Markets are still jittery as Coronavirus spreads. But events such as this offer an opportunity
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As I write Thursday morning, the Coronavirus outbreak has topped 7,700 cases in China, exceeding what we saw with SARS 17 years ago.
The flu-like virus has killed at least 170 people to date and the virus continues to spread.
New cases have been identified here in the U.S., Finland, Thailand, Taiwan, Japan, Singapore, Germany, the United Arab Emirates, Canada, India, and Cambodia.
As you might expect, the financial media has pounced on the story.
In the last few days, the headlines have been filled with grim calls for major economic damage.
Here are a few examples ...
The fear has worked its way into the collective investor psyche.
Below is a chart of the Hang Sen Index. You can see it falling 7% in the last couple weeks as the virus has spread.
How do you respond when a serious event such as this shakes the markets?
If you're reading this, it's safe to assume you're an intelligent investor. So, you're probably already at the conclusion of "events such as these are unfortunate but temporary, so stay the course."
And that's correct ... yet perhaps incomplete.
You see, events like Coronavirus that rattle markets can also provide very profitable shorter-term trading opportunities.
Famed investor, Louis Navellier, just illustrated this in an update to subscribers.
The reality is markets have a way of clawing back from the brink of doom. And as they do, certain elite stocks can post major gains for investors with the vision to see the opportunity.
From Louis about today's Coronavirus fears:
Between the viral outbreak and political uncertainty -- from impeachment to Brexit -- it all feels very similar to situations we've dealt with in the past.
In the past 10 years, we've had the Ebola virus ... the "fiscal cliff," when tax cuts would expire and automatic spending cuts would kick in ... and the "taper tantrum," when the Fed announced it would tighten fiscal policy. (To name just a few!)
Yet the bull market has just kept going. And every time the market pulled back along the way, I told readers to buy.
In his update, Louis then looked back at the impact of various negative events on the market, but then analyzed how the market rallied over ensuing months.
He then took it one step further, identifying how some of his top recommendations performed in the wake of each scare.
The takeaway. There are big gains to be had.
So, in today's Digest, let's look at a few of these past events to put them into perspective. You'll see that each pullback could also be viewed as a bullish trading opportunity.
But then, more importantly, we'll look at a free tool you can use to help identify superior stocks. You can use it to help find what could be a highly profitable short-term trade as markets regain footing, regardless of the crisis-du-jour.
***History shows that markets have a way of bouncing back
The first market-panic Louis identifies is the Fiscal Cliff Scare back in November 2012.
As you probably recall, a handful of previously enacted laws threatened to hit all at once, increasing taxes while decreasing spending.
The fear of economic fallout caused the S&P to drop 7%.
At the time, Louis told subscribers "I expect that the market will stabilize considering that it yields significantly more than going to cash. Once we have some resolution on the impending fiscal cliff, we should see strong upside in the market."
How'd it play out?
By the new year, the S&P was up 7%. And by that April, up 15%.
But as you can see below, Louis' top recommendations at that time did far better. Look as these returns as potential short-term trade opportunities.
I won't go through all the details of each ensuing crisis, but let's hit on the high points.
During the "Taper Tantrum" in the spring of 2013, the S&P dropped 5%. It was up 22% by year-end.
Over that same period, Louis' portfolio featured an 81% gainer, and two 50%+ gainers.
The next crisis was the Ebola scare. In fall of 2014, the S&P dropped 6%. By April, it was up 5%.
Louis' best performer over that period tacked on 22%.
In the Chinese market crash from June 2015 through January 2016, the S&P lost 10%, before rallying and recouping all losses.
During that time, Louis' top recommendation added 37%.
I'll skip Brexit and the late 2018 market panic since you probably see a pattern here -- markets rebound, and certain, elite stocks make big gains.
So, the question becomes "how do you find those winners?"
***Putting numbers and momentum on your side
Regular Digest readers know that Louis is a numbers guy. While other analysts move in and out of stocks based on hunches and gut-feelings, Louis' investment plant is rooted in objective, impartial numbers.
We're talking sales growth, operating margin growth, earnings growth, earnings momentum, earnings surprises, analyst earnings revisions, cash flow, and return on equity.
This well-defined, strict set of criteria guides him into select, elite stocks.
Fortunately for you and me, Louis has created a free tool that's built upon the same metrics that drive the big winners in his portfolio -- it's called the Portfolio Grader.
We can use this tool to find fundamentally superior stocks, then simply do our best to buy-in when we believe the markets have begun to gain traction.
Don't worry about timing the bottom perfectly -- you'll never hit it consistently. You could even scale in over a period of weeks or months. The point is simply to capture a good chunk of the exaggerated upside that often comes when great stocks are driven higher by the tailwinds of recovering markets.
So, let's look at a potential trade setting up today ...
***One of Louis' top picks, which he's allowed me to give away here in the Digest in the past, is EDU -- the New Oriental Education & Technology Group
As you might guess given the name, the company is based in China.
Here's how EDU looks according to the Portfolio Grader:
Now, what about concerns that the Coronavirus will hurt EDU?
Well, if we look at January, we absolutely see the company's stock getting caught in the sell-off.
Here's EDU from January 16 through this morning.
Down 12%. That's a noteworthy pullback.
Now, let's look at EDU in a 12-month context -- it's up 64% -- nearly tripling the S&P, as you can see below.
This chart reveals significant strength. And it shows a stock getting dragged down by an event that's not related to its fundamentals.
The Coronavirus will eventually be contained. And any effect it has on EDU's profits (if there are any) will eventually fade away. At that point, what do you believe is likely to happen to the stock price?
***Now, for anyone reading this who says "but this time it's different! This time we have a Chinese crisis, and this is a Chinese stock" consider this ...
We glossed over it earlier, but one of the past crises which Louis identified was the Chinese Market Crash back in 2015/2016.
What was his top-performing trade over that time when the dust settled?
Market scares such as the one we're experiencing today out of China have a way of working themselves out. If you're a buy-and-hold investor with great stocks in your portfolio, simply remained focused on your long-term goals.
But if you're a more aggressive investor, you can see market scares for what they also bring -- the chance to make bigger, faster profits through elite stocks.
Use Louis' Portfolio Grader to help you find such stocks. Of course, if you'd prefer to outsource the entire process to Louis, or to learn more about EDU after joining Louis in Accelerated Profits, click here.
Have a good evening,
Jeff Remsburg
P.S. The ultimate retirement "catch up" stocks ...
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Some of these fast-moving stocks can deliver huge gains in months ... and some in mere weeks.
Louis recently sat down for a rare interview and explained the full details behind Project Mastermind -- the nearly four decades of research that went into its development ... and how it can help you "catch up" on retirement.
He even revealed his #1 stock to buy now based on insights from Project Mastermind -- ticker symbol and all.
For all the details, including the name & ticker symbol of Louis' #1 stock ...
Click here to watch a replay of the interview.
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