How to Find Silent Winners
The Answer is Often Right in Front of You
Dear Investor,
We all want to know how to spot the best stocks that fly under the radar.
Today, I will give you a simple guideline to find them. Once you have internalized it, you will see everywhere low-risk investment opportunities that are ignored by the market.
The only thing you need to do is to read and interpret the news the right way.
Let’s assume that Twitter is still a public company and they announce a new revenue source: Twitter Blue.
Most analysts would make model calculations and try to guess how profitable the new revenue stream will be. In general, this is not the worst method.
You know the price of the subscription, and how many users the app has and can make a rough assessment of future revenues.
But how about you go for the low-hanging fruit?
Who is the sure winner of Twitter Blue, no matter how successful it will be?
Apple AAPL 0.00%↑ and Alphabet GOOG 0.00%↑ are the sure winners.
No matter how Twitter Blue plays out, they get their cut.
I call these companies second-level profiteers. And once you learn how to interpret the news, you will spot them everywhere.
Some more examples:
News Headline: E-Commerce is booming!
Well, the first company that comes to mind would be Amazon AMZN 0.00%↑.
This is one way to interpret the headline. But who else would benefit indirectly from the growing e-commerce market?
Industrial REITs (Real Estate Investment Trusts)
Industrial REITs own and manage warehouses and distribution centers that play a critical role in helping fulfill e-commerce orders and meeting the demand for rapid delivery.
Companies in the logistics and delivery sectors need large storage spaces for their inventories and Industrial REITs are the second-level profiteers of that trend.
While the majority of investors are conditioned to read the news one-dimensional, you, reading the example above, will know that companies like Prologis PLD 0.00%↑, Stag Industrial STAG 0.00%↑ , and EastGroup Properties EGP 0.00%↑ might be an additional way to benefit from the growing e-commerce sectors.
News Headline: Air Travel Demand is Booming!
Same principle.
The first-level profiteers are airline companies.
The second-level profiteers in that case are vacation home companies like Airbnb ABNB 0.00%↑ and Booking Holdings BKNG 0.00%↑.
To explain my reasoning in more detail, let’s imagine the following scenario:
You have 5 airlines that report a high demand for flights to a certain region/country.
What’s the smarter move?
Figuring out which of those airlines is going to profit the most?
Or going for the low-hanging fruit and realizing that the travelers from all 5 airlines need to sleep somewhere?
As you can see, valuable information is often right in front of you, you just have to get into the habit of peeling off the top layer and the implications of an economic trend will reveal themselves to you.
Once you have internalized this, you will uncover the not-so-obvious investment opportunities from random everyday headlines.
I hope you learned something new today.
Until the next issue. 👋
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Disclaimer: This analysis is not advice to buy or sell this or any stock; it is just pointing out an objective observation of unique patterns that developed from my research. Nothing herein should be construed as an offer to buy or sell securities or to give individual investment advice.
very good insights. thanks.