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Your portfolio is in danger if you don’t understand the big changes that have happened in the market due to recent economic and geopolitical transformations. They’re causing a historic market shakeout that will make some investors rich. Investors who see it coming could profit 300% or more in 2–3 years. Others will go crashing down with the entire “second tier” of stocks. Companies without solid earnings or a valid technological edge, as well as those that are scandal-plagued with greed, are falling like dominoes. You’ve seen them drift with no growth, or crash entirely. And their investors have taken massive losses. Take the recent fall of Countrywide Financial. Here was a company that was flying high during the housing boom, but did not have the solid underpinnings to withstand the sudden hit from the subprime fallout. Within a few months its stock went from $45.26 to $4.43. It looks like it will take first-tier Bank of America’s buyout of Countrywide to help investors salvage something. Unfortunately, collapses like Countrywide’s can have a major effect on the market During the market’s nose dive of a few years ago, many solid companies were unsteadied. But as I told my readers at the time, this was only temporary. And top-tier stocks had a major comeback. So, if you can recognize top-tier stocks and know when to buy, they offer a once-in-a-lifetime opportunity for you to increase your profits 300% or more in just 2–3 years from now. You can prepare yourself for this historic two-tier split and make sure you’re investing only in first-tier stocks by reading Volume 6 of the Investor’s Guide, The New 2-Tier Market: Prepare Yourself for Profits of 300% or More. (Click here for a complete description.) This report will tell you why it’s happening, plus how to recognize first-tier stocks and how to get huge profits from them. The second secret is a crucial issue to pay immediate attention to…
Knowing how to invest according to this rule could mean an increase of 50% on top of your expected gains from investing in the top two-tier market stocks! That means that if you invest exactly when I tell you to, and you sell again 2 years later exactly when I tell you to, you can increase your gains by up to 50%! And that’s historically predictable. Since 1832, this pattern has produced gains of 557%, compared to an 81% gain for the same time period for stocks bought exactly opposite to the pattern’s timing. And right now…we’re smack in the middle of the prime investment portion of the cycle and that could mean great things for your portfolio. You’ll want to know all about the 4-Year Rule that’s upon us right now, so be sure you read Volume 7 of the Investor’s guide, The 4-Year Cycle: How to Increase Your Gains by 50%. Now let’s look at… The whole is greater than
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SECRET #3 |
A portfolio is more than just a collection of individual investments. It’s a combination of investments that work together over time to achieve your financial goals. The key, of course, is finding the right combination.
Stocks can be classified according to the many categories supplied by the stock exchanges, fund companies and bond rating companies. Categories like small caps, cyclicals, consumer nondurables and so on, ad infinitum.
The problem with labels like these is that they’re designed for ease of classification, or to sell you something.
I use a reality-based approach, which aims to make money for you. I classify stocks into 1 of 5 easy-to-identify economic sectors:
As I explain more fully in Volume 2 of your FREE Investor’s Guide, How to Build an “Unsinkable” Portfolio (click here for a complete description), each sector has its own distinct characteristics. Finance and utilities are the most stable and offer some of the highest yields. The manufacturing and resources sectors are the most uncertain. Consumer stocks are somewhere in the middle.
Generally speaking, you should have holdings in all 5 economic sectors, with the proportion in each depending on how much risk you’re willing to accept and how much current income you need. But above all, you need to stick to high-quality stocks while avoiding stock promotions.
I help you do this in each issue of The Successful Investor. But let me start here by giving you an important heads-up on two issues that will dramatically affect all your investments.
First, to ensure steady gains, my starting point is to immerse myself in financial statements.
Like many investors, I start my search for winning stocks by looking at a company’s income statement and balance sheet. But unlike the typical investor, I don’t accept the figures that appear there, especially those that purport to show the company’s earnings, and here’s why…
SECRET #4
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A company’s earnings are inherently unreliable for a couple of reasons. First, they’re usually based on estimates of unit sales, costs and a variety of other factors, all of which are subject to constant revision. Second, earnings are adjusted (cynics would say manipulated) in accordance with a variety of accounting rules that frequently do more to distort than to clarify.
For example…
One way to overcome the distortions caused by deductions for goodwill, purchased R&D (research and development), depletion allowances, depreciation, etc., is to disregard them. You do that by adding these items back to earnings.
This results in “cash flow per share,” which gives you an idea of how much cash a company has available for investment or dividends.
Cash flow can reveal hidden value (which is what my ValuVesting System is all about), but it can also hide problems…
As you saw with Gennum and Sleeman Breweries, cash flow is often a better indicator of a company’s fortunes than earnings. But that’s not true for all companies in every sector. In some instances, cash flow can be terribly misleading.
This is particularly true for income trusts where essentially the trust hands out most of its cash flow to investors. It can be great for investors in good times. However, that often leaves the company with very little in reserve to carry through a period of slow sales and that quickly spells disaster for the investors.
