Editor's note: To be the best at anything, you first must master the basics...

Regular Digest readers know that focusing on the fundamentals is a key way to gain an edge in the stock market. And according to Stansberry Research senior analyst Mike Barrett, when you become proficient at the few things that matter most for investing, you can create a reliable "game plan" for when things go wrong.

Mike believes two important principles can help dramatically strengthen your strategy, limit your investing mistakes, and maximize your upside potential – no matter what the market is doing...

In today's Masters Series – originally from the February 24 Digest – Mike explains what professional golf can teach us about investing... reveals the three-step strategy he uses in his personal investments... and details how his system helped him identify a double-digit opportunity at the height of the pandemic...

Using the 'Single-Plane Swing' to Gain an Investing Edge

By Mike Barrett, senior analyst, Stansberry Research

For Bryson DeChambeau, "simple and repeatable" is the key to success...

In September 2020, the then-27-year-old golfer won the U.S. Open by six strokes over second-place finisher Matthew Wolff. He was the only competitor in the tournament to finish under par.

The victory cemented DeChambeau's place in the sport's history... He joined legendary golfers Jack Nicklaus and Tiger Woods as the only men to ever win an individual title at the NCAA Division I golf championships, the U.S. Amateur, and the U.S. Open.

Over the years, DeChambeau has become known for his unique approach to the game. His nickname is "The Mad Scientist" – a nod to how he uses all the available data to his advantage.

But when it comes down to it, the key to DeChambeau's success isn't complicated at all...

In today's Master Series, I'll explain exactly how DeChambeau does it. Like legendary former NFL head coach Bill Walsh, DeChambeau uses an innovative system to come out on top in his sport. In DeChambeau's case, it gives him an edge over the competition from the first tee box.

And this essay isn't just about golf... I'll also show you how the same basic principles that DeChambeau uses on the course can help you improve your investing game as well.

To start, consider this quote: "Mastery of everything is all about the basics."

That's one of the core messages from author Matthew Kelly in his 2020 gem, I Heard God Laugh.

I couldn't agree more... If you want to be successful at something in life, you first want to figure out the few things that matter most for that particular skill – the "basics." You want to become proficient at them... and success will surely follow.

That's what golfing instructor Todd Graves stresses with the "single-plane golf swing." And DeChambeau is one of the most successful pupils to put this concept into practice.

The single-plane golf swing has one key difference from a conventional swing...

Most golfers have a lot of movement in their swings. Whether they realize it or not, the club passes through different imaginary planes between when they set up to hit the ball and when they make impact with it.

However, in the single-plane swing, your front arm essentially becomes an extension of the club's drive shaft.

This means your stance sets up farther back from the ball... It basically forces your swing to remain on a single, imaginary plane as it goes back to gather speed, then gets pulled down to strike the ball. Here's how DeChambeau explained it to Golf Magazine in June 2019...

I don't want my hands starting low at the beginning of my swing and then getting high at impact. I just want to start them high and then return to that position.

It takes a little time at first, but once you get used to it, it's the most efficient way to return the clubhead to the ball. Think about it this way...

If you were to design a machine to swing a golf club, how would that machine do it? You wouldn't program the machine to have a bunch of excess movement. You'd build it so it's simple and repeatable. That's what my swing is.

In order to replicate the same (correct) swing over and over, regardless of whether he's using a 4-iron or a 9-iron, DeChambeau also switched to "same-length clubs"...

You see, as you move from a conventional 4-iron to a conventional 9-iron, the club length shortens. That means your setup must also adjust to the slight differences in club length. But by using irons that are all the same length, DeChambeau employs the same exact swing and setup every time.

Think of it this way... The single-plane golf swing is perfectly synced with one of the universe's immutable (though mostly underappreciated) laws... "Keep it simple."

But as DeChambeau says, it's about being "repeatable" as well.

Think how many times you'll swing a club playing a round of 18 holes...

If you're good, you'll still hit the ball around 70 to 80 times. And let's be honest... Many folks can take more than 100 shots in a round. Plus, you make countless practice swings.

By minimizing the number of things that can go wrong on every swing, it's easier to know what adjustments you need to make.

That's what really intrigued me about the single-plane golf swing... And it's why I adopted it myself last year.

My greatest golfing frustration is that I never understood why I would hit one tee shot 200 yards straight down the fairway, but couldn't replicate it on the next tee.

