Category Penny Stocks

Tom Yeung here with today’s Smart Money.

Do you remember what happened on March 1, 2018?

James Hackett probably does.

On that day, the then-CEO of Ford Motor Co. (F) saw President Donald Trump announce a sweeping round of tariffs targeting steel (25% duties) and aluminum (10%) – two of the most essential raw materials for automakers.

Over the following year, Hackett saw his company lose a fifth of its stock value – driven by a $750 million loss from tariffs and another $1.1 billion from broadly higher commodity prices. Many other importers saw even steeper declines.

But to most investors, March 1, 2018, was relatively unremarkable. The broader S&P 500 would rise 5% over the next 12 months, and high-quality tech stocks like Salesforce Inc. (CRM) and Intuit Inc. (INTU) and Advanced Micro Devices (AMD) would rise 20% … 50%… even 100%.

That’s because top companies can perform well despite interference from the top.

These innovative firms make products that are so essential that no amount of trade wars or late-night presidential tweets can seem to derail them.

Fast forward to today, and we’re watching history rhyme.

Trump has returned to the White House, and tariffs are back on the table – this time in even bigger and broader forms. On Tuesday, tariffs on Chinese goods rose another 10%, while certain non-exempt goods from Canada and Mexico saw a 25% hike. (Yes, things have shifted since then, and they probably will again tomorrow.)

Predictably, the headlines are full of doom and gloom. But for investors, there’s little reason to lose sleep over tariffs – just like in 2018.

That’s because the most successful stock market stories of the next decade will have very little to do with Chinese imports, steel prices, or even the cost of eggs.

Instead, they’ll be about companies that are reimagining the very foundations of our economy, and the ones that have discovered products so desirable that customers will put aside their economic fears to savor those products.

So, in today’s Smart Money, I’ll share more about the industries and companies driving the next decade of wealth creation.

And, most importantly, where you can find them.

Desirable Industries and Desirable Products

Consider artificial intelligence. It’s no secret that this industry has already changed the market landscape… and will continue to change that of our economy.

Over the next five years, global spending on AI will surge to $800 billion, growing at 30% annually.

Companies pioneering the infrastructure of AI – from Nvidia Corp. (NVDA) with its specialized GPUs to OpenAI and DeepSeek with their groundbreaking language models – will drive productivity gains that dwarf the cost increases that tariffs cause.

That’s not just a theoretical argument. It’s already happening.

Over the past year, U.S. companies added over 160,000 AI-related job postings, even as they slashed positions in older sectors like retail and legacy manufacturing. It’s becoming harder to get through the day without encountering AI. At this point, it’s safe to say that most of us have encountered an AI-powered customer service chatbot.

And the story goes beyond AI.

In 2018, Salesforce, Intuit, and AMD thrived not because they were immune to tariffs, but because their core products – software solutions, financial technology, and advanced semiconductors – were too valuable for businesses and consumers to ignore.

That pattern will only accelerate in 2025 and beyond. Many companies around the world will panic over the next four years as they worry about what Donald Trump will do next.

But firms that make irresistibly desirable products will steam right ahead.

One of our favorite picks in this category is Dutch Bros Inc. (BROS), a drive-through coffee shop chain with a cultlike fanbase. Customers often drive for miles to get to a Dutch Bros location… and some rabid fans have even tattooed the company’s name and logo on themselves.

That’s dedication.

In fact, this Oregon-based company has proved so popular that it’s having no trouble spreading across America. In 2024, the firm opened 151 new stores in 18 states, helping drive a 35% surge in revenues. And they’re planning to open another 160 stores this year.

Eric added the company to the Fry’s Investment Report portfolio last August, and since then shares of this firm have risen 90%.

Incredibly, one-third of that growth has happened within the past two months… after President Trump first floated tariffs.

At Fry’s Investment Report, Eric remains focused on the megatrends that will outlive the tariff noise, and the companies set to prosper within them.

Here’s why this approach is so important…

Ignore the Noise, Focus on the Megatrends

If history teaches us anything, it’s that politics makes headlines – but great products make fortunes.

Investors who panicked over the 2018 tariffs and pulled money out of the market missed out on a golden era for tech stocks. Those who instead focused on transformative trends – cloud computing, mobile software, e-commerce – saw their portfolios surge.

The same principle applies today.

The 2025 Trump tariffs will make noise, but they won’t change the fundamental trajectory of industries driving the next decade of wealth creation.

Semiconductors, AI,  next-generation energy, and advanced healthcare – those sectors will generate trillions in new economic value, completely independent of tariff rates. In addition, some select firms in traditional sectors are also going to succeed, even as rivals stumble.

Of course, there will be pain ahead for those on the wrong side of the trade war. To refer back to Ford, shares of the automaker are down 6% since Trump took office in January, and more losses could be on the horizon.

But let’s not forget the big picture: Many innovative firms are still doing incredibly well, and that’s always what matters in the end.

To learn more about the companies that will continue to weather the tariff storm, click here to become a member of Fry’s Investment Report today.

Getting Prepped for Nvidia’s “Q Day”

My colleague, the Wall Street legend Louis Navellier, certainly isn’t letting the tariff headwinds distract him from the AI boom.

As the AI megatrend quickly evolves, Louis will tell anyone who’ll listen, Nvidia has maintained its king status. And now he is telling us that on March 20, during the company’s first ever “Q Day,” Nvidia may announce a new breakthrough technology that is poised to ignite the next phase of the AI supercycle… and affect nearly every aspect of our lives.

But according to Louis, the media is missing out on the most important part of the story: One tiny small-cap company is positioned to be crucial to Nvidia’s AI reveal, thanks to its technology protected 102 patents.

So, on Thursday, March 13, at 1 p.m. Eastern, he’s holding a special time-sensitive briefing to get you ahead of the news (reserve your spot for this free broadcast by going here). Instead of buying Nvidia now, Louis will reveal six alternative stocks set to benefit from this AI breakthrough – including the one small-cap company that could deliver 10X to 50X gains.

Click here to sign up for the free event.

Regards,

Tom Yeung

Markets Analyst, InvestorPlace

Wall Street legend Warren Buffet is known for his belief that when it comes to investing in stocks, it’s best to be greedy when others are fearful. 

Well, everyone is extremely fearful right now. A global trade war has begun. Government layoffs are spiking. Job growth is slowing. The economy is weakening. Consumer and business sentiment is sliding. And stocks are crashing.

Does that mean it is time to be greedy? I think so. 

But before you go thinking I’m putting the cart before the horse, let’s talk a bit about what’s driving the rampant fear out there right now – and what’s making us bullish.

Understanding the Market Risks

This week, U.S. President Donald Trump started what may be the biggest trade war seen in a century. He enforced 25% tariffs on goods from Canada and Mexico and levied an additional 10% tariff on goods from China. In so doing, Trump has raised the average tariff rate in the U.S. from 2.3% to 11.5%, the highest it has been since World War II. 

Economists’ consensus belief is that this will have an adverse impact on the economy. 

