Buy low, sell high.
We’ve all heard it before. But few investors actually invest this way.
Instead, they buy expensive stocks. That’s because stocks often appear safe when they’re up big.
But buying high usually generates poor returns. Sometimes it results in heavy losses.
• You would do much better buying cheap stocks…
Of course, that’s easier said than done.
After all, stocks are usually cheap for a reason.
For example, a country’s stock market might be cheap because it’s in the middle of a recession or financial crisis. Those are good reasons to avoid stocks.
At the same time, you can make incredible gains buying stocks that other investors won’t touch. That’s how Casey Research founder Doug Casey made millions of dollars. It’s also how legendary investors Baron Rothschild, Sir John Templeton, and Warren Buffett built their fortunes.
The good news is that you don’t have to be a world-class investor to make money this way. You just have to find situations where the potential reward far outweighs the risk. In other words, you want to buy stocks when they’re irrationally cheap.
If you do this successfully, the rewards can be incredible.
Just look at what happened to Russian stocks last year…
• Russian stocks were the world’s most hated market at the beginning of 2016…
They traded at a cyclically adjusted price-to-earnings (CAPE) ratio of 4.6.
The CAPE ratio is the cousin of the popular price-to-earnings (P/E) ratio. The only difference is that it uses 10 years of earnings data instead of one. Like the P/E ratio, a low CAPE ratio means stocks are cheap.
According to StarCapital, Russia had the world’s cheapest stock market at the start of 2016.
• Russian stocks were dirt-cheap for a reason…
You see, Russia’s economy revolves around commodities. And commodity prices were trading at the lowest level in years at the beginning of 2016.
The Bloomberg Commodity Index (BCOM), which tracks 22 different commodity futures, was down 55% from prior highs. Oil, Russia’s most important commodity, was down 65%.
Low commodity prices crushed Russia’s economy and stock market.
But commodity prices started climbing early last year. The BCOM is now up 21% since last January. The price of oil has nearly doubled since last February.
• Rising commodity prices sparked a huge rally in Russian stocks…
They finished last year up 37%. That made Russia the world’s top-performing stock market.
Russian stocks also beat U.S. stocks more than 3-to-1 last year.
But higher commodity prices aren’t the only reason Russian stocks surged last year.
• The Obama era is about to end…
As you’ve probably noticed, relations between the U.S. and Russia have been in a steady decline since Barack Obama took office in 2009. Tensions between the two superpowers are now at the highest level since the Cold War.
But that could soon change.
• Obama will hand Donald Trump the keys to the White House on Friday…
And that has a lot of investors excited about Russian stocks.
Unlike Obama, Trump doesn’t want to agitate Russia. He wants to work with them.
He recently told The Times that he wants to make “good deals with Russia.” He’s also hinted at lifting economic sanctions that Obama put in place three years ago.
• Russian stocks have taken off since Trump won the election…
You can see in the chart below that the VanEck Vectors Russia ETF (RSX)—a U.S. fund that tracks Russian stocks—has surged 17% since Election Day. It’s now up 73% over the past year.
Russian stocks are now in a clear uptrend. In other words, momentum is on their side.
• Plus, Russian stocks are still dirt-cheap…
They entered 2017 with a CAPE ratio of 5.9.
That makes Russian stocks the cheapest in the world for the second straight year in a row. They’re also 31% cheaper than Czech stocks, which are the second cheapest in the world according to StarCapital.
But they probably won’t stay this cheap for long.
Remember, Trump will take office on Friday. If he does what he said he’s going to do, sentiment toward Russian stocks could go from bad to not so bad in a hurry. Billions of dollars could flow into Russia’s stock market over the next few months, or even weeks.
• Russian stocks have everything we look for in a speculation…
They’re cheap. They’re on the rise. And they’re hated, at least for now.
Still, many investors won't go near Russian stocks. They still view Russia as our Cold War enemy. They see Vladimir Putin, Russia’s president, as the reincarnation of Joseph Stalin.
If you think this way, that’s fine. We didn’t write today’s issue to change your political opinion. We wrote it to tell you about an incredible moneymaking opportunity.
• E.B. Tucker, editor of The Casey Report, just recommended a world-class Russian company…
The company is one of the world’s most dominant businesses. It has a monopoly on one of Russia’s most important exports.
It also pays a 4.8% dividend. That’s more than double the S&P 500’s 2.0% dividend yield.
And, like other Russian stocks, you can buy it for almost next to nothing right now. The company’s shares trade at just five times earnings. It’s 81% cheaper than the average stock in the S&P 500.
• World-class companies don’t usually stay this cheap for long…
That’s why it’s important that you take advantage of this opportunity while you still can.
You can learn all about E.B.’s top Russian stock by signing up for The Casey Report today. But we encourage you to first watch this brand-new presentation.
It talks about another company poised to deliver monster gains over the next four years. According to E.B., this stock could be one of the biggest winners of the Trump administration.
He’s not the only one who thinks this, either. Last fall, Doug Casey told a room full of investors that this was his top moneymaking opportunity. To see why, watch this FREE video.
Chart of the Day
The “Trump Rally” is fading.
After the election, the S&P 500 jumped 7% to a new all-time high. The Dow Jones Industrial Average and Nasdaq also hit record highs in recent weeks.
The rally in U.S. stocks was so big and unexpected, the media started calling it the “Trump Rally.” But that rally has lost steam recently. The S&P 500 and Dow have both gone almost a month without setting new highs.
E.B. thinks U.S. stocks stopped rallying because they’re still in a “profit recession.” The chart below shows this very clearly. As you can see, the S&P 500 broke out to record highs even though corporate earnings stopped growing in 2014.
This is extremely unusual. Stock prices are supposed to move with earnings, not go in the opposite direction.
Unless corporate profits skyrocket, U.S. stocks will stay expensive. That’s one reason we’re skeptical about the U.S. stock market. But that doesn’t mean you should avoid all stocks. You just have to be careful about what stocks you own.
We encourage you to stick with cheap stocks and companies that will directly benefit from Trump’s policies.
These are the kinds of investments that E.B.’s focusing on in The Casey Report. So far, it’s been working. In fact, one of E.B.’s picks has already surged 204% since Election Day.
Normally, we wouldn’t tell you to buy a stock after it’s tripled in value. But this stock is still 24% below E.B.’s “Buy Under” price. In other words, it has plenty more upside.
You can learn more about this company by watching this presentation. Just make sure to watch it soon. As E.B. explains, this company could become many times more valuable on Trump’s first day in the White House…which, again, is just four days from now.
Delray Beach, Florida
January 16, 2017
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