Now, I know... Before, I tried too hard to get every little part of the process correct. I didn't focus on the basics. I didn't keep it simple and repeatable like the single-plane swing does.

And the best part is, I didn't have to shell out hundreds of dollars to figure that out... I simply read about DeChambeau's accomplishments and watched a lot of YouTube videos.

Don't just take my word for it, though.

Consider what the single-plane swing's greatest champion has accomplished with one critical metric...

You see, the PGA Tour tracks "strokes gained off the tee" for every golfer.

This metric is exactly what it sounds like... It measures how much better or worse a player's drive is when compared with the average professional golfer.

For the past two seasons, DeChambeau ranked first out of more than 190 qualifying golfers... He was the only competitor with an average greater than one stroke (1.039 in 2020 and 1.162 in 2021).

In other words, DeChambeau was hitting the ball so much farther and so much more accurately than his peers – the greatest golfers in the world – that he was essentially a full shot ahead of them when he stepped up to the tee.

And of course, like with everything in life, it's always great to gain any edge that you can.

Now, as I alluded to at the outset of today's Masters Series, I'm not sharing all of this just to improve your golf game. You see, a "single-plane swing" exists for investors, too...

It's a simple, repeatable system that could potentially help you minimize your mistakes, improve your results, and keep you focused on what matters most.

I use this system with my personal investments. And more important for readers like you, I also use this system as an analyst for Extreme Value. It's how my colleague and editor Dan Ferris and I have uncovered hidden gems on a regular basis year in and year out.

My "single-plane swing" investing system has just three simple, repeatable steps...

1. Limit mistakes by only investing when the odds are in your favor.

2. Use valuation to find and select your best ideas.

3. Stay relentlessly focused on the two most important "Cs" in investing.

No one hits every drive straight down the fairway in investing...

No one.

The key to success is to limit your mistakes. You only want to put your hard-earned capital at risk when you're likely to succeed. This is the crux of my first step.

It sounds simple, but it's a lot harder to do than you might think... When we're in the middle of a seemingly never-ending bull market in stocks, you might feel like you can't make any mistakes. But think about it... Has every stock you bought gone up forever?

In Extreme Value, Dan and I attempt to limit our mistakes by focusing on two attractive setups – broad market sell-offs and underappreciated growth stories.

As I explained yesterday, during big market downturns like we experienced a year ago, most folks sell first and ask questions later...

They panic out of great businesses, regardless of their underlying fundamentals.

But the thing is... this indiscriminate selling creates a tremendous buying opportunity for those of us who are ready. The odds of success are rarely more stacked in your favor than during a massive sell-off... It's the best time to find great bargains in the stock market.

For instance, with the COVID-19 pandemic suddenly closing bars and restaurants last year, investors dumped the stock of Constellation Brands (STZ). It was as if they believed its loyal customers would never drink another Corona – the alcoholic-beverage giant's top-selling brand.

Dan and I knew better... So in early April 2020, we recommended that our subscribers buy STZ shares.

By the end of 2020, Constellation had bounced back just as we anticipated. And it's still climbing... Subscribers who followed our advice after the initial overreaction are sitting on a 62% gain today.

But big sell-offs like what happened in spring 2020 are relatively rare... At most, they occur once or twice each year.

So I spend most of my time looking for something far more common – underappreciated growth stories, like yesterday's example of TFI International (TFII). These situations involve companies with expected revenue growth of, say, 6%... but shares are priced as if growth will be closer to zero for the next several years.

Of course, buying stocks is always risky... We don't know what tomorrow will bring. Even the best-chosen stocks can still fall if something happens that you can't predict.

To limit your mistakes, though, you can look for situations that make it difficult not to win – like panic-induced sell-offs and underappreciated growth stories.

Moving on... the second step in our "single-plane swing" investing system is to use valuation to choose investments.

In a typical month, I evaluate more than 100 investment ideas... I cover a lot of territory quickly because I rely on a proven, proprietary valuation model that's both simple and repeatable – just like DeChambeau's approach to his golf swing.

By now, I've used it thousands of times. It's so effective that I can evaluate a stock I'm not even familiar with... And in a matter of minutes, I can get a high-conviction estimate of its intrinsic, or "real," value – the highest expected price that a knowledgeable buyer would pay for the entire business.

