MARC:
In this case, MicroStrategy had a whopping 96% cash conversion! And NEGATIVE 3% accruals. Sure enough, watch what happened next… MOLLY:
Take a look… Back on October 24, 2008, the stock lit up Bullish on the Power Gauge in our backtest. Now, that was
Remarkable. The stock more than doubled in just over a year… even after the worst Wall Street meltdown in a generation.
extremely unusual… because it was only about a month after the collapse of Lehman Brothers, and only two weeks after the biggest stock market drop since Black Monday 1987.
Even Works During a Recession
MOLLY:
MARC: Meanwhile, Molly, our new EQ filter exposed the bigger losers to AVOID during that same time period. JOE: Yeah, I’m especially proud of this… Fannie Mae got slapped with Double Bearish ratings on October 24, 2007 – a full YEAR before the 2008 crash even began. By the time the broad market sold off, it was already down 99%! MARC:
That’s exactly my point, Marc… With all due respect, who cares if MicroStrategy was a pioneer in cloud computing at a time like that? Bullish rating or no, it seems downright foolish to buy a speculative stock in October 2008. MARC: Well, let’s not forget Warren Buffett’s famous words… “Be greedy when others are fearful.” And in this case, you could have afforded to be very greedy with MicroStrategy. Because watch this… One more click in our system…
Same with Citigroup. Banks were devastated by the Great Financial Crisis, right? Well, this stock got slapped with Double Bearish ratings on October 1, 2007 – more than a year before the broad market crashed. By the low in 2009, it was down 99%! That’s what we love
And it lit up in our study with VERY HIGH Earnings Quality on our new filter. A Bullish rating. JOE:
In other words, a Double Bullish rating… from both the Power Gauge and the EQ filter. And that was smack in the middle of a sell-off, which is the ideal time to buy into these stocks. Because you can get into a megatrend at a far cheaper price than buying in the heat of a bull market. MARC: Remember Molly, we typically only see around 2.3% of stocks get a Double Bullish rating at any given time. They’re the four-leaf clovers of the stock market. That made this stock a low-risk and high-potential way to play the emerging tech boom during what later proved to be a historic low in the market. If you ask most people today, they’d have BACKED UP THE TRUCK in 2008. That’s why we consider this year’s sell-off a “gift.” JOE: And again, we determine this through Earnings Quality.
about our new EQ Power Gauge system. It can spot a stock like MicroStrategy as a fantastic opportunity, even as it warns about the biggest losers, in the exact same market. MOLLY: Got it. So you can be fearful – AND greedy – often at the same time… so long as you’re applying your new EQ filter to “separate the good from the trash” – as you put it earlier. And of course… Warning about the biggest losers is one of Marc’s longtime specialties.
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