Bullish on Japan... Cameco soars, again... What the market hates more than Japan... Last chance for DailyWealth Premium... Why selling puts is great... Where was Friday's Digest?...
When the Japanese markets plunged following the earthquake, Steve Sjuggerud immediately recognized the buying opportunity... And he pounded the table. Buying at the point of maximum pessimism is a sure sign you're buying right. Here's what he wrote in the March 16 DailyWealth:
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[Japanese stocks are] even cheaper now... Over two days, Japan's TOPIX (a broad stock market index) fell more than it ever has since its inception in 1949. |
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People are selling first and asking questions later. Japanese stocks as a whole are trading at just 1.06 times book value. (Compare that to the Dow, which goes for 2.75 times book.) |
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Small-cap Japanese stocks are trading at just 0.7 times book value – or a 30% discount to book value – and 0.34 times sales. This is off-the-charts cheap. |
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Those are the statistics of the WisdomTree Japan Small Cap Dividend Fund (DFJ). – Steve Sjuggerud, March 16, DailyWealth |
Then in Friday's Digest, we pulled several quotes from Steve's most recent issue of True Wealth (where he explains his favorite Japanese play). The market hated Japan last week. Steve wrote, "People have given up on Japanese stocks, more so than any other developed country I have seen in my entire career."
But Steve was bullish... He believed the Japanese market was starting to go from "bad to less bad." And it's at record cheap valuations. In particular, Steve says one sector of Japanese stocks is "the best value in the world... and one of the best values you will ever see."
Today, the richest investor in the world sided with Steve. On a visit to a South Korean factory, Warren Buffett said he's bullish on Japan... "It will take some time to rebuild, but it will not change the economic future of Japan," Buffett said. "If I owned Japanese stocks, I would certainly not be selling them."
Buffett, who's seen many economic crises, recognizes the opportunity following panicked selling. "Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don't think Japan will be an exception," he said.
Even perma-bear Marc Faber is bullish on Japan. Faber, editor of the Gloom, Boom & Doom Report, said the Japanese market selloff created a "lifetime buying opportunity." It's impossible to call the exact bottom in a market. And Japanese stocks could easily sell off another 10%. But buying today should set you up for 100%-200% gains over several years. (Both Sjuggerud and Faber forecast triple-digit gains.) To sign up for True Wealth and access what Steve says is "the best value in the world," click here...
We also reiterated our short-term, bullish stance in the uranium sector in Friday's Digest. Uranium stocks, more than any other sector, were crushed in the midst of the Japan crisis. The market was afraid the problems with Japan's nuclear reactors would hurt demand for uranium. In particular, we liked Cameco, the "ExxonMobil" of uranium.
The price action in Cameco was classic panicked selling. Never mind that nuclear power provides around 20% of the U.S.'s electricity (and it plays a big role in China and India)... The world was focused on Japan and ignored the fundamentals. We brought Cameco to your attention around $28. It's up nearly 8% today to $31.70.
If there's anything more hated than Japanese stocks, it's Florida real estate. On Thursday, the Census Bureau said 18% – or 1.6 million – of Florida's homes are vacant. That's a rise of more than 63% over the past 10 years. And Florida's vacancy problem is worse than any other state. Only 8% of units in California are vacant. Nevada – the state with the nation's highest foreclosure rate – is around 14%. Arizona has a vacancy rate of around 16%.
The median price for homes sold in January was $122,000, according to the Florida Association of Realtors. That's down 7% from a year ago and less than half the price at the market peak. But the experts are still bearish.
"Housing went from being the preeminent investment of choice to toxic waste," said Richard DeKaser, an economist at consulting firm Parthenon Group.
Ingo Winzer, a housing market analyst and founder of Local Market Monitor advised, "If you're buying in Florida for retirement, maybe you buy next year when prices will be near the bottom. If you're buying for investment – don't."
Florida – Miami in particular – will always be an international destination due to the beaches and sunshine. And with the dollar plunging against almost every currency in the world, foreign buyers will enter the real estate market. Porter said this is already happening. And he's positioned to profit... One of his largest assets is a premiere, waterfront home on Miami Beach.
Today is your last chance to receive DailyWealth Premium (DWP) for only $7 a month. Written by Steve Sjuggerud, DWP is the best value of anything we publish. As a subscriber, you receive extra, "premium" insight from Steve in addition to the regular DailyWealth content. Steve reads almost everything we publish, and every day in DWP, he gives his opinion on our editors' recommendations. It could be an energy stock from Matt Badiali, or a dividend-paying stock from Dan Ferris. Whatever the sector... you receive an actionable investment recommendation almost every day. And it's only $7 a month (the price will increase tomorrow). If you haven't already subscribed, we urge you to do so. Click here to learn more...
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New 52-week highs (as of 3/18/11): EV Energy Partners (EVEP), Tejon Ranch (TRC), Barnes & Noble (BKS, short).
Nothing makes us happier than when a reader learns and successfully implements an investment strategy we preach – in this case, selling puts. If you haven't sold puts before, make sure to read the note below. And if you have, how did it go? Send us your feedback here... feedback@stansberryresearch.com.
"Porter, whenever you and your research analysts preach the merits of selling options, you get a hearty 'Amen' from me. I have been using this strategy for the past two years with a 93% win rate on S&A recommended stocks.
"My best overall performer to date is Interoil (IOC). When Matt first profiled the stock in January 2010, he recommended buying up to $77 a share. Here we are 15 months later, and the stock closed Friday at $77.71. Some would call that 'dead money' – and they would be dead wrong. In that time, I sold IOC options 34 times and averaged more than $1,600 a month in profits on that one stock alone.
"My net cost basis is now less than $23 a share, a price at which the stock has not traded for more than two years. It's also cheaper than the $35 average Soros paid for his first shares. I fully expect to eventually own IOC for free. Thanks to S&A for recommending this stock, and for all the great research you guys deliver every month." – Paid-up subscriber LB
Goldsmith comment: We love selling puts... Especially when we're selling them on stocks we'd love to own. It's free money. For a great essay on the benefits of selling puts, make sure to read the July 16, 2010 Digest. And for our current best put-selling recommendations, I'd recommend you read Doc Eifrig's Retirement Trader.
"Love to read the Digest and didn't receive Today's. Anything wrong? iS Porter playing golf with Obama and couldn't send me my Digest?" – Paid-up subscriber Patrick
Goldsmith comment: Friday's Digest was published as scheduled. If you still haven't received it, check the archives.
Good investing,
Sean Goldsmith
Baltimore, Maryland
March 21, 2011