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Four billionaires, four investment styles, and one incredible result

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From Dr. Richard Smith, founder, TradeStops:

Last week we showed you the results of one of our first billionaire portfolios. In just 8 months’ time, we were able to double the performance of the S&P 500.

Our long-term backtesting using the billionaires’ stocks as the basis for our portfolios shows a similar result, outperforming the S&P 500 by more than 3-1.

Today, I want to show you some more research that we did when we limited the number of billionaires to just four. Not just any four billionaires, but four of the most successful investors in modern history.

The billionaires we included in our study were Warren Buffett, Carl Icahn, Seth Klarman, and David Einhorn.

These billionaires have their own methodologies for finding stocks. They all consider themselves to be “value” investors, but what they look for is completely different.

  • Warren Buffett looks for “intrinsic value” – the discounted value of the cash that can be pulled out of the company over the remaining life of the company.
  • Carl Icahn is an “activist” investor – he describes himself as a “contrarian” investor looking for companies with prices that reflect a poor P/E ratio or trading underneath book value.
  • Seth Klarman is a “risk-averse value investor” – he invests in heavily-concentrated stock positions as well as fixed income and real estate.
  • David Einhorn uses a combination of fundamental and quantitative research – he’s best-known for shorting Lehman Brothers into the 2008 collapse.

Using the TradeStops Stock State Indicator (SSI) and Risk Rebalancer tools would have improved the performance of three out of four of these billionaires.

David Einhorn is an interesting case. As commented here, Einhorn likes to get into companies early, shortly after the IPOs, hoping for large gains as the company moves higher. This is a risky strategy.

Because these billionaires have such differing methodologies to identify and invest in stocks, we wondered what would happen if we limited our investment choices to just their four portfolios.

The results are… incredible!

In 17 years, these 4 billionaires’ stock picks with the TradeStops Pure Quant Strategy outperformed the S&P 500 by almost ten times!

Some members of my staff thought we should keep these results under wraps. This is as close to the “Holy Grail” of investing as we’ve seen.

Instead, I wanted to share this with my TradeStops members to give you another option to get the best returns possible.

We all know that what happened in the past is not what we should expect in the future. But the concept of using 4 billionaires with different perspectives is powerful. And there’s no reason to think these billionaires – Buffett, Icahn, Klarman, and Einhorn – will stop being successful.

It’s inspiring to see what is possible with discipline, patience, and a little bit of research. Especially when some of the smartest investors in the world can do the heavy lifting for us – allowing us to ride alongside them, while taking the stress out of investing with our proprietary TradeStops tools

Richard

Crux note: Richard’s TradeStops philosophy is to cut your losses and let your winners ride… And the results speak for themselves.

You can discover why one satisfied investor called TradeStops his “safety net” right here.


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Stocks

Why the bull market will be over by November

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From Justin Spittler, Editor, Casey Daily Dispatch:

“I want to talk about death.”

I heard an extremely successful trader say this last week. He was speaking to a room full of investors and business executives. The group included Doug Casey, Bill Bonner, E.B. Tucker, Nick Giambruno, and David Forest. There were also two other traders from Wall Street in the building.

We all came together to attend an exclusive investing conference in Miami’s South Beach. There, we discussed huge money-making opportunities that almost no one else is talking about. We also talked about the biggest threats facing investors.

Over the next few days, I’ll share some of the best ideas from that conference with you. But first, let me tell you how we got on the subject of death. You see, this trader wasn’t talking about a loved one who recently passed away… or even the idea of death…

He was talking about the death of the bull market…

Specifically, the bull market in U.S. stocks. Yes, the one that just turned nine years old last month.

Now, I know many investors can’t imagine this bull market ending. That’s because U.S. stocks have rallied despite sky-high valuations, weak economic growth, and record debt levels.

Nothing could get in its way. As a result, many folks think this bull market will run forever. But that couldn’t be further from the truth.

As you’re about to see, this trader thinks that this bull market is running out of steam fast. In fact, he believes the market could top out in “six to seven months.”

I’ll tell you why in a second. But let me first introduce this mysterious man.

I’m talking about Jeff Clark…

Jeff is a master option trader. He used to manage millions of dollars for investors in Silicon Valley.

He also has an incredible track record. You see, Jeff’s generated 389 winning trades since 2004, which is when he started sharing his trading ideas with the public. That includes 82 triple-digit winners and 296 double-digit gainers.

As if that weren’t impressive enough, remember that this track record covers 2008 and 2009, which were two of the most volatile years ever for stocks.

You see where I’m going with this. In short, it pays to listen to Jeff, especially when the market gets turbulent.

And right now, he’s saying that the U.S. stock market is wobbling on one leg. The warning signs are everywhere.

Unfortunately, I don’t have time to share all those warning signs with you. But I can tell you one of the biggest reasons he’s turned bearish…

Volatility has come storming back…

You can see what I mean below. This chart shows the CBOE Volatility Index (VIX) since the start of last year.

The VIX, or what most people call Wall Street’s “fear gauge,” measures how volatile investors expect the market to be over the next 30 days.

A high VIX generally means that investors are fearful. A low VIX generally suggests that investors are complacent.

You can see that the VIX stayed below 16 for pretty much all of last year. It also dipped below 10 several times. This is extremely rare. In fact, last year was one of the least volatile years on record. Nothing could faze investors.

It’s been a much different story this year. As you can see above, the VIX has exploded higher this year.

This tells us that investors have woken up. They care about bad news again. That means we could see even more volatility going forward.

