A Final Message (and recommendation) from Tim Melvin

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April 30, 2020 Editor's Note: Starting tomorrow, Friday May 1, you will be receiving access to daily market insights from the entire panel of Money Morning experts. Now more than ever, this information can make or break your financial future, including the best stocks to buy right now.Click here for more. Farewell (and a Final Recommendation) By Tim Melvin Dear Reader, This will be the last issue of Max Wealth. Thanks for taking this journey with me. Hopefully, you have gained some knowledge that helps make you a more successful investor. We had some opportunities for nice gains with some of the stock ideas along the way. Hopefully, by now, you have signed up for Money Morning to gain access to the Money Map Press traders and investors who right on that site every day. These folks have decades of collective experience in the markets, and perhaps you can continue the learning experience over there. Be prepared for more selling in the broader stock market in the weeks ahead. So far, the Fed and stimulus packages have kept prices elevated, but we have some brutal economic news ahead of us. GDP is going to take a massive dump in the second quarter of 2020. Earnings will be awful in the second quarter of this year. That is not to say that they were great in the first quarter. S$P 500 companies are on track for a 15% decline right now. That will look spectacular when we start seeing numbers in July. 25% of the S&P 500 is technology stocks. The FANG stocks alone make up 20% of the index right now. That is an unprecedented amount of concentration. So far, they have maintained their levitated state, but that could well end when the economic numbers and 2nd quarter earnings are revealed. Three Ways to Prepare... When the selling comes, make sure you have cash to be a buyer. If we see a massive wave of selling that takes the VIX back above 50, start collecting cash again by selling call options on stocks you own. Sell cash-secured puts to establish positions in stock you like at lower prices. Be willing to be a long-term owner of any stocks that you put options on. Resist the urge to juice returns by selling the puts on margin. Put up all the money. Aggressive investors should focus on stocks trading below asset value that have strong financials. Pay no attention to the income statements. They will be a disaster. Focus on the balance sheet. Scale and be prepared to buy lower. More conservative folks should look to buy dividend aristocrats stocks that paid a dividend for decades and raise almost every year. These include big companies like AT&T (T), 3M (MMM), Colgate Palmolive, and Clorox (CLX) that make products we use every day. Again, be prepared to buy more lower. One More Idea... I spent a lot of time thinking about how to close Max Wealth. Rather than a sappy goodbye that does neither of us any good, I decided to leave you with one more idea. This is a stock I want you to buy if the shares should trade down below the March lows. Markel (MKL) is an insurance company that operates much like Warren Buffett's Berkshire Hathaway (BRK-A) They are very good at generating profits and float that can be invested in stocks and bonds. It turns out that CEO Tom Gayner and his team are really good investors as well. Since 1993 they have beaten the S&P 500 index by a wide margin. They own about $6 billion worth of stock, and like Buffett, they are long term investors. In fact, the firm's biggest position is Berkshire. They also own stocks I have mentioned before as stocks to hold forever like Brookfield Asset Management and private equity firms KKR (KKR), Apollo Global Management (APO), and Blackstone. You will also own companies that will benefit from the most prominent trends that will dominate as the recovery begins. They own Electronic Arts (EA), which will be a huge player in e-gaming. Visa (V) and Mastercard (MA) will get a boost from the changes in how we bank and pay for things after the crisis is past. General Dynamics (GD) profits from never-ending wars that will still take place all over the world. Scotts Miracle-Gro (SMG) will have legal cannabis tailwinds pushing the stocks higher. Markel also has a private equity arm, Markel Venture, that buys family-owned companies that are looking to cash out. They only purchase successful businesses that produce cash flow. They like businesses that have solid management that is willing to stay on after the deal closes. Unlike most private equity investors, they intend the investments to be permanent with no desire to sell Markel also has roughly $10 billion of fixed income investments and another $1 billion of short term investments, so they will be in an excellent position to be buyers if and when the market does begin to move back to the lows. The stock currently trades at $900 a share. It is worth at least $1500 right now, according to my math. Book value is $800 and has been growing at about 10% a year. In an average year, the stock trades right around 1.5 times book. In book times, it has traded above two times book value. If management continues to execute as they have under Mr. Gayner's leadership, the stock could be between $3000 and $4000 a share. That's my final gift to you. This is a lot like buying Berkshire Hathaway when Warren Buffett was only 59. That has worked out pretty well, and I expect this stock will as well. There it is. My final Max Wealth pick as a parting gift. It is best bought in a market tumble, but if it gets below $800, it is time to be an aggressive buyer of the baby Berkshire insurance company. Thanks so much for taking this journey with me. It has been my pleasure and honor. Stay safe, Stay calm. Wash your hands! Tim Melvin You are receiving this e-mail at, its028@gmail.com, as a part of your free subscription to Tim Melvin's Max Wealth. Remove your email from this list: Unsubscribe Manage Your Email Preferences To cancel by mail or for any other subscription issues, write us at: Tim Melvin's Max Wealth | Attn: Member Services | 1125 N Charles Street | Baltimore, MD 21201 North America: 888.384.8339; International: 443.353.4519; Fax: 410.622.3050 Contact Customer Service Website: https://maxwealth.com/ © 2020 Tim Melvin's Max Wealth All Rights Reserved. Nothing in this email should be considered personalized financial advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. 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