For instance, Spinrite Income Fund was launched in February 2005, amid a lot of broker attention due to a rise in popularity of knitting bringing a demand for fancier yarn.
Units reached a high of $14.25 in August of 2005, but when sales began to lag, the units quickly fell to just under $6. And the unit holders ultimately paid a terrible price.
With the lack of sales and rising inventories at retailers, Spinrite announced that it would be cutting distributions by more than half, causing the unit price to collapse all the way to $2.50 and the investors to lose twice.
While I do recommend income trusts from time-to-time, I am quick to point out that this kind of business strategy can come undone if growth slows, even a little bit.
The bottom line is that the calculations you’ll need to properly determine cash flow vary from industry to industry. Using the same formula for all companies in all economic sectors will likely fill your portfolio with losers.
You’ll find the tools you need to properly calculate a company’s cash flow, including specific adjustments needed for particular industries, in your 7-volume set of the Investor’s Guide—Triple Your Wealth & Slash Your Risk: How to Generate Outsized Profits in Uncertain Markets. (These calculating tools are in Volume 4, Finding the Real Bottom Line.) Read on to learn how you can receive a copy, absolutely FREE.
Once you have a company’s “earnings” (whether you take the easy way and use reported earnings or calculate a more accurate cash flow figure), you can combine that number with the stock’s price to get the P/E (Price/Earnings) ratio.
This is one of the most widely used investing tools on Earth. Unfortunately, it doesn’t work the way most people think it does…
The P/E ratio appears in the stock tables of just about every North American newspaper and is used by a great majority of investors. But although the P/E ratio seems easy to use, it’s much more complex than most investors realize…
You’ll find answers to these questions (and several more that may not have occurred to you) in Volume 5 of the Investor’s Guide, The Uses and Abuses of P/E Ratios. (Click here for a complete description.) I’ll tell you how you can receive a FREE copy of the 7-volume Guide in a moment. But first, I’d like to share with you one of the most important points that Volume 5 of the Investor’s Guide makes…
SECRET #5
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One of the biggest mistakes investors make is buying a stock with a low P/E ratio, thinking that this ensures that they’re getting a “bargain.” Sometimes that’s true, but sometimes a low P/E stock is a sign of danger. Here’s why…
When a profitable company is headed for a long period of losses, its share price usually drops far more quickly than its earnings. That’s because well-informed investors and insiders sell before the bad news becomes widely known.
So, before the “E” shrinks (i.e., before earnings disappear), the stock passes through a low P/E period. Buying at this point is like getting on a train just before it derails.
Analyzing a company’s income statement is the key to determining the quality of its earnings. Analyzing its balance sheet is the key to finding stocks about to soar…
One of my most consistently successful techniques for finding winning stocks involves going on a treasure hunt of sorts…
SECRET #6
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Just as reported earnings don’t really tell us how profitable a company is, its balance sheet doesn’t always reveal the true value of its assets. Some of a corporation’s most valuable assets—its so-called intellectual property—are carried on the books at nominal amounts.
This would include patents, customer lists, brand names, etc. The classic example, of course, is the secret formula for Coca-Cola, which is reputedly carried on the company’s books at one dollar.
In addition, many companies own assets that never appear on their balance sheets at all. These include such things as a crucial market position, or a long-standing customer base to which a company can sell new products and services.
Readers of The Successful Investor have made incredible profits over the years from companies that have hidden assets. For example…
As you can see, hidden value takes many forms. So it should come as no surprise that you can’t uncover it using just one tool or technique.
In your FREE 7-volume Investor’s Guide, Triple Your Wealth & Slash Your Risk: How to Generate Outsized Profits in Uncertain Markets (click here for a complete description), you’ll find multiple ways to assess the real value of a company’s assets.
In addition, you’ll discover the best ways to find the answers to the 9 most important questions you need to ask before you buy any stock. |
If you’re tempted to forgo the research needed to find winning stocks and depend instead on advice from your broker, you better be aware of the brokerage industry’s dirtiest little secret…
SECRET #7
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The price of these stocks is artificially inflated by all the hot air coming from the firms’ analysts (who, these days, seem to spend more time on television than in their offices). As the price goes up, the brokers encourage more and more customers to buy so they won’t “miss out” on the gains.
This creates a vicious cycle as new buyers drive up the price even more. But once the firms’ salespeople have sold these stocks to as many customers as they can, the buying frenzy stops…and prices collapse. And if the analysts’ projections prove to be off the mark, the selling (and resulting price decline) is especially ferocious. That’s exactly what happened to:
And artificially inflated stocks are just one reason to be wary of brokers. With today’s low interest rates some brokers are urging clients to buy structured investments…
I like to call them “Frankenstein” investment products. They are created when a brokerage firm’s underwriting department takes genuinely desirable securities and slices and dices them into a new structured investment.
