Our Chris Johnson is back this week with a "bad to the bone" stock that's good for some fast gains.
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trading strategies
Breaking Down a Breakout in Three Simple Steps
For more than a decade, our Chris Johnson has eyed charts and data to put together a foolproof model to identify the right time to buy ahead of a breakout.
In fact, he's broken it down into three easy steps for you...
Here's Why the Old Tricks Will Always Work for Investors Like Us
Laton Spahr, a senior portfolio manager of the value fund over at asset management giant Oppenheimer Funds, had a quote in The Wall Street Journal last week that I've had trouble getting out of my mind.
The article tackled whether or not value investing is changing in the new world order of insanely high stock prices, which have presented a so-called "existential crisis" for the value-oriented ilk I belong to.
Mr. Spahr said, "One of the toughest things is being able to articulate what value investing is anymore."
He went on to say that older, traditional methods of valuing companies have changed, and standards must be lowered to allow for the ownership of overpriced, growth-oriented behemoths like Alphabet Inc. and Apple Inc.
After careful consideration, I have arrived at the inescapable conclusion that his argument is a load of you-know-what.
The quality of traditional methods of valuing companies has not changed in the slightest. Identifying bargain stocks based on the share-price discount to the value of the assets of the company still works. So does finding bargains based on a low price relative to the free cash flow produced by the company.
I can find plenty of strong companies trading at unreasonably undervalued prices, even with the S&P 500 trading near its highest levels in history. What I can't find are enough bargain stocks to fill up a multibillion-dollar portfolio.
The concept of buying companies for less than they are worth and selling for more than they are worth lies at the heart of value investing. It has worked and always will work incredibly well for individuals looking to build a nest egg or save up for their kid's tuition.
But I find it hard to sympathize with fund managers like Mr. Spahr, who need to swell the size of their funds in order to generate the massive fees that pay exorbitant bonuses so they can rent office buildings in Midtown Manhattan.
The only reason these managers are trying to expand the value-investing ethos is to create higher fees for themselves with little concern about what it means for their clients' long-term returns.
The Wall Street types like to fiddle with the idea of value investing because it has simply never worked for them. It's never been a profitable strategy for those investing enormous sums of money.
Why Too Much Caution Could Cost You Big Right Now
These days, there's a phrase going around so much about how the market pundits see the current markets that it's become a cliché: "cautiously bullish."
But our Chris Johnson is here to tell you why he's steadfastly bullish – and that too much caution could cost you big…
Marijuana-Based Medicines Are "Giving Parents Their Children Back"
NEW YORK CITY – With flicks like "Sister Act," "Jumpin' Jack Flash," and "The Associate" (a personal favorite and a film I believe is greatly underrated), comedic actress Whoopi Goldberg has made a career out of making folks laugh.
But in one of those odd ironies of life, Goldberg was serious – even downright somber – during her appearance at a conference here on the last day of last month as she talked about the sorrow felt by the parents of epilepsy-afflicted children.
"I know dozens of families with children with epilepsy. You see your child disappear," she said, referring to what happens after kids are prescribed traditional seizure medications. "But then you find something better… and the seizures go away."
It was here when Goldberg experienced a mood shift – from somber to mad – as she addressed one of the most frustrating and sorrowful catch-22s in medicine today.
I'm talking about the catch-22 that occurs when the solutions to medical maladies are kicked to the curb when our "elected elite" decide to politicize them.
Now, we've addressed this frustrating conundrum here before in the area of chronic pain.
You see, even though chronic pain is a growing, ever more costly problem here in the United States, elected officials in Washington and at the state level have so politicized pain medications that patients with real afflictions are finding it difficult to find treatment programs.
It turns out childhood epilepsy sufferers are in a similar boat; Goldberg sketched out a similar scenario with childhood epilepsy.
She noted that cannabidiol (also known as CBD) – which comes from the marijuana plant but does not have psychoactive effects like tetrahydrocannabinol (THC), the chemical that gets users high – has been used with some success by parents in halting epileptic seizures in their children.
But that success comes with a backlash.
You have successes, Goldberg said, "and then, child services wants to take [the] child away. That is wrong."
The actress didn't let up at all...
There's Still Time (but Not Much) to Get Set Up for Canadian Weed Profits
Canada was in the headlines all weekend but, as far as I'm concerned, the most earth-shattering news went almost totally unreported.
This is the culmination of more than seven months of research and parliamentary debate among five separate committees. After repeated, firm, public promises among legislators – including the Prime Minister, Justin Trudeau – an incalculable amount of political capital was on the line.
And sure enough, on Thursday, right around the time world leaders started arriving in Quebec for what would be an extremely contentious G7 summit, the Senate of Canada voted in a late-night session to legalize the recreational use of marijuana across the country.
That means Canada is right at the doorstep of being the first G7 nation to open the door to legal, regulated weed.
That's right: It's not a done deal… yet. Despite rhetoric calling for legal weed sales to begin by July 1, 2018, there are still two dominoes that have to fall for legalization to come into force.
As you'll see in a second, full legalization is still a virtual certainty, but now we have some extra time – just a little – to take a look at our weed holdings with exposure to Canada…
...and make sure we're loaded up on the right stocks before this thing explodes into the markets...
Buy the REIT That Soars When Interest Rates Rise
Hey, did you hear? Interest rates are going up.
You know what that means: We should sell our real estate investment trusts (REITs).
Well, that's what Wall Street would like you to believe during periods of rising interest rates.
After all, REITs borrow a lot of money, so their borrowing costs will go up and cash flows will shrink, and they might have to cut their dividends. Higher rates mean more competition from fixed-income investments. That urges investors to sell their REITs, then take that cash to go buy bonds, thus dragging REIT prices lower.
I mean, the U.S. Federal Reserve began raising rates in June 2004, going from 1.25% to 5.25% by summer 2006. That's a massive increase in just two years and had to have been horrible for REITs.
There's just one small problem with this thinking, though…
It's incorrect.
In fact, if you look at the most recent period of rising interest rates, REITs performed exceptionally well.
Outperformance: These Small Banks Are Good for Big Profits Today
If you were following along, you witnessed our Chris Johnson's powerful Best in Breed system in action last week.
The Past Four Months Prove It: Passive Indexing Is Pure Portfolio Poison
Index investing was sold, hard, to investors – to the tune of $58 billion a month – as a safe, hassle-free way to ride stocks all the way to the moon.
Led by the High Priest of Indexing, John Bogle, and endorsed by Warren Buffett and other legendary investors, indexing was supposed to be the answer to all our investing goals.
"Buy a low-cost index, sit back, and let the magic happen."
But trade wars… U.S. President Donald Trump's vendetta against Amazon… North Korea… Iran… Italy… rising interest rates… and more have all helped propel huge swings, and I suspect 2% daily swings were not what most new index investors were looking for when they made their initial investment.
The Bears Are About to Get Slaughtered in These Stocks
One of our Chris Johnson's "10 Commandments of Trading" is that short sellers are usually a bull's best friend, and that's bad news for the bears, because they're about to have a rough ride. But we're set to make a killing…