A decade has passed since I first met our Chief Investment Strategist Keith Fitz-Gerald – and from that first day, the big-payoff investing ideas have just kept rolling in.
So I invited Keith to share his best ideas – and best strategies – for the last six months of 2018. It’s going to be a challenging stretch – with unforeseen “wild cards” roiling already-turbulent waters.
He also offered one of the simplest – but most profound – bits of advice about surviving and thriving in the second half of this year.
In fact, I’ll share it before we get started:
“Right, now, BP, with all the wild cards, with all the uncertainty, with all the worries folks have – I still don’t see this as a time to cut and run,” said Keith.
He went on, “To me, the stock market at this time is about playing to strengths – and not bowing down to weaknesses. It’s about being tactically opportunistic – and not ‘hunkering down.’
I say all this for one very good reason: Threats and opportunities are just different sides of the same coin. It’s all about how you look at things.”
That’s a “winner’s way” of looking at things, as evidenced by the long list of double- and triple-digit winning stocks he’s researched and recommended for his Money Map Report and High Velocity Profits subscribers in the first half of 2018.
Here’s how he plans to build on that success in the months ahead…
Why the Next Six Months Could Be Even Better
William Patalon III: As we approach the midpoint – and get ready to start the year’s second half – what’s foremost on your mind?
Keith Fitz-Gerald: You know BP, the current market – the market conditions – we’re looking at right now can be summed up in two words: wild cards.
By that, what I’m saying is – while careful investment analysis remains as important as ever – the reality is that you also have to be vigilant. In fact, very vigilant. Because in addition to the usual headline risks we know about, there are a whole host of possible wild-card risks that can catch investors off guard.
Let’s just think about it for a minute, BP.
Here at the midpoint, some of the things I’m watching closely – and that I know you’re watching as well – include the Trump summit with North Korea and its aftermath.
The trade spat with China.
The ongoing issues with Russia and Vladimir Putin.
There’s the Fed, interest rates, inflation, slowing corporate earnings growth.
And those are the “obvious” worries.
But it’s the less-than-obvious factors – the “surprise” factors that aren’t really in the headlines – that can cause the most damage.
WPIII: Such as?
KFG: Here’s one I mentioned to you as we prepped for this, BP – one that most “experts” are ignoring.
WPIII: The global debt buildup…
KFG: That’s right. The world’s central bankers just keep practicing their brand of financial alchemy. But if you ask me, I think these guys are dumber than a bag of rocks.
Consider this. The Bank for International Settlements just reported that global debt is now at $170 trillion – that’s “trillion” with a “t.” That’s up $60 trillion since the world financial crisis of 2008. If you look at it another way, as a percentage of global GDP, world debt levels are up 40 percentage points from where they were on the eve of the Lehman Bros. bankruptcy.
WPIII: Ah, yes, global debt levels are out of control – yet again.
KFG [shaking his head]: They never learn.
WPIII: What I like about the way you view this, though, Keith, is the fact that this escalation in risk can cut both ways, correct?
KFG: It can, BP. It certainly can.
On one hand, the ramp-up in headline risk and what we’ll refer to as “wild card” potential ramps up the need for vigilance. And believe me, most investors – professional and retail – will not be vigilant.
WPIII: Which is good for us.
KFG: That’s right. You see, for the vigilant, chaos brings opportunity.
And the bigger the chaotic displacement, the bigger the opportunity for the vigilant and nimble.
WPIII: Which really dovetails into my next question. I wanted to ask you about your outlook for stocks. But the fact is that you look closely at certain things – because that’s where the best opportunities arise.
KFG [nodding]: We’re talking about “wild cards.” One of the biggest is North Korea. Because of that, and because of other emerging hot spots around the globe, you’re seeing massive upticks in defense spending. That creates winners. And that constitutes an opportunity.
WPIII: These wild cards also have a “destabilizing” effect, correct?
KFG: They do, and that creates opportunities, too. Markets are transitioning. When that happens, some companies fall by the wayside. But some restructure, remake themselves – and become “turnaround” candidates. We’re talking about companies that are actively and aggressively remaking themselves – taking steps to improve their operations, which creates opportunities for us.
One trend I believe we’ll see, should there be an extended trade war, will be “onshoring” – with U.S. firms bringing production back to the mainland U.S. proper.
