Why this star trader is ‘HODL-ing’ bitcoin, small-caps and short-squeeze stocks for now
I wrote the following article for MarketWatch. LINK: https://bit.ly/4g3kNNZ
Robert Ross never expected that his knowledge of stock-trading and investment strategies would make him a social-media sensation.
Ross cut his teeth as the senior equity analyst at investment research companies including Mauldin Economics. He had a knack for financial market analysis and stock picking, and became one of the youngest chief analysts in the industry.
Now Ross runs TikStocks, attracting a massive social-media following for his practical and insightful market-related TikTok and Instagram videos (@tikstocks). He also publishes a weekly newsletter on Substack called “Let’s Analyze” (tikstocks.substack.com) and is the author of “High-Risk, High-Reward Investing.”
In a recent interview, which has been edited for clarity, Ross shared his perspective about whether the market can extends its impressive year-to-date gains into 2025. (He’s bullish). Among his conclusions: Nvidia
NVDA1.18% stock is fairly valued but Apple AAPL1.28% shares are expensive; bitcoin’s BTCUSD-0.47% swift run will lead to some profit-taking, and that too many stock investors actually aren’t bullish enough.
MarketWatch: What shape is the U.S. stock market in now?
Ross: Near term, it’s extended. That being said, we’re in a secular bull market that’s going to last at least a few more years. Historically, secular bull markets are fueled by technological advancement, a fiscal or monetary stimulus, or a liquidity boom.
We have all three right now. We’re having a huge technological boom with artificial intelligence (AI) that will increase earnings and productivity across all sectors and especially benefit a few stocks like Nvidia. The U.S. Federal Reserve is cutting interest rates, and globally, central banks are lowering interest rates, which is creating a lot of liquidity in the market that I expect to flow into U.S. securities. Another reason the secular bull market continues is we will have a deregulation tailwind happening across the U.S. economy. Overall, I’m bullish and staying invested.
MarketWatch: Some people would counter that many stocks are too expensive right now. Are you comfortable with current valuations?
Ross: A lot of stocks aren’t that expensive if you look at them relative to their earnings growth. Earnings growth is what makes stocks go up. Take a look at Nvidia: The company is expected to grow earnings at 35% per year over the next five years, but recently traded at only 35 times forward earnings, which really isn’t expensive —- it’s a 1:1 ratio. On the other hand, Apple is expected to grow earnings at 15% over the next five years and is trading at 27 times earnings. That’s a little less compelling.
MarketWatch: In general, should investors be afraid to buy when the market looks to be at a high point?
Ross: No. That’s a trap that many investors fall into. They want to go bottom-fishing for stocks. They want to find stocks that are at their 52-week lows and time the bottom for a turnaround. If a stock is at a 52-week low, especially in the type of bull market we’re in right now, there’s something wrong with that business. I don’t want to buy crap businesses at a cheap price. I’d rather buy a really good business at an okay price.
MarketWatch: What parts of the market look attractive now?
Ross: I own the Vanguard Small Cap Index Fund ETF
VB-0.23%. I like a crypto miner, TeraWulf WULF-0.68%, one of the only carbon-neutral bitcoin BTCUSD-0.47%miners. I also like Upstart Holdings UPST8.00%, which is a great short-squeeze candidate. About 28% of its shares are so sold short. I can see it going significantly higher from here.
MarketWatch: How do you reduce stock-market risk?
Ross: I always define my risk before I enter a position. I’ll have a stop-loss in place at a specific technical level. I would never open a position without a stop-loss. If a stock falls below a certain level, I’m out of the trade. I’m happy to sell it and reallocate my money elsewhere, especially during a bull market like we’re in now. If a stock is not going up in a bull market like this, it’s not something I want to own.
MarketWatch: What’s your take on bitcoin after its sprint to almost $100,000?
Bitcoin is actually my largest position right now. I’ve held it since 2017. Since that time, the position has gotten much bigger. We’re going to have a lot of tailwinds here, especially since a crypto-friendly presidential administration is coming in. But in the near-term, I wouldn’t be chasing crypto higher. Everyone loves the euphoric highs that we get during these rallies, but with bitcoin, most of the gains since 2016 and 2017 come in about 10 days in a year. We have these massive surges higher. So while I’m not necessarily buying here, I’m not selling either. Happy to keep “HODL-ing,” as they say in crypto.
MarketWatch: How do you manage bitcoin’s volatility?
Ross: I’m happy to hold volatile positions for the long term if the long-term thesis makes sense. Bitcoin fits into my long-term portfolio because I don’t know when these big surges are going to happen. It’s also dominating my portfolio so I will probably rebalance at some point. Again, I’ve held bitcoin since 2017. In bull markets, it dominates my portfolio. Considering it’s ~20% of my entire portfolio today, I’m not looking to buy right now.
There are a few indicators I watch to know when it’s time to sell, and I think we’re getting to a point where it’s time to take some profits off the table. I went on record as early as April 2023 stating we were in a new crypto bull run, so I’ve captured nearly all the upside. I like to buy crypto when nobody’s talking about it or cares about it. That is not the case right now.
MarketWatch: Do you trade options?
Ross: I usually buy LEAPS (Long-Term Equity Anticipation Securities). Right now, I own LEAPS on the Nasdaq Semiconductor Index through an ETF, VanEck Semiconductor ETF
SMH0.22%, and SPDR S&P 500 ETF Trust SPY0.05%. I’m thinking of buying LEAPS in Tesla TSLA-1.59% for the same reason I bought Upstart. [Telsa CEO] Elon Musk will be in Trump’s administration, which I think will help companies like Tesla, which will benefit from government subsidies.
MarketWatch: What advice do you have for beginning investors?
Ross: Too many investors are too bearish. They think the way to make a lot of money in the market is to put on these sexy directional bets, like Michael Burry in “The Big Short.” If you’re right, you make a fortune and if wrong, you lose everything. I think that’s more like a Hollywood dramatization of how investing actually works. The fact is that the S&P 500
SPX0.05%, since 1921, has finished in positive territory 75% of the time, delivering returns of about 9% per year.
Everyone thinks the next crash is around the corner, but the fact is market crashes — or declines of -50% or more — are extremely rare, happening only twice in the last century. Overall, the best piece of investment advice came from [former Fidelity Investments mutual-fund manager] Peter Lynch, who said that more money has been lost trying to anticipate the next correction than from the correction itself.
Michael Sincere (michaelsincere.com) is the author of “Understanding Options,” “Understanding Stocks,” and his latest, “Help Your Child Build Wealth” (Wiley, 2024).