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Crisis Investing: Secrets of the Whack-a-Mole strategy

Today's Financial News - Posted April 30, 2009

How to make money in the stockmarket these days? The Hot Stock Confidential team has racked up 22 (count ‘em!) winning stock trades with double-digit gains in the past 18 weeks. But it’s not Wave Theory or value investing strategies behind their run of profitable stock investments…

by J. Christoph Amberger

Baltimore—TFN: Watching the congratulatory back-slapping on the First 100 Days, I didn’t see much to crow about, especially as an investor. Nobody with actual money sense or hands-on business experience does, either. (Then again, nobody mentioned that horrendous 25% drop in the U.S. stock markets that occurred in the past 100 days… and the lack of any identifiable trend in the tentative recovery.)

In fact, I don’t believe I’ve ever seen market volatility like this—not after the dotcom collapse… and not after 9/11.

Plenty of people have withdrawn from the markets… frozen their contributions to retirement accounts, or cashed out altogether. What’s left of investable capital is sitting on the sidelines—understandably cautious in a populist culture that is increasingly anti-business and anti-investing.

But volatility also means that despite the depressed overall sentiment in the markets, there’s now plenty of short-term opportunity.

You see, investing is the most committed form of optimism. You not only talk the talk… you’re actually putting your money on the line as you expect the markets to validate your vision.

Now, I admit, anyone with a bullish investment horizon less than ten years out is probably over-optimistic. Or maybe he hasn’t studied the election platform of the new Administration. But the short-term—the fluent bordeline between hope and greed—is teeming with opportunities to make money in the markets.

The difficulty is that it is hard to figure out just where this short-term opportunity arises. It’s like a game of Whack-a-Mole at the arcade or your friendly neighborhood Chuck’e'Cheese: You never know what hole the mole will poke out from… and you have to strike rapidly before he disappears again.

But once you get the hang of it, the machine starts spitting out winning tickets.

Whack-a-Mole investing may be the least marketable term for our Hot Stock Confidential approach that I can possibly think of. But it comes pretty darn close to what we’re doing… except that we stock the machine with “moles” ourselves… carefully selected stocks at low prices that can reliably generate double-digit returns as the market propels them into the open.

We’ve been whacking those moles quite dextrously this year. After taking 35% gains on Vical (35%) and 25% on Cepheid this week, Laura Cadden used today’s spike upward to knock Cliffs Natural Resources Inc. (NYSE:CLF) out of the ballpark. The stock has risen over 10% today on news that its earnings per share loss for last quarter was $0.07 — half of what analysts were expecting!

“If you got in at our $18.54 entry price on March 26, you’re up over 20%,” she said. “That’s our target so I recommend you cash in your shares of Cliffs Natural Resources Inc. (NYSE:CLF).”

For those keeping track, this is the 22nd double-digit gainer for HSC Members since the beginning of the year! (We also had six losing position, mostly options hedges.)

Here’s our HSC parade of profits for 2009: Vical (35%)… Cepheid (25%)… Cliffs Natural Resources (24%).. Papa John’s (20%)…Brocade Communications (21%) Cerus (20%)… YRC Worldwide (83%)… Corus (21%)… APower Energy (25%)… Graham Corp. (34%)… FuelTek (23%)… Guangshen Railway (18%)… Valence Technology (30%)… Bank of America 65% and 44%) Maket Vectors Russia (30%)… Citi (40%)… Carmax (21%)… Alon USA (24%)… Aastrom Biosciences (24%)… Supervalu (20%)…

Again, these are not just “up”. These are gains taken… all within the first 18 weeks of the year!

Since I’m a tad competitive, I went to check out how our competitors are doing. I noticed to my surprise that some trading services—who charge over a thousand bucks per subscription—actually had stopped publishing their closed positions. A bad sign… you only do that when you’re so far down your marketing would collapse if you realized the losses. Or when your editors are goofing off and aren’t paying attention to their picks.

We couldn’t afford that: “Whack-a-Mole Investing” requires our full attention…

For more on our HSC Investing strategy… and three breakthrough biotechs we included in our initial report: Click here to sign up for our next round of gainers… at recession prices!

*** And of course, we didn’t forget about TFN members who’re not yet HSC members.

Following up on the 40.9% gains on Spartan Motors yesterday, Laura pulled the plug on Sociedad Quimica y Minera di Chile to the tune of 21.6% just today… Polypure with 13.5%… 11% on ATS Medical Inc, and 19% on RTI Biologics.

If you missed her alert posting, check it out here.


Next Article: James River Coal: A good company in an uncertain industry

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Posted by J. Christoph Amberger · Filed Under US Stocks and Markets 

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