The Smart Profits Report #540
Tuesday, July 15, 2008
by Marc Lichtenfeld, Senior Analyst, Smart Profits Report Bear markets are great equalizers. They tend to level the playing field considerably. Take the current market, for example (now that all three major stock indexes have dropped 20% from their October highs and have officially descended into bear market territory). Bad stocks are getting pounded. But good stocks are getting whacked, too. When fear is rampant, investors fleeing for safety tend to sell everything, not caring if they’re letting go of a quality company or a dog. They just want to get the heck out of Dodge. This is the reason I like bear markets – and exactly why they offer some excellent opportunities to profit. You see, for folks like me, who are in the market for the long haul, you can find some outstanding bargains. Like my last stock pick… An 11% Gain In Three Weeks… In This Market In the most recent issue of the Xcelerated Profits Report, I picked a very well-known Big Pharma company in the midst of a strategic shift in its business model. Not only is it taking steps to combat the widespread nemesis affecting the Big Pharma industry today (expiring patents and poor drug pipelines) by beefing up its pipeline through acquisitions, it’s also hugely undervalued in relation to its peers. Oh, and it pays a nice dividend, too. Out of fairness to our paying Xcelerated Profits Report readers, I can’t reveal the name of the company, but I can tell you that it’s up 11% since my recommendation. Meanwhile, the S&P 500