U.S. companies will face meaningfully higher import costs and either be forced to absorb them (shrinking profit margins), pass them on to consumers (raising inflation), or reorganize their supply chains (disrupting business operations). 

No matter which path companies choose, a negative growth shock is likely. Researchers at the Federal Reserve suggest that by raising the average U.S. tariff rate to 11.5%, GDP growth will be negatively affected by 1.3%. 

Meanwhile, real-time estimates for U.S. economic growth suggest that it is trending very weak this quarter. One estimate from the Atlanta Fed shows -2.8% growth; and that was even before the trade war began. Slicing off another 1.3% would put U.S. GDP growth below -4%. 

That’s awful. And it doesn’t even take into account the tariffs yet to come…

Technology’s spooky next step … enormous potential market size … the easiest way to invest today … nervous about a market crash? Keith Kaplan has you covered

In the pantheon of business/investing clichés, high on the list is the phrase immortalized by hockey legend Wayne Gretzky:

I skate to where the puck is going, not where it has been.

The quote has been recycled and mangled by countless investment professionals in PowerPoint presentations for years.

However, it accurately reflects how wise investors set themselves up for life-changing investment returns.

So, where is the puck going today?

Here’s a clue from Tesla CEO Elon Musk:

“[This cutting-edge technology product] will be overwhelmingly the value of the company” with “the potential to be north of $10 trillion in revenue.”

Got your guess?

Sci-Fi meets real life

Congrats if you answered “humanoids.”

Humanoids are advanced robotic machines that can mirror human movements, reasoning, and day-to-day activities. They sit at the convergence of multiple technological trends: AI, biomechanics, machine learning and sensor connectivity.

Whether you think they’re cool or creepy, they’re coming…and bringing with them a multi-trillion-dollar investment opportunity.

Let’s jump to our technology expert, Luke Lango:

These creations are finally stepping out of science fiction and into reality, possibly poised to become the most disruptive AI advancement yet.

From factory floors to elder care, these machines could easily reshape industries, redefine labor… maybe even challenge what it means to be human…

Everyone who’s anyone in the tech world is betting on humanoid robots being the next big AI breakthrough. 

Tesla’s Optimus humanoid is the most visible example. And as noted earlier, Musk believes the future of Tesla isn’t in electric cars, it’s in humanoids.

Optimus is already being used inside Tesla factories to complete a variety of tasks. Reports suggest Tesla will sell them to outside companies next year.

And after that, they’re headed to a household near you.

Here’s Luke:

We could soon have our own personal humanoid robot assistant in our homes, doing everything from unloading groceries and cleaning to safeguarding our house while we’re away. 

It’s not just Tesla – all the Big Tech players are moving on humanoids

Luke points toward, Meta, Apple, Alphabet, Nvidia, and OpenAI as just a few of the companies working on aspects of humanoid technology.

Meanwhile, many private companies are involved as well. A Polish startup called Clone Robotics just released a video of “Protoclone.” This is its “faceless, anatomically accurate synthetic human.”

Source: @clonerobotics

Whether this thrills or terrifies you, some version of it is headed your way over the next 5-10 years.

Sizing the market potential

Let’s go to ETF provider and research shop, GlobalX:

The potential market opportunity for humanoids is massive, and it’s accelerating.

Tesla CEO Elon Musk and industry stakeholders believe there could be over 1 billion humanoids on Earth by the 2040s.

While adoption of single-purpose collaborative robots (cobots) is already widespread in industrial settings, the potential of general-purpose humanoid robotics remains largely untapped, with their appeal being their versatility.

Humanoids are now a tangible reality, capable of working in diverse settings like hazardous factories, and elderly homes, bringing innovative solutions to sectors like logistics, manufacturing, and healthcare.

Given the widespread potential use cases for industrial humanoids, GlobalX puts the total industrial addressable market size at nearly $2 trillion over the next decade.

But the market for household humanoids could be even bigger. GlobalX estimates 15% household penetration and a price point of $10,000 – $15,000. That results in a market size of almost $3 trillion by 2035.

So, how do you invest?

We profiled the easiest way to invest back in September.

Regular Digest readers will recall an issue in which I shared part of an internal email from InvestorPlace’s CEO Brian Hunt to a few members of our leadership team.

Brian described the technological advancements coming (like humanoids), the potential for market volatility, but the even greater potential to make enormous wealth over the next five to 10 years.

With that as our context, here’s Brian from that email with the most effortless way to ride this trend:

If you want to make it simple, easy, and powerful, just look up the five largest AI/robotics ETFs and buy them in equal parts and go to sleep for a while. Maybe throw in some QQQ.

Ignore the corrections. They will be painful but temporary.

This tailwind will blow with hurricane force.

As our experts make their single-stock humanoid recommendations over the coming quarters, we’ll highlight them for you. For now, Luke is eyeing the next step in the evolution toward humanoids – self-driving cars:

The next stage of the AI Revolution has begun. 

But it’s about more than just humanoid robots unloading groceries or doing factory work. It also includes robotic driving systems – like self-driving cars. 

This future may still seem many years away. But it’s already a reality… Of course, the arrival of the Age of Autonomous Vehicles also means the arrival of huge opportunities in AV stocks. 

If you’d like a deeper dive into the opportunity, Luke just put together a special informational presentation focused solely on the Autonomous Vehicle Revolution. You can check it out here.

What if you can’t handle the market corrections that Brian referenced?

Not everyone has a decade-long investment horizon.

What if you’re a few years from retirement and can’t afford the type of painful pullback Brian referenced?

What if you’re saving for a downpayment on a home, or a child’s tuition, or an aging parent’s healthcare needs, and you can’t absorb a haircut of, say, 30% on your capital?

You need a tool to help you sidestep the worst of a bear market crash. And that’s where the quant-based market tools from our corporate partner, TradeSmith, come in.

Here’s a quick story from TradeSmith’s CEO Keith Kaplan to illustrate:

It was early 2020 and I had flown to Florida to meet with a group of 50 of my peers where each of us pitched our best and biggest investment ideas.

When it was my turn, I told them all “I sold almost all my stocks on Friday.”

As you would imagine, I was not the most popular person in the room.

I urged people to protect their investments and consider warning their subscribers that a bear market was rapidly approaching.

I even showed them proof of how I knew we were headed toward the fastest bear market in history — one that would catch everyone by surprise and destroy years of wealth building.

I showed them the alerts I received and then how accurate these alerts have been over the last 20 years.

I was laughed at and told not to panic. Not a single person in the room wanted to hear what I had to say.

But anyone who acted on my systems advice saved their portfolio.

Keith was using a quant-based trading tool that sent him “bear market” alerts.

Here’s an example of what he saw on Friday February 27, 2020…

…which was shortly before the S&P 500 suffered its steepest plunge in the Covid crash…

Back to Keith:

In 2020, my personal portfolio was saved a huge loss thanks to the indicators I got.

Next Thursday at 8 PM ET, Keith is holding an event to explain how this tool works, and how it could help protect your wealth from a similar crash

If protecting the money that you already have is as important as generating new investment gains, this event is for you.

That said, I’ll point out that this same tool works in reverse – notifying investors when to buy back in after a crash.

Returning to Keith, here he is describing what happened not long after those sell alerts arrived:

Just a month later, our indicators did it again, alerting me to a bullish set up in the markets.

By this time the CNN Fear and Greed Index had plummeted to extreme fear and people were nervous.

Heck, I was nervous!

But again, I trusted the math and these signals, and I took action. I started gobbling up stocks that had big pullbacks and were noted “healthy” in our system by their green designation.

Boy was that the right decision!

As you know, the S&P would go on to soar nearly 70% from its March 2020 low through the end of that year.

Source: TradingView

I’ll bring you more on TradeSmith’s market timing tool over the next few days, but to reserve your seat for next Thursday’s presentation right now, click here.

During the event, Keith will walk through how this tool helps you know:

• When to buy a stock
• How much of a stock to buy
• When to sell a stock
• And how risky that stock is – how much movement you should expect

He’s also going to unveil the biggest market prediction in his company’s 20-year history.

It’s all next Thursday at 8 PM ET.

More on this to come…

In the meantime, start looking into humanoids. It’s going to be a big one.

Have a good evening,

Jeff Remsburg

Hello, Reader.

Over the course of human evolution, we Homo sapiens have developed a survival instinct called the “negativity bias.”

This rather pessimistic term refers to the theory that negative events impact us more significantly than positive or neutral events, even if the positive or neutral events far outweigh the negative ones.

As early humans, this trait served us well. Our ancestors faced greater immediate dangers, like predators and environmental hazards.

We can all agree that when confronted with a woolly mammoth, you’d want to consider every dire outcome. So, prioritizing negative stimuli provided an evolutionary advantage.

As modern humans, though, this cognitive bias can cause a lot of mental turmoil. Especially since our current president is the master of creating dizzying headlines.

Truth be told, I believe that “headline risk,” is probably the most significant new risk investors will face throughout the Trump administration.

However, a lot of present-day fear is grounded in reality.

Yesterday, President Trump made good on his tariff threats against Mexico, Canada, and China. Citing ineffective border controls (and other grievances), he implemented additional 25% tariffs on imports from our neighbors to the north and south and a 10% additional tariff on imports from China.

Canada responded with a package of tariffs on $107 billion worth of goods. China responded by announcing additional tariffs of up to 15% on imports of U.S. farm products such as poultry, chicken, and beef. Mexican President Claudia Sheinbaum condemned the tariffs and said her government would respond soon.

Markets began to sell off yesterday as a result of the tariffs. All of the major indices opened sharply lower in the morning. And at one point, they were all down by more than 1%.

Now, as investors, it’s important not to let negativity bias get the best of us when the market is volatile. While the headlines may be scary, there’s always a chance that negative events, like the woolly mammoth, will become extinct.

So today, I’d like to share the best course of action to take when faced with market volatility… and the best way to hedge against the chaos.

Stay Steadfast

Brian Hunt, the CEOhere at InvestorPlace, puts it well…

Our instincts make us pay close attention to potential dangers… both real and imagined. So, our subconscious minds compel us to click on bearish headlines, fixate on disasters, worry about elections, buy magazines with gloomy forecasts on their covers, and fret over 15% stock market corrections.

I encourage you to let common sense and the facts shape your actions instead of leaving it up to caveman thinking.

You’ll be far more successful investor if you do.

Why do I say that? And what are the facts?

Well, just consider that the stock market has averaged a positive annual return of 10% for the past 100 years. This is because the trend of increasing prosperity that is powered by free markets and free enterprise is one of the strongest trends in human history.

And here’s another important fact…

During the 20th century, stocks appreciated in value by 1,500,000%.

A 1,500,000% return turns every $100 invested into $1.5 million.

Of course, the 20th century was fraught with its own turbulence. The Great Depression… World War I and World War II… the Korean War… the Cuban Missile Crisis… the Watergate scandal… the list goes on.

However, as Hunt says…

Despite all these things, U.S. stocks appreciated in value by 1,500,000% during the 20th century.

Despite something bad happening every decade, incredible wealth was created by innovative businesses like The Coca-Cola Co. (KO), Ford Motor Co. (F), Hershey Co. (HSY), Intel Corp. (INTC), General Electric Co. (GE), McDonald’s Corp. (MCD), The Procter & Gamble Co. (PG), Tootsie Roll Industries Inc. (TR), Pfizer Inc. (PFE), Walmart Inc. (WMT), Starbucks Corp. (SBUX), and thousands of others.

We all know there are problems in America…

These topics are covered daily in the news. They are the subjects of best-selling books. They have many people paralyzed by fear.

But if you know your history and know how powerful American innovation is, you know this is no cause to sell your stocks and crawl into a hole.

John W. Gardner, the Secretary of Health, Education, and Welfare under President Lyndon B. Johnson, once said, “History never looks like history when you are living through it.”

But the reality is that history does rhyme, and there is precedent for remaining steadfast in the face of market volatility.

So, in agreement with Hunt, I still prefer the wait-and-see approach. In fact, this approach has already worked in the last 24 hours. Trump may soon announce tariff compromise deals with Canada and Mexico.

Yesterday, Commerce Secretary Howard Lutnick said, “I think [Trump] is going to work something out with them – it’s not going to be a pause, none of that pause stuff, but I think he’s going to figure out: you do more and I’ll meet you in the middle some way.”

Following Lutnick’s remarks, the stock futures tied to all three major averages rose.

So, it is important to curb our negativity bias.

Protection Against the Unknown

That said, if we want to pass by a woolly mammoth unscathed, it’s prudent to have a spear. Likewise, we want our portfolios to offer us the same sense of protection.

I believe that gold and gold stocks offer security in the face of uncertainty or market volatility.

When the S&P 500 index, the Dow Jones Industrial Average, the Nasdaq Composite, and the Russell 2000 were all in the red yesterday, gold was not. In fact, the futures contract for the price of gold in April 2025 ended the trading day yesterday 0.67% higher… and it is up 0.42% as I write today.

Now, I do not recommend “loading the boat” with precious metals. But I do recommend buying them as a hedge against unforeseen financial trauma. In other words, buy scarcity, at least as a hedge.

While many investors may rush to buy physical gold or gold stocks, there is a more powerful way to capitalize on this golden hedge – one that multiplies your returns.

It’s by using long-term equity anticipation securities (LEAPS), which are long-dated options contracts with expiration dates one to three years away. (Options may sound scary, but they don’t have to be. You can learn more about trading options in my free special broadcast, here.)

Every option is identified with a specific stock. And we’ve had major success with a recent LEAPS option on SPDR Gold Shares (GLD), the first U.S.-traded gold ETF.

I recommended a LEAPS option on GLD to my Leverage subscribers on March 21, 2024. The call had an expiration date of June 20, 2025.

Since then, we’ve sold…

• A one-fourth position on April 18, 2024, for a 379% gain…
• A one-fourth position on September 19, 2024, for a 94% gain…
• A one-fourth position on September 20, 2024, for a 110% gain…
• And the final one-fourth position on October 18, 2024, for a 292% gain.

