If you’re investing like you did during the long bull market run from March 2009 through January of this year, there’s no other way to say this: You’re doing it wrong!
I keep seeing many people approach this market in the absolute WRONG way. Consider this case of “Crazy Eights” … not the card game, but rather a company that shows its losing hand and STILL can’t get people to stop buying its stock!
I’m talking about iQIYI (IQ, Rated “D+”).
IQ is a Chinese video-streaming service that’s majority-owned by Baidu (BIDU, Rated “C”). It’s been in business since 2010. Unfortunately, in every single one of those eight years, it lost money. That includes $554 million in 2017 … $463 million in 2016 … and $410 million in 2015.
What about the future? It must look better or else the “Netflix of China” wouldn’t have been able to go public in a March 2018 IPO that raised $2.25 billion, right? Nope! As of June 2018, analysts were forecasting losses to surge to $789 million in 2018 and $723 million in 2019.
Again, let me repeat that for emphasis …
8 years of operation … 8 years of losses … and another $1.5-BILLION-PLUS in losses likely over the next 2 years (at least).
Yet investors have been piling into IQ shares like the company is spinning straw into gold!
The stock soared from its $18 IPO price to $43.93 as of Tuesday, a gain of 144% in just a few weeks. Bloomberg helpfully explained that one of the reasons it’s surging is that it has “become a darling for millennial investors on the stock trading app Robinhood.”
|A quick look at Robinhood, which lists IQ as one of its 100 Most Popular stocks, shows that its users have paid an average of $35.50 per share.|
I feel like channeling my inner John McEnroe and going “You can’t be serious, man. You cannot be SERIOUS!” Who in their right mind is buying this complete and total crap? It’s exactly like what I saw in 1999-2000 right before the first tech bubble burst.
My advice? If you want to preserve and grow your wealth for the long term, leave highly speculative stocks like IQ in the dumpster where they belong. Instead, stick with the kinds of safer, more stable, highly rated names I’ve been recommending in my Weiss Ratings’ Safe Money Report.
Keep holding a much higher allocation of cash, too. This is a much-riskier, more-volatile market than what we had for the last several years. You have to approach it as such. At the very least, don’t buy money-losing stocks!
Until next time,
P.S. Some of the air is already starting to come out of iQIYI with the recent market pullback. Some will treat this as a buying opportunity. But if you want stocks that can go up … and keep going up … you want to buy stocks with our highest safety and performance ratings. To receive those in your inbox each week, complete with detailed buy and sell instructions, click here.