Of all the images that come to mind when we think of space flight, few are as iconic as a Space Shuttle soaring upward, its twin rocket boosters blasting out fire.
If you’re familiar with this image, you probably know why those twin rocket boosters are necessary. The spaceplane — also called the “orbital vehicle” — is extremely heavy. Getting it off the ground and away from Earth’s gravitational pull requires a huge amount of what rocket scientists call “thrust.”
About 27 miles into the flight, the boosters separate from the Space Shuttle, descend with parachutes, and land in the ocean. The boosters are recovered, refurbished, and reused.
The extraordinary power of the Space Shuttle’s rocket boosters has a parallel in the stock market. Just like the Space Shuttle, a stock needs a tremendous amount of power to soar hundreds of percent higher and create wealth for shareholders.
Understanding this power – and knowing how to harness it – is critical if you want to make giant returns in stocks.
This power has helped my readers make 1,125% in beverage maker Hansen Natural… 457% in energy firm Holly Corp… 430% gains in computer chip maker NVIDIA… 477% in fast-growing computer storage firm EMC Corp… and the list goes on and on.
In this essay, I’ll explain everything you need to know about this power and how to put it to work in your stock portfolio.
The Real Driver of Mega Stock Market Winners
How much money does it take to be “wealthy” in America?
A million bucks? Two million? Three?
Even if someone has three million dollars in the stock market, they are a pipsqueak compared to large institutional money managers. These folks manage massive pools of money for mutual funds, hedge funds, sovereign wealth funds, pension funds, and insurance funds.
I often say large money managers are the “elephants” in the market. Why do I call them elephants? When they start to move as a group, like a herd of elephants, they make everything shake.
Just one large institutional investor can manage over $10 billion in assets. So even a wealthy individual with $5 million in assets is a mouse compared to an elephant (as, in this case, the elephant is 2,000 times larger).
One rich individual investor, or even a group of individual investors, can’t move a stock price significantly. But institutional investors invest so much money that just a few can send a stock’s price soaring hundreds of percent higher.
Some institutional investors manage much more than $10 billion. The sovereign wealth fund of Norway – which has been fattened by oil revenue for years – has $1 trillion. That’s 100 times bigger than the large institution with $10 billion to invest.
In other words, the large institutional investors of the world have a ridiculously large amount of money to invest in stocks and bonds and other assets. No meaningful, sustained move in a stock can happen without their participation – and they WANT to invest their money. They are always looking for an opportunity.
They are the massive rocket boosters that power every meaningful stock rally.
What logically follows is that knowing what these managers like to buy – and being able to track exactly what stocks they’re buying – can give anyone a huge edge in the market.
And we have that edge. Thanks to our advanced computerized analysis of stock data, I know what these managers want to buy, and I know when. Let me explain…
How Elephant Tracking Allows Us to Anticipate Huge Stock Moves
Just like a big animal leaves tracks on the ground, large money managers leave tracks in the stock market. We can follow their tracks, know what they are loading up on, and ride their buying power to stock gains in the hundreds of percent.
Here’s how you can track elephants in the stock market:
You may have heard of a financial concept called “alpha.” Alpha measures the performance of an investment against a market benchmark like the S&P 500.
The investment’s return in excess of the benchmark’s return is the investment’s alpha.
Alpha is quoted as a number. For example, if the S&P 500 rises 10% in a given year and a stock rises 12% during that same time, the stock has an alpha of 2.
If the S&P rises 20% and the stock rises 25%, the stock has an alpha of 5.
Our computers scan the market every day for stocks with alpha. We find stocks that tend to rise more than the market. But we don’t stop there.
Many stocks that exhibit alpha (or “beat the market”) are also more volatile than the broad market. You’ve probably been told that in order to make market-beating gains, you have to take bigger risks and accept more volatility. That’s simply not true.
Our research has shown that the absolute best growth stocks to own often beat the broad market while at the same time are LESS volatile than the broad market.
These “magic” stocks are things of beauty: bigger returns, less volatility.
We rank stocks according to a combination of alpha and volatility. Those stocks that are going up the most with the least volatility are ranked the highest.
That’s the sweet spot. Those stocks are the ones large money managers are buying hand over fist.
Obviously, only the stocks that are enjoying very strong institutional buying pressure can manage to both beat the market AND be less volatile than the overall market. Only the elephants can bring that kind of buying pressure, and when a herd of elephants starts to move, they can bring mega rivers of capital that can allow stocks to behave this way.
Our “elephant tracking” analysis led us to recommend shares of Chinese online car shopping firm Bitauto to our readers in June 2013. The stock soared 209% in about eight months.
Our buying pressure analysis led us to recommend online retailer Vipshop to our readers in April 2013. The stock soared 487% in just under a year.
Our buying pressure analysis led us to recommend automaker Ferrari to our readers in early 2017. The stock soared 100% in just under a year.
In the institutional money management world, some investors focus on stocks that pay high dividends. Some focus on blue chip stocks like Disney, Apple, and Bank of America.
But a lot of big money managers focus on growth stocks. They want to buy stocks with the potential to appreciate 5, 10, and 20 times in value. They are looking for the next Apple and the next Disney. They want to see evidence that a company’s potential is starting to be fulfilled in the form of strong revenue and earnings growth.
The examples above – and many more – illustrate how much wealth you can create by finding such companies. When you combine strong earnings growth, huge “blue sky” potential, AND heavy institutional buying support, the results can be extraordinary.
Remember, large money managers – the “elephants of the stock market” – are thousands and thousands of times larger than your average wealthy individual.
Even a wealthy individual with $5 million in assets is a mouse compared to an elephant. That’s why tracking their movements with our “alpha/volatility” metric is a crucial component of our market-beating stock picking approach.
No one can predict the future. But knowing the stocks institutional investors are buying, and knowing when they are buying, will provide you with a huge advantage in the market. It’s part of the secret sauce that turns small investments to big profits.
Note: Finding great stocks is one thing. Timing is everything. And being able to detect these “elephant stampedes” is how you correctly time a great investment; that’s what we’re all about at Breakthrough Stocks.
Often, the stocks we buy are not so well-known to most investors. If you never heard of Bitauto or Vipshop in 2013 (or even today), I wouldn’t be surprised. But you can bet the big institutional investors have. And my system detects when they rush into a stock — just like the tremors in the ground during an elephant stampede.
You can follow along, too — if you know where to look. Click here for more details.