Overall, those who followed my LEAPS strategy in Leverage pocketed a whopping 220% gain on this GLD call.

To learn more about this strategy, I’ve created a special presentation that explains how anyone can take advantage of LEAPS. In the broadcast, you’ll also learn how to access a special report that lays out three LEAPS trades with the potential to double your money in just a few months.

Click here to learn how to join Leverage and take advantage of this powerful options strategy.

Regards,

Eric Fry

P.S. Tariffs, along with geopolitical uncertainty and stalled-out price action, have been throwing a wrench into the works this year.

But our partners at TradeSmith couldn’t be more certain about what’s coming.

And what’s coming is the continuation of an epic melt-up that officially began in April of last year… and will likely only accelerate over the next 12 months.

Click here to watch TradeSmith CEO Keith Kaplan’s free special broadcast that includes full details on his Mega Melt-Up thesis… and a breakdown of his new trading strategy.

A big slowdown in job growth … statistics and perspective on this pullback … gold miners are trading at discount valuations … two trades to consider

Job creation hit the brakes last month.

This morning, ADP’s private sector jobs report showed February’s gains clocked in at just 77,000 workers. That’s miles beneath January’s revised number of 186,000 and substantially lower than the consensus estimate of 148,000.

For what’s behind the slowdown, here’s Nela Richardson, ADP’s chief economist:

Policy uncertainty and a slowdown in consumer spending might have led to layoffs or a slowdown in hiring last month.

Our data, combined with other recent indicators, suggests a hiring hesitancy among employers as they assess the economic climate ahead.

As we’ve been highlighting here in the Digest, “uncertainty” is the big market overhang today.

Will President Trump’s tariffs be fleeting or long-term? How will they impact corporate profits? How will they affect consumer spending? How will they influence inflation and the Fed’s interest rate policy?

This swirl of questions has weighed on the market since mid-February.

As we’re going to press, we’re getting welcomed news that’s helping the market

President Trump has given a one-month tariff exemption to the big three U.S. automakers.

From Press Secretary Karoline Leavitt:

Reciprocal tariffs will still go into effect on April 2, but at the request of the companies associated with USMCA, the president is giving them an exemption for one month so they are not at an economic disadvantage.

Stocks are rallying on the news. The hope is that this is a foreshadowing of additional tariff concessions to come.

Meanwhile, earlier today, Commerce Secretary Howard Lutnick suggested the Trump administration could scale back tariffs on Canadian and Mexican goods. An announcement with more details could come as soon as this afternoon. As we go to press, that update hasn’t arrived.

But even if that announcement comes, a “scale back” isn’t a “removal.” And so, the impact of scaled-back-yet-sustained tariffs remains an uncertainty…which Wall Street hates.

Returning to jobs, the most important report comes on Friday with the Labor Department’s Bureau of Labor Statistics report on nonfarm payrolls. It could be a market mover.

We’ll report back.

One thing to remember if the recent market drawdown has you feeling rattled…

It’s normal.

As I write, the S&P is down about 5% from its high. This doesn’t even register as a “correction,” as defined by “down 10% from the most recent high.”

So, in the grand scheme of things, this is far less a massive 10-car pileup, and more so the slightest of parking lot fender benders.

But what if we get a 10% correction, or even something a bit deeper?

Such pullbacks are commonplace in Wall Street’s long history. Here’s some perspective from Kiplinger:

Since the 1950s, the S&P 500 has experienced around 38 market corrections. That means that historically speaking, the S&P 500 has experienced a correction every 1.84 years.

Considering that the S&P’s last correction came in 2022, we’re basically right on schedule.

And how long should we be prepared to endure this?

Obviously, no one knows. But American Century Investments crunched the numbers and found that if this pullback reaches “correction” territory but doesn’t slip into a full bear market, then, on average, we’re in for a 14% drawdown that will last about four months.

How do you manage your portfolio during such a drawdown?

A study of market history shows that the best thing to do is ignore it.

Of course, if your specific investment timeline and/or financial situation requires you to pull your money out of the market, do what you must. But if you’re investing for a longer period, log out of your brokerage account and go live your life as you wait for the inevitable rebound.

Here’s Schwab with perspective on that eventual bounce:

Occasional pullbacks have historically been followed by rebounds, according to the Schwab Center for Financial Research.

Since 1974, the S&P 500 has risen an average of more than 8% one month after a market correction bottom and more than 24% one year later.

Schwab delved into additional historical data on corrections, concluding:

Despite these pullbacks, however, stocks rose in most years, with positive returns in all but 3 years and an average gain of approximately 7%.

This brings to mind the 2025 market forecast from our hypergrowth expert Luke Lango, editor of Innovation Investor:

We think this will be the pattern for the stock market for the foreseeable future: two steps forward, one step back. Lather, rinse, repeat. 

And yet, I still think stocks are going higher in 2025.

Bottom line: Pullbacks like the one we’ve been experiencing today are 100% normal. Take it in stride.

A different way to play the gold bull market

As I write Wednesday, the yellow metal is barely 0.3% below a new all-time high.

But rather than discuss investing in gold today, let’s highlight gold miners. You can think of this as investing in gold yet with operating leverage. 

You see, there’s something strange happening with miners today…

While gold’s price has been hitting new highs in recent months, sentiment toward miners has been lukewarm at best. This is resulting in valuations near historic lows.

Here’s Barron’s from last month:

Gold stocks, despite their gains, really do look like bargains.

The VanEck ETF trades at just over 12 times 12-month forward earnings, a 44% discount to the S&P 500’s 22 times, a much wider gap than the 10-year average of 20%.

Narrowing the price/earnings gap to that average discount would bring the ETF up to just over 16 times, landing it, once again, at $51.

Let’s get a visual on this inconsistency between gold and miners.

As you can see below, since spring 2022, while gold has climbed almost 50%, gold miners, as represented by the VanEck Gold Miners ETF, GDX, are basically flat.

(Disclosure: I own GDX.)

This is abnormal. Typically, top-tier gold mining stocks make moves that are 2X- 3X the size of gold’s move. This reflects the swelling profits that miners enjoy as gold’s market price rises above breakeven costs…or the snowballing losses they suffer when prices swing the opposite way.

Recently, miners haven’t been commanding this premium. Here’s Mining.com:

The gold miners’ stock prices have largely decoupled from their metal, which overwhelmingly drives their profits.

This fundamental disconnect has spawned a shocking valuation anomaly, with gold stocks far too low relative to gold. But this aberration won’t last, as markets abhor extreme deviations from precedent.

Mean reversions and proportional overshoots soon follow, so gold stocks will soar to reflect their record earnings.

But why are miners lagging so badly?

First, miners usually sell their gold based on long-term contracts or hedging strategies. This creates a lag in profits even as gold hits all-time highs.

