I’ve Seen Nothing Like This in Nearly 20 Years of Stock Picking

It seems like it was only yesterday that we wrote about the short sightedness of the market.

Oh, that’s right, it was yesterday.

That was all about the market’s surprise that China’s services sector was growing.

Well, the market got another surprise yesterday evening. But we don’t understand why.

We’ve written about this for at least the past two years. And because of that, we bet this news won’t surprise you either…

What has been our single biggest theme for the past two years?

You won’t need to think about it for long.

We’ve written about it so much that you’re probably bored to tears of it.

But it’s an important subject. We are, of course, talking about low interest rates.

It’s a theme that has been at the centre of almost every one of our investment ideas over the past two years. And that isn’t about to change.

No surprise that interest rates are falling

So, what was the news that amazingly took the market by surprise?

The Financial Times explains:

‘The European Central Bank has cut interest rates to a record low, in a fresh attempt to counter the threat of economic stagnation across the Eurozone.

‘The governing council cut its benchmark main refinancing rate from 0.15 per cent to 0.05 per cent and said it would charge lenders 0.2 per cent, up from 0.1 per cent, for their deposits parked at the central bank.’

If we’ve told you once, we really must have told you more than 100 times — interest rates aren’t rising anywhere anytime soon.

Talk of rising interest rates is hogwash. But that’s all you seem to hear in the mainstream — ‘rates are going up next year,’ ‘get ready for rate increases,’ ‘blah, blah, blah.’

It’s not that the central bankers don’t want to raise interest rates; it’s that they can’t raise interest rates.

Not for the near future anyway…not until governments have shovelled all their debts into 50-year or perpetual bonds.

This is exactly why we’ve made interest rates the key focal point of our investment approach for the past two years.

While others blathered on about the threat of inflation, the perils of money printing, and why interest rates had to rise one day…we took a step back.

We asked what if the bad stuff doesn’t happen yet? What if it doesn’t happen for another five years, 10 years, or longer? Do you really want to miss out on what is the natural consequence of low interest rates (higher stock prices).

A simple strategy for profits

As a speculator and stock picker there was no way we were going to miss out on that action.

That’s why we came up with a plan to make the most of it.

We figured there were two ways to profit from this era of low interest rates. And remember, we’re not talking rocket science here. This is ‘vanilla’ stuff. It’s something anyone could have and still could do.

The thing is, most folks were so busy worrying about rising interest rates and inflation that they completely missed out on the first leg of the boom. The good news for them is that the boom is nowhere near over. It’s just a question of whether they’ll take advantage of it now.

The two areas we focused on were dividend stocks and small-cap growth stocks.

Our dividend strategy was fairly broad — we liked all dividend paying stocks. Although the dividend stocks we liked best were the small-caps that had a chance to give investors both capital growth and income.

As for the small-cap growth stock strategy, that’s self-explanatory. Buy small-cap growth stocks. These stocks tend to rise the most when the market takes off.

This is a strategy that we encouraged investors to follow more than two years ago. But if you think the gains have come and gone, don’t bet on it. Based on what we’ve seen over the past few days, small-cap growth opportunities are still coming thick and fast…

Two triple-digit gainers in mere months

You’ll have read in these pages and elsewhere about our most successful stock pick. We tipped a natural gas company just over two years ago.

The stock did nothing (except fall) for about 18 months. But then, a few months ago, things started to happen. To the extent that, since then, the stock price has gone bonkers.

Those who bought in at the initial recommended price could now be sitting on an 841% gain. Those who bought in later could be sitting on gains of up to 2,862%.

That’s darn good by anyone’s standards. However, it would be a big mistake to think that the stock market’s best returns are behind us. The truth is that there are always opportunities tobuy stocks.

Something is always happening. A company discovers a resource, another increases its sales numbers, and yet another develops a new drug or creates a new breakthrough technology.

The latter was what Tim Dohrmann had hoped for when he tipped a small technology stockthree weeks ago…and then went on holiday. When he returned this week he had a nice surprise — the stock had doubled.

He was even more surprised when he looked at the stock price yesterday. At the close it was up 224% on the recommended buy price.

That’s the kind of return most speculators can only dream about. And yet, we’ve seen two huge triple-digit percentage gainers from Australian Small-Cap Investigator stocks in just the past three months.

But this latest one is a stunner. We first got involved in small-cap stocks in London in 1995. So we’ve been around for a while. But in all that time we don’t recall a case where a stock we’ve recommended has bolted up 224% in three weeks.

Clearly Tim has backed an exciting opportunity. We can only wait with anticipation to find out his next stock tip...due out any week now.

It just goes to show you that there are always opportunities to make money in almost any market. Economies may look dire. Money printing may be in full flow…or grinding to a halt. And interest rates may be rising, falling or staying flat…

But the fact is, despite all that stuff, stocks still move. Some of them move in a big way. And if you’re not taking part in this market you’re missing out on the chance to clock up some extraordinary gains.

Cheers,
Kris.

Read the rest of this article at Money Morning