Hedge Fund Hypnosis: How To Trick Your Brain Into Better Investing

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I recently read an interesting psychology experiment that could make you a lot of money:

Two versions of a New York Times book review were shown to different focus groups.

One group was shown a positive review of the book, while the other was shown a negative review. The only visible difference between the two book reviews was that the positive adjectives in one review were substituted for more critical words in the negative review.

For example: inspired was changed to uninspired, capable was changed to incapable, great intensity to little intensity, and tremendous impact to negligible impact.

Every other word in the reviews stayed the same.

A survey was then taken to determine which review sounded smarter — positive or negative. And the results were shocking…

You would think that since everything was the same, except the tone of the words, that they would both sound equally smart.

After all, the substituted words were basically on par with the originals. It’s not like inspired was replaced with prosaic, or stolid — which sound much smarter to me.

Inspired was merely changed to uninspired — no thesaurus needed here.

But in fact, the negative reviewer was rated 14% more intelligent, while having 16% greater literary expertise than the complimentary reviewer.

All for criticizing a book review rather than complementing it. So what gives?

As it turns out, researchers found that the person who gave a negative review was deemed more experienced and trustworthy, while the positive reviewer was seen as more naive.

Think of an example in your personal life. If someone voiced an opinion that was blatantly negative, I’d think to myself “he’s got to know what he’s talking about to have such a strong opinion.” Wouldn’t you?

“People think an amateur can appreciate art, but it takes a professor to critique it,” might be a good phrase to sum up this experiment.

The same goes for the bears on Wall Street.

I’m talking about the “talking heads” on TV who are constantly negative on the stock market. The ones who make blanket statements as if there are absolutely no good buying-opportunities in the world.

“Get out while you still can! The crash is coming!” they say.

These statements are not more intelligent. If anything, they’re lazy.

In the stock market, there will always be buying opportunities for one reason or another. Even in Great Recession, stocks like Dollar Tree actually thrived.

And today’s retail sector is no different. Although Amazon has decimated some department stores, this week’s earnings have proved that some of these stores are here to stay.

But that hasn’t stopped the bears from hollering…

The Coming Retail Apocalypse

-The Morning Call

Department Stores: A Return To Recession-Like Days?

-Barron’s

The Dying U.S. Retail Sector Actually Added Jobs In April, But Don’t Get Too Excited

-The Street

Sure, there are many companies that deserve the negative publicity. But there are also retailers who are currently thriving in this new e-commerce-driven environment, just like Dollar Tree did back in 2008.

But I guess I can’t blame them. Because after all, those bears do come across as 14% more intelligent than bulls, and 16% more experienced…

Open Up Your Eyes, Bears. There Are Profits To Be Made!

I’m here to say look a little closer. Don’t take the easy way out by labeling this sector “uninvestable.”

The bears are wrong. And have been wrong since the day they opened their mouth. And because of it have missed out on massive gains.

There are plenty of great retail opportunities, if you know where to look…

Wal-Mart (NYSE:WMT)- The superstore giant is taking on Amazon. In late 2016, Wal-Mart acquired Jet.com, an Amazon competitor, in a $3.3 billion deal. Since the beginning of the year, products available at walmart.com have quadrupled, while online sales have increased 29 percent in the U.S. and 15.5 percent globally. In addition, orders over $35 ship in 2 days for free — no subscription needed. Your move Amazon.

Look for the stock price to be active today as the earnings report is digested.

Home Depot (NYSE:HD)- This retailer has been one hottest stocks in any sector over the last 5 years — up 194%, during a time when Amazon has done most of its damage. “Home Depot beats has avoided Amazon’s wrath by ignoring online shopping carts and focusing on stuff you load into the back of a pickup. It’s a solid strategy for continued success in this tough retail environment,” says analyst Greg Guenthner.

Shares jumped Tuesday as earnings and revenue topped analyst estimates.

Target (NYSE:TGT)- The stock fell in early 2017 after concerns grew about its online business cannibalizing the brick and mortar. However, on Wednesday, a stellar earnings report spiked the stock 3%. During the call, Target reaffirmed its annual profit guidance but said there was an increased probability of finishing the year above the midpoint. Throw in a low P/E ratio and a 4% dividend, and TGT could be a great fit for your portfolio.

Here at The Daily Edge, we leave no stone unturned. I’ll continue to scour the markets for opportunities, and will be sure to keep you informed.

Here’s to growing and protecting your wealth!

Zach Scheidt
Editor, The Daily Edge
[email protected]

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