Masters Series: Your Biggest Chance for Capital Gains in 2015
Editor's note: Extreme Value editor Dan Ferris says the best buying opportunity of his career is here. And you're about to miss it.
Dan has one of the best track records at Stansberry Research. He has closed three triple-digit winners for his subscribers in 2014 alone. Dan is a contrarian. He looks for unloved, little-known, deep value stocks… and then rides them higher as the market realizes their potential.
Now, as the market panics about plummeting resource stocks, Dan is buying.
Dan doesn't usually "time the markets." But in today's edition of our weekend Masters Series – excerpted from the November issue of his Extreme Value advisory – he says a quick and drastic reversal to the upside for natural resource stocks will come soon. And it will likely be the biggest chance for capital gains in 2015.
Your Biggest Chance for Capital Gains in 2015
By Dan Ferris, editor, Extreme Value
"For me, it was my mother."
That's what Street Smarts author and investor Jim Rogers said during the annual Stansberry Alliance Conference in the Dominican Republic last month.
Stansberry Research founder Porter Stansberry had just asked Jim if he knew anyone whose opinion he valued as a contrary indicator.
Jim said his mom would call, wanting to buy shares of some company. Rogers would say, "But Mother, why do you want to buy that stock? It has already tripled! You're supposed to buy before they triple, not after."
If his mom called, he knew whatever stock she was interested in was a bad investment idea...
I've heard many stories like that. My colleague Jeff Clark writes about his mother doing the same thing. He calls it "The Mother Indicator."
I bet every investment or finance professional has a relative who gets excited about buying stocks after they've gone up a bunch... and depressed about owning them after they've gone down a bunch.
Most people are like Jim's late mother. They follow the crowd.
They only feel comfortable buying when prices are high. But a good contrarian knows that's when they should sell, or at least refrain from buying. Most folks feel like selling when prices are low. But that's when good contrarians are buying.
That's the bottom line on why most people lose money in stocks.
To reverse this dangerous cycle and start making money instead of losing it, investors should embrace The Principle of Ever-Changing Cycles.
That's the title of Chapter 5 of Robert L. Bacon's classic book on betting the ponies, Secrets of Professional Turf Betting.
On page 31, Bacon writes...
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The principle of ever-changing cycles turns bull markets to bear markets and vice versa. In both cases, the public embraces a trend, and the embrace becomes the kiss of death. The trend reverses and leaves the majority of investors holding losses or missing out on new bull-market gains.
Technology stocks were a winning idea in the late 1990s... until the tech-heavy Nasdaq peaked in March 2000 and changed suddenly and drastically, falling 78.5% over the next two and a half years. Housing and structured finance were winning ideas until they suddenly and drastically caused the biggest financial crisis since the Great Depression.
The principle of ever-changing cycles works at the bottom, too. Everyone hated stocks in March 2009, the perfect moment to buy. Stocks suddenly and drastically soared that year and for the next four years.
Natural resource stocks were adored in spring 2011. Investors got used to winning back some of the money they lost in the financial crisis. They read stories about the Federal Reserve printing record amounts of money to stimulate the economy. They feared inflation.
Gold hit a new all-time high of $1,900 an ounce. Gold and resource stocks were rising and the trend attracted investors who'd lost money in the 2008-2009 crash. The public had gotten wise to a winning idea. Then a quick and drastic change drove the U.S. dollar up and commodity prices and mining stocks down, down, down.
The sequence of results in metals prices has been extremely bad for the past three years, driving down precious-metal and base-metal prices. Here's what things look like today...
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Metal
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Price
(2011-2014)
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Gold
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-37%
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Silver
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-67%
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Platinum
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-36%
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Copper
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-35%
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Lead
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-33%
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Zinc
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-14%
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Iron Ore
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-65%
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A sudden and drastic reversal of the bearish trend at this point would surprise everyone... except those of us who know how the principle of ever-changing cycles forces quick and drastic changes right when the expectation of more of the same becomes a popular idea.
And of course, the share prices of the companies that produce these metals have been hit even harder. The Market Vectors Gold Miners Fund (GDX) is down about 73% in the last three and a half years. The Market Vectors Junior Gold Miners Fund (GDXJ) is even worse, down 85%. The numbers boggle the mind.
The losses suffered by so many investors in natural resources over the past three years won't go on forever. Once the public "gets wise" and expects an existing trend to continue – either bullish or bearish – a quick and drastic change usually isn't too far away.
I expect that to happen in natural resource stocks – a quick and drastic change... a reversal of the bear market.
I'm not a wizard. I can't predict exactly when a quick and drastic change will turn the resource bear market into a bull. But I suspect it'll happen sometime in 2015.
When it does, you could make a ton of money in the upswing.
Good investing,
Dan Ferris
Editor's note: The upswing in natural resource stocks Dan expects in 2015 is so potentially lucrative, he's putting his own money into it. He says if you don't own these stocks by the end of the year, you could have missed the best opportunity in more than a decade to buy certain world-class resource stocks.
Dan recently told his Extreme Value subscribers the names of the best three stocks to own leading into the resource rally. Even if 2015 is just a short-term reversal, you could double your money. Click here to learn more about what's happening with natural resources… and which stocks Dan says to buy before December 31.