Why We’re Entering the Greatest
Buying Opportunity Since January 2009
By Charles Mizrahi
Editor, Hidden Values Alert
A lot has changed over the past three years September 2008, yet investors are behaving as if we are reliving the events of the Great Recession.
Forget the fact that corporate balance sheets are stronger, banks have worked through much of their bad loans, and many companies are reporting record profits.
Mr. Market would rather believe the hype instead of the facts.
Over the past few days, the financial crisis in Europe and the future of the Euro have taken center stage. Fear is now the dominant emotion and stock prices have been falling hard.
Investors want nothing to do with stocks as they sell equities and park their money in Treasury bills. The three-month Treasury bill is not yielding a negative return but it is yielding a return that is so small it can hardly be called a return—0.02 percent. The ten-year Treasury bill is yielding less than 2 percent … an all-time low.
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Volatility in the U.S. stock market has never been higher than what we’ve seen over the past two months – and already thousands of investors have been burned badly by “panic-selling.”
But according to one man – someone with an astounding record of 49 winners in his last 50 trades – there’s one investment you must consider right now that could not only help you protect your wealth…
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We’ve Been Through this Before
Remember…it was only three years ago that we lived through an “economic tsunami.” Bear Stearns was sold for $2 a share to JP Morgan, Lehman Brothers filed for bankruptcy, and Fannie Mae and Freddie Mac were placed into conservatorship.
Shareholders in those companies were wiped out, and there was talk of nationalizing the U.S. banking system. Investors, both great and small, began questioning the safety of money market accounts … and rightly so.
After Lehman Brothers filed for bankruptcy on September 15, 2008, the Reserve Primary Fund owned debt issued by Lehman. When they wrote the debt off their books, their money market shares were priced at 97 cents. They were the first money market in a long time to “break the buck.”
Investor anxiety went through the roof. If your money market funds could lose money, all bets were off. You had to be crazy to think about investing in stocks. Investors’ hard-earned cash seemed safer in their mattresses and, in a redemption frenzy, they withdrew billions of dollars from money markets in a matter of days.
If the U.S. Treasury didn’t step in on September 19 of that year and announce a program that would guarantee to cover money market funds that broke the buck and restore them to $1 per share, who knows what would’ve happened.
Fear among investors was so palpable; they were more concerned with a return of their money than a return on their money. The three-month U.S. Treasury bill had a negative rate of return—investors paid for the Treasury to hold their money for three months. To say that fear was rampant in global markets would’ve been an understatement.
During the turmoil, great companies were selling at valuations that hadn’t been seen in more than two decades. After several discussions, meetings, and strategy sessions, our team agreed to publish a new investment letter — Inevitable Wealth Portfolio (IWP).
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One remarkable company – at this very moment – looks remarkably similar to what Berkshire Hathaway looked like 40 years ago.
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This company was identified as having the potential for explosive growth by the very same profit-generating machine that has produced 49 winners out of its last 50 trades…with an average return of 46.4% per trade.
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The approach was going to follow Benjamin Graham’s method, which he researched and made public in 1976. We were going to buy the stocks of companies that had bulletproof balance sheets when they were trading at bargain prices.
When we published our first issue at the end of January 2009, the stock market was still several weeks away from hitting bottom. IWP would always have a portfolio of 30 stocks. When a stock would hit our profit objective or two years would pass from the time of its purchase, it would be replaced with another stock that fit our buy criteria.
When I began researching companies to add to IWP, I couldn’t believe how many blue chip companies made the cut. The first screen resulted in so many well-known companies, I thought I might’ve made a mistake. How was it possible that so many great companies were selling as if they were never going to make another penny in profits again?
I blocked out all the “nervous Nellies” and “Chicken Littles” who were shouting that the end of the financial markets was near … and recommended to our subscribers to buy, buy, buy.
IWP did not look too good one month after our first issue. Many, if not all, of the stocks we recommended were now even greater bargains. It took courage and the proper temperament to be one of the original IWP subscribers. We were trying to catch falling knives and we ended up with bloody hands, which usually happens right before markets turn.
During the first week of March 2009, the selling stopped, and investors started buying. The stocks in IWP began to soar as Mr. Market came to the realization that he was offering 50-cent dollar bills. Less than 10 weeks later, Corning Inc. was the first of our portfolios to hit its profit objective with a gain of 52.6 percent.
That started us on a string of 48 consecutive winners over the next two years, with an average gain of 49 percent.
And – right now – what I see happening to great companies looks very similar to what we saw back in January 2009.
In times like these, stock traders are selling first – and asking questions later.
When that happens, great companies tend to be see their share prices pulled down – for reasons that have nothing to do with the value of the company.
And that’s when great profit opportunities are created.
It always seems that it’s darkest before the dawn, and this time is no different. As long as you stick to buying companies with strong balance sheets when they are trading for bargain prices, stock market profits should follow.