Beyond that, the question is usually better answered on a case-by-case basis. But here are some of the top reasons why miners are lagging:

• They’ve faced higher operating costs due to inflation
• Environmental and regulatory costs have also increased
• Some miners have a history of poor capital allocation (bad acquisitions, excessive debt, shareholder dilution)
• Many mines operate in politically unstable regions, leading to supply chain disruptions, government intervention, or nationalization risks

Remember to do your due diligence and be discerning about which miners you buy, but the opportunity today looks compelling.

For your own research, I’d recommend looking at Agnico Eagle Mines (AEM) and Alamos Gold (AGI). They’re generating enormous free cash flow today. And, of course, there’s GDX, which gives you exposure to a basket of top miners.

Finally, are you feeling courageous?

One of Warren Buffett’s most famous quotes is to “be fearful when others are greedy and to be greedy only when others are fearful.”

Well, we’ve got the “Fear” part covered.

Even though stocks are up as I write Wednesday, CNN’s Fear & Greed Index puts us at “Extreme Fear.”

So, are you ready to be greedy?

If so, here’s an idea…

According to TrendSpider, the trade is to buy QQQ (a fund that tracks the Nasdaq 100) when its price is 10%+ off its 20-week range high.

In the last 10 years, when following this entry signal, the average returns six months later have been 13.5% with an 82% win-rate.

Here’s the chart from TrendSpider.

Source: TrendSpider

For another idea, I’d point you to our global macro expert, Eric Fry, the editor behind Leverage

In Leverage, Eric recommends LEAPS trades, which stands for “Long-Term Equity Anticipation Security.” You can think of this as an option with a longer-dated expiration, usually lasting from one to three years.

One of the main reasons to use LEAPS is because of the “leverage” they afford investors. As Eric writes, you “put down a small investment to control a large amount of stock.”

As an example of the potential payoff, last month, Leverage subscribers locked in gains of nearly 300% on their Dutch Bros. Inc. (BROS) call options that they opened in July.

Now, less than two weeks ago, Eric recommended a miner that he called a “hidden” gold play.

From Eric:

[This miner’s] relatively low valuation underscores its identity as hidden gold play.

Its shares are trading for just six times gross earnings (EBITDA), which is 40% lower than the valuation of the Philadelphia Gold and Silver Index (XAU) stocks.

Since that recommendation, this stock has fallen slightly in sympathy with the broad market. But this is offering investors an even better entry price on what could be a monster trade if gold mining stocks roar higher as history suggests they’re likely to do.

To learn about joining Eric in Leverage to get the details on this trade, click here.  

If jumping into QQQ or Eric’s “hidden” gold trade makes you nervous…

That’s totally normal.

But here are a few words of wisdom from wise (and very successful) investors who have gone before us.

From billionaire Rob Arnott, founder and chairman of the board of Research Affiliates:

In investing, what is comfortable is rarely profitable.

And J.P. Morgan:

In bear markets, stocks return to their rightful owners.

Finally, Cullen Roche:

The stock market is the only market where things go on sale and all the customers run out of the store.

Bottom line: Don’t take on more risk than is appropriate for you and your financial situation, but recognize that one investor’s panic sale is another investor’s bargain entry price.

Have a good evening,

Jeff Remsburg

Right now, the U.S. economy is slowing rapidly. 

According to the Atlanta Federal Reserve’s GDPNow model, “the estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -1.5% on February 28, down from 2.3% on February 19. The nowcast of the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points, while the nowcast of first-quarter real personal consumption expenditures growth fell from 2.3% to 1.3%.”

And as recent data from ADP’s employment report shows, employers added just 77,000 jobs in February, far below January’s upwardly revised 186,000 and below the 148,000 estimate.

All this weak data and ongoing economic uncertainty has kept the stock market in volatile territory. 

As the following chart shows, the S&P 500 has endured near-constant up-and-down action for the past several months. In fact, just in the past five days, the index has fallen about 3%. It has tested and broken its 100-day moving average (MA) and is now approaching a test of its 200-day MA.

With President Trump’s trade war with Mexico, Canada, and China looming large, things could get even worse in the coming months, potentially tipping the global economy into a recession and plunging stocks into a full-blown bear market. 

That’s the bad news. 

But here’s the good news. 

We actually see huge opportunities emerging amid all this economic uncertainty and stock market volatility. 

Follow me here…

Weak Economic Data Abounds

In our view, there’s no arguing that the U.S. economy is buckling under the pressure of policy uncertainty. No matter where you look, the data is weakening. 

Consumer sentiment has crashed, as shown by the Conference Board’s Consumer Confidence Index, which declined by 7.0 points in February. 

Consumer spending has slowed, with personal consumption expenditures (PCE) decreasing $30.7 billion (0.2%) in January, according to the Bureau of Economic Analysis. 

Inflation expectations have surged higher, from 5.2% to 6% in February. 

Business investment has slowed, down from $938 billion in Q3 of 2024 to $809 billion in Q4.

At the end of 2024, the U.S. economy was growing at a 2.3% clip. But based on real-time estimates from the Atlanta Fed, the economy is now contracting at a 2.8% clip. In other words, over the past two months, we’ve gone from steady growth in the U.S. economy (+2.3%) to meaningful contraction (-2.8%). 

That’s not good. 

And this slowdown to -2.8% GDP growth happened before the onset of a global trade war. 

Trump has enforced 25% tariffs on Mexico and Canada and has also levied additional tariffs on China. All three countries have responded with reciprocal tariffs of their own… meaning the global trade war has officially begun. 

According to calculations from Bloomberg Economics, all these tariffs will raise the average U.S. tariff rate from 2.3% to 11.5% – the highest it has been since World War II. 

Such a drastic rise in the average U.S. tariff rate will only further hinder economic growth.

Understanding the Risks to the Economy

According to estimates from the Fed, hiking the U.S. tariff rate from 2.3% to 11.5% would negatively impact the U.S. GDP growth by about 1.3%. 

We’re running at -2.8% GDP growth right now… before the trade war. And current tariffs already in place should knock that down another 1.3%… which means we’re looking at potentially -4.1% GDP growth. 

And that doesn’t even include any of the other tariffs Trump plans to enact over the next month. He’s said that he wants to implement 25% tariffs on all steel and aluminum imports, as well as 25% tariffs on cars, chips, and pharma goods. He is also planning to launch global reciprocal tariffs next month. 

If even just a portion of these threatened tariffs go into effect, that would negatively impact U.S. GDP growth by at least another 1%. If so, then with all these tariffs, we’re looking at a potential pathway to -5% GDP growth by the summer. 

By any and all metrics, that negative growth would be consistent with a recession. In fact, a -5% GDP would actually be consistent with a very bad recession – not a mild one. 

In other words, the global trade war – if it persists – could tip the U.S. economy into a recession by summer. 

Of course, if that happens, the stock market is likely to crash. 

Trade wars continue to roil the stock market … good news on the semiconductor front … an AI Applier recommendation from Eric Fry … more jobs losses due to AI

Earlier today, all three major stock indexes found themselves deep in the red as President Trump’s trade war escalates.

This morning, 25% tariffs on imports from Canada and Mexico went into effect, as did 20% levies on Chinese goods.

