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Meb Faber's Secret to Triple-Digit GainsBy
Thursday, February 16, 2017
"When was the last time a sector or an industry went down six years in a row?" I asked my good friend Meb Faber at lunch in New York last November.
Meb is the guy to ask... He is one of the smartest, most respected minds on Wall Street. And he has crunched the numbers going back decades.
"Six down years? It NEVER happens," he said. "But coal stocks ended 2015 down five years in a row."
Based on this fact alone – that coal stocks went down five years in a row – Meb told his subscribers in late 2015 to buy coal stocks. He got it exactly right... Coal stocks finished 2016 up 98%.
Today, another opportunity is on Meb's radar. It finished 2016 down – for the sixth straight year. And as a result, we agree that it's a great speculation with triple-digit upside.
Let me explain...
Meb has made a career out of tracking down large investment returns.
He scours the globe, looking at investments differently than most analysts do. So when he started telling me about his research on buying after multiple down years, I was interested.
Here's another example: Meb said that gold stocks were down five years in a row ending in 2015. And like coal, gold stocks absolutely soared in the first half of 2016.
Keep in mind, Meb said to buy coal stocks and gold stocks at the end of 2015 NOT because of some fundamental change, or because of some great story unfolding. Meb didn't create the script for coal – or gold. He chose them simply because he knew what happens after five down years...
Meb has run the numbers going back to the 1920s on how sectors perform the year after multi-year declines. Here's what he found:
As the table shows, the average gain in the year after a consecutive number of down years is shocking. The rarity of multiple down years is shocking, too...
For example, four consecutive down years in a sector has only occurred 1% of the time since the 1920s. And five down years has almost never occurred.
In other words, opportunities like this don't come along often.
That's why Meb was nearly giddy at lunch about his new idea for 2017...
In DailyWealth last week, I explained a bit of the fundamental story for uranium... It's cheap and hated. And now, it's finally starting an uptrend. But the fact that it fell for six straight years is one more reason I'm excited about it.
You see, over the long run, reversion to the mean is an incredibly powerful force in financial history. When coal stocks reverted away from the mean for five years, they snapped back violently in 2016. And the same thing happened with gold stocks.
Today, the opportunity in uranium is nearly identical to the ones in coal and gold last year.
Uranium stocks have fallen for six straight years. And now, they've silently entered an uptrend.
I expect uranium stocks will be a big winner in 2017. And now is the time to get on board...
Good investing,
Steve
Further Reading:
"Uranium finally has exactly what I want to see in a trade," Steve wrote last week. The commodity is cheap and hated today... And it has finally started an uptrend. Learn why now is the best time to get on board: Up 47% in Two Months, With Plenty of Upside Left.
Steve recently spotted another opportunity where lackluster performance has led to impressive gains going forward. This extreme has never been so huge... which means this time, your upside could be bigger than ever. Read more here: Shocking Underperformance Leads to a New Stealth Bull Market.
Market NotesTHIS 'WORLD DOMINATOR' MAKES THE INTERNET GO Investing in the best businesses on the planet continues to be a winning strategy...
Extreme Value editor Dan Ferris calls these types of businesses "World Dominators." They have huge, global brands and histories of steady, long-term growth. They often hold the top position in their industry. Last year, we showed you these winning traits at work in a world-class business: medical-technology company Becton Dickinson (BDX).
Today, another world dominator is trending higher: Cisco (CSCO). The company makes routers and switches – the "plumbing" of the Internet. It sells more than 60% of the world's data-networking equipment in both wireless and "wireline" (with wire connections) markets. Tech companies like Google and Amazon depend on Cisco's products to run their businesses.
As you can see from the chart below, Cisco's shares are climbing. The stock just struck a fresh multi-year high. Once again, buying "World Dominators" is a great way to invest for safe, long-term gains...
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