Buy Germany!
That’s what I told subscribers of my monthly True Wealth newsletter to do last week.
Our timing was excellent…
German stocks soared 8% on Thursday alone. The jump followed news of a deal for Greek debt and the creation of a $1.4 trillion rescue fund.
Did I know in advance this announcement was coming? Of course not…
I just know that, in investing, you make the biggest fortunes by buying and owning as things go from “bad” to “less bad.”
[ad#Google Adsense 336×280-IA]This is exactly what happened with Germany on Thursday. Things went from “uncertain” to “less uncertain,” and the markets loved it.
In True Wealth, I wrote:
I can’t know if this is the exact moment [when things go from bad to less bad in Germany]… But I am willing to risk a small amount on the downside to find out. With history as our guide, this decision could be worth hundreds of percent on the upside.
Why was I so interested in Germany?
German stocks are the cheapest they’ve been in 30 years. I gave some specifics in that newsletter:
Germany is home to some of the planet’s biggest and best companies. And right now, they’re trading at single-digit forward price-to-earnings ratios. I’m talking about Siemens, Bayer, Daimler (Mercedes), BMW, and BASF, to name a few. German stocks are paying a 4%-plus dividend, also the highest in a quarter-century.
I look for three things when sizing up an investment… I hope to find ideas that are 1) cheap, 2) hated, and 3) just starting an uptrend.
Germany passed the first test with flying colors. German stocks are the cheapest in 30 years.
For the second test – hated – Europe qualified as well. On Thursday of last week, I felt like we’d reached the “puke point.” (The “puke point” is Wall Street slang for the moment investors are so repulsed, they get rid of everything.)
So in True Wealth, I wrote to subscribers: “European stocks are more hated than I can ever remember in my two-decade career following the markets.”
The problem with Germany had been the uptrend…
I’d been patiently waiting for the uptrend to buy in Germany for months. (DailyWealth readers know this. You can read my September essay, “Triple-Digit Profit Potential in the World’s Cheapest Major Market,” for details.)
By my standards, we hadn’t had a glimmer of an uptrend… until last week.
So I recommended buying. I told my True Wealth readers how to do it for the least risk and the highest possible return:
I’m willing to risk 15% on the downside for the potential to make triple-digit profits in a year. That’s the right kind of risk-versus-reward scenario to make real money in the markets.
What did I mean by taking a “risk 15% on the downside?” I told subscribers to use a 15% stop loss. If German stocks fall by 15%, get out.
At the time, a 15% fall would have been (roughly) a new low for the year (in U.S. dollar terms). In short, if German stocks hit new lows for this year, I got it wrong.
Could I get it wrong here? Absolutely. Uncertainty is incredibly high in Europe right now. I will get some wrong, and some right.
It’s all about the odds… Late last week, all the odds were in our favor, so we pulled the trigger. But sometimes, even when the odds are hugely in your favor, you don’t win the bet.
I’ve set the odds of this specific bet in our favor as well… For True Wealth subscribers, our downside risk is limited to 15%… but our upside potential in the trade is unlimited. I expect it could turn out to be a triple-digit winner.
German stocks have jumped… but you likely haven’t missed it.
This could be the start of a new bull run in German stocks. All the pieces I look for are in place… Hop on board, with a stop loss in case I’m wrong. Otherwise, stay on board. It could be a great run.
Good investing,
— Steve Sjuggerud
Further Reading:
Last month, Steve told Daily Wealth readers that “triple-digit profits are likely in Germany some day soon.” At the time, we were only waiting on an uptrend. Now that we’ve got one, make sure to read his original writeup for the full story on German stocks.
But German stocks aren’t the only value in today’s market. Steve says stocks in general are so cheap, “we’re fast approaching a moment like March 2009, where no matter what you do, you’ll make money.” Read more here: Sometimes You Can’t Help But Make Money… We’re Near Those Times Now.
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Source: Daily Wealth