pressed about liquidity, he said (joking about his height):
One of my closest friends says, “Sheldon, don’t worry about hour height. You’re the tallest person I know when you stand on your wallet.” And I’m saying right now the company will not have liquidity problems.
I had already bought shares on the way down from its peak, and (as luck would have it) just a few days before the market hit bottom, I doubled down again. My thought was that if Sheldon Adelson’s company went under, we were all screwed — I might as well be ultra-agressive while everyone is freaking out.
I told my friend I was buying and advised him that some of the cash he had sitting in his account would be put to good use in Las Vegas Sands Corp. (NYSE:LVS). But the fear of widespread layoffs and an economy that continued to tank was too much to overcome.
Markets like certainty, which is why stocks fell as far as they did in 2008 and early 2009. It wasn’t until the summer of 2009 that anyone could see unemployment or the economy turning around, but those who bought when uncertainty was highest made a killing.
We’ll go through this again
The next recession or financial crisis may not be as bad as the last one, but we should always be prepared for a bear market when it arrives. History tells us that every seven to 10 years the market will tank. Hopefully these three lessons will make the next crash more profitable than the last one.
The article From Peak to Peak: What I’ve Learned About Investing in the Last 5 Years originally appeared on Fool.com and is written by Travis Hoium.
Fool contributor Travis Hoium manages an account that owns shares of SunPower. Travis Hoium personally owns shares of SunPower and is short shares of Amazon.com. Travis Hoium has the following options: Long Jan 2015 $7 Calls on SunPower, Long Jan 2015 $5 Calls on SunPower, and Long Jan 2015 $15 Calls on SunPower. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com.
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