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One of My Most Unusual Buy Recommendations Ever

Monday, June 15, 2015 5:25

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The average gain in my True Wealth Systems letter on current recommendations we’ve held for more than six months is 136%.

136% is an incredible return… It’s only six recommendations. The average holding period of these has been two years.

The oldest three recommendations are each up triple digits. The next two (both less than a year old) are up 44% and 78%, respectively.

But the newest – and most unusual – recommendation from this list is down a bit. And that means it’s still a great opportunity today…

The recommendation I’m talking about is for government-issued “TARP” warrants on Bank of America stock.

In short, it’s a unique way for you to make money if shares of Bank of America go up.

Let me explain…

Shares of financial companies have been going up lately. But investors aren’t interested. I explained this in a recent True Wealth Market Intelligence Sentiment Monitor update…

Years after the financial crisis, investors still want nothing to do with financial stocks. Today’s [sentiment] reading of 20% is one of the most negative in history. Sentiment this bad could point out an opportunity. When investors flee a sector en masse, it tends to point toward a bottom, not a top. When investors are all doing the same thing, they’re usually wrong.

Interestingly, financial stocks have begun a silent uptrend in recent months. They’ve underperformed the overall stock market since the beginning of 2015… but they’ve beaten U.S. stocks since bottoming at the end of January. Negative sentiment, combined with an uptrend, makes financial stocks a sector that interests us right now.

Bank of America, in particular, is cheap… It’s trading at a discount to book value and at a forward price-to-earnings (P/E) ratio of 11. It’s hated. And it’s in a solid uptrend. This is exactly what I want to see in a stock.

Now, you can set yourself up to profit from Bank of America shares heading higher by buying the stock… or you can set yourself up to profit even more by buying the TARP warrants.

TARP warrants are one of the most profitable recommendations I have made in my career.

If you’re not familiar with TARP warrants, let me briefly give you the backstory…

TARP stands for the Troubled Asset Relief Program. The U.S. Congress passed TARP to basically save the U.S. financial system during the 2008 crisis.

The U.S. Treasury used TARP money to inject cash into hundreds of banks around the country. The Treasury didn’t give out cash for free… The government made an investment in each and every bank that received TARP money. And it received preferred stock that paid a high rate of interest.

As a kicker, the government also received stock “warrants” that were potentially worth billions of dollars. This was a way to sweeten the deal for the Treasury.

But the government doesn’t really want to be invested in private businesses like banks.

So in a move that most investors were never aware took place – the government sold off the bank “warrants” that it owned to the public.

Most people don’t know it. But today, you can buy these TARP warrants just like any stock – through your brokerage account. And importantly, the right warrants offer incredible upside.

For example, in True Wealth Systems, we’ve used TARP warrants to lock in several double-digit and triple-digit winners over the past few years.

Now, we have another opportunity for big gains through the Bank of America TARP warrants.

The Bank of America TARP warrants that I like (NYSE: BAC-WTA) have a strike price of $13.30. That means you have the right to buy Bank of America shares for $13.30 anytime between now and expiration – January 16, 2019.

Bank of America stock is around $17.50 as I write, so it’s “in the money” – trading at $4.20 above the “strike” price of the warrants.

The current price of these warrants, as I write, is $6.19. So the “option premium” is only about $2.

Now, here’s why these warrants can make you more money than just buying the stock…

You see, your initial investment is only $6.19 – the warrant cost. That makes your initial cost less than half of one Bank of America share. And that means that if Bank of America does well, your upside is even greater with these warrants than if you had just bought the stock.

For example, if Bank of America shares are at $26 when the TARP warrants expire three and a half years from now, then you will double your money on the TARP warrants if you buy today. If you bought the stock instead of the TARP warrants, then your return would be less than 50% – a big difference.

I recommend checking out the Bank of America “A” TARP warrants today. Keep in mind, the symbol for these warrants is different among different brokerage firms. On Yahoo Finance, the symbol is BAC-WTA.

TARP warrants are one of the most unusual – and profitable – investment ideas I’ve uncovered in my two decades in this business. Don’t miss the opportunity.

Good investing,

Steve

P.S. TARP warrants are just one of the big opportunities I’ve recently told my True Wealth Systems readers about. With the help of my sophisticated computers, I’ve finally cracked the “Gold Code”…

In my recent report, I show how you can double your money this year… with a discovery that has pinpointed every triple-digit gold move over the past 44 years. To learn all the details about cracking the Gold Code and the best way to profit, click here.

Source: http://www.stansberryresearch.com/dailywealth/3029/one-of-my-most-unusual-buy-recommendations-ever

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