- After it recently hitting a decent high of $64 per share, Canadian Solar is down all the way to under $40. A whopping 35% drop.
- Trulieve dropped from over $65 to under$ 50.
- Brookfield Renewable Partners LP (BEP) dropped to $37 from its high of over $50.
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Hello everyone, and welcome back to Investing with Antoaneta. In today’s blog, we’ll talk about growth stocks. Or, more specifically, why they’ve been doing so poorly, and is there a reason to panic. Check out my other blogs such as, “Why Long Term Investing Is My Way Of Investing“.
First things first: No, this is not “the end” for growth stocks
That’s a given. By now, you should know that this sort of message is just clickbait. When it comes to the Stock Market, the situation always rebalances itself after a while. So, personally, I do what every experienced long-term investor does – I buy the dips.
I’ve said this so often that even thinking about it makes me feel like I’m repeating myself, but you always want to buy during the dips. And that’s exactly what every other long-term investor does. The dips are actually good for us because they allow us to add more of our favorite stocks for cheap. We aim to buy only during dips, hold for as long as possible and only sell when there’s a good reason. Oh, and if you’re wondering what I consider “good reasons to sell”, you should check out my blog.
As a long-term investor, I don’t mind dips at all. I like dips.
But, right now, we’ve got something else going on. A situation that is anything but “standard” for the Stock Market. And, of course, I’m talking about the stuff that happened last year. Between the worldwide crisis and the lockdowns and everything, the Stock Market got really wild. I’ve never seen the market do what it did last year, and it’s safe to say that we shouldn’t expect a “repeat” of this performance.
A lot of companies went really, really high, because of … varying reasons. I recently published a blog talking about why this happened, so if you missed it, I highly recommend checking it out after you finish this one. The link will be in the description as per usual.
But the market was moving so fast that, sometimes, if you hesitated even just for a moment, you would miss the window. Personally, I’m not a massive fan of this because, well, I’m not in long-term investing for the stress. I prefer it when the market moves slower and more time to make calm and collected decisions. Rapid moves and rushing to buy is more short-term investing territory.
Luckily, the market always balances itself out, so we’re returning to normal. The market is slowing down, and some corrections are in order. Because, let’s be real here – no matter how much we enjoy seeing growth stocks go up, this just isn’t sustainable in the long run. There have to be corrections. And the longer it takes for them to come, the more drastic they’re going to be. There’s just no way around that.
When I buy stocks, I usually do it thinking that I’m going to hold on to the position for somewhere between five or ten years at the least. Or, ideally, for much longer. Like I said – as long as I agree with the fundamentals, I’m very hesitant to reduce (or much less let go of) a position.
With the whole growth selloff that’s been happening, I’ve noticed a ton of negative comments about growth stocks. And, well, with so many new people on the Stock Market, that’s not exactly surprising. People watch a video or read an article about some company, they like what they see, so they decide to put their money into it. Then, the stock drops, and they get super sad, disappointed, angry, etc.
I expect to see this sort of stuff, but I don’t really like it. Because, like I always say, you should invest in a stock, because you, personally, understand and believe in the company. You should add to your position because you are optimistic about the future of the company. Not because some YouTube person or some article writer said they’re doing it. Besides, almost all of these channels (including mine) go out of their way to point out that this isn’t financial advice.
This “outrage wave” then also comes with its own consequences, where even more people pull out of the stocks in question because they see others doing it … and it’s a ridiculous situation all around.
And the only people who really suffer from all of this are the new investors. Their positions go down, they get upset, and they sell them at a loss more often than not.
Before buying a stock, I always take some time to consider situations like these.
If I go into this position, and then it goes down by 30-40%, am I going to want to buy the dip, or will I want to just sell out of the position and move on?
If I don’t feel confident in the company and if the answer is “sell and move on, ” I just … don’t buy.
Besides, there’s always some volatility with growth stocks. If you are a growth investor, you need to be prepared for these periods, and you need to know exactly what you own.
In 2012, Apple was going for $25. In 2013, it hit a low of 13.95. That’s almost 50% down. Naturally, a lot of people were upset about this. Fast forward to 2015, and it was back to $33. Then, in 2016, it went down by almost 40% and hit $22.63. Today, Apple shares go for $125.
Okay, and what about Alphabet Inc. (Google)? Well, in 2018, Google stock was going for $1238 per share. However, before the end of the year, it dropped down to $979 (about 30%). Today, Google stock is worth $2270.
Microsoft? Oh, they’re something else. In 1999, Microsoft was selling for $58. Fast forward 7 years to 2006, and you’re looking at $21 for a drop of about 60%. Then, in 2007, it jumped up to $37, only to go down to $15 during the Great Recession of 2009. In 2014 it recovered somewhat, hitting $49, but that’s still lower than the $58 we had in 1999. How much does Microsoft go for today? 252 dollars. If you zoom out and look at the long-term, all the volatility is just small hiccups.
Volatility is just a part of growth stocks. Long-term investors look at the bigger picture. We buy and hold stocks for a long enough period of time that the minor ups and downs really don’t concern us. Unless we’re looking to add more to our positions, of course.
“The big money is not in the buying and the selling, but the waiting.”
If Microsoft, Google, and Apple are not immune to volatility, then it would be completely unreasonable to expect that your stock of choice will remain unaffected.
Tesla is another big example here. Back in November 2016, Tesla was sitting at a whopping $36 per share. In June 2017, it climbed all the way up to $76 only to drop back to $62 less than a month later. And, then it spent over two years being extremely volatile, dropping to as low as $37 in May 2019. Then, it started going up and up and up and up, with just a couple of minor hiccups along the way, until it reached its all-time high of $880 on Jan 4th, 2021, after which it started dropping. Right now, Tesla is priced at $610 per share. Not quite as impressive as $880, but much, much better than $36, right? I bet that there are quite a few people out there who sold out of their positions during the volatility and most of them are probably upset about it. It’s easy to talk about what you “could’ve” and “should’ve” done yesterday. But you can only do that by using the knowledge that you’ve gained today.
