Posted January 21, 2022
By Zach Scheidt
3 "Buys" the Market Is Giving Us Today
2022 is off to a very difficult start for most investors.
Many of the stocks that performed well last year are now in full-fledged selloffs.
And even some of the best stocks started trading lower this week as investors tossed out the proverbial baby with the bathwater.
While I understand the frustration many investors have right now, it's important to remember that this is the kind of action that makes millionaires!
You see, if we didn't have situations where the market traded lower and skittish investors made emotional decisions, you wouldn't have the opportunity to buy stocks at discount levels.
So instead of letting the market's fear get under your skin, I suggest taking a look at three quality plays you can buy today — despite what’s happening in the overall market.
The "Everything Selloff" Creates a Limited-Time Opportunity
As I watched the market action this week, I started to get flashbacks of my time working as a hedge fund manager.
You see in the early 2000s, there were several periods in which the market behaved very similar to what we're seeing right now.
At first, you would have one area of the market start to weaken. In today's case, it’s the low-earnings/high-growth tech stocks that have fallen out of favor.
As the affected stocks traded lower, fear would start to spread across other areas of the market.
At some point, we typically had a day or two where everything was under pressure as some investors bailed out and swore of investing for good.
This was the moment of opportunity where our hedge fund created the most wealth for our clients.
During those short days when the quality stocks got hit as well, we set up new trades to profit from the best companies that didn't deserve to be sold.
Then as investors finally came back to their senses and bought back the quality stocks, our investments grew and our clients made money.
That's how you profit from situations like we have in today's market.
So if you've got the confidence like I do to invest in the strongest areas of the market, here are three plays you can put in your account right now.
Rebound Play #1: Traditional Bank Stocks
One of the main reasons stocks are trading lower right now is because investors are bracing for higher interest rates.
Do you know what companies do well when interest rates move higher? That's right... bank stocks!
Higher interest rates allow banks to charge more for the loans they offer customers. And that means more profits for the year ahead.
While traditional bank stocks were near all-time highs at the start of this week, many shares sold off just because the overall market was weak.
This is one of the first areas I expect to rebound. And it’s one of the best places for your money to grow in the year ahead.
Consider buying shares of the SPDR S&P Bank ETF (KBE) right away!
And this weekend, you may want to research some of the individual banks in this fund so you can buy some of the strongest individual stocks in your account next week.
Rebound Play #2: Traditional Energy Stocks
Another area that is still in great shape this year is the oil and gas (or traditional energy) sector.
Many investors left this area for dead and decided to invest in renewable energy plays instead.
But while renewable energy is certainly the growth area for the future, we're still going to have to get there first.
And that means demand for oil and gasoline will continue for years and years to come.
Thanks to underinvestment in new oil supplies along with surging demand, oil prices are trending steadily higher. That's great news for oil and gas companies that still produce fossil fuels.
Today, you can buy shares of the SPDR S&P Oil & Gas Exploration ETF (XOP) after a short-term pullback.
Just like the bank stocks, investors have pushed oil and gas stocks lower for the last two days. But this short-term pullback is just a blip in the overall positive trend.
The pullback does give you a great entry point, which sets you up for more profits throughout 2022.
And just like KBE, I think you can spend some time over the next few days picking out some of your favorite stocks included in this fund to buy individually.
Rebound Play #3: Value Stocks
Here at Rich Retirement Letter, we've talked a lot about the rotation out of growth stocks and into value plays.
A value stock is simply a stock that trades for a low price compared to the earnings book value of the company. In other words, you're getting more value for every dollar you invest in these stocks.
The Vanguard Value ETF (VTV) is a fund that holds a basket of value stocks.
Shares of VTV hit a new all-time high earlier this month while the rest of the market was pulling back.
Despite this relative strength, VTV finally started pulling back this week as selling picked up in earnest. But the fund only pulled back to the spot where it broke out in mid-December.
So while other areas of the market are experiencing extreme weakness, VTV is just taking a step or two back to give investors a chance to get on board.
I'd love for you to buy shares of this fund right now and profit from a rebound.
But even more, I'd love it if you'd take some time looking back through our Rich Retirement Letter archives for the last few weeks to find the individual value stocks we've been talking about.
Picking up shares of these stocks is an even better way to make sure you're taking advantage of the discount prices the market is offering and profiting from the next rebound.
So please, whatever you do, don't let your emotions cause you to miss an opportunity.
Instead, look for the pockets of strength in today's market and invest wisely to protect and grow your wealth.
Here's to living a Rich Retirement,
Editor, Rich Retirement Letter