The Upside to Avoiding Drawdowns

The Upside to Avoiding Drawdowns: “If you buy things you don’t need, you will soon sell things you need.” -Buffett

  • Our first newsletter of 2021 suggested it might be a great time to rotate out of speculative IT and into Staples
  • Our second newsletter of 2021 showed that Staples were trading as cheap relative to the market as they were at the peak of the internet bubble
  • The chart below shows that over any 3 rolling year period, Consumer Staples stocks have almost NEVER lost money
  • At the Dot.Com trough,  IT and the S&P 500 lost investors -75% and -41% of their money while Staples were UP 10% over the three year period
  • At the GFC trough,  IT and the S&P 500 lost investors -34% and -39% of their money while Staples were down only 5%

If you invested $1 in IT at the peak of the Dot.Com bubble, you lost 75% of your money, leaving you with only $0.25 cents – that requires a 400% increase to break-even.  Might be a great time to buy what you know & need!

Hat Tip to the folks at Ash Park for their wonderful work on Staples and the idea for this chart!!

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