“When was the last time a sector or an industry went down six years in a row?” I asked my good friend Meb Faber at lunch in New York last November.[ad#Google Adsense 336×280-IA]Meb is the guy to ask… He is one of the smartest, most respected minds on Wall Street.
And he has crunched the numbers going back decades.
“Six down years? It NEVER happens,” he said. “But coal stocks ended 2015 down five years in a row.”
Based on this fact alone – that coal stocks went down five years in a row – Meb told his subscribers in late 2015 to buy coal stocks. He got it exactly right… Coal stocks finished 2016 up 98%.
Today, another opportunity is on Meb’s radar. It finished 2016 down – for the sixth straight year. And as a result, we agree that it’s a great speculation with triple-digit upside.
Let me explain…
Meb has made a career out of tracking down large investment returns.
He scours the globe, looking at investments differently than most analysts do. So when he started telling me about his research on buying after multiple down years, I was interested.
Here’s another example: Meb said that gold stocks were down five years in a row ending in 2015. And like coal, gold stocks absolutely soared in the first half of 2016.
Keep in mind, Meb said to buy coal stocks and gold stocks at the end of 2015 NOT because of some fundamental change, or because of some great story unfolding. Meb didn’t create the script for coal – or gold. He chose them simply because he knew what happens after five down years…
Meb has run the numbers going back to the 1920s on how sectors perform the year after multi-year declines. Here’s what he found:
As the table shows, the average gain in the year after a consecutive number of down years is shocking.
The rarity of multiple down years is shocking, too…
For example, four consecutive down years in a sector has only occurred 1% of the time since the 1920s. And five down years has almost never occurred.
In other words, opportunities like this don’t come along often.
That’s why Meb was nearly giddy at lunch about his new idea for 2017…
Steve, uranium stocks have fallen every year since 2011. They’ve crashed around 90%.
If they close down for 2016, that will be six straight down years. You have to go back to the Depression to find an industry down for six straight years.
In DailyWealth last week, I explained a bit of the fundamental story for uranium… It’s cheap and hated. And now, it’s finally starting an uptrend.
But the fact that it fell for six straight years is one more reason I’m excited about it.
You see, over the long run, reversion to the mean is an incredibly powerful force in financial history. When coal stocks reverted away from the mean for five years, they snapped back violently in 2016. And the same thing happened with gold stocks.
Today, the opportunity in uranium is nearly identical to the ones in coal and gold last year.
Uranium stocks have fallen for six straight years. And now, they’ve silently entered an uptrend.
I expect uranium stocks will be a big winner in 2017. And now is the time to get on board…
Source: Daily Wealth