Our Irrational Economic Summit is coming soon, and there’s an incredible slate of speakers scheduled. Somehow I made my way onto the list, and it’ll be an opportunity for me to discuss my general views on the markets as well as some specific companies that are primed for serious gains.
I’ll take some time to discuss one of my favorite issues of Hidden Profits from 2017, but I can give you a sneak peek – a tantalizing morsel, if you will – now.
Imagine walking down the snack aisle at your neighborhood convenience store. You’re not hunting for anything in particular, but your sweet tooth is howling. Something feels off, but you can’t put your finger on it. All the usual suspects are there — the candy bars, the bags of chips, the sour stuff your kids love so much — but something’s missing. You finally make your choice and head back home, dogged by a curious emptiness.
What I just described isn’t the setup for some sort of silly, psychological thriller. It happened to millions of people not that long ago. The number-one snack in America disappeared from store shelves for several months in 2013, and subsequently every media outlet, from newspapers to TV to online, lamented its absence.
Americans cared more about its missing sweet-baked good, it seemed, than anything else. It didn’t matter if you hadn’t had one of these snacks in years — the absence of a consumer choice struck a nerve in the American psyche.
Now that’s a brand.
But this brand was in dire need of a turnaround, and the kind of people that can execute such a move are few and far between.
But there is a tiny, elite class of executive with that rarest set of skills, who know the questions to ask, the decisions to make, and the buttons to push. These guys and gals don’t spend their lives with one company or even a few great ones. Rather, they favor the underdog, the down-but-not-yet-out business that, with the right touch, can become great — or great again.
This iconic brand landed someone who has the best track record in the consumer acquisition space. He’s a self-made billionaire with unparalleled experience turning around familiar yet ailing consumer brands. He grows revenues, cuts costs, and turns the whole machine into an efficient, smooth operator.
He’s not a one-hit wonder, either. In fact, he’s made more than 80 private equity investments over 30 years. His last 12 deals are reported to have delivered an average internal rate of return of 60% — that’s 60% per year!
When you hear me talk about “hidden profits,” this is the sort of thing I mean. The brand itself may be far from hidden, but this sort of inside-baseball move can be the key that unlocks profits and dividends for years to come.
This is what you’ll hear me talk about at the Irrational Economic Summit next month.
Profit During Earnings Season
In addition to discussing a stock that I think has 500% upside (or more!), I’ll also be conducting a seminar on strategies to profit from this upcoming earnings season.
The beauty of this strategy is that it doesn’t matter if we are in a bull or bear market. What matters is identifying companies that are about to see their stock prices explode or implode based on their earnings reports.
For nearly eight years I’ve been using a proven model to help identify companies that have solid or poor earnings quality. While I mostly focus on shorting stocks, the model is equally useful in identifying companies to own. In real time, the highest-scoring companies have returned more than 27% annually.
What am I looking for?
When it comes to companies to buy, I’m looking for solid cash flow, good revenue recognition policies, friendly shareholder yield, and relatively low expectations.
Stocks to sell – or short – carry the opposite characteristics. I’m also looking for stocks already trading poorly that institutions are starting to sell. That means high volume on down days and stocks trading near or below their 200-day moving averages.
I recently added another tool to our strategy: stock options. After a review of my short positions over this record-breaking bull market, I noticed that much of the profits on the shorts were from earnings-related announcements. Much of the losses were due to the bull market.
Stocks don’t tend to rise 50% on an earnings report. But they can certainly rise 50% between earnings reports as the market continues to march higher.
There are plenty of opportunities where stocks fall 10% to 15% on earnings releases. We’ve had plenty of positions this year that have done so. By using options, we narrow the timeframe and also provide the opportunity to juice the returns when we make the right call.
And, recently, my Earnings Insider Alert readers have seen two opportunities to triple their money!
I’ll walk through these trades every step of the way and, hopefully, leave you with a few extra bucks in your pocket when earnings season gets under way in October.
See you in Nashville!
John Del Vecchio
Editor, Hidden Profits
P.S. We’re just a few weeks away from the Irrational Economic Summit in Nashville. If you haven’t already, get your ticket now to catch me, Harry, and the rest of the Dent Research team in person – plus a great guest speaker lineup, too.