Knowing a lot of intrinsic values also provides me with a great sense for relative value. In other words, I know which stocks offer the most bang for the investment dollar at their current prices.

The over-loved, overhyped stocks of the day offer little or no upside to their real values...

For these stocks to be worth their current prices, everything would have to go perfectly right for them all the time. And as I said earlier, the odds are against that happening.

Instead, the best ideas usually don't register on investors' collective radar for some reason... These are the opportunities I'm diligently looking for month after month.

For example, two of our best 2020 ideas in Extreme Value were smaller-cap Canadian-domiciled companies just starting to trade on a U.S. exchange. They weren't in the spotlight yet for most investors, but Dan and I recognized the "hidden value" in these two stocks.

In an essay titled "Something of Value," investing legend Howard Marks perfectly sums up the thought process of every value-seeking investor. As he writes...

The goal at the end of the day should be to figure out what all kinds of things are worth and buy them when they're available for a lot less.

You simply can't know in advance where the most attractive opportunities will be. But by using a simple and repeatable valuation system to constantly evaluate your pool of potential investments relative to one another, you can uncover the very best ideas.

My final step is the most important. It doesn't matter if you find the best ideas if you don't also follow this step...

You must always focus on the two most important "Cs" of investing – capital and compounding.

Capital is just a fancy word for savings. To build wealth, you must first accumulate capital. Then, to maximize your return on it, you want to focus on compounding.

Compounding is most often thought of as "earning interest on interest"... For everyday stock investors, we're really talking about earning dividends on dividends. And taking it a step further, it means earning additional unrealized gains on top of your unrealized gains.

Keep this conclusion in mind from a study by money manager Hartford Funds...

Going back to 1970, 78% of the total return of the S&P 500 Index can be attributed to reinvested dividends and the power of compounding.

That's an incredible amount of wealth created by essentially doing nothing.

And as Warren Buffett, one of the greatest long-term investors of all time, once said...

My wealth has come from a combination of living in America, some lucky genes, and compound interest.

Fortunately, you don't need to be Buffett to enjoy these kinds of returns...

Two decades ago, a friend of mine started four dividend-reinvestment plans.

He has made regular contributions over the past 20 years. But more important, thanks to his reinvested dividends and stock splits, he now receives an annual income of $100,000 off these plans alone.

My friend would need to accumulate and invest at least 10 times more capital to generate a comparable amount of annual income today. That's the power of compounding over the long run.

In an interview with website ThinkAdvisor about his book The Psychology of Money, released last year, the Collaborative Fund's Morgan Housel summed up my third step perfectly...

You should be an optimist about the long run, but a pessimist about the short run... because the short run is always a continuous chain of breakages, problems, errors, recessions, [and] pandemics.

In other words, listen to your inner pessimist as its prods you to save every dollar possible. Then, listen to your inner optimist when you put this capital to work.

Make compounding your friend. And never, ever forget its first rule, as espoused by Buffett's right-hand man, Charlie Munger...

The first rule of compounding is to never interrupt it unnecessarily.

Let your well-bought investment ideas keep working year after year... and decade after decade.

Every golfer who steps up to the first tee inherently senses two things...

Adversity awaits... But so does opportunity.

Your success depends on how well you minimize the former and exploit the latter. You set yourself up to succeed with a system that limits your mistakes, improves your accuracy, and helps you focus on the "simple and repeatable" swing mechanics that matter most.

The same is true about investing...

Limit investing mistakes by only putting capital to work when the odds are in your favor... Invest in companies that are undervalued rather than overhyped... And never lose sight of investing's two most important "Cs" – capital and compounding.

Good investing,

Mike Barrett

Editor's note: Mike has used his simple, repeatable system to identify some of Stansberry Research's top performers... including cannabis company GrowGeneration (GRWG) and bank stock Silvergate Capital (SI) – which climbed 1,158% and 992%, respectively, in a little more than a year. Put simply, he has developed an unusual moneymaking strategy that he's sharing for the first time ever...

It's a way to identify smaller, more obscure companies whose biggest upside potential has yet to be seen – by the public or private markets. Some people would say you'd be crazy to consider this type of stock... but according to Mike, his strategy could help you make "10x" your money even if the market keeps falling. Plus, his projections can help you predict exactly when to get in and get out for maximum gains. Click here to learn more.