Editor’s note: Ever missed an investment opportunity due to indecision? This essay’s for you.
To conclude our special trading series, RiskHedge’s Chief Trader Justin Spittler explains how he manages to consistently buy the right stocks early on in their upcycles, and how you can do the same.
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Earlier in my life, I was a slave to a regular job. My earnings were capped by the number of hours I was physically present at work.
Becoming a trader freed me. All a trader needs to potentially earn money is a laptop and an internet connection. I can be just as productive while visiting my family in Omaha, Nebraska, as I am sitting by a pool in Colombia, South America where I spend a lot of time.
But independence is only a side benefit of trading. Above all else, trading allows you to identify and enter moneymaking trends early—when the biggest opportunities are on the table.
Opportunities that most investors miss because they suffer “paralysis by analysis.”
How many times have you heard a compelling story about a stock…
Only to see it had already soared 200%... and the opportunity had passed you by?
I lost count of how many times that happened to me early in my career.
What I didn’t yet understand is that news is slow. By the time you hear about a trend in The Wall Street Journal, it’s almost always too late to profit.
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Now, I don’t wait around for the news to tell us about opportunities. I find them and anticipate them before the TV-watching crowd is aware.
Let me show you how this worked in the real world during some of the most tumultuous markets of the past 20 years: the early days of COVID.
After the initial market plunge, the world raced to sort out how things would change. Tech stocks, growth stocks, and many “work from home” stocks staged rallies that booted their stock prices 200%... 300%... even 400% in a year or less.
Problem was, if you had waited for the “fundamentals” of these stocks to alert you to these opportunities, these moves would’ve passed you right by.
Take telehealth company Livongo (LVGO), for example.
It posted better-than-expected Q1 earnings on May 6, 2020. First-quarter total revenue was up 115% year over year. “Fundamental investors” who waited for these results got into the stock at around $48/share.
But my subscribers got in three months earlier at $27.60/share, because LVGO’s chart made clear it was emerging as a true leader.
On October 30, 2020, Livongo was acquired by Teladoc (TDOC). Because we got in early, our total gain as of that date was 406%.
It was a similar story with DocuSign (DOCU)…
The e-signature company released Q1 earnings on June 4, 2020. Total revenue jumped 39% year over year—a great result. Problem was, the stock was already around $100/share.
The best time to buy the stock was before these results—which we did. Exactly five months later, we managed to take profits on the exact day the stock put in an all-time high. Then we sold it a couple weeks later for a 161% gain.
That’s important because the stock would go on to lose more than 50% of its value. But we didn’t care. We cashed out, took our profit, and moved on to the next trade. Great traders don’t “fall in love” with stocks, like many buy-and-hold, long-term investors do.
As an extreme example of the advantages of being a nimble trader, consider a stock I recommended called VectoIQ Acquisition Corp. (VTIQ).
We bought it at $11.50 in March 2020 because the chart was screamingly bullish.
It ran up to $73.70, and we eventually sold for a 395% profit.
A few weeks after we sold, the bad news started to come out…
It turned out the company’s CEO was using dishonest marketing tactics. The stock tanked, eventually giving back every penny from its initial surge.
But my readers and I had collected our profit and moved on weeks prior. We didn’t have to give back a penny of our 395% gains, no matter what happened with the company afterward.
The key to these opportunities is we were early. Had we waited for the “fundamentals” to confirm our thoughts that these stocks were good trades, we would’ve missed most of the profits.
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I’m trying to kill the stigma that trading needs to be overly complicated. It doesn’t.
In my new trading letter Express Trader, I keep it super simple and recommend just three trades to make every Monday morning. The three strongest stocks based on what I’m seeing in the markets.
This service is all about execution and results. It’s a simple, straightforward trading blueprint that’s easy to follow.
If you’re interested in joining us, go here.
Justin Spittler
Chief Trader, RiskHedge