By Sara Nunnally, Editor, Smart Investing Daily, taipanpublishinggroup.com
You may have already received a letter from Michael Robinson introducing you to his new service, 180 Trader. (You may know Michael as the editor of American Wealth Underground.) In his letter, he talks about something called “T-Gems” and he’s cornered a way you can harness their power to make a small fortune for yourself.
What are T-Gems, exactly, and should you be investing in them?
During the financial crisis, we watched helplessly as good companies lost massive chunks of their share prices right alongside companies that were actually struggling.
We watched valuations disappear faster than an ice cube in the noonday sun.
This made everything look cheap, and the market rally since the start of the recovery has made even bottom-feeding investors look like geniuses.
In other words, the sharp drops in share prices created a lot of opportunities, but not all are worth investing in… and some offer vastly better returns than others. That’s why I found Michael Robinson’s letter so intriguing. His 180 Trader service seeks out these beaten-down stocks to find turnaround companies, or T-gems.
But he doesn’t just pick any old stock that’s lost some 95% of its share price.
He has a system, and we at Smart Investing Daily like systems. They can be analyzed and tested to see if they actually work, or if they’re just a bunch of baloney.
Michael gave us his criteria for weeding out the cheap companies from the true turnaround gems:
Turnaround Key #1: They Aren’t Really Broken! They only appear that way because their stock price is low and they may be receiving negative press. I won’t consider recommending a company that is not fundamentally and financially sound.
Turnaround Key #2: They Have a Major Dominant Advantage. The company must also possess a dominant advantage in its own industry sector. Maybe they have a patent. Or maybe a major contract. Or maybe they have a powerful brand that wipes out the competition.
Turnaround Key #3: Minor Flaw Caused 90% Plunge From Normal Price Levels. There is usually a minor flaw that sets off the selling. Could be too much short-term debt. Could be overextended operations. Could be the company missed their earnings target by a couple pennies. But it must be only a minor problem.
Turnaround Key #4: The Big Money Is Quietly Buying! Once the big firms start to realize that a company is financially sound and has upside potential, they jump back in very quickly. They pour big money into a stock, lifting it back to normal price levels.
Turnaround Key #5: “The Triple-Cross” Buy-Signal Flashes. I use a proprietary indicator known as the “Triple Cross.” This signal is rare. It requires three technical indicators to converge. Again, this doesn’t happen often, but when it does, it is a near-certain signal that a stock is beginning an explosive bolt upward.
We’ve talked about buy signals here in Smart Investing Daily before. There are many of them, and each analyst has their favorite combination that they’re pretty possessive about. It’s kind of like a secret recipe.
The “Triple Cross” deals with specifically calibrated moving averages that indicate when a stock is gaining enough momentum to rise more than 100%.
We’ve told you that a moving average is the average price of a stock over a certain period of time. So, for example, a 20-day moving average tracks the last 20 days of a stock’s share price. Moving averages are useful to measure the momentum of a stock because they smooth out the everyday share price movements.
(Investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Jared Levy simplify the stock market for you with our easy-to-understand investment articles.)
In general, a rising moving average indicates rising momentum, and a falling moving average indicates falling momentum.
But the use of more than one moving average can give you a powerful indicator with buy and sell signals when one moving average crosses another. This is what the “Triple Cross” is doing — using more than one moving average and watching where they cross.
T-Gems, though, require more research than a technical buy signal, and that’s where Michael’s other “Turnaround Keys” come in. They are just as important, perhaps even more so, depending on what kind of investor you are.
Michael says that turnaround companies show “absolutely stunning gains, as much as 1,000%… 1,700%… even 3,400%… on a regular basis. But I’ve been unable to recommend these stocks to my 9,500+ American Wealth Underground subscribers.”
Here’s why.
When these companies are so beaten down that they are trading for $1 or $3 a share, even highly liquid stocks can have volatile share price movements at the bottom.
We’ve talked about something called Average Dollar Volume (ADV) here before. You multiply the share price by the daily volume to find ADV. So for example, if Company X is trading for $2 a share with a daily volume of 250,000, the ADV is $500,000.
That’s not a very high ADV, which means that someone with a large trading account can buy a lot of shares and move the price very easily.
More conservative investors tend to look for investments with an ADV higher than $1 million just to be on the safe side.
And that’s why T-Gems might not be appropriate for everyone.
That’s also why Michael hasn’t been able to recommend these companies to his large base of American Wealth Underground subscribers. But for the right investor they can make incredible returns. And for Michael’s new service called 180 Trader, they’re perfect.
Michael’s 180 Trader will be a small and select group of traders. Being small allows for a greater number of opportunities with these turnaround companies. A large group like American Wealth Underground would be able to shift share prices too much.
If you haven’t read Michael’s letter about 180 Trader yet, it’s something you should take the time to do. I was able to read through it in less than 10 minutes, and as someone who loves a spot-on technical signal as much as the gritty details of fundamental research, I have to say that I was impressed with the system Michael uses to weed out the cheap stocks from the potential T-Gems.
*Editor’s Note: If you can’t find the letter Michael sent you about 180 Trader, you can access my copy here.
About the Author
Sara is Managing Editor of Smart Investing Daily. As Senior Research Director and global correspondent, Sara Nunnally’s diverse resume includes studies in art history, computer science and financial research. She has appeared on news media such as Forbes on Fox, Fox News Live, and CNBC’s Squawk Box, as well as numerous radio shows around the country. Most recently, Sara co-authored a book with Sandy Franks called, Barbarians of Wealth.
As Senior Research Director, global correspondent and managing editor of Smart Investing Daily, Sara has traveled all over the world in search of the best investment opportunities to recommend to her readers, be they in developed economies like France and Italy, in emerging markets like the Czech Republic and Poland, or in frontier terrain like Vietnam and Morocco. Her unique “holistic” approach of boots-on-the-ground research has given her an edge in today’s financial marketplace as she searches for the next investment opportunities in hot sectors like alternative energy, currency markets and commodities.
