Of all the images that come to mind when we think of space flight, few are as iconic as the 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 – technically 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 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 155% from real estate investment company Arbor Realty Trust (ABR)… 123% from REIT company Safehold Inc (SAFE)… and 396% from software company AppFolio (APPF)… and the list goes on and on.
In today’s Market360 article, 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?
No matter if someone has a million, two million, or 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 (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 – was over $1.3 trillion in 2021. That’s over 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 mangers like to buy – and being able to track exactly what stocks they’re buying – can give anyone a huge edge in the market.
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…
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 hundreds of percent stock gains.
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 relative to 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 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.
But 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 sporting goods retailer Big 5 Sporting Goods Corporation (BGFV) to our readers in November 2020. The stock soared 270% in about 12 months.
Our buying pressure analysis led us to recommend biotechnology company Repligen Corporation (RGEN) to our readers in June 2019. The stock soared 124% in just under two years.
Our buying pressure analysis led us to recommend real estate company Safehold Inc. to our readers in October 2019. The stock soared 123% in 18 months.
In the institutional money management world, some investors focus on stocks that pay high dividends. Some focus on blue chip stocks like Disney (DIS), Apple (AAPL) and Bank of America (BAC).
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 powerful the wealth creation can be when you find 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 into big profits.
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below: