These stocks rallied while markets fell... Is the gold bottom here?... Big news on Apple... Your best low-risk buying opportunity in more than two years...
Markets around the world sold off this week (thanks in part to the unexpected news from China).
But one group of stocks defied the trend...
Gold stocks – as measured by the Market Vectors Gold Miners Fund (GDX) – are up 14% since last Wednesday. Though they're still down nearly 80% from their 2011 highs, it looks like they may have formed a bottom...
As regular readers know, several Stansberry Research analysts are bullish on gold and gold stocks right now.
Porter explained the opportunity in the July 24 Digest...
The gold and precious-metals sector is in the midst of a three-year decline. I see that junior mining stocks have declined every year since 2011. Most of the best names in the space are down more than 80%.
I'm 100% certain that eventually, this downward trend will reverse.
And I know that when that occurs, the resulting price increases will be dramatic. I believe average gains in excess of 250% are likely.
Investors smart enough to "hedge" their exposure to the U.S. stock market by establishing a "toehold" in the highest-quality gold and junior gold-mining stocks will likely be far more successful over the next three to five years than investors who don't.
In the August 6 Growth Stock Wire – published on the exact day gold stocks bottomed – Jeff Clark explained why activity from commercial traders suggested gold stocks were going to rally.
That same day, Steve Sjuggerud told DailyWealth readers why he was planning to buy gold and gold miners "heavily" once an uptrend was in place.
Of course, we can't be sure the bottom is in just yet. And in the short term, a consolidation of the recent rally is likely. But after the historic bust of the past few years, it's a great sign to see gold stocks ignore a broad market selloff and move higher.
Regular readers know we've also been covering the bullish case on Apple...
We've explained how dominant the company is. As our colleagues Brian Hunt and Ben Morris noted last month...
Apple is one of the best businesses in the world. It controls more than 50% of the global market for mobile phones (by sales)... and about 30% of the market for personal computers (including tablets). And because of its strong brand name and leading technologies, it enjoys thick, 23% profit margins.
They also noted how incredibly cheap the stock had become...
Even though Apple's share price has risen 238% (from $37 to $125), shares are cheaper today than they were five years ago. Apple isn't just cheap relative to its five-year history. It's cheap relative to other stocks in the market today...
Apple is at least 37% cheaper than the average tech stock today and at least 45% cheaper than the benchmark S&P 500 Index. Yet Apple is a far stronger company than the average company included in these indexes. We suggest using the pullback as an opportunity to "trade for income."
Despite reporting record third-quarter earnings last month, shares have moved lower. And they're even cheaper now. As we mentioned last week, Apple shares are now at least 44% cheaper than the average tech stock.
But if the opportunity to buy a great company at a cheap price still hasn't convinced you – or if the negative headlines have made you concerned about the company's future – we have another big reason to consider buying shares of Apple today.
In short, new research from our friend Dr. Richard Smith says this is the best low-risk buying opportunity in Apple in more than two years...
Longtime readers may remember Richard is a mathematics PhD – and former Stansberry Research subscriber – who built the wonderful TradeStops trailing stop loss software that we often recommend.
Over the last few years, Richard has been quietly working to transform TradeStops from a simple trailing-stop tracker (which it still does incredibly well) to a full-featured portfolio-management system. And as we discussed in the June 18 Digest, the new TradeStops Pro software blew us away...
It's still as easy to use as ever, but it now features "smart" trailing stops that take the guesswork out of choosing the right trailing stop for any stock... it has simple tools to help you decide how much money to invest in any position based on the size of your portfolio and risk tolerance... and it can even alert you to the best time to buy back into a stock you previously stopped out of, or when to buy a stock for the first time.
That last feature is the one we're going to discuss today using Apple as the example...
In a post on his TradeStops blog earlier this week, Richard explained that Apple has now entered the "low-risk zone," meaning the stock is offering a low-risk buying opportunity. Here's Richard...
The low-risk zone is the price range in which a stock has pulled back a bit more than halfway from its recent high close to its smart trailing stop. Here's how it looks on a chart of Apple...
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The blue line is the top of the low-risk zone. The red line is the smart trailing stop. The space in between the blue and red lines is the low-risk zone.
Since the start of its most recent bull run in May 2013, Apple has only crossed into its low-risk zone once before, in June 2013. It touched the top of the low-risk zone again in February 2014 but quickly bounced right off it.
This week, Apple crossed back into its low-risk zone again for the first time in more than two years. And Richard says it's offering a great opportunity for folks who missed the rally of the past few years...
I must admit, I've personally been interested in Apple for the past six months, ever since it released the iPhone 6 and it became clear to me that Apple is going to dominate the all-important mobile space. I was also blown away when I read that it currently soaks up 95% of the profits in the mobile space.
I've never seen anything like Apple's dominance since, well, Microsoft 30 years ago. Am I late to the party? Yep. Did I want to jump into Apple when all of the hype around Apple Watch was driving the stock to new highs? Nope.
As of today, however, I've got a very tempting opportunity [with] Apple. It's particularly tempting because my risk in [buying today] is very low.
Apple's current smart trailing stop is set at 19.23% from its highs, or $106.79. The technology behind these stops is proprietary, but understanding how it works is simple...
