PowerTrend Brief: The Informed Investor Scores Big Profits by Embracing Volatility

Chris Versace

Chris Versace is a financial columnist and equity analyst with more than 20 years of experience in the investment industry.

Ever since Fed Chairman Ben Bernanke hinted that the Fed could begin tapering its stimulating efforts, volatility returned to the stock market. There has been much discussion about when and how the Fed will deal with the sugar stimulus-addicted economy. The concern is if the Fed acts too quickly, much like a child on too much sugar, it will crash.

I shared my view last week that the Fed is not likely to taper near term. More recent data confirms that perspective, which I shared in greater detail this past weekend when I appeared on The Wall Street Report. Just this morning, the New York Fed’s own Empire Manufacturing Survey for June boosted the case for no near-term tapering:

  • “The new orders index slipped six points to -6.7, the shipments index fell twelve points to -11.8, and the unfilled orders index fell eight points to -14.5.”
  • “Labor market conditions worsened, with the index for number of employees dropping to zero and the average workweek index retreating ten points to -11.3. Continuing the trend seen in the past few months, indexes for the six-month outlook declined, suggesting that optimism about future conditions was weakening further.”

Now that’s just the latest, and we can add last week’s industrial production report, as well as the May producer price index. Keep in mind that China is slowing and the euro zone remains sluggish. Factoring all of these elements together, it reinforces my view that the Fed is not likely to taper its stimulating efforts near term.

Even though the evidence points in that direction, the horde likely will wait until it learns of the Fed’s decision for itself this Wednesday, which is the date for the next Federal Open Market Committee meeting. Should Bernanke — and I think he will — signal the Fed will continue to inflate the economy in the coming months, it will not only be gas for the fire that has been the stock market, but it will bring calm to the stock market.

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With that view, we’ve been using the recent market volatility to scale further into some of our existing PowerTrend Profits positions. Much like the fat cats of Wall Street, we don’t buy an entire position in one fell swoop. Rather, we take advantage of any dips in the share price to improve our cost basis, while also increasing our position size — that’s a long-term win-win and a key strategy to long-term profits. That strategy has led to huge profits:

  • More than a 45% return in our Starbucks (SBUX) holdings during the last 10 months;
  • A near 32% gain in Applied Materials (AMAT) in less than 10 months;
  • A return of 34.4% return for our Inter Parfums (IPAR) position in less than six months;
  • A near 29% return in roughly a year’s time in International Flavors & Fragrances (IFF).

Not only are those returns well ahead of the major market indices, but with each of those, I’ve used market volatility to your advantage. Keep in mind that those are only some of the big returns that subscribers to PowerTrend Profits have booked. As I said, my subscribers and I have been using the last six weeks to make sure we’re positioned for even more big profits in the weeks and months ahead. After all, the informed investor not only wins the day, he or she also generates considerable profits while being able to sleep at night.

PowerTalk #35 — Dishing on Cyber Security with Sourcefire’s CTO

Earlier this week, I was talking with some folks at the U.S. Chamber of Commerce, and they pointed out several of the key concerns that are on the minds of its more than 3 million members. For those businesses that comprise the Chamber’s constituents — from mom-and-pop shops to leading industry associations and large corporations — cyber security increasingly is on their minds.

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That makes my most recent PowerTalk all the more timely. Joining me to discuss the growing threat we all face — cyber attacks — as well as a set of new solutions to combat them is Martin Roesch. Martin is not only a founder of cyber security company Sourcefire (FIRE) but also its chief technology officer (CTO) and a board member.

Cyber attacks not only are growing in volume, but they are hitting major companies like Google (GOOG), Bank of America (BAC), Northrop Grumman (NOC), Microsoft (MSFT), Yahoo (YHOO), AOL (AOL), LinkedIn (LNKD), Tumblr, the Reuters news service and the BBC, to name a few. The situation is a cause for alarm. Findings from Symantec’s (SYMC) Internet Security Threat Report, Volume 18 revealed that not only was there a 42% surge in targeted attacks during 2012, but 31% of all targeted attacks are aimed at businesses with fewer than 250 employees.

That’s one of the reasons why the threat of cyber attacks sits in the crosshairs of my Safety & Security PowerTrend, one of my Great 8 PowerTrends that shapes how we invest in my PowerTrend Profits newsletter.


To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

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