How To Identify A Great Trade
by Brian T
Mikes
Just a few weeks ago I was on a shopping mission. I had two objectives. First, I was finding a few books for myself. I needed some summer
reading for around the pool. My second objective was finding a birthday
gift for my 4 year old niece. As you can imagine, the books were easy to
find; the birthday gift was much more difficult.
I live just a few short miles from a major shopping complex. They’ve got
almost every store you can imagine. I made a quick stroll through Best
Buy then headed over to Target. I also hit Barnes & Noble and Borders.
Yes, two bookstores. What can I say? I love to read.
I stopped at a few other smaller stores in between. . . it was a
marathon shopping session.
At some point during this massive hunting expedition I came across a
discount store. I was surprised at just how packed the place was. I
parked a good distance from the entrance. As I walked to the store the
first thing I noticed was the steady stream of customers. I couldn’t
believe the number of people entering and exiting.
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I’d been to that store a time or two, but I’ve never seen it this busy.
This got me thinking. The economy is slowing as gas and food prices head
higher every day. How are the discount retail stores doing?
As you can see from the chart above, the S&P Retail Index has been
falling for the last year. More recently, the industry rallied off the lows set in the
first quarter. The government stimulus checks drove the excitement, and
covered up some of the problems. Putting that aside, the retail industry
looks to be in deep trouble.
The problems continue.
I’m not going to rehash every issue. You know most of them. Gas prices
are high. Food prices are creeping up. Consumer credit is being cut.
Folks can’t use their homes as ATMs any more. Everyone’s looking to
stretch their hard earned dollar.
Even the wealthy are suffering.
Did you see American Express’ (AXP) earnings announcement this week?
They missed their earnings numbers in the second quarter. And when they
missed, they missed big. Management pulled their growth forecast for the
year. They said the deterioration was greater than expected. June was
bad . . . even for their “longer term super-prime customers.”
That’s not good for the economy . . . but there is a silver lining.
The discount retail industry is composed of more than 20 different
companies. You can have your pick of the big ones or the small ones. As
I examined the industry, I found a company with a tremendous presence. They’ve recently increased guidance, and are following through on a
stock repurchase program.
The business was performing well, and future milestones gave three
opportunities for the stock price to rally. Then I looked at
institutional ownership. A few of the “smart money” investors were
increasing their positions. Realizing what a great investment I’d found,
I immediately looked for undervalued options on this stock.
After finding one, I sent it to subscribers to my trading advisory,
Elite Option Trader.
Those that acted on the trade alert are now up almost 60% so far (in
less than 20 days). Not bad for one trip to the shopping mall!
So the point of the story is to really keep your eyes open when looking
for investment ideas. Even with our fancy computers, instant research
capabilities, and bundles of analysis software, sometimes the best ideas
can be found just by paying attention to what’s going on around you.
[By the way, I’d love to tell you what company I picked, but that
wouldn’t be fair to my paying subscribers. However, I’ve found another
trade that I expect to perform even better. It’s in a white hot sector
and has some great things going for it. I’m going to let my subscribers
know about this new pick on Friday. To get on the list to receive it,
you’ll need to be an Elite Option Trader subscriber by Thursday at
midnight. Click
here for more information.]
• Live Cattle ($0.9760 per lb)
Corn prices have been retreating over the last few weeks. The good
weather in the Midwest may prove promising for harvests. As a result,
out month cattle contracts have fallen. The assumption is it will be
less costly to grow beef. Feeder cattle also fell on the news.
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