There’s so much written about timing. That’s because investing for most retail investors is about timing – moving in and out of stock positions to take advantage of price movements.
It’s about getting in and out at the right time and price to maximize gains and minimize losses.
Because of timing, Wall Street is like a gathering place for people with ADHD. Very few retail investors think long-term. It’s all about timing for them – getting a quick fix and then moving onto the next stock.
The problem is not many investors are good at timing the market. That’s why retail investors, on average, lose money long-term when factoring in inflation.
Here’s an example of how investors try to take advantage of timing on Wall Street:
Workhorse Group Incorporated (WKHS) out of Ohio is a manufacturer of all-electric last-mile delivery vehicles. Last-mile delivery refers to local delivery of packages once they’ve been transported interstate.
Around the middle of March – right about the time the market bottomed out in the early days of the COVID-19 pandemic – WKHS was trading at $1.47/share. Then the news leaked that WKHS was in the running (along with three other manufacturers) for a USPS (United States Postal Service) contract to replace the service’s aging fleet.
The contract to supply 165,000 units could be worth up to $8.1 billion. As the only manufacturer among the contenders to offer an all-electric option, WKHS was considered the front runner.
Everyone expected an announcement from the USPS declaring the winner sometime in late summer. In the meantime, Workhorse’s stock shot up more than 900%, closing as high as $30.60/share in early September.
When September came and went without an announcement, many investors jumped ship. Many stayed in trusting the analysts who assured everyone that an announcement was coming in November. Then the USPS announced that they would not be decided for 2021. In the meantime, the WKHS stock has been on a roller coaster ride lifting and dashing hopes almost daily.
The problem with WKHS not only highlights the problems with timing, but it also highlights the lack of consideration by investors of any type of economic fundamentals when buying stocks.
The average stock trades at a P/E (Price/Earnings) ratio of 15:1. WKHS has never been profitable, has never had gross sales of more than $1 million in one year, and in the latest quarter, reported a loss of $.73/share.
Its stock price is overvalued and not based on any economic fundamentals. Instead, the price is based on investors banking on the timing of their investments with an expected boost once the USPS contract is announced and granted to WKHS.
Leveraging timing to make money in the public markets is crazy. Nobody’s good at it, so why bother?
Passive income opportunities in the alternative asset class, on the other hand, don’t rely on timing to deliver returns to their investors. That’s because these opportunities only exist in the illiquid private markets where the investment windows are much longer than on Wall Street.
Most passive income investments have lockup periods of at least three years, which effectively eliminates the volatility created by investors attempting to time the market.
With long-term windows, cash flowing alternatives like private equity and commercial real estate doesn’t rely on timing to make money for their investors. That’s because they have intrinsic value – meaning they generate value on their own without regard for what others are willing to pay for them.
Private businesses generate income from the sale of goods or services. Real estate generates cash flow from rents. That’s intrinsic value.
With alternative passive income opportunities, timing means something completely different than what it does on Wall Street.
With alternatives, the only timing question investors are faced with is whether it’s the right time to reallocate assets to the private markets from the public markets or to stay put and keep being frustrated. In that regard, 2021 might be the best time in years for retail investors looking to make the leap from the public to the private markets.
With imminent COVID-19 vaccines about to hit the market, travel bans likely to be lifted, businesses reopening and pent-up demand for travel about to be unleashed, 2021 is bound to be a boom year economically.
And if you’re looking to invest in passive income generating alternatives, there may not be a better time than now to invest.
For successful investors, there is never a right time or wrong time to invest in a particular asset. As long as the underlying fundamentals look good, some investments are always a good investment – no matter whatever else is going on in the world.
For successful investors, there is never a right and wrong time to invest. The timing can be right at any time.
Successful investors know that in the long-run, cash-flowing passive investments deliver some of the best risk-adjusted returns of any investment class and reliably appreciate over time. That’s why there’s never a bad time to invest in these assets.
For investors tired of playing the timing game on Wall Street, now might be the perfect time to get started with the right alternative investment assets.
Michael Foley, president and CEO of Humabilt Capital, oversees the entitlement process, funding, and operations for Humabuilt Capital. Mr. Foley has been a full-time real estate investor since 1995 during which time he has developed hundreds of single-family homes, townhomes, condominiums, and apartments. Mr. Foley started his investment ventures in Long Beach, California, and has expanded to Apex and Durham North Carolina. Mr. Foley is a graduate of the University of California at San Diego.