In response, China will impose new 10%-15% tariffs on certain U.S. imports next week… Canada is applying 25% tariffs on more than $20B of U.S. imports immediately … and Mexican President Claudia Sheinbaum said she will announce her tariff plans this weekend.

Stepping back, brief levies used as a negotiating tool are one thing… extended tariffs as a “new normal” for U.S. trade policy is another.

Today’s market upheaval reflects fears that we’re slipping into a “new normal” that would weigh on corporate earnings and the U.S. consumer.

The related economic uncertainty is creating a “batten down the hatches” mindset for corporate managers that’s slowing business activity.

For more on this, let’s jump to our hypergrowth expert Luke Lango. From yesterday’s Innovation Investor Daily Notes:

The U.S. economy is clearly buckling under the pressure of heightened policy uncertainty.

GDP grew by 2.3% in the fourth quarter of 2024. Real-time estimates for GDP growth in Q1 have fallen to -1.5%.

In other words, U.S. economic growth has fallen off a cliff over the past two months from steady growth (2.3%) to fairly meaningful contraction (-1.5%) …

According to the February ISM Manufacturing Report released [yesterday] morning, the U.S. economy is moving in all the wrong directions right now.

Business activity is collapsing, with the New Orders index falling from 55.1 to 48.6 – its lowest level since October 2024.

Labor conditions are deteriorating, with the Employment index falling from 50.3 to 47.6 – its lowest level since October 2023.

And inflation pressures are spiking, with the Prices Paid index surging from 54.9 to 62.4 – its highest level since June 2022.

Everything is going in the wrong direction.

Before we get too bearish, Luke remains optimistic that these tariffs won’t become permanent

He sees stocks roaring back when today’s uncertainty dissipates. And that point is approaching.

Back to Luke:

Policy uncertainty will abate in the coming weeks. It may even be replaced by policy optimism as the new administration shifts its focus from tariffs and federal spending cuts to deregulation and tax cuts.

As that happens, stocks should rebound…

Aside from policy risks, the fundamentals underlying the stock market remain positive and strong. That’s why we believe that as policy risks ease, this market will blast higher.

I’ll note that stocks are trading off their morning lows as I write early afternoon. The Nasdaq has jumped from “2% down” to less than half a percent lower.

Who knows where we’ll close, but this is encouraging, and has shades of Luke’s forecasted rebound.

Circling back to tariffs, Trump will likely defend/promote his policies tonight when he delivers the first joint congressional address of his second term. In the meantime, mind your stop-losses…and look for great stocks that are now selling at panic prices.

I’ll share one stock to consider below.

Following the trail of innovation…

Let’s follow the steppingstones.

AI is the future…

The nation that leads the AI race will gain a significant edge – both economically and militarily – over its rivals…

At the heart of this competition lies cutting-edge semiconductor technology…

And that places Taiwan Semiconductor Manufacturing Co. (TSMC) squarely in the global spotlight.

According to The Economist, Taiwan produces more than 60% of the world’s semiconductors and over 90% of the most advanced ones. And most of them come from TMSC.

To make sure you’re not confused, Nvidia designs the most advanced AI chips, but it does not manufacture them. Instead, it relies on TSMC to produce its cutting-edge chips, including the latest GPUs used for AI.

With this context, yesterday brought important news.

From The Wall Street Journal:

Taiwan Semiconductor Manufacturing Co. intends to invest $100 billion in chip-manufacturing plants in the U.S. over the next four years under a plan expected to be announced later Monday by President Trump, according to people familiar with the matter.

The investment would be used to build out cutting-edge chip-making facilities.

Such an expansion would advance a long-pursued U.S. goal to regrow the domestic semiconductor industry after manufacturing fled largely to Asian countries in recent decades.

This is a big next step in our AI war with China

Taiwan – particularly TMSC – is a potential flash point between the U.S. and China.

China has increasingly asserted its intention to reunify with Taiwan, using both military posturing and political pressure. Recent activities include intensified military drills and frequent incursions into Taiwan’s air space. Experts suggest this signals a readiness to use force if Beijing deems it necessary.

Here’s The Guardian:

China’s military launched a record number of warplane incursions around Taiwan in 2024 as it builds its ability to launch full-scale invasion, something a former chief of Taiwan’s armed forces said Beijing could be capable of within a decade.

TMSC – being the world’s largest contract chipmaker and a key supplier of cutting-edge semiconductors – is critically important to both China and the U.S., making the news of the $100 billion investment even more significant.

Domestic chip production would be critical if a worst-case scenario plays out between the U.S. and China over the coming years.

We’ll keep you updated as this story unfolds.

Meanwhile, a reminder to invest in “AI Appliers” – even more so today while the markets are panic selling

If you’re new to the Digest, “AI Appliers” are the companies using AI to grow revenues, cut costs, and beef up bottom lines. Here’s a bit more color from our global macro expert Eric Fry, editor of Investment Report:

AI Appliers take foundational tech breakthroughs – like Nvidia AI chips – and profit off utilizing them.

Some companies use AI to enhance businesses, while others provide the energy AI needs to run.

These are the companies now set to produce strong investment gains in the coming years.

In recent weeks, we’ve highlighted various AI Appliers recommended by our experts. Let’s highlight with another one, courtesy of Eric:

Coupang may not be a household name here in the United States, but the company is well known in every South Korean household. Coupang is South Korea’s go-to provider of Amazon-like services.

In his analysis, Eric highlights the company’s Q1 2024 earnings call in which founder Bom Suk Kim spoke to Coupang’s AI initiatives.

I’ll include a snippet of it below, as this is the exact type of commentary that we should be looking for from the CEOs of the companies in which we’re investing today.

From Kim:

Machine-learning and AI continues to be – have been a core part of our strategy. We’ve deployed them in many facets of our business from supply chain management to same-day logistics.

We’re also seeing tremendous potential with large language models in a number of areas from search and ads to catalogue and operations among others.

There is exciting potential for AI that we see and we see opportunities for it to contribute even more significantly to our business.

But like any investment we make, we’ll test and iterate and then invest further only in the cases where we see the greatest potential for return.

This focus isn’t new. Eric notes that Coupang’s e-commerce platform already utilizes AI and advanced robotics.

Meanwhile, the company’s other patent-protected AI-related tech can predict future order volumes, alert product managers when prices fluctuate significantly, optimize Coupang Eats delivery, and enhance search accuracy.

And if this isn’t enough, there’s one final reason to consider Coupang…

Stanley Druckenmiller – arguably one of the greatest traders of all time – is heavily invested.

For newer Digest readers, “the Druck” is a market legend. He’s credited alongside George Soros as “breaking the Bank of England” when the two made $1 billion from shorting the pound. He has perhaps the best long-term investment track record of any investor alive.

As of mid-November 2024, Coupang was one of his top five holdings.

Bottom line: If you’re looking for a top AI Applier that’s not already in the average U.S. investor’s portfolio, give Coupang a hard look.

By the way, the stock is down about 10% over the last two weeks as this selloff continues.

For additional AI Appliers that Eric is recommending in Investment Report, click here to learn about joining him.

