Profiting from 2014's hottest market... A 'backdoor' way to invest in China... A major bullish signal for gold... Finding the value in energy stocks... The five best shale companies to buy today... 'One of the greatest buying opportunities' in resources just began...
Can you guess the top-performing stock market this year?
True Wealth subscribers know the answer... and they're sitting on huge profits as a result.
We're talking about China. It's up 37% this year... and another 4.3% today – the country's largest one-day gain since 2012.
After today's surge, China surpassed India for the No. 1 spot. (True Wealth subscribers are also up 55% in Indian stocks) Chinese shares have traded higher for 10 of the past 11 days... and they're gaining on record trading volume.
Steve Sjuggerud recommended China because shares were cheap, hated, and in the beginning stages of an uptrend (with some help from the Chinese government, which we'll discuss momentarily). The last time shares were this cheap was in 2006, when they soared 600% in two years.
From the October issue of True Wealth:
Today's conditions are even better than they were in 2006... Chinese stocks are cheaper now than they were back then. And China's government is in the midst of a big media campaign to get the Chinese to buy stocks.
In short, if you asked me where the best chance for 100% gains in the next two years is, my answer would be in Chinese [stocks].
Plus, today, the Chinese government is actively trying to boost its stock market...
Last month, China launched a program called Stock Connect that links the Shanghai and Hong Kong stock exchanges. The program allows foreigners to buy Chinese stocks on the Shanghai Exchange and Chinese citizens to invest in foreign markets by trading shares in Hong Kong.
Investors hope it's another step in easing restrictions on money flowing in and out of China.
Foreign investors buying on the Shanghai exchange have a daily limit of $2.1 billion. Once the daily limit is reached, trading is halted.
Steve also explained how the Chinese government is actively trying to get the Chinese people interested in Chinese stocks. Chinese authorities organized investor presentations and cut fees associated with trading and opening new accounts.
Governmental efforts are proving to be successful. According to the Wall Street Journal, "China's small investors are rushing back into stocks."
Chinese retail investors opened more than 1 million brokerage accounts in November, up 280% from a year ago, according to official data.
Trading volume on the Shanghai Composite Index rose 85% over its 30-day averages, according to Bloomberg.
Despite the slowdown in the Chinese economy, Steve still thinks Chinese shares have lots of room to run...
A few weeks ago, the country's central bank – the People's Bank of China (PBOC) – reduced one-year lending rates 0.4% and one-year deposit rates 0.25%.
Deposit rates were cut in an effort to boost consumer spending... which the PBOC hopes will stimulate China's economy. (Does that sound familiar? It should. That formed the crux of Steve's "Bernanke Asset Bubble" thesis.)
China has already tried several mini-stimulus plans this year to inject money in the banking system and lower interest rates... but none proved to be effective.
We've seen what happens when a government is hell-bent on increasing stock prices: They succeed.
True Wealth subscribers are up nearly 35% on Steve's top China recommendation since mid-September. But Steve says triple-digit gains are possible... and he just recommended another "backdoor" way to invest in China. He believes it could return 11% a year.
In addition to Chinese stocks, we've also seen positive price movement in gold...
On Sunday, the Swiss overwhelmingly rejected a referendum requiring the Swiss Central Bank (SNB) to hold 20% of its foreign reserves in gold. Plus, the SNB would be barred from selling gold in the future. Only 22% of Swiss voters supported the initiative because they worried the value of the Swiss franc would rise substantially, pressuring exports and hurting the economy.
For the past three years, the Swiss franc was tied to a weaker euro. The SNB continues to cap the value of the Swiss franc by purchasing euros every time the franc is close to breaching the 1.2 francs per euro level.
Had the referendum passed, the SNB would have been required to purchase gold every time it intervened in the currency market. Under those circumstances, it would have been nearly impossible to prevent the franc from rising.
The vote's outcome was an obvious negative for gold prices. And after falling to a low of $1,141 per ounce, gold spiked 7% higher... its largest move since April 2013.
Silver's move was even more dramatic. After reaching a low of $14.15 an ounce, it swung all the way back to $16.81. That's a gain of nearly 19%... the biggest move since May 2012.
When an asset rallies in the face of bad news, it's a bullish sign. And in the case of precious metals, it looks like the bad news is priced in to the market.
Earlier this week, we discussed the rout in oil prices... and how it led to indiscriminate selling of all energy assets.
In yesterday's Growth Stock Wire, resource analyst Brian Weepie explained where he sees some obvious value in energy today...
Oil's price decline has taken natural gas prices down with it. The price of natural gas has fallen around 10% since its June peak.
The shares of natural gas producers have also fallen. As you can see in the table below, many major natural gas producers are down double digits in the past five months.