Tariffs though – which are different – would actually induce an exodus from our shores, and that’s something not a lot of people understand. Harley Davidson Inc. [NYSE: HOG], as I noted a few weeks back, is the first of many if cooler heads don’t prevail.
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WPIII: I actually covered Harley back during my newspapering days, years ago – so it’s a company I know well.
Here’s What to Know About the Economy
WPIII: Since we’re talking about the economy, let’s talk about your unique way of viewing it – an approach that lets you ID opportunities to your subscribers – and to folks throughout Money Map Press. You do this by first carefully watching what you refer to as “Unstoppable Trends.”
KFG: Here in this country – and in other markets around the world – you have aging populations. Those folks will need more and more care as they age, creating demand for new and better treatments. We’re also seeing – continuing to see – great advances in technology. So medicine and technology are two areas we’re watching for opportunities – especially in areas where medicine and technology intersect.
WPIII: We’ll be coming back to that when we talk specific stocks. But one point of yours I’d like to underscore here – and it’s a great one – is the fact that it’s important to be discerning about those opportunities, too, isn’t it, Keith?
KFG: That’s well-said, BP.
Take Bitcoin, for example. Look, I know there’s a lot of interest in it and its cryptocurrency brethren. Everyone seems so fascinated by it.
I come at this from a different vantage point. My goal is to help people make money – in fact, lots of money. But I want to do that while exposing them to the lowest amount of risk possible.
WPIII: And by “risk,” you really mean “reckless risk” or unnecessary risk.
KFG: Correct. As I see it – viewed through my “maximum profit/lowest acceptable risk” lens – Bitcoin is a “stage 1” industry, meaning it’s an immature technology/innovation/business. It’s largely unregulated. It’s fraught with the risk of theft. There are many “false opportunities” that, sadly, will cost investors who learn the hard way a lot of money. They always do!
That said, I’m very interested in the underlying technology – the innovation that’s driving it.
WPIII: The blockchain.
KFG: Yes, the blockchain.
As I see it, this underlying technology is very valuable. And it’s definitely time to start investing in it. You’re starting to see an emergence of proponents who are championing the blockchain – people like [Elon] Musk and [Richard] Branson. They will help make markets for this technology, getting it to “stage 3,” where scalability and economic viability emerge.
WPIII: Let’s keep going along the “opportunities” pathway.
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KFG: Roger on that. Well, we’ve touched on “Unstoppable Trends” and military spending. One of my Unstoppable Trends under human progression is a category I refer to as “war, terrorism, and ugliness.”
And that brings us to defense-sector plays. Here, though, I’m not really focused on weapons. What I’m most interested in is the development of new technologies, where there’s overlap with the need for new systems. A lot of the best weapons designers are doing the best research in new technologies – and a lot of these investments have not been recognized yet.
We’re looking at “intelligent weapons” – like Raytheon Corp. [NYSE: RTN] missile systems or the artificial intelligence needed for automated robots. I mean, forget automated driving – the real crush of technology will come from weapons-grade innovation. That’s unfortunate, but true – and creates an opportunity for us.
Other defense-related technologies include the ability to manipulate data for cyberwarfare.
WPIII: We’re really looking at similar trends in medicine, which you mentioned previously. Again, where there’s an intersection – where a “need” is fulfilled by technology and innovation.
KFG: Absolutely, BP. In medical technology, I’m increasingly looking at the nexus of Big Data with medicine. There’s such a big need for less-expensive medicine. Just look at the recent development with the JPMorgan-Berkshire Hathaway-Amazon venture to lower health-care costs.
We’re just coming into an era where we have the computing power to do all of this really cool stuff. As recently as a decade ago, we didn’t.
Think about it – back when many of us were kids, there was the whole comic book deal with Dick Tracy talking into his wristwatch as a radio. Today, that’s real – and so real that many take it for granted.
We live in an era where everyone’s worried about scarcity – but I think the problems of abundance are far more pressing.
Everyone’s talking about self-driving cars and trucks eliminating 1.5 million trucking jobs. But what we’ll really have is an abundance of now-available talent – not a shortage of jobs. That talent will be put to good use.
Something good always comes out of the chaos. There’s always new opportunities.
The speed at which this happens is accelerating. That’s the scary part of the equation.