Finally, maintain a big-picture perspective on why you’re investing in AI

Unfortunately, it’s not just about investment gains…

It’s about being on the right side of history and securing your future.

Right now, in closed-door business meetings around the country, executives are having the same conversation…and it’s leading to the same action step…

The most effective way for companies to increase profits today is by letting go of expensive, error-prone human workers and replacing them with inexpensive, near-perfect AI workers.

Here’s a tiny sampling of what’s been happening in the corporate world recently:

• Salesforce: Management announced layoffs due to artificial intelligence, indicating a strategic move towards automation to enhance efficiency.
• Autodesk: The software company will cut approximately 9% of its to increase efficiency and focus on growth areas such as artificial intelligence.
• Workday: They’ll be laying off about 8% of its workforce as part of a shift towards more AI-driven solutions and investments.
• Duolingo: In January last year, it offboarded 10% of its contractor workforce as the company pivoted to AI for content translation.
• Siemens: It’s considering cutting up to 5,000 jobs globally in its factory automation sector due to ongoing challenges, with a focus on integrating AI to enhance efficiency.

I could list dozens of these stories, but they all point to the same takeaway…

AI is replacing a growing number of the corporate workforce

Executives will do all they can to avoid directly stating this reality. After all, it looks terrible in the headlines. So, they’ll mask it with business jargon, using words like “efficiency” and “streamlining.” But the takeaway is the same…

More jobs lost to AI/automation.

To be clear, this isn’t about struggling companies using AI as a lifeline to right the ship and return to profitability. Most of the companies incorporating AI today are profitable. But AI can help them become even more profitable.

Here’s Forbes making this point yesterday in an article highlighting corporate job cuts coming in March:

Michael Ryan, a financial advisor, says that AI is a big driver in the announcements…

“It’s not like these companies are struggling to stay afloat. They’re making these cuts while their bottom lines look good.

“I think what we’re seeing isn’t just a normal economic hiccup. It feels more like companies are using this moment to fundamentally reshape how they operate.

“They’re thinking, ‘Well, if we can replace these positions with automation, why wouldn’t we?’”

This is the direction corporate America is headed. Here’s how I put it in our Oct. 7, 2024, Digest:

Imagine a billiards table with its pool balls spread about the table randomly…

Now, imagine hoisting up a corner of the table so that all the balls roll into a single pocket.

This is the financial impact of Artificial Intelligence (AI) on global wealth.

AI is lifting the billiards table… the pool balls are global wealth/investment capital… and the one pocket receiving all the balls are the owners of the businesses that wisely and effectively implement AI technologies.

What about the five other empty pockets?

Well, they’re the businesses that fail or are unable to adapt to next-gen AI technology or business models. They’re also the “regular Joes” who get shafted financially as AI steps in to do their jobs faster, better, and cheaper…

In the era we’re entering, there will be just two types of people: the owners of AI, benefiting from the lopsided flow of capital, and everyone else, who are watching AI swallow their former economic productivity like light into a black hole.

So, what do we do?

From an active income perspective, become proficient at whatever AI tools are most relevant to your industry (if applicable), and use them to make yourself more effective.

From a passive income perspective, your best defense is a good offense of well-placed AI investments.

That’s what we’re trying to help you achieve here in the Digest with recommendations like CPNG.

Bottom line: Make sure you’re ready for what’s coming…because it’s already begun.

Have a good evening,

Jeff Remsburg

February was a bumpy month for the overall stock market and our stocks.

Distractions like Trump 2.0’s latest tariff threats, the German elections, DeepSeek’s AI claims, weak consumer confidence and elevated inflation caused some wild market swings. As a result, all of the major indices ended the month of February lower, with the S&P 500 down 1.4%, the Dow down 1.6% and the NASDAQ down nearly 4%.

March has gotten off on equally volatile footing. Yesterday, markets began to sell off as deadlines approached for President Trump’s threatened tariffs against Canada and Mexico. As a result, the S&P fell 1.7% on Monday to post its worst day of the year. Meanwhile, the Dow lost 1.5% and the tech-heavy NASDAQ dropped 2.6%.

The stock market threw another hissy fit over tariffs today, with all of the major indices opening sharply lower this morning. At one point, they were all down by more than 1% before moderating those losses in afternoon trading. As investors digested the tariff news, they began to worry about how they will impact the U.S. economy now that they are in place. 

So, in today’s Market 360, let’s review the latest tariff news. I’ll explain why we shouldn’t worry and what we need to remember during market selloffs. Simply put, good stocks will bounce. I’ll share an example of one such stock… and why quantum computing should serve as a catalyst for it in the future.

Most investors expected stability, but cryptocurrencies have delivered spectacle…

After touting his support all along the campaign trail, President Trump initially had cryptocurrencies tearing higher. But as with the rest of the financial markets, cryptos have been stuck on a rollercoaster that would test even the most iron-stomached investors since November’s election.

Indeed, Bitcoin (BTC/USD) rallied 60% in the month after the election on hopes for pro-crypto policies out of D.C. Then, worries about reinflation sent Bitcoin crashing 15%. 

As those inflation worries abated, BTC rebounded 15%… only to crash 20% on tariff fears. 

Most recently – just this past weekend – Bitcoin popped 10% in a hurry on news that Trump is set to create a strategic national reserve for cryptos. But when the president subsequently announced more tariffs on Monday, BTC gave back all those gains. 

It has been a violent and volatile ride over the past few months. The natural question on everyone’s mind is: What’s next?

We think a rally – and a pretty big one at that… 

This Week’s Bullish Development

Perhaps surprisingly, considering what we’ve just outlined, our bullishness stems from Trump. 

As we mentioned, shortly after the election, Bitcoin surged from $60,000 to $100,000 on the idea that the president would enact a series of pro-crypto policies that would support innovation and growth in the industry. Since then, however, BTC has stumbled on concerns that the president was de-prioritizing cryptos. 

That is, in his first few weeks in office, Trump hit the ground running with tariffs and federal spending cuts. But he moved rather slowly with his crypto-related promises, creating worries that his action would be less than hoped. 

That could all change later this week. 

This Friday, March 7, Trump is set to host the first-ever White House Crypto Summit. Attendees will include prominent founders, CEOs, and investors from the industry. 

We think he could announce more big things at this summit. 

Trump is well-aware of how crypto markets have struggled – and of how some crypto investors who supported him on the campaign trail may be disappointed with how the markets have fared so far during his presidency. 

That’s why we think he tried to ‘save’ the crypto markets with the announcement of a crypto strategic national reserve on Sunday… 

Editor’s Note: A lot of folks know I recommended NVIDIA Corporation (NVDA) back in 2019.

And since then, that stock has soared more than 3,000%.

I still consider NVIDIA my Stock of the Decade. But I don’t love the stock. Because after more than four decades in the market, I’ve learned not to “fall in love” with any particular stock.

Instead, I let the fundamentals speak for themselves. And that’s why I rely on my proven quant system to be my guiding star.

After all, it doesn’t have an emotional connection to a stock. It lets the numbers do the talking.