Company
Mkt Cap
Production
(% Nat Gas)
Decline
since June
Chesapeake Energy (CHK)
$17.4B
71%
-34%
Encana (ECA)
$16.1B
84%
-34%
Southwestern Energy (SWN)
$14.1B
100%
-30%
Talisman Energy (TLM)
$11.0B
63%
-54%
Range Resources (RRC)
$12.6B
67%
-25%
Source: Capital IQ
But as I told you in November, the selloff in natural gas stocks is overblown. Unlike oil, which could fall lower in the months ahead, natural gas prices are about to see a rebound.
Natural gas is a major fuel source of both heat and electricity. With temperatures quickly dropping in the U.S. (many parts of the U.S. have been hammered with cold temperatures and snow recently), natural gas demand should increase as consumers and businesses use gas and electricity to stay warm.
And in the latest issue of the Stansberry Resource Report, editor Matt Badiali shared the five shale oil producers you want to own today. All of these companies have gone "on sale" in the aftermath of oil's price destruction.
Extreme Value editor Dan Ferris and research analyst Mike Barrett are super-bullish on commodities today, too. As they wrote in the December 2 Extreme Value weekly update...
One of the greatest buying opportunities we'll see in natural resource stocks for the next couple decades just kicked off. The Market Vectors Junior Gold Miners Fund (GDXJ) dropped 12% last Friday, the first of 19 trading days between Thanksgiving and Christmas. This provides a great opportunity to own good businesses at dirt-cheap prices.
As we detailed in the November issue... Investors who lose money in small-cap mining stocks often sell their shares late in the year, so they can write off the losses on their taxes. They wait until late in the year because they remain hopeful the stocks will bounce back.
To exit as quickly as possible, desperate resource investors start accepting lower and lower bids on their shares. That pushes resource-stock prices down. After the first of the year, the selling stops and the share prices spring back to life. The general idea is you can buy when everybody is selling in November and December and sell when they're buying early the next year. Buy low, sell high. Investors who dump their losing resource stocks between now and Christmas will create an excellent buying opportunity for long-term investors.
In particular, Dan and Mike like a certain resource company that is diversified across a handful of commodities – including coal, uranium, potash, and gold. As commodities prices rebound, this company will make a fortune – as will most other firms capable of withstanding the cyclical busts.
Plus, this company recently completed a deal that will pay huge royalties in the future... According to Dan, the deal will boost its revenue 10-fold. He's "100% certain" the company will start paying a "substantial" dividend in the next couple years... He thinks it will be a double-digit yield, based on today's share price.
New 52-week highs (as of 12/2/14): American Financial Group (AFG), Amgen (AMGN), Deutsche X-trackers Harvest China A-Shares Fund (ASHR), ProShares Ultra Nasdaq Biotechnology Fund (BIB), Bristol-Myers Squibb (BMY), Berkshire Hathaway (BRK), Chubb (CB), Cisco (CSCO), WisdomTree Japan Hedged Equity Fund (DXJ), Express Scripts (ESRX), Fidelity Select Medical Equipment & Systems Fund (FSMEX), Intel (INTC), Eli Lilly (LLY), Medtronic (MDT), 3M (MMM), Altria (MO), ONE Gas (OGS), PepsiCo (PEP), Procter & Gamble (PG), ProShares Ultra Health Care Fund (RXL), and Alleghany (Y).
It looks like some of you can see the value in "boring" businesses that gush cash... Two subscribers write in to today's mailbag to offer their experiences. Have you grown your wealth through World Dominators and other "boring" companies like muni bonds, insurance companies, and the like? Let us know at feedback@stansberryresearch.com.
"Gentlemen, I do adore boring shares. I love sitting in my rocking chair at evening, after a hard day work, and thinking my obscure and boring shares made me a little bit more rich. Without any effort from my side!" – Paid-up subscriber Claudio Nebbia
"'World Dominators are some of the safest ways to compound your long-term wealth. But Stansberry Research subscribers complain about us recommending these "boring," cash-gushing businesses.' This is one of the greatest gifts that Stansberry can give to its readers. I am sure that the people that whine about boring investments don't exactly get it. Everyone needs a platform to trade off of. You want a bunch of boring stocks that pay you a bunch of money so that you can move on to trading options or short term trades for percentage profits.
"What bothers me is that it is so simple and logical how could you miss the fact that someone would pay you money every quarter or every month so that you don't have to pay any attention to them giving you the opportunity to trade in a short term environment knowing that you have that platform that is going to pay you money no matter what. Thanks to all of you... you have taught me well." – Paid-up subscriber Jeff Spranger
Regards,
Sean Goldsmith
December 4, 2014
