Investors dream of buying on the exact day an investment bottoms… or darn close to it. Then, they dream of selling after it soars to incredible heights.
It’s a fun dream. But there’s a catch…
Buying near those bottoms is scary. Every part of your brain tells you that you’re making a huge mistake. And most of the time, that voice in your head keeps you from getting in when the time is right.
That’s exactly what’s happening today on the opposite side of the world.
Hong Kong stocks are finally in a strong uptrend… yet investors aren’t buying.
This fear is setting up an opportunity for contrarian investors. And Hong Kong stocks could rally double digits as a result.
Let me explain…
Hong Kong stocks are up 14% since bottoming in March. And while they haven’t hit new highs yet, the uptrend is clearly in place.
Investors still want nothing to do with this market, though. We can see this through shares outstanding for the iShares MSCI Hong Kong Fund (EWH).
As an exchange-traded fund (“ETF”), EWH can create and liquidate shares based on demand. So when investors give up on Hong Kong stocks, EWH’s share count will fall. And when demand picks back up, the fund creates more shares to accommodate it.
Importantly, when EWH’s shares outstanding hit extremely low levels, it’s often a buying opportunity.
Today, shares outstanding for EWH are the lowest we’ve seen in a decade. Take a look…
Folks hate the idea of owning Hong Kong stocks today. And EWH’s shares outstanding are at a multiyear low because of it. This is a great sign for us contrarian investors…
We’ve seen situations like today’s a handful of times over the last decade. Each case led to higher returns for investors in the coming months.
The table below shows what’s possible when you buy after these kinds of setups…
We’ve seen four other major fear triggers since 2010. Each led to double-digit gains in the following year. The largest return was 31% following the 2011 low in shares outstanding.
Now, shares outstanding could fall even further from here. But with Hong Kong stocks in an uptrend and investors still sitting on the sidelines, the upside potential is impressive.
You can easily take advantage of this by owning shares of EWH – the fund we discussed above. It holds a broad basket of Hong Kong stocks. And it’s the simplest way to take advantage of this situation.
I realize that might not seem like the smart move today. That’s what the crowd thinks, at least. But if you’re looking to put money to work outside of the U.S., history shows Hong Kong is a smart bet today.
— Chris IgouWall Street legend warns "A strange day is coming" [sponsor]
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Source: Daily Wealth