|
Published: September 28, 2009
I hate to say it, but this year has been "easy."
The "hard trades" have fallen out of the sky and into my lap.
When the bond market was at risk of imploding, True Wealth
readers made the hard trade and got into risky bonds safely,
trading a "junk bond" fund for a +52% profit. We bought stocks
in March, when the market looked awful, and are up +40%. And
this summer, when real estate was the "hard trade," we bought
commercial real estate. We're up +37% and there's more to come.
While everyone was panicking and looking out for the Next Great
Depression, we've probably had the best year in the history of
True Wealth. But now that everything is up, what is the
"hard trade"? Sometimes it's difficult to pinpoint...
Look, the stock market rose +50% in six months from its bottom
in March. That was the best six-month rally in our lifetimes.
What's the easy trade for everyone now? To sell! People LOVE to
lock in small profits. But that's not how you make BIG money in
your investments.
The hard trade right now is
this: DON'T SELL. The harder trade
is to add new positions. In
True Wealth, we're taking the
harder trade... We're adding a
speculation: biotech. If you catch
just one biotech bull market, you
may never have to work again...
In the early 1990s, biotech stocks
roared +1,347% (according to the
Datastream Biotech Index). Every
$100,000 invested turned into nearly
$1.5 million. And since 1983,
biotech stocks have launched into
four separate triple-digit bull
markets. The average bull market in
biotech lasts about two and a half
years... and the average gain is a
stunning +565%.
So you can see why we want to catch
the next bull market in biotech.
Even better for us, we're far
overdue for a real biotech stock
boom. The Nasdaq Biotech Index is
still nearly -50% below its highs a
decade ago. The great thing is,
while stock prices have gone down,
the innovation has continued... and
so have sales.
Biotech stock prices have stayed
flat, but sales have been going up.
So by definition, the price-to-sales
ratio of biotech stocks has gone way
down. We're seeing values today that
we haven't seen since, well, the
last 500%+ boom in biotech, from
1998 to 2000.
|
 |
So as measured by price to sales, biotech stocks are a
bargain... they're as cheap as they've been in over a decade.
Also, in what boggles my mind, biotech stocks are completely
ignored right now. I find this crazy. It's the exact opposite of
a decade ago. Ten years ago, NOBODY wanted to hear about gold. I
know that for a fact. And EVERYONE wanted the next great
technology back then...
Now, everyone wants gold... but who cares about biotech?
Meanwhile, the major biotech index (the S&P Biotech Index)
quietly broke above its February 2009 high to hit a new high for
the year. Biotech is in a definite uptrend.
The three criteria we look for in an investment are: 1) cheap,
2) hated or ignored, and 3) an uptrend. Biotech offers the rare
combination of all three of those factors right now.
It's time to make the hard trade and buy. -- Steve Sjuggerud
Editor
True
Wealth |
