Adam O’Dell | Monday, May 20, 2013 >>
Emotions make us human. Sometimes they’re good. Sometimes they’re bad. And, as I’m sure you know, emotions can make us lose money in the stock market.
But this isn’t a story about fear, or greed. This is a story about love.
Investors, just like giddy schoolgirls at prom, fall in love.
We fall in love with our favorite stocks – the ones that, depending on their mood, treat us “for better, and for worse.”
We fall in love with narratives… comeback stories and tales of the underdog’s triumph.
And we fall in love with corporate american icons. You know them… the likes of General Motors, General Electric and McDonalds. These are the companies, and stock tickers, that even the most casual, go-it-alone stock market investors recognize, trust and buy.
Heck, a Google Image search of “American Icons” gave me this…
A fella eating Hormel (NYSE: HRL) chili, wearing a John Deere (NYSE: DE) hat.
EVERYONE Knows… Tractors are GREEN
Last December, as the Industrial Sector was leading the S&P 500 out of a pullback, I was running research scans using the Cycle 9 Alert system I’ve developed… looking for the strongest stocks in the Industrial Sector. With this sector ranked #1 on my Leaders & Laggards Board, my research showed stocks here were poised to outperform the market.
And Titan Machinery (Nasdaq: TITN) revealed itself as the “cream of the crop.”
Titan is a very small company – worth just less than half a billion in market cap – that makes farm equipment… tractors and combines. The only thing is, Titan’s tractors are red…
The company competes with John Deere – which is worth $35 billion, or 70-times more than Titan. And of course, EVERYONE knows its iconic GREEN tractors and “Nothing Runs Like a Deere,” slogan.
Although my scans revealed a buy signal in Titan, and not Deere, I researched both companies. On paper, John Deere would have seemed more attractive to the casual observer.
Deere’s profit margin was 8.7%. Titan’s was 2%.
Deere was paying a 2.3% dividend. Titan was paying zip.
And of course, I knew if I recommended buying John Deere, Cycle 9 Alert beta-testers would surely recognize the name… and likely have feelings of patriotism and nostalgia as they placed orders to buy the iconic stock.
That would have been the “easy” recommendation. But “easy” doesn’t pay, in life, or in the stock market.
My system – which I’ve tested front-ways and back – was telling me Titan was a better buy… that Titan’s stock, not Deere’s, had a higher statistical probability of shooting higher over the next two to three months.
So, brushing Deere’s love story aside, I wrote a Trade Alert that we broadcast to Cycle 9 Alert beta-testers on December 11, 2012, saying…
Action to Take: Buy March 16, 2013 $20 Call options on Titan Machinery, Inc. (NASD: TITN) paying up to $4.75 per contract.
Here’s how this worked out for us…
Gains You Can Learn to Love
I’m glad I led my beta-testers to Titan, and not the easy John Deere love story.
Titan’s stock crushed Deere’s over the following two months.
Deere gained 6%.
Titan jumped 34% higher.
And while Titan’s stock price itself shot higher, the in-the-money call options I recommended soared. Take a look…
With Cycle 9 Alert, I’m usually aiming to take gains after two to three months. That’s because, after much research, I’ve identified this window of time as being the most reliable for high probability stock moves. But you’ll see I helped beta-testers lock in gains of 65% just one month into the trade.
Remember my “gift horse” rule (I talked about it last week)? Seeing that Titan handed us more than half of the gains I was targeting, in just one-third of the time I’d expected, I did the prudent thing and alerted my beta-testers:
Action to Take: Lock in 65% profits on half (50%) of your Titan position.
Then, after two months from our original entry, we closed out the remainder of the position for a gain of 140%!
We followed the system. We didn’t let emotion drive our decisions. We didn’t get greedy. And it’s a good thing, too.
After Titan’s stock went up 34% during the two months we were long… it fell 27% over the next three months. But that didn’t affect us at all. We’d already taken our gains and moved on to different plays in other sectors. We got in… got the gains… and got out!
That’s the beauty of having a time-tested system and the discipline to follow it.
No emotions. No guesswork. And I’m sorry to all the John Deere fans out there… no love stories.
P.S. I’ve put together this webinar explaining how my Cycle 9 Alert system works so you can better understand how we made these gains with Titan… and with Kroger… and Merck… and all the others we’ve banked profits on since we began beta-testing last November. I urge you to take a few minutes to watch. I believe you’ll find it useful. Start here.
Ahead of the Curve with Adam O’Dell
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