While these investments often offer principal protection or a guaranteed interest rate, they also come with such big fees that while you may make a few dollars, the big winners will be your broker and his bosses.
“But Pat,” you may be saying, “I don’t need to worry because I do business with a very conservative broker.” In that case, you need to hear the heartbreaking story of what a “conservative” broker did to one investor’s life savings. Although this broker only put his client into “good-quality companies,” the results were a disaster.
The whole sad story appears in a new Special Report, How a “Conservative” Broker Can Send You to the Poorhouse. It’s yours, along with the 7-volume set of my new Investor’s Guide—Triple Your Wealth & Slash Your Risk: How to Generate Outsized Profits in Volatile Markets, without cost when you agree to a no-risk examination of…
The Successful Investor advisory service is much more than just a monthly advisory. It’s a comprehensive approach to safely making money in today’s tumultuous markets. The service consists of the following:
I work hard at making The Successful Investor an “easy read.” Perhaps that’s why the Toronto Star described my writing style as “a cross between the gentle instruction in fundamental analysis of a Benjamin Graham and the folksy but trenchant wit of a Mark Twain.”
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And now…for a really pleasant surprise…
When people learn how reasonable our subscription rates are, they think I’ve lost my mind. Well, let me assure you that I haven’t.
I deliberately keep my investment advisory service affordable because I know there are millions of investors who will gladly pay a reasonable price for a high-quality investment advisory.
On the other hand, there are only a handful of professional traders willing to shell out several hundred (or in some cases, several thousand) dollars.
Click here or call our Toll-Free order desk at 1-800-579-GAIN (4246), 24 hours a day, 7 days a week and you can try The Successful Investor for a full year (12 monthly issues) at the special introductory rate of just $72, a $67 savings off the regular subscription price of $139.
In addition, you’ll…
That’s a total value of $209.65 for the 6 Special Reports, yours FREE when you try The Successful Investor for 1 year.
If you prefer, you can subscribe for 6 months for just $39, a $40.50 savings off the regular subscription price of $79.50.
This short-term trial subscription entitles you to receive FREE monthly Portfolio Updates during that 6-month period and receive Volumes 1 and 2 of my Investor’s Guide, plus a FREE copy of my new Special Report, How a “Conservative” Broker Can Send You to the Poorhouse. It’s an additional value of $34.20, yours FREE.
Regardless of the subscription length you select, you risk absolutely nothing, thanks to my Personal, Money-Back, TRIPLE Guarantee.
Send for your no-risk trial subscription and start protecting your hard-earned savings right away.
Yours for safe investing,P.S. The model portfolio I told you about—the one that generated a stunning 339.3% return during one of the most uncertain markets in history—is my Conservative Growth Portfolio. (By the way, 30 of the 38 stocks in this portfolio had returns of 102.9% or more since I recommended them.)
P.P.S. As I mentioned, companies that are positioned to take advantage of secular trends often enjoy explosive increases in their share price. The oil boom in the Maritime Provinces is a perfect example. I’ll tell you more about this as yet underappreciated trend, and name the companies that are poised to cash in big because of it, in my new Special Report, How to Profit from Black Gold in the Maritimes (a $29.95 value).
I’ll be happy to send you a FREE copy when you begin
your no-risk subscription, right now, to The Successful Investor. Click here to subscribe now or call our Toll-Free order desk at
1-800-579-GAIN (4246), 24 hours a day, 7 days a week. This is in addition to the FREE 7-volume Investor’s Guide and FREE Special Reports just described.
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Any questions?
Copyright © 2008 The Successful Investor. All rights reserved.Call Toll-Free: 1-800-579-GAIN (4246) 24 hours a day, 7 days a week Fax: 1-416-756-0397 Email: service@thesuccessfulinvestor.com or write me at: The Successful Investor 6021 Yonge Street, Suite 977 Toronto, ON M2M 3W2 The Successful Investor Inc. is affiliated by common ownership with Successful Investor Wealth Management Inc., an Investment Counselor/Portfolio Manager. Past returns do not guarantee future results. |
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Patrick McKeough—One of Canada’s top safe-money advisors—whose conservative growth portfolio is up
339.3% since 1995. As early as 1980 he was recognized as #1 in the world of published investment advice by the Washington, DC–based Newsletter Publishers Association and he was the first multiyear winner of The Globe and Mail’s Stock Picking Contest. He is editor and publisher of The Successful Investor, Stock Pickers Digest, Wall Street Stock Forecaster and Canadian Wealth Advisor; inventor of the Quick Profit/Value System and the ValuVesting System™; and a best-selling Canadian author who wrote the book on the 1990’s stock market boom, Riding the Bull. |
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My Personal, Money-Back, TRIPLE Guarantee |
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My Personal, Money-Back, TRIPLE Guarantee |
| Click here now for a FREE 1-month trial subscription to The Successful Investor, plus a FREE Investor’s Guide and 6 FREE Special Reports. Or
Click here for a 1-year or |