Chris’ note: Today, we take a look into the mind of one of the best big-picture thinkers in our business, Strategic Investor editor E.B. Tucker.
You’ll want to read today’s piece closely.
It’s an inside look at the secret to E.B.’s success – an edge that’s led him to some of the biggest calls of his career. And one that he’s still applying today.
It’s why one of his picks is up 426% in less than a year… and another is up 164% in less than nine months.
As E.B. says, this isn’t due to luck. It’s because of his approach to investing that he’s spent years developing. Read on below to find out more…
By E.B. Tucker, editor, Strategic Investor
On September 22, 2008, about a half hour before the stock market opened, I made a decision that changed my life.
“Sell LNC at market on the open,” I said, my voice straining through the cell phone.
At the time, LNC was my largest stock holding. LNC is Lincoln National, a major life insurance and annuity company.
In 2006, LNC had acquired a smaller life insurance company in a stock deal. I owned shares of that company, so when LNC bought it at a premium, I held onto the stock. I looked at the company as a long-term holding – a well-run life insurance business can be a great long-term stock investment…
The annuity business LNC focused on, however, worried me. I believed that the company’s big push into annuities was about to be its undoing.
“Are you sure you want to do this?” asked my stockbroker at the time.
“Yes,” I insisted. “Get the trade in now.”
My stockbroker did get my order in that morning. He sold my LNC shares at $54.
Over the next 43 days, shares fell 91% to a low of $5.07.
Not long after that, in November 2008, I bought back all of the shares I sold, and even increased my position by 16%.
I paid $10.93 per share on that repurchase, which means I kept $43.07 per share. I now had cash – dry powder – as the market bounced from its March 2009 low. (The S&P 500 was up more than 30% by May and over 60% by the end of 2009.)
This was more than a trade.
It Was a Profit Windfall…
Over the coming months, I used that windfall to buy up assets on the cheap.
Looking back on it now, I know that the LNC decision put me on a path to financial independence.
Some might chalk it up to pure dumb luck. Sheer chance.
They’d be wrong.
As far back in life as my first memory, I wanted to know how things worked. I had to try everything for myself. I didn’t want to read books about how things worked – I wanted to go meet an expert who would show me in person.
When I got into the stock market at age 20, my curiosity found a home. I spent the following decade buying and selling anything that I felt I had an edge in. But more important, I said “yes” thousands of times to new opportunities.
I took thousands of shots. I went to annual meetings. I listened to earnings calls. I waited in line to shake hands with company executives just to see if they had a firm grip and solid eye contact.
Let me give you an example by going back to the 2002 recession…
In the wake of the tech bust and the 9/11 tragedy, the U.S. economy ground to a halt.
The Federal Reserve stepped in to do something unprecedented, which today seems normal. It lowered interest rates and pumped money into the stalled U.S. economy.
I had to know what this would do to stocks. I knew some sectors would thrive, but I had to figure out which specific ones.
You see, when I want to know the answer to a question like this, I don’t go to a textbook for the answer. I wear out my phone (it was a landline back then) and get on a plane and go. I keep asking the question until I get the pieces of the puzzle needed to make a decision.
In this case, I figured out that lower borrowing rates would boost the construction and development business. I needed to buy steel, wood, and concrete providers in key states likely to see big growth.
I found newly listed Rinker Materials. The Australian company made a play in the U.S. market, buying up concrete providers in Florida and Nevada. Both of these markets see quick growth when money begins to flow.
I needed to know how the concrete business worked, and fast. I drove to Bushnell, Florida and showed up at the Rinker office. I told the manager I was a shareholder and wanted to see how the place worked.
E.B. in the driver’s seat
He told me, “We’re sold out for the rest of the year.” He said business was so good recently they couldn’t take on any more scheduled work until the following year. That was enough for me.
I paid $22.82 for Rinker shares in early 2004 and sold them three years later for $79.25 a share – a 247% profit. Concrete giant Cemex bought the company the same year.
I ended up with a great yield, too… nearly 15% on my buy price. When a business gets good, it gushes cash.
Over time, I had winners and losers. I bought into great stories. Some worked out, others didn’t. But I was never afraid to learn about and invest in something new. In fact, I sought it out.
Then something happened. As time passed, I had more and more winners. I had fewer and fewer losers. I started to develop a knack for getting it right. But more importantly, I knew which factors to look for and which ones to ignore.
I Started to Notice Patterns
I could suddenly see predictable patterns and outcomes – well in advance – because I’d seen them before. And I developed strategic maneuvers to profit from those patterns time and time again.
In early 2009, I realized that the U.S. housing bust would create a generation of renters. I raised money and bought a large portfolio of single-family rental houses at rock-bottom prices… as low as 10 cents on the dollar. Today, I still have a passive income stream that yields around 20% per year.
In 2018, I strategically avoided bitcoin’s collapse… while making a 15,000% profit on a blockchain mining deal.
Again, this isn’t luck. It comes down to experience and noticing similar patterns that no one else is looking for.
I’m constantly talking to people, traveling, attending shareholder meetings, and doing boots-on-the-ground research.
And I’m never afraid to go against the crowd.
That’s what being a contrarian is all about.
It’s how I got my edge.
And today, I’m seeing something big… something that every smart investor needs to have on their radar…
It has to do with the next wave of cellular technology called 5G. It’s going to change our lives as well as become one of the top investing trends of the decade.
And this week, I’ll tell you all you need to know about 5G… so you can take advantage and secure huge gains as this technology takes off in the years to come.
Editor, Strategic Investor
P.S. Gold is another sector that I expect to deliver huge returns. So I also recommend you watch this short video featuring our founder, legendary speculator Doug Casey. In it, Doug explains EXACTLY what’s going on in the gold market right now.
Thanks in part to a shocking new rule – the first of its kind in 45 years – gold is making international headlines. The last time we saw anything like this, gold took off. Today, it’s happening once again… And it’s set off a buying frenzy… a “gold panic” unlike anything we’ve seen since the early 1970s.
Go here for the full story… including the details of five of my explosive gold stocks in Strategic Investor – the best way to play the coming boom.