Rather than choosing a 20% or 25% trailing stop for a position (which our research shows is already surprisingly effective), Richard's smart trailing stops factor in the expected volatility – what Richard calls the volatility quotient – of that particular stock. In other words, it helps distinguish normal fluctuations from moves that suggest a real change in trend.
Apple's current smart trailing stop means that Apple tends to move up or down as much as 19.23% without telling you much about its long-term trend. On the other hand, moves of more than 19.23% tend to be more important.
But because Apple has pulled back to its low-risk zone, investors who buy today can risk much less than that...
As of midday trading today, you could buy Apple shares for less than $116. With the current smart trailing stop at $106.79, you would be risking less than 8%.
If Apple were to fall below that level, Richard says it would be a signal that Apple is behaving differently and it's likely best to sell for a small loss and "let the dust settle" before reconsidering the stock. (Of course, as we mentioned earlier, Richard's TradeStops Pro can also tell you when it's safe to get back in.)
One of the world's greatest businesses is "on sale," and the market is now offering a terrific low-risk buying opportunity today. If you've been waiting for the "right time" to buy, Richard says this is could be it...
It's stunning to see how the talking heads have turned on Apple in the past few weeks as the stock has corrected just 12% from its highs. It seems like just yesterday that Apple could do no wrong as far as the major media was concerned...
I regard the media almost exclusively as a contrarian indicator at this point – I consider doing the opposite of whatever it suggests. The negative coverage of Apple is reaching a feverish pitch, having turned on a dime from its recent euphoric coverage.
If you're interested in investing in Apple, this is a great chance to take a shot with a tight stop on a close below $106.79.
And if you're interested in learning more about Richard's incredible new TradeStops software – and how it can easily help you make more money with less risk – be sure to click here.
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New 52-week highs (as of 8/12/15): American Financial Group (AFG), Inogen (INGN), and Constellation Brands (STZ).
In the mailbag, a comment on China and its currency... and a new subscriber questions our advice to own stocks today. Send us your questions, comments, and complaints to feedback@stansberryresearch.com.
"[Tuesday] night, contrary to popular belief, I sold the U.S. dollar (against the chf/cad/jpy) and invested long on the other side of the basket (bought gbp/eur--forget the aud/nzd since they will follow China) and made a small fortune.
"Still, your article gave me considerable insight into the war China currently wages against the U.S. It reminded me of what I would do to get rid of worthless (eventually) U.S dollars: I would devalue my currency, force investors to sell and flock to the safety (illusional/delusional) of the U.S. dollar. While everyone was buying the U.S. dollar at elevated pricing I would start to unload U.S. dollars on the open market (especially as it begins to devalue over the next several months).
"What better way is there to get rid of the U.S. dollars that the Chinese are holding en masse? I think it was Chairman Mao, when asked his opinion about the effects of the French Revolution, responded, 'it's too soon to tell.' Strategy is so much more interesting than military might, bombs, and the use of force. Hats off to the Chinese. The U.S. should take time to reflect on how to wage war without lifting a single jet off the ground.
"Unlike Steve, I would bet this cat and mouse continues right up until the Chinese currency finally falls into the open arms of the IMF. The FED has finally ruined the U.S. and is ready to set its parasitic grip on China, although, like Napoleon, I think the Central Bank will find that they've overreached their grasp in regard to the Chinese. Freud said the Irish were impervious to psychoanalysis. I think the Chinese are equivalent in regard to financial advice. Thanks, as usual, for the great job of reporting. By the way, I would really enjoy it if Stansberry would begin to report more extensively on Forex markets." – Paid-up subscriber Rick Carter
"Hi, I'm a new subscriber, and I need clarification on an issue which is keeping me up at night. All of your newsletters contain portfolios which recommend certain stocks to buy/hold. However, you and some other analysts at your firm believe a stock market crash may happen very soon, for various reasons. What I'm troubled with is this: if you and others believe a market crash is coming, why not recommend your subscribers pull out of the market, and go to all cash? I know I'm starting late here, but I don't want to go 'all in' if things are about to turn ugly. Please straighten me out here. Thanks!" – Paid-up subscriber Eddie Scoppa
Brill comment: As always, we can't give individual investment advice. But this is a question we often get from new subscribers, and there are a couple important things you should know.
We never recommend going "all in" on any investment. Not all of our analysts believe a market crash is imminent, but even our most bullish analysts recommend diversifying your investments across different assets and keeping a portion of your wealth in cash and "crisis insurance," like physical gold and silver.
But you're correct that our bearish analysts don't recommend pulling out of the market and going to cash. For example, as he explained in the July 24 Digest, Porter believes a substantial stock market decline is likely in the coming months. Yet he and his analysts continue to hold and recommend stocks in the Stansberry's Investment Advisory portfolio. The reason is simple...
No one can consistently predict the timing of stock market corrections. And as we always say, the key to making money in stocks is to cut your losers quickly (take small losses) and let your winners run (don't sell your winners too soon).
There have been plenty of reasons to be bearish over the past six years (and plenty of folks who suggested moving to cash), but the big trend in stocks has remained up. So rather than sell stocks and move to cash, we recommend using trailing stop losses. These limit your risk and protect your capital if the market declines... but let you continue to profit if the market moves higher. And if you're especially bearish, you can also "hedge" your portfolio by shorting overpriced stocks.
Regards,
Justin Brill
Baltimore, Maryland
August 13, 2015
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