Thoughts on a bear market in 2021

John Cook
John Cook
Feb 15 · 3 min read

So I was listening to an interview with Howard Marks & Joel Greenblatt, called “Is It Different This Time?” and one of Joel’s talking points about the euphoria we’ve reached in the stock markets is that:

  • He took the 100 least profitable companies in 2019 (pre-covid)
  • As of early 2021 all 100 companies have posted a 100% return [1]

I thought that statement was bonkers, so I took a list of NYSE + NASDAQ companies ~ 6500, excluded SPACs/warrants and anything that triggered an error in google sheets (lazy I know), which left around 5000 equities.

  • Of the 5,000 equities, Over 3,130 have posted a >100% return from their 52 week low
  • Of the 5,000 equities, Over 500 have posted a >500% return from their 52 week low

So I try to rationalize these statements as buying opportunities as a result from COVID but when I filter the 5,000 equities to only include companies w/ a TTM EPS of <0 I am left with 2500. So 2500, or ~50% of the total universe of equities on NYSE + NASDAQ, over a 12 month window, have not been profitable (as defined by TTM EPS <0).

What blows my mind is of these 2,500 “unprofitable companies”

1,795 have had a >100% return from their 52 week low500 of the have had a >50% return YTD


50% of all publicly traded NASDAQ/NYSE companies are not profitable

  • Filter 1 = only list equities where TTM EPS <0
  • Result = 2500

Yet 35% have posted a 100% return from their 52 week low

  • Filter 1 = only list equities where TTM EPS <0
  • Filter 2 = Filter 1 + [2]
  • Result = 1795

And 10% have had a 2021 YEAR TO DATE RETURN OF > 50%

  • Filter 1 = only list equities where TTM EPS <0
  • Filter 2 = Filter 1 + [3]
  • Result = 500

I mean guys, do this yourself if you don’t believe me — it’s literally 5 GOOGLEFINANCE functions a bunch of pivot tables in excel.

What I dont have is a relative basis for comparison, e.g if these numbers are normal in a pre-covid environment, e.g. 5 years ago, 10 years ago, etc.

I love a good rally, and i’m definitely in some risky small caps but when I see companies like SOUTHWEST AIRLINES posting negative quarter-over-quarter earnings, yet it is trading back at pre-pandemic levels I have come to one of two conclusions:

  1. My math is wrong
  2. There will be a “major correction” in 2021

In the absence of my math being wrong, i predict a +10% correction in 2021.


Set stop limits and take profits.

February 2021

Formulas used:

[1] — (Share price at end of 2019 — Share price End of January 2021) / (Share price at end of 2019)

[2] — ( (current price — 52weeklow)/52weeklow) > 100% )

[3] — ( (currentprice — price on 1/1/21) / price on 1/1/21 ) > 50%)

You are too smart to be this broke, join the journey at Educated & Broke

Subscribe to receive our top stories here.

Educated and Broke

Eliminate student loans, escape the debt trap and create wealth

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store