Kipling wrote a well-known poem about keeping your head while others around you are losing theirs.  That sentiment is very relevant in the roller coaster ride that many are experiencing in the current stock market.  Warren Buffet adds to that sentiment when he says:  when the tide goes out, we'll see who is swimming naked.  In other words, a rising tide covers a lot of mistakes and challenges.  A receding tide will expose a lot of gaps, weaknesses and opportunities.  For those who are paying attention, and keeping their heads about them, the market correction of late 2018 will create significant opportunities.

The receding tide

The tide on Wall Street is receding right now, and many pundits are worried about the stock market averages.  The average investor is rightly concerned - it turns out that markets don't always go up.  But as the markets pull back from incredible highs, many larger corporations will have their weaknesses exposed.  Many of their stocks rode the market up without a lot of financial under pining, and as the market recedes investors will take a new look at the products, services and capabilities of some leading firms.  And they'll find them lacking.  Their exposure and loss is your gain, in several ways.

Filling the gap

Larger companies that have been comfortably riding high market valuations but failing to invest to create new products and services will be exposed in the market correction.  This means that customers may recognize that products and services from larger companies aren't that new or interesting, or that the offerings from the larger companies simply aren't keeping pace with customer needs and market dynamics.  Thus, the market correction will create opportunities for entrepreneurs and innovators to fill a gap - a gap that was easily overlooked when the market was riding high, but an increasingly obvious gap as the market recedes.

Larger companies will be slow to recognize their weaknesses and slow to respond.  They are more bureaucratic, more risk averse and simply slower to move.  Where are the gaps in products, services and business models that you can fill for customers as larger firms retrench?

Exposing new opportunities

Just as new sandbars or underwater formations are exposed as the tide goes out, so too in this correction we may see opportunities that were hidden or obscured by the rising tide.  Smaller, more nimble firms can rush into these opportunities and win a disproportionate share as larger firms are slower to recognize emerging opportunities and will be restructuring or reorganizing to cut costs or retrench for new market realities.  What new markets or opportunities will be exposed as the market shifts that larger firms simply aren't ready to serve?

When they are selling, I'm buying

Another Buffett aphorism is to buy when the markets are selling.  In this way he gets a bargain, moving into markets as others panic or sell at a loss.  In the same way entrepreneurs and innovators should watch their markets closely, because any stock market retrenchment will have the larger competitors reconsidering their investments, which customers and markets they serve and how they service them.  There will be opportunities that arise as larger firms reduce their exposure to markets, segments and channels.

Now is the time for you to be gearing up for a significant push - at a time when there is uncertainty in the market, less trust in larger corporations and when new opportunities will be exposed by a shifting tide.  Will you be ready?

Published on: Nov 2, 2018