Monthly Investment Performance on iBillionaire: Just four investments had positive returns in October.
Want to know which investments on iBillionaire performed best in October, which lagged, and why? Read below to learn more about returns on iBillionaire last month, and see how they did compared to the rest of the market.
The only four positive performers were, in order, Elon Musk’s Tesla, the Brazil ETF, the Gold ETF, and the Pre-IPO Fund. Here’s what happened.
Tesla: +27.40% 🚗 💨📈
After a huge price drop when the SEC charged Elon Musk with fraud, the Tesla more than rebounded in October. While the rest of the market sold off (read more about that below), Tesla stock surged after the company blew expectations away in its third quarter earnings report. Elon Musk had promised that Tesla would become profitable after sales and production of Tesla’s Model 3 sedans picked up. It seems that’s happened, with a positive net income over $300 million. Stock analysts were expecting the company to report negative earnings per share BUT instead Tesla reported positive net income, positive free cash flow and adjusted earnings per share of $2.90.
Brazil ETF: +19.03%
The stock market in Brazil is rallying for mostly one reason: Jair Bolsonaro, the country’s newly-elected President. The far-right Bolsonaro who has promised to crack down on crime and bring economic growth and glory to Brazil elicits strong feelings from those who favor him, and those who do not. Because of the strong Bolsonaro rally, the Brazil stock market has returned to positive terrority year-to-date, though only slightly, 0.90% to be exact. Since reaching a low point on September 13th, it has returned a whopping +30.70%. The market appears to be a fan of a victory because Bolsonaro is expected to bring radical change. His opposition, the “Worker’s Party,” was until relatively recently favored to win.
We will also note, however, the relatively favorable review of the country’s improved business-friendliness that Brazil received from the World Bank. Summarized by the Financial Times, in Brazil it is now “easier to start a business by allowing new companies to register online. The country also improved access to credit information in the past year and modernised its labour market regulation. It made cross-border trade easier by introducing electronic certificates of origin for imported goods. That has speeded up the process of, for example, bringing car parts across the border from Argentina.”
The price of gold typically rises in a sell off and “flight to safety” period, which October certainly was. During October ETFChannel noticed a meaningful inflow into the Gold ETF GLD (which is an investment option on iBillionaire). This makes sense given historic trends, which have shown Gold negatively correlated to stocks and many other investments, meaning the price of gold rises in down markets, and vice versa.
The three worst performers were AMD stock, Square stock, and Nvidia stock. Here’s what happened.
Advanced Micro Devices (AMD): -41.05%
Tech stocks in general and among them, many chipmakers dropped in October. CNBC cites a few reasons: slowing overall growth in chip sales and profits, albeit after a stellar 2017, has economists and market observers questioning whether technology investment is cresting. It did not help AMD that the company reported that revenue was little changed in the third quarter, as growth in its crucial auto segment slipped. The slowing crypto craze did not help either, and neither did AMD’s stagnant growth in cloud computing.
Square has had a volatile few months. in October, two things in particular happened to hurt the stock, in addition to the general market and tech sell-off. One, an analyst voiced concern that SQ has credit risk. Square stock subsequently fell -8.5% (FYI the same guy gave SQ the same exact sell/$30 price target last year in November). Two, Square’s CFO Sarah Friar announced she is leaving. Square loses a key leader at the company with her departure.
Nvidia, a chip-maker like AMD, also dropped substantially in October. However, just before month-end, a JP Morgan analyst released a report that sent the stock 9.36% higher on Tuesday. He wrote that the company’s long-term growth potential in different markets, including cloud datacenter and autonomous driving, makes it an attractive stock to own.
Thought for next month 📈
In October it was revealed that U.S. GDP in the third quarter was +3.5%. Better than expected +3.3% but lower than last quarter’s +4.2%.
As for market performance, despite the significant sell-off in October, many analysts either expect the bull run to resume, or the bear market to have a limited run. Others of course, expect worse. And indeed, October’s returns were quite terrible: the S&P 500 Index was down -6.8% and the NASDAQ
down -9% and the DOW Jones down -5%. Out of all of the major asset classes, the strongest performer in September was gold, with the spot price up +2.8%, and the GLD ETF, as we mentioned above, up 2.1%. Foreign developed market equities -8.0% and emerging market stocks -8.7% did about as poorly as the U.S. Oil performed the worst, with the price down -10.8%. Despite poor U.S. market performance, the Federal Reserve has indicated that it will continue to raise rates, with the view that the economy is healthy.
Our recommendation 👌
Warren Buffett has a great quote that applies to the sell off this month. Find it in full below, but basically he’s saying that if you’re a long-term investor, which at iBillionaire, we encourage you to be, it’s actually a good thing when prices drop, because your money goes further: you are able to invest the same amount, yet buy more shares. This is exactly why we recommend investing the same amount at regular intervals. Timing the market is extremely difficult, if not impossible.
Using our automatic investment plans, you can avoid making irrational decisions. Our plans automatically invest the amount you choose on a regular schedule, ensuring you buy more shares when prices are low, and fewer shares when prices are high.
Quote of the month:
“Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.” – Warren Buffett.
By the way: You can invest like Buffett with as little as $5 on iBillionaire: Buy Berkshire Hathaway on iBillionaire.
P.S. Do you think you could lose all of your money investing? Think again. Check out this graph that shows how if you were a regular investor in the S&P 500 at almost anytime since the 1800s, you would NEVER lose all of your money, and you would rarely lose any money at all – in fact most of the time, you make a great deal!
Important Note: Past returns do not indicate future performance. Market returns source: James Picerno.