U.S. stocks have been going haywire for well over a month now. (Catch up here.) And that’s made former Wall Street insider Jason Bodner, who heads up our Palm Beach Trader advisory, even more bullish…
Last week, he told readers, “As we slog through this volatility, I think it’s a great time to hunt for bargains.”
One reader pointed out that he could’ve armed her and her fellow bargain hunters with more precise guidance. And Jason came through with some more insight…
Reader question: Great article and wondering what we can do to hunt for those bargain stocks that will be very profitable in the near future?
– Diamond B. (Legacy Research member)
Jason’s answer: You want quality stocks that have been beaten down even if there’s no inherent change in the story of the company.
These are the stocks that have fallen out of the treasure chest. Here are three things you can do to find them…
Focus on prior big winning stocks that have fallen out of favor. Think Facebook, Amazon, etc. That’s where the smart money is looking for bargains.
Seek out sectors that are under pressure AND are on the lips of the media. Think retail last year… energy three years ago… China today… tech today. These are the spots where bargains are to be had. When the masses don’t want them, scoop with both hands. But, focus on prior leading stocks.
Use fear to your advantage. When big market pullbacks happen, all stocks fall… good ones and bad ones alike. Look for healthy stocks that have wide moats, pulling back simply due to the market and NOT due to business deterioration.
In last Thursday’s Daily Cut, Dave Forest, who heads up our International Speculator advisory, told us why he’s so bullish on commodities…
We’re on the cusp of what I believe will be one of the biggest investment opportunities we’ve seen in the current millennium – a major up-cycle in commodities.
I believe commodities, as a group, are about to enjoy a historic resurgence. The kind that has happened regularly and reliably throughout history, and which has made fortunes for early investors.
Dave’s comments prompted some great questions from your fellow readers.
One called Dave out for not giving enough proof to back up his bullish case for commodities…
Reader question: I just read this and all it says is that commodities are going to go up. But WHY? I see two possible scenarios…
If there is a melt-up and economies get stronger all over the world, then businesses would need more commodities. As a result, greater demand would lead to higher prices, more profit, and an up move in share values.
On the other hand…
If there is a bear market and demand weakens, the opposite happens.
Therefore, I can only conclude that you think markets are going to stay strong and that the melt-up is going to happen. If I am missing something, as to why this scenario is going to happen, I would like to know what it is.
Looking forward to a little more depth in your reasoning.
– Kenneth R. (Legacy Research member)
Dave’s answer: Our research shows that economic downturns are associated with commodities up-cycles.
You see, typically at the end of business cycles, there’s a significant increase in commodities prices. You can see this when you look at how the CRB Commodity Index – which tracks 19 of the most commonly traded commodities – has performed over the last 133 years.
Stock market blow-offs and economic downturns tend to precede an increase in the overall commodities complex.
It’s quite a curious phenomenon. But I’m not the only one who’s noticed it. My colleagues who follow the wider stock market – Jeff Clark and Jason Bodner – have also reported observing this pattern historically.
The bottom line is that commodities are historically cheap right now compared with stocks. That point has – in the past – preceded triple-digit rallies in commodities prices, which have spurred even larger gains for commodities stocks.
Next up, another reader asks Dave for more specific commodity investment advice…
Reader question: So, there are a dozen commodities: iron, lithium, copper, etc. What are the best investments?
– Anonymous
Dave’s answer: I get this question all the time – and it’s a critical one. Picking commodities at the bottom of their boom-and-bust cycles is a repeatable and reliable way to make significant profits.
To spot which commodities have the highest potential, we use our proprietary Casey Cost Curve analysis. This tells us what percentage of mines globally are unprofitable at current prices.
When we see a commodity where almost every producer is losing money, we know prices have to rise in order to keep needed supply online. We buy into the sector in anticipation of the price rise and the ensuing stampede of investors back into these beat-up commodities.
Right now, our Cost Curves tell us platinum, uranium, and nickel are the commodities with the highest potential for gains. Platinum is particularly interesting, with almost half of all platinum mines around the world currently losing money.
We’re positioning ourselves in these commodities to benefit from the eventual price rebound.
Moving on… a reader of master trader Jeff Clark wants an update on a call Jeff made at the end of September…
Reader question: Jeff, what happened to the “Buy” on China?
– Tony M.
Jeff’s answer: It has been several weeks since we looked at China’s stock market. Back then, the Shanghai Stock Exchange Composite Index (SSEC) had just completed a bullish move off of oversold conditions.
It reached the price target I pointed out one week before. And, I was willing to buy Chinese stocks if the SSEC pulled back towards the 2700 level – which it did in early October.
The problem is… the 2700 level did not hold up as support for the SSEC. The index collapsed all the way down to 2500 – a loss of almost 3% in just about one week. And, if you bought Chinese stocks based on my bullish prediction, you probably took me off of your Christmas card list.
Based on the action over the past two weeks, though, you might consider putting me back on the list.
The index is now bumping into resistance near 2700 – which was the former support line. If the SSEC can rally above that line, then there’s no real resistance until about 2800. So, a break above 2700 could create a sharp, fast move higher.
If the SSEC drops back below 2550, however, then all bets are off.
Next up, a question about the “green wave” for Crisis Investing chief analyst Nick Giambruno…
Reader question: I’m relatively new to CBD [cannabidiol] use and have already experienced health benefits. I plan on purchasing stock but am finding it difficult to zero in on the best stocks to buy. Tools to produce CBD, growers of hemp, or direct sales of CBD?
– Betty G. (Legacy Research member)
Nick’s answer: The U.S. CBD market could easily grow 10 times larger in the coming years. Shares of select publicly traded companies in the CBD industry could surge even higher.
But we have to understand there are not many publicly traded companies that have meaningful exposure to the CBD industry – probably about a dozen tops.
The best stocks are from CBD producers that distinguish themselves with a strong brand and retail pipeline.
That’s all we have for this week.
But before signing off, we’d like to share an email from a reader that caught the attention of everyone here at The Daily Cut…
Reader comment: It’s crazy that the best daily missive I receive in my inbox is the one that’s free! Keep up the great work uncovering the corruption of our government and the Deep State!
– Jacob H. (Legacy Research member)
Thank you, Jacob. And don’t worry… This is a story we’ll be keeping a close eye on.
Regards,
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James Wells
Director