My friend and colleague Keith Kaplan, operates the same way.

Keith is a gifted computer programmer and fintech pioneer. He’s the CEO of a company called TradeSmith, which produces some of the most powerful stock-trading algorithms I’ve seen. More than 60,000 people use Keith’s algorithms to track some $30 billion in assets. And they’ve reported making millions in the process.

For the past three months, Keith’s team has been working on a highly secretive project.
It’s a new kind of algorithm designed to do one thing: detect the start of technical melt-ups before they happen.

And right now, it’s pointing to an ultra-rare event poised to disrupt the market…
In fact, it has only been seen twice before going back to the year 1900. And that’s why Keith is making what he calls “the biggest prediction in TradeSmith’s 20-year history.”

And just days from now, he’ll reveal his full prediction for the first time ever.

On February 27 at 8 p.m. Eastern, Keith will take you behind the paywall of his powerful $5,000 software to reveal 10 tech stocks poised soar as this event unfolds.

Either one could become the Next NVIDIA in terms of potential gains.

You’ll get his full list – and his full prediction – when you join his briefing next Thursday. I suggest you go here and get your name on Keith’s attendee list right now.

**************************

I love stocks and the market. I love reading about, thinking about it and, best of all, profiting from it.

But year after year, I found the same thing happening to me over and over again.

I was great at buying the right stocks… but I was a terrible investor.

If you’re anything like the average investor, this has happened to you too.

Ask yourself this: How many times have you bought a stock, then sold it, just to find out that it rose much further?

This happens for a few reasons. And chances are, if you’re anything like me, it’s happened to you in the past… a lot.

To help prevent this kind of impulsive decision making, I made it my mission to develop a system that prevents me from doing that to my portfolio…

It has worked wonders for me!

And it can help you too.

And today I’m going to show you how it works…

The Right Way to Buy and Sell

In October 2016, I bought Advanced Micro Devices (AMD).

This action makes me look like a genius; AMD has gained more than 1,000% since I bought into the stock.

But I’m not a genius because I sold nearly right away …

Why did I sell?

I trusted my gut. The same gut that I trust to judge right and wrong and who to be friends with. You know, the emotional being in me that makes all my decisions.

Clearly, that didn’t work out well for me. And you probably have a lot of these types of examples too.

So how is it that we can buy the right stocks, but we wind up being terrible investors?

Well, because we make quick decisions when we trust our gut.

Do you have a regimented process for understanding exactly when to buy a stock, how much to buy, and when to sell it?

I do NOW, and it all starts with this formula below …

Before I unpack this for you, let me tell you about the findings of two Nobel Prize winners in behavioral economics.

You may have heard about Richard Thaler and Daniel Kahneman. Their groundbreaking studies of behavioral economics and investor psychology ultimately won them both the Nobel Prize.

Their first finding was that we are “risk-seeking when we’re losing.”

This is simple. And I bet you’ve had this happen plenty of times. I call it “rationalizing your decision after you make it.” When a stock is falling, you say to yourself:

• I’m going to buy this on the dip.
• This stock will come back, and my break-even price will be lower.
• It’s just a paper loss.

Really, what you’re doing is adding more risk to your position. You are “seeking out more risk” by buying more OR holding on to a falling stock.

Momentum is the single most important factor in investing. MSCI Inc. has studied this factor and labeled it one of the most important in reference to a stock’s rising or falling. Here’s what that means in plain speak: When a stock has a confirmed uptrend, it is more likely to rise in the short term. When a stock has a confirmed downtrend, it is more likely to fall in the short term.

And by buying more of a stock as it’s falling, or by “waiting” for that stock to turn around, you are taking on risk and even increasing risk. You are setting yourself up to lose more money.

So how do you combat that? You cut your losses when a stock is in a confirmed downtrend. Stop the bleeding.

But what Thaler and Kahneman found about winning is even more important to understand. They found that when a stock rises, we are “risk-averse when we are winning.”

Here’s what that means, and I’m sure you’ve been there with me. Typically, when a stock is rising, we get excited. We have a winner! So we decide to sell our stock to “lock in our gains.”

Folks, that’s lowering our risk. That’s taking money off the table.

But we’re winning!

When a stock is rising, and it is in a confirmed uptrend, you are winning. Here is where you want to take more risk, folks!

This is the BEST TIME to either ride the winner higher or even add more money to the position to take advantage of its short-term rising outlook.

And that leads me to our (TradeSmith’s) discovery of the single most important number in investing AND why it works.

This number is the formula I showed you above for the “VQ,” which stands for Volatility Quotient.

And it solves so many problems that individual investors face today. Certainly people like me, and likely you as well.

It’s a measure of historical and recent volatility – or risk – in a stock, fund, or crypto. And that measurement is really focused on the moves a stock, fund, or crypto makes.

Here’s what it tells you (I’ll just refer to stocks, but it covers everything we track):

• How much of a stock to buy.

• And how risky that stock is – how much movement you should expect.

To show you an example, here are the VQs of some popular stocks:

Let me leave you with a single nugget that may change your investing life forever. It certainly has changed mine …

The trend is your friend.

If the confirmed trend is up, stay in your stock. Ride the winner! If the trend is a confirmed downtrend, cut your losses.

The best way to get the most out of a winner and cut the loser (and of course, winners become losers at times) is to deploy a trailing stop. A trailing stop acts as a point at which you sell a stock (or any other fund, crypto, etc.).

When you buy a stock, you specify what your trailing stop is – most people pick a “generic” number like 25%. That means that from the moment you own a stock, there is a stop loss number at which you will then sell the stock, and the trailing stop trails the highs (but not the lows) that the stock makes.

If you buy a stock at $100 and it goes down over time by 25% and never makes a new high since you purchased it, you sell at $75.

If that stock rises to $200 and never falls 25% from a high, you’re still in that position, and your stop out point is $150.

So you ride your winners and cut your losers.

But NO TWO stocks, funds, or cryptos are the same. That’s why you can use the VQ number for each stock you buy to determine exactly what the right stop loss would be.

Looking at the table I posted above with popular VQs, that means your stop loss for Johnson & Johnson would be about 12%. But for Tesla, your stop loss would be around 49%.

Tesla moves around more than three times as much as Johnson & Johnson. Now you know that if you were to buy Tesla, you would have to suffer through a lot of thrashing around, but it may be worth it.

And on my AMD trade, had I followed a 25% trailing stop, I would have made nearly 50% instead of losing 3.5%!

And had I used a VQ-based trailing stop, well, I could have followed the signals and made more than 1,300%. I would have known that AMD is risky and moves around a lot.

So… the VQ is important. It sets expectations and gives you a framework for making better decisions.

It turns great stock pickers into great investors!

I honestly believe it’s the most important number in investing.

On Feb. 27 at 8 p.m. Eastern, I’m going to unveil the biggest prediction in my company’s 20-year history. And I’ll explain how anybody can use the VQ to make data-driven decisions about their investments. It’s free to attend; all you have to do is register.

Happy investing!

Keith Kaplan

CEO, TradeSmith