TradeSmith Presents: The Five Biggest Investing Takeaways of May 2022

By TradeSmith Editorial Staff

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May 2022 was an eventful month filled with record-breaking financial news — like watching the stock markets plunge to their lowest levels in years.

  • The S&P 500 suffered its longest losing streak since 2011.
  • On May 18, the Dow lost 1,164 points, or 3.6%, which was the worst trading day since June 2020.
  • The Dow records its eighth-straight weekly loss, which is the longest weekly losing streak since 1923.
May started with the Federal Reserve attempting to combat sky-high inflation of 8.3% hanging over our heads from the previous month, raising the federal funds rate (the target interest rate) a full 50 basis points, and spooking investors by signaling more to come throughout the year.

Outside the United States, China initiated a new round of COVID-19 lockdowns as the virus roared back.

Plus, we were introduced to something called monkeypox.

Making Sense of It All

During the month of May, TradeSmith Daily has been with you every step of the way to help you improve your financial wellbeing so you can feel secure about your future.

The daily advice hitting your inbox each morning covered a wide range of topics, including:

  • Moats: How to find companies with the best competitive advantages in this market.
  • How to distinguish between recession-resistant stocks and inflation-resistant stocks.
  • How to avoid the mistakes of Cathie Wood, founder of Ark Invest.
  • Tom Brady’s relentless pursuit of greatness, and how that could make you rich in three easy steps.
  • One important metric that reveals how tech companies are really doing.
Let’s review the most important takeaways of each article.

Takeaway No. 1: Economic Moats Matter More than Ever

Twenty-seven years ago, Warren Buffett shared a piece of his investing strategy at the 1995 Berkshire Hathaway Inc. (BRK.A) annual shareholder meeting. Not only is it still relevant today, but it could be the most important investing advice you hear all year.

“What we’re trying to find is a business that, for one reason or another — it can be because it’s the low-cost producer in some area, it can be because it has a natural franchise because of surface capabilities, it could be because of its position in the consumers’ mind, it can be because of a technological advantage, or any kind of reason at all, that it has this moat around it.”

Like the waterways that protect castles, economic moats surround a company’s profits and market share, shielding them from external forces that can range from inflation to war to recessions.

Click here to learn more, including:

  • Six “barriers to entry” preventing folks from starting their own businesses.
  • The four Ps of marketing.
  • How to find businesses with protective moats today, and why it’s so important.

Takeaway No. 2: The Important Difference Between a Recession-Resistant Stock and an Inflation-Resistant Stock

With inflation reaching 40-year highs and recession fears on the horizon, many folks want to hear more about stocks that can thrive during inflation, as well as stocks that can handle a recession.

But it’s dangerous to think of these as interchangeable, and with Senior Analyst Mike Burnick believing inflation is here to stay, it’s crucial to know the difference between a recession-resistant stock and an inflation-resistant stock.

Read on to discover:

  • Three reasons why one conservative, dividend-paying stock has performed very well in a difficult market but does not pass the inflation-resistant test.
  • The two key ways to see if any company is inflation-resistant.
  • Which sector offers better alternatives to handling inflation.

Takeaway No. 3: Cathie Wood Is Human. That’s Her Biggest Downfall and Why Ark Is Down 56% This Year

When you see a story right now about Cathie Wood, the portfolio manager of the Ark Innovation ETF (ARKK), you’ll hear about how Ark is down 56% this year.

Or how Wood is doubling down on stocks that just keep sinking further.

Or even how over the last five years, the S&P 500 has performed better (70.8%) than ARKK (57.15%), a fund that focuses on investing in new and disruptive technology.

But what you’re not hearing about is why this has happened.

Wood has fallen into the human trap of emotions that lead people to:

  • Sell too early.
  • Buy too high.
  • Or simply throw in the towel too soon.
Keep reading to learn how to avoid the mistakes of Wood, including one simple step you can take today to lessen your losses and keep more of what you earn.

Takeaway No. 4: What Tom Brady’s Relentless Pursuit of Perfection Can Teach Us About Investing

After seven Super Bowl victories, the most career quarterback wins, and the most career passing touchdowns in NFL history, Tom Brady still wakes up at 5:30 a.m. to train, sticks to a regimented diet, and watches 40 hours of film per week to study the weak spots in opposing defenses.

Why? Because even one of the greatest quarterbacks to ever play the game believes he still has work to do to get better.

Continue reading to discover:

  • Three simple ways to make more money from your investing.
  • How to establish an investing journal for long-term success, and the basic components every investing journal should possess.
  • Three essential qualities your investing strategy should contain.

Takeaway No. 5: Revenue Miss? No Problem for Meta. This Metric is More Important

There isn’t just one way to evaluate a tech company, but from the recent headlines from earnings reports, you would think there is:

  • “Twitter Hits 217 Million Daily Users, Stocks Jump” — Hollywood Reporter
  • “Netflix Rocked by Subscriber Loss, May Offer Cheaper Ad-Supported Plans” — Reuters
  • “Facebook Parent Meta Soars 16% after Q1 Results Show User Growth Recovery, and Mark Zuckerberg Reins in Metaverse Spending”
    — Yahoo
It’s seemingly all about user growth for tech companies now.

Read more to find out why this metric is so important and what it means for companies that may be in your portfolio right now.

What was your most important takeaway from May? Would you like to see a roundup of our takeaways each month moving forward? Let me know right here.

We’ll be back tomorrow with new ways you can make more money in the stock market to help secure your family’s future and design the retirement of your dreams.

Until then, have a happy Memorial Day, and I’ll talk to you soon.