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Forget Apple or Facebook, Own This InsteadBy
Tuesday, May 15, 2012
"What do you think of the Facebook IPO?" my mom asked me last week while visiting.
Last month, Apple was the darling stock of her bridge club... Now with Facebook about to trade publicly, the chatter among the bridge girls must have shifted.
Me? I have no interest in Facebook shares...
I don't want to buy what the bridge club is talking about. I have nothing against Mom's friends, of course. I just don't want to buy what's popular. If you buy what the average investor is buying, the very best you can expect is average returns.
If you want to make much greater than average returns, you have to be willing to buy what most people are NOT buying. That is where you can find great values.
And I want to buy what is quietly strong... what is quietly booming... right now.
Apple is falling like a rock. And while many other sectors are following Apple's lead, "rolling over," and falling... the biotech sector is stealthily ON FIRE. Many of the major biotech funds are hitting new highs.
Subscribers to my True Wealth Systems letter are up over 40% in 2012 alone on my recommended biotech pick, the ProShares Ultra Biotech Fund (BIB). (I'm not cherry-picking a particular date or a particular biotech stock here... we bought this basket of biotech stocks at the beginning of this year.)
 But nobody is in the trade... yet. The simplest way to show it is through the "shares outstanding" of the most popular biotech fund (which has the symbol IBB). Exchange-traded funds like IBB simply issue more shares as more people want them. If investors don't want shares, the number of shares outstanding falls.
Over the last three years, investors have been fleeing biotech stocks. From late 2008 through late 2011, the shares outstanding of IBB fell in half. As the chart of the shares outstanding (not the stock price) shows, investors are just barely starting to buy again:
.png) Meanwhile, biotech stocks are still cheap. Judging by the price-to-book ratio (P/B), they're the cheapest they've been since the late 1980s (except for the last two years).
 This is the ideal time to get in.
I've often written, "If you catch just one biotech bull market in your lifetime, you may never have to work again."
Biotech stocks have had CRAZY bull markets multiple times through stock market history.
Starting in 1998, the Nasdaq Biotech Index soared sixfold in 18 months. And biotech stocks soared even more than that in the early 1990s – up over 1,000%.
It's been over 12 years since the last biotech boom ended. Biotech stocks are cheap. They're ignored. And they're in a serious uptrend.
This is the exact recipe we need to see to make triple-digit profits.
We have it, today, in biotech.
True Wealth Systems readers are already up over 40% since January in shares of BIB. But this could be just the beginning. I believe much bigger gains are possible.
It's been 12 years. It's time for another big boom in biotech.
Get on board, if you're not already...
Good investing,
Steve
Further Reading:
In 2011, Steve showed readers the power of bull markets in biotech. With the sector cheap, hated, and in an uptrend, he shared four dirt-cheap companies to keep an eye on. Today, the group is up 16% on average. Get the full story here: If You Catch One of These Booms, You May Never Have to Work Again.
Market NotesVALE BREACHES THE "DANGER ZONE" LEVEL Vale has cratered. That's the idea behind today's chart.
Regular readers know we like to monitor shares of Brazilian iron ore giant Vale to get an "instant read" on the global economy. Vale is one of the world's largest iron ore producers. Much of its output goes to China. Thus, the stock is at the end of a big set of economic dominoes...
Iron ore is used to make steel, which ends up in all kinds of basic products and infrastructure. If the global economy slows, folks stop building and buying things. If folks stop building and buying things, demand for steel falls. If demand for steel falls, demand for iron ore falls. If iron ore demand falls, so does Vale's share price.
Last week, we warned Vale was approaching the "danger zone" of $20 per share. This was the "maximum pain" level reached in last year's horrible selloff. In the past two trading sessions, this level has been violated. Vale is plummeting, along with many other large resource stocks. At the very least, this huge decline tells us China is slowing. At the worst, it could be the start of a massive China correction.
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