And, as long as I agree with their fundamentals, I’ll keep using these volatile periods to add more Tesla to my portfolio. Because, like many other investors out there, I am a big believer in the future of Tesla. I’m certain that they can (and will) do much better.
Like most companies in the solar industry, Canadian Solar is also going through a selloff. With the big leap, solar had in 2020, it’s once again something to be expected. I don’t see this as a “sign” that it’s time to sell out of the position. I still believe in solar energy big time, and Canadian Solar is looking as solid as ever. Oh, and, just for the record, I don’t think that selling, when the price peaked at around $60, would’ve been a good move either.
Now, I know what some of you would say – you should’ve sold when it was high and then bought back in now when it’s cheap again. But that’s unrealistic. Timing the market is pretty much impossible for 99.999% of investors. There are way too many factors to consider, and nobody can do it with certainty. It might work once or twice in someone’s entire investing career, but you can’t realistically expect that you would be able to buy the bottom and sell the top. Simply because you’ve got no guarantee when the top or the bottom is going to be reached. Besides, trying to always hit as close to “perfect timing” as possible is extremely taxing. Emotionally and mentally taxing, I mean. It’s a ton of stress that I do not want to deal with. Trying to do this for an extended period of time can really mess with your mentality and even cause long-term damage if you get carried away.
Canadian Solar might keep going down, or it could just jump back up before I even manage to post this blog. And the same thing applies to my buying strategy. I never wait for the company to “hit bottom”; I just buy in increments whenever I believe that the company is undervalued. The real money is in being patient and giving your companies the time they need to grow.
And Canadian Solar has been growing really well. In March, Canadian Solar reported that they’ve given guidance to 18-20 GW of solar shipments for 2021 and revenue guidance of 5.6 billion to 6 billion dollars. This makes for a 65% increase in shipments and 70% in revenue growth year-over-year. And, with polysilicon supply back on track, their gross margins are also projected to start increasing again. In April, they also announced the beginning of their 143 MWp mega-project in Japan.
If you haven’t been following the solar industry closely, let me tell you that this is huge news. This is not just Canadian Solar’s most significant project but also expected to be one of the largest in Japan as a whole. Work on the project is expected to conclude by Q1 2023, and once it’s finished, I expect that their revenue will go up drastically.
But wait, there’s more!
At the start of May, the Biden administration (US Government) greenlit a big solar project in the California desert. This is expected to provide energy for “nearly 90 000 homes”. Or, in other words, the government trusted the construction of a project worth 550 million dollars to Canadian Solar. Impressive, right.
Over the next five years, Canadian Solar expects some impressive increases too:
- Solar development project sales – expected to go up by 300%
- Services and asset management – expected to go up by 500%
- Partial Ownership of solar projects – expected to go up by 1500%
By 2025, Canadian Solar expects its recurring cash flow to make up about half of the total cash flows.
This would not just smooth the cash flow but also make their margins even better.
And, I believe that this is only the beginning (not just for Canadian Solar, but for the entire industry as a whole). Because, if we look at the data, solar power is just a tiny part of the electricity generation in the world.
Currently, we’re looking at something along the lines of:
- Coal – 36%
- Gas – 23%
- Hydro – 16%
- Nuclear – 10%
- Solar – 3%
The projections for 2050, however, expect solar to provide up to 30% of the world’s electricity. And I find this absolutely amazing because I’m a big believer in sustainability and eco-friendliness.
Before we wrap it up for today, I want to point out another interesting thing that’s played a role in the sudden drop of prices across the board – crypto. Or, rather – the hype about crypto. Because it’s not like cryptocurrencies are something new that just came out yesterday. They’ve been around for years. Bitcoin, for example, came online twelve years ago, in 2009. It’s just that they weren’t quite as hyped as they are at the moment. Between the shaky economy, the big-name investors talking about crypto, institutions investing in it, and the (almost daily) media coverage, crypto has attracted a massive following. And, naturally, the more impatient investors are going to move their money out of stocks and into crypto instead of doing the usual long-term incremental buying thing. Personally, I find that quite silly because I don’t like having all of my eggs in one basket, but, hey – it’s their money. For me, that’s just another interesting factor at play. Yes, I own crypto, and, yes, I’m actively investing in it over time, but I’m not going to sell out of the long-term solid positions (positions that I’ve spent years building) just so I can “get in” on the new trend.
This ended up being just another blog of me talking in length about why long-term investors need to think long-term. But, I believe that it’s pretty fitting, especially with all the new people worrying about the so-called “end” of growth stocks. This ended up being a pretty long blog, so here’s a quick summary for you:
- No, this is not “the end of growth stocks”.
- No, I’m not worried about the volatility and the corrections.
- No, I’m not selling my positions.
- Yes, I’m looking at the long-term.
- Yes, many people are pulling out of stocks to jump into crypto because of the hype. I prefer to keep my portfolio balanced.
If you like my content and want more of the same, you should check out our Private Investing Group. We’ve got exclusive detailed blogs, interesting discussions, strategy talks, and a live chat where you can get in touch with me in real-time. I’ll leave a link for you in the description below.
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Thank you all for reading, and until next time!
Recommended for further reading:
- The Lean Startup: How Constant Innovation Creates Radically Successful Businesses
- Business Adventures: Twelve Classic Tales from the World of Wall Street
- The Snowball: Warren Buffett and the Business of Life
- The Simple Path to Wealth: Your road map to financial independence and a rich
- The Business Book: Big Ideas Simply Explained