And that’s a huge deal. According to Jeff, volatility soars just before major bull markets roll over and die. It happened during the final innings of the dot-com bubble, and again just before the 2008 financial crisis.

In short, the recent explosion in volatility could mean that the market’s about to tumble…

And given how low volatility’s been, Jeff says that “there’s a potential for a very powerful move.” And after that, “most investors will be screwed.”

Still, it’s not time to hit the panic button. Jeff thinks we’ll see one more major rally before the market tops out six to seven months from now.

In other words, we still have a chance to make a killing in U.S. stocks.

Sadly, most investors will let this opportunity sail right by them. They’ll either panic sell or hold their stocks through the coming crash. Neither is a good strategy.

If you really want to juice your returns in the months ahead, you’ll want to learn how to trade options. But the good news is that Jeff can help.

You see, Jeff says that the best time to be an option trader is when volatility is rising, like it is right now.

Jeff will be keeping a close eye on the VIX as we head into the week, and especially as he puts together his next Delta Report trade recommendation. To take advantage of this opportunity, you should consider signing up for his Delta Report advisory today.

But first, check out this video presentation. It details another of Jeff’s favorite indicators to use when searching for short-term, high-upside opportunities in the options market.

Regards,

Justin Spittler
Buenos Aires, Argentina


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Boeing, Raytheon charts show defense stocks still have upside

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The largest name in aerospace and defense, Boeing has major exposure to military-grade aircraft, rockets and more. Shares of the manufacturer rallied 130 percent between February 2017 and February 2018 before being dragged down in March.

After finding its floor of support, Boeing’s stock has been bouncing back. Moreno pointed out that it recently made a rounded bottom pattern, which helps technicians predict a stock’s future path.

When Moreno added the height of the rounded bottom pattern to Boeing’s ceiling of resistance at $340, he came up with a potential price target in the $360s. Unless Boeing’s stock breaks down below its $313 floor of support, Moreno was bullish on the uptrend.

“Moreno believes there’s a good reason to be positive here,” Cramer said, adding that Boeing’s Chaikin Money Flow oscillator, a tool that measures buying and selling pressure in a stock, is in positive territory.

“Boeing is only a few points away from breaking out to the upside,” Cramer said. “If the stock can rally $5 bucks from here, Moreno thinks the next $25 bucks could be smooth sailing.”



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This market ‘wizard’ just predicted another rally

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From Nick Rokke, Editor, Palm Beach Daily

They call him the Gandalf of Wall Street…

For those who don’t know, Gandalf is the wizard from the Lord of the Rings series whose predictions often turn out right… just like Marko Kolanovic’s do.

Kolanovic is one of the most respected market forecasters out there.

He came to prominence after forecasting the August 2015 flash crash. He was only a couple days away from calling the September bottom. And then he called the top in October before the market pulled back over 12%.

Predictions like those helped make Kolanovic one of JPMorgan’s top strategists.

Here’s why I’m telling you about Kolanovic…

Last week, he made his latest prediction. He told Barron’s that—despite the recent 7%-plus drop in the S&P 500—the market would rebound off strong earnings.

“The market will recover,” he said. “We are less than two weeks from what we think will be the strongest earnings season in recent history.”

This is a bold prediction…

You see, when earnings go up, stock prices typically follow. And we’re about to see the strongest earnings season in the past 20-plus years.

If you’re nearing retirement or just starting to put together your retirement plan, here’s why you should follow Kolanovic and add some equities to your portfolio…

Wall Street Isn’t Playing Its Usual Game

In January, I told you Wall Street liked to play a shady “bait-and-switch” game with investors.

The game allows for analysts to make higher valuations in the present… but then gives companies an easier target to “beat” their earnings estimates later on.

It works like this: Analysts start the year with a relatively high earnings estimate. But as the year progresses, they slowly lower it.

The adjusted earnings allow companies to clear a lower hurdle.

This “bait-and-switch” game makes it easier for companies to beat expectations… and for their stock prices to pop after earnings are announced.

And it happens a lot… especially when earnings growth isn’t very strong.

But this isn’t happening right now…

Beating Expectations

Today, earnings are growing faster than analysts have predicted. Instead of revising estimates downward, they’re revising them upward.

This rarely happens, and never to the extent we’re seeing today.

The chart below shows changes in the earnings per share (EPS) estimates in the first quarter of the year over the past 20 years.

As you can see, analysts have revised EPS estimates upwards only four other times before 2018

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Analysts haven’t revised earnings upwards since 2010 and 2011. Those were pretty good years for the S&P 500, too. The index shot up 12% over that span (despite a 19% drawdown in the middle because of Greek debt contagion fears).

Before that, analysts last revised earnings upward in 2004 and 2005. The S&P 500 was up a total of 12% over those two years as well.

Those numbers are far from exciting… But they are signs the market should continue upward.

Strong Earnings Will Push the Market Higher

Typically, the market follows earnings. That’s why people like Kolanovic aren’t worried about the recent dip.

Now, I know the market is volatile. But a lot of the pain is coming from news that doesn’t impact profits (see yesterday’s Daily).

The economy is still strong. Businesses are thriving. And earnings will trump all other news. You’ll want to own equities going into this earnings season.

Regards,

Nick

Crux note: Equities are poised for a rally… But if you’re looking for additional income outside the stock market, you may want to consider what the folks at Palm Beach call Washington’s “Private Pension Plan”…

The best part is, you don’t need to live near Washington, D.C. And you don’t have to spend hours on the phone, or waiting in line at a government agency.

Learn more right here.


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