A Major Sign of a Bottom in Gold Stocks
Another former high-flyer is crashing... A major sign of a bottom in gold stocks... Two more reasons to get bullish on gold now... Early feedback on our new Stansberry's Big Trade service...
Bad news for Fitbit...
Shares of wearable fitness device maker Fitbit (FIT) plunged more than 30% today following its latest earnings announcement last night.
The company reported dismal third-quarter results. Revenue did grow 23% to $504 million. But this was well below analyst expectations of 38% growth... and it was the slowest quarterly growth since the company went public in June 2015. Meanwhile, net income plunged 75% to just $26.1 million.
The company also reported the average selling price for its devices fell from $99 to $93 last quarter... and sales in the high-growth Asia Pacific region plummeted more than 45%.
Worse, the company slashed its fourth-quarter forecast... It now expects revenue to grow just 2%-5% this quarter, which includes the typically busy holiday season. This is a massive drop from the 98% growth the company reported in the same period from last year.
It appears the company's once-ubiquitous devices are already falling out of favor in the super-competitive fitness tracker industry.
Regular Digest readers may remember we noted the risks in Fitbit just days after shares soared following its highly-publicized initial public offering ("IPO"). As we wrote in the June 24, 2015 Digest...
There are plenty of reasons to doubt Fitbit as an investment... For one, the company held a 34% market share in the first quarter of 2015, according to market intelligence firm IDC. While that's a significantly larger piece of the "pie" than competitors Garmin (6%), Samsung (5%), and Jawbone (4%) held, it's down significantly from the company's 45% market share in the same quarter of 2014.
Even more concerning is research from Endeavour Partners. The digital-strategy consulting firm polled 6,223 U.S. adults and found that while one in 10 already own a fitness tracker, more than 50% of those who own them no longer use them at all. Worse, one-third of those stopped using their device within the first six months...
Finally, companies like Apple are now including similar technology in their smartphones and wearable devices. This could dramatically reduce the appeal of standalone fitness trackers like those Fitbit makes. Why shell out another $100 or more to wear a band on your wrist, when your iPhone or Apple Watch can already do the same thing (plus much, much more)?
Our resident tech expert and Stansberry Venture editor Dave Lashmet went even further, telling Digest readers to stay far away from the trendy stock...
Avoid tech IPOs with lots of competition, especially dominant competitors like Apple and Google... I suspect Fitbit is the Blackberry of wristbands. It looks like it has a walled garden... and it will lose its wall...
Fitbit shares have now fallen 75% since Dave's warning.
This chart says gold stocks may have already bottomed...
Yesterday, we noted why gold could move higher regardless of which candidate wins the election next week. Today, we see one more sign the recent correction in precious metals could be over...
The Gold Miners Bullish Percent Index (or "BPGDM") is a longtime favorite indicator of our colleague Jeff Clark, editor of the Stansberry Research Pro Trader.
As Jeff has explained, a bullish percent index is a gauge of overbought and oversold conditions. It measures the percentage of stocks in a sector that are trading in a bullish technical formation. And because it's measured as a percentage, it can only trade between 0 and 100.
In general, a sector is considered extremely overbought when its bullish percent index moves above 80, while it's considered extremely oversold when it drops below 20. And buy or sell signals are triggered when the index hits an extreme and reverses.
As you can see in the chart below, the BPGDM has just dipped below 20 and reversed, triggering a gold stock "buy" signal...
More important, this is the first buy signal we've seen since February, just before gold stocks soared.
Now, it's important to remember no indicator is perfect, and the BPGDM is no exception. It can sometimes trigger multiple buy or sell signals before putting in a meaningful reversal. So we don't recommend making buy or sell decisions solely on this indicator alone.
But this week's buy signal is another big sign a longer-term gold bottom is approaching... if it isn't already here.
Two more reasons to get bullish on gold now...
Our colleague Ben Morris agrees. In this morning's issue of DailyWealth Trader, Ben shared two more reasons he believes gold is likely headed higher from here.
First, as you can see in the following chart, gold has quietly rallied back above its highs from before the last correction. Ben says this is a sign the trend has turned back up...
