Search For New Stars In 2020 Financial Crisis

June 4, 2020

Broad Perspective

We all love to look at stars in our life, whether in films or in sports.  This may be an innate sense of hero/heroine worship.  In the bible, we learn that the wise men and astrologists from the East looked at the stars in the sky to search for the Savior.

In this article, we will look for new stars in the current 2020 Covid-19 financial crisis.  Will the technology sector’s stocks remain the stars and darlings of Wall Street?  Our short answer is:  they will fade away and replace by new stars in this crisis environment.  The next question: where will we find these new star performers?

We first consider the Great Depression as a model for today’s events.  Then we consider the current high flying Nasdaq ($compq) index and compare them with two examples from the precious metal sector.

New Star Performers of 1929      

Chart 1 – The New Star Performer (HM) in 1929 Crisis

Note that the gold mining stock (HM) out-performed the equity market (Dow) by almost 800% by the end of 1932.  Further note that during the Depression period (1929 – 1933) gold itself was under price cap at $20/oz.   The relationship between gold and gold stock is different today.  In addition we observed that gold stock has under-performed the gold price since 2012.  Where do we search for the next star performers?

Chart 2 – Where to Search for Next Star Performers

Searching for New Stars

The following chart showed the composition of the Nasdaq Index, which is dominated by the technology stocks (MSFT, AAPL …).  They are the current star performers.  Will they continue to dominate the markets?   We do not think so.  These stocks will be replaced by new stars.  We need to learn a lesson from 1929: the high flyer stock RCA was replaced by gold mining HM in time.   In the next section, we list two examples.

Chart 3 – Nasdaq Index ($compq) Composition

Examples of New Stars

We give two examples of new star performers from the precious metal sectors.  One is a top silver streaming company Wheaton Precious Metals Corporation (WPM) and the other is top gold streaming company Franco-Nevada Corporation (FNV).

Wheaton Precious Metals Corporation

Chart 4 – WPM as Next Star Performer

WPM out-performed Nasdaq Index since 2019.  The estimated WPM gain from now to 2020-2021 is as follows:

  • Estimated % Gain of WPM from current price (41.6) to 2021 (92.5) is 122%.

Franco-Nevada Corporation                        

Chart 5 – FNV as Next Star Performer

We estimated that that the gain of FNV from current price to the price of 2021 as follows:

  • Estimated % Gain of FNV from current price (135.54) to 2021 (220) is 63%.

Summary

Our analysis showed no stars will last forever.  We list two new emerging star performing stocks in 2020 - 2021. There are many others for us to discover.  One deeper truth is for us to know the real star Creator, as the wise men from the East had experienced two thousand years ago.

“He determines the number of the stars; he gives to all of them their names.”

We are not certified or qualified financial advisors.  Please consult your certified financial advisors for actual trading and investing.

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F.T. Dao is a private investor and recently left the corporate world for technical analysis of stock markets.  He holds a PhD degree in physics and has done technical analysis of the market on the side for many years.  He welcomes constructive discussion and can be reached at:  [email protected]  , [email protected]

A single ounce of gold (about 28 grams) can be stretched into a gold thread 5 miles (8 kilometers) long.

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