→ Module 2 1975 Investing Strategy: Profiting from the Post-Recession Recovery

1975 Investing Strategy: Profiting from the Post-Recession Recovery

The mid-1970s presented unique opportunities as markets emerged from the brutal 1973-74 bear market. Here's how savvy investors could have positioned themselves for the coming bull market.

Step 1: 1975 Market Environment

Key Economic Conditions

Stagflation easing (inflation 9.2%, down from 11% in 1974)
Oil shock aftermath (prices stabilized around $12/barrel)
Post-Watergate political uncertainty
NYSE trading at decade-low valuations

Available Investor Tools

Full-service brokers (Merrill Lynch, E.F. Hutton)
Printed research reports (Value Line, S&P)
The Wall Street Journal (daily market data)
Moody's Manuals (fundamental data)

Step 2: Best Investment Strategies

1. The "Nifty Fifty" Recovery Play

Blue Chip Bargains:

IBM (P/E under 10)
Eastman Kodak (dominant market position)
McDonald's (global expansion beginning)
Coca-Cola (brand power surviving inflation)

Strategy: Buy quality at depressed prices

2. Energy Sector Revival

Top Picks:

Exxon (integrated oil giant)
Schlumberger (oilfield services)
Occidental Petroleum (growth exploration)

Catalyst: Long-term oil demand growth

3. Small-Cap Value Stocks

Opportunities:

Regional banks
Industrial manufacturers
Consumer goods companies

Why: Many trading below book value

4. Inflation Hedges

Protective Assets:

Gold ($140/oz in 1975 → $800 by 1980)
Silver
Real estate (before 1976 tax law changes)

Step 3: Research Methods

1. Fundamental Analysis

Price/Earnings ratios (historically low)
Dividend yields (many over 5%)
Book value comparisons

2. Information Sources

Broker research reports
Corporate annual reports (mailed)
Forbes and Fortune magazines

3. Technical Analysis

Basic chart patterns
Moving averages (200-day)
Volume analysis

Step 4: Executing Trades

Trading Process

Phone call to broker ($100+ commission)
Floor trader executes on NYSE
Confirmation slip mailed days later

Market Characteristics

No after-hours trading
T+5 settlement
Limited liquidity for small caps

Step 5: Risk Management

1. Diversification Approach

40% Blue chip stocks
20% Energy sector
20% Small-cap value
10% Precious metals
10% Cash

2. Exit Signals

P/E ratios approach historical averages
Dividend yields fall below 4%
Inflation reaccelerates

Sample 1975 Portfolio

Stock	Sector	Purchase Price	1980 Value
IBM	Tech	$50	$70
Exxon	Energy	$12	$35
McDonald's	Consumer	$5	$15
Citicorp	Financial	$8	$25
Gold	Commodity	$140	$800

Historical Performance

S&P 500 returned 37% in 1975
Many value stocks doubled by 1976
Energy stocks 5-10x by 1980

Key Insight: 1975 was one of history's great buying opportunities for patient investors willing to look past short-term economic pain.