Second, he noted that while bullish sentiment – as tracked by the Commitments of Traders ("COT") report – is still historically elevated, it may not fall much further. Here's Ben...
Back in July, speculators were more bullish on gold than ever before. But as gold has pulled back, their bullish positions have fallen far from their peak.
It's important to note that the COT measures positions in futures markets. And with time, more and more people are participating in these markets. So even though speculators had 55% more bullish positions in July than they did at the peak in 2008, it doesn't mean that speculators are 55% more bullish.
Levels that mark "extreme" sentiment change over time. You can see this in the 21-year chart of speculators' positions below...
Again, while speculative bullish positions are still higher than they've often been in the past, Ben noted that they have dropped 44% from their summer highs. This marks a huge change in sentiment that should be more than enough to fuel the next leg up in gold. Ben believes the bottom is in...
Gold made a higher low and extreme bullish sentiment has gotten less extreme. Gold's October low of about $1,250 per ounce was likely the bottom for this correction. Next stop, a higher high.
The picture for gold stocks is similar. They will likely follow gold.
If you're not yet positioned to profit, I suggest you don't wait around any longer.
One final note before we sign off today...
Tomorrow after the market close, Porter and his team will release their latest "beta" issue of our new Stansberry's Big Trade service...
As we've mentioned, even though we haven't officially launched this service, many folks have already agreed to join us.
In appreciation for their support, these subscribers have received our preliminary research on "The Dirty Thirty" – a list of the most troubled corporate credits. They've also received several weekly beta issues as we've been building out the service.
And while we haven't published any official recommendations yet, if today's mailbag is any indication, folks are already having great success with this strategy. We're thrilled by this early feedback and can't wait to share this research with the rest of our subscribers.
Again, Porter will be hosting a live presentation on Wednesday, November 16 at 8 p.m. Eastern time to explain his "Big Trade" in full detail. Attendance is absolutely free, but this event is sure to fill up quickly. If you haven't reserved your spot, you can do so with one simple click right here.
New 52-week highs (as of 11/2/16): CONE Midstream Partners (CNNX), short position in Fossil Group (FOSL), short position in General Growth Properties (GGP), and short position in Hertz Global (HTZ).
Several Stansberry's Big Trade "beta" subscribers share their thoughts on the service so far. Send your comments and questions to feedback@stansberryresearch.com.
"Porter and Company, I have been reading you for many years and finally decided to sign up for the Stansberry Alliance this year. It has been well worth the price paid! I will easily get my money back many times. I was a Managing Partner at one of the Big 4 audit firms and when I heard of [your Big Trade] idea, I thought it was brilliant. I have been nibbling and trying some of the listed companies just to see how it all works. After doing so, I can now see the magic in it. I think you are on to something that will protect my assets and others as we collectively go through what will surely be a terrible process for many. Thank you for allowing us to partake." – Paid-up subscriber T.P.
"Tried out the idea early: I bought 20 puts [on one of these companies] a few days after the initial Dirty Thirty came out for $1,980; now worth over $4,000. Thanks, you rock!!!!! I will now try to hold off for official recommendations... You guys have trained me well!!" – Paid-up subscriber Marc
"I have invested already in 22 of the 30 companies on the list. On or about October 12, I put approximately the same amount into each of them. To date (through today), I am up 14.5%. My investment in each was only a portion of what I may finally commit once Porter gives the go ahead and further instructions, etc." – Paid-up subscriber Dorsey W.
"First of all, thank you to everyone involved in Stansberry Research... In advance of your opening I decided to try [a trade on one company in the Dirty Thirty]. I bought 5 [long dated] puts for $1.80. At this time the puts are at $2.50, or a 36.91% gain. So far so good." – Paid-up subscriber Bob J.
"On October 10, I took advantage of the information available... and invested approximately $40,000 in 15 of the [Dirty Thirty] names. As of the close today 11/02, I am up more than $6,700 for a gain of almost 17%. Can't wait for more detailed info. As always, it's great to be an Alliance member." – Paid-up subscriber Harold L.
Regards,
Justin Brill
Baltimore, Maryland
November 3, 2016