There Are Some Potential Hazards to Watch For
WPIII: Now, when we were getting ready for this sit-down, you said that – even with all the opportunities – several things keep you awake at night. What are those? And how do they influence the strategy you advocate for folks?
KFG: First and foremost, I’m increasingly worried about corporate earnings. Earnings have been great. But the rate of increase is slowing. The first- and second-quarter profits are “baked in.” But quarters three and four I’m worried about. Execs aren’t going to put the numbers up on the board.
I’m very worried about another pension crisis.
I think we’ll know by Halloween whether a couple of big pension funds are going bankrupt.
That could scare the hell out of the markets – it would be very negative.
Second – and this goes back to our “wild cards” discussion a few questions back – global traders are actually using pre-financial crisis tricks to disguise leverage.
I’m talking stuff right out of the Lehman Bros. playbook.
If regulators lose control…
WPIII: All hell breaks loose.
KFG [nods slowly]: Unfortunately, yes.
This is second-half-of-the-year stuff…
And that’s really the dilemma. Too many people make the mistake of saying “I’ve got to get ahead of this rotten ballgame, so I’m heading for the hills.”
WPIII: But that’s a mistake, isn’t it?
KFG: Yes, it can be…
Investing is a lot like a rodeo bull ride. You need to make it to the buzzer. If you don’t, you get left behind by all the other riders/contestants. And the cost of getting left behind – over time – is much, much greater than the cost of riding out an interim correction.
Here’s a good way to look at this, BP: With every investment you like, assume you’re going to ride it until the market gives you a reason to do otherwise.
WPIII: Love that, Keith. Love that.
Okay, since you brought up investments, let’s talk about some that you like.
Here Are Keith’s Favorite Stocks Right Now
KFG: One I like is the ScottsMiracle-Gro Co. [NYSE: SMG].
I like the management team – starting with maverick CEO Jim Hagedorn. This is a guy who has a history of creating opportunity when it’s desperately needed. He shepherded the merger of Scotts and Miracle-Gro years ago. And just a few years back – looking into the future and understanding the emergence of cannabis-based products and the potential legalization of marijuana – he moved his company into that market.
Right now, the market is punishing the shares because of a near-term earnings slowdown. But this guy is investing in his company for the future, for the long term. And there will be a payoff – his track record proves it. There will be an eventual uptick as more and more folks invest in marijuana-based products.
In the meantime, you can accumulate shares on the cheap. And you’ll earn 2.4% on your money while you wait.
Another play that I like – one I know you’ve had great success with, BP, and that you still like – is Nvidia Corp. [Nasdaq: NVDA].
WPIII: Yeah, we have a “16 bagger” – 1,655%, in fact – on that. And your analysis is right on the money here – thanks to its plays in graphical computing and artificial intelligence… we definitely still like the stock.
KFG: Absolutely. Nvidia is known to most for gaming chips. I care nothing about gaming. I do care about the huge processing capability. These guys are driving cryptography, the AI revolution, automation, robotics – all leading-edge innovation that’s being put to good and profitable use.
It’s not the light bulb that matters… It’s not that kind of original invention. It’s the guys who strung the wires and electrified America. Those are the big-payoff investments.
WPIII: There are two other stocks you like that Private Briefing subscribers have had big successes with – one of which you were kind enough to recommend to them. But they’re worth repeating here – because they’re great stocks, because they speak to the kinds of opportunities you’ve been talking about here, and because, as I said, one speaks to your record of delivering profits.
KFG: The first is Becton, Dickinson and Co. [NYSE: BDX], a medical technology powerhouse that develops diagnostic and analytic systems (such as blood tests) and cutting-edge bioscience solutions (such as kits for cell analysis).
WPIII: I want to remind folks that this is a company that’s risen nearly 114% since you first recommended it. A dividend-paying, blue-chip stock – that doubled. Heck, it’s up something like 3% since you re-recommended it in late June. We’re including Becton in our “shopping list” of stocks to buy on market pullbacks. With every medical threat to come – and there will be plenty – BD will be one of the first stocks the Wall Street pros highlight. And you highlighted it first – once again giving Money Map readers a big head start over the rest of the market.
KFG: Thanks, BP.
— William Patalon III
Source: Money Morning