Our Shopping List

Stocks we might add when the market declines

The S&P 500 is down 5% last month.

We love declining markets as we can buy wonderful companies at cheaper prices.

Let’s create Our Shopping List. Which companies would we like to buy when the market tanks?

Trump Tariffs

The reason for the market volatility?

Trump added new taxes on goods from Canada, Mexico, and China. He also states tariffs on the EU will be announced soon.

These countries fought back by adding their own taxes. This made things more expensive and uncertain for businesses.

The key thing to remember? Nobody wins in a (trade) war.

"In war, whichever side may call itself the victor, there are no winners, but all are losers." - Neville Chamberlain (Prime Minister of Great Britain during WOI)

What will happen next?

What will happen next? The market will fluctuate.

Please note that from a stock market perspective, nothing happened yet.

The S&P 500 declined by 3.3% this week and we’re down only 1.7% since the beginning of the year.

It’s still way too soon to heavily start adding to your positions.

However, great things happen to those who prepare themselves.

Just look at what happened in 2020. During the COVID uncertainty, the S&P 500 declined by 34%.

If you bought these stocks at the exact bottom you’d have:

• Arista Networks: +730%

• Intuitive Surgical: +324%

• Constellation Software: +311%

• Copart: +260%

• Brown & Brown: +254%

Please note that buying stocks at the exact bottom of a declining market is impossible.

However, you get the point: the best time to buy stocks is when there’s blood running through the streets.

There’s always an intelligent sounding reason to sell.

But in the end owning stocks is one of the best ways to create wealth:

Declines are good

Stock market declines are good (and healthy).

Once traditional media starts talking about stock market crashes, it’s usually a great time to add to some of your positions.

But please don’t take my word for it.

Let’s listen to Warren Buffett, the best investor in the world.

Just imagine you love hamburgers and eat one at least once a week.
If the price goes up, you wouldn’t be happy. Do you?

Stocks are just like hamburgers. They work exactly the same way. 

Many people are happy when prices go up. But if you are a serious investor and you want to keep compounding your money over the next few years or even decades, lower stock prices are the greatest thing you could wish for.

You still need some extra convincing?

In the long term, stock prices always go up.

If you invested $1 in 1800, you'd have over $20 million (!) today.

It’s a great idea to add to your positions in times of uncertainty:

"It’s absolute cockamamie crazy to sell stocks after they drop. Instead, you should say, “Today there’s a first-rate bargain and I’m buying.” — Charles Ellis

"I’ve found that when the market’s going down and you buy stocks wisely, at some point in the future you will be happy." — Peter Lynch

"After a stock market decline, people may perceive more risk than before when, in fact, the decline may have taken some of the risks out of the market." — Robert Shiller 

The power of the Community

I think the Community is something very powerful during times of turmoil.

It helps to focus on the long term and to do the right thing.

I love that when stocks go down, Partners don’t panic. Instead, they buy more at lower prices.

This caused some Partners to:

• Pick up Dino Polska in September 2024: +60%

• Buy Fortinet in November 2023: +110%

As Napoleon Bonaparte once said: A genius is the man who can do the average when everyone else around him is losing his mind.

Our Shopping List

Now let’s create Our Shopping List.

It’s a list of phenomenal quality stocks we would love to buy at the right price.

For every company, we add a price at which I would be interested in buying.

An example?

Copart is a business I would love to own. However, I think the valuation is currently too expensive.

• Current stock price: $53.7

• Forward PE: 35.8x

• Average Forward PE past 10 years: 26,9x

This means the stock should decline by 25%. As a result, we put our ‘Buy Under Price’ at $40.8.

We do this exercise for our entire shopping list (29 High-Quality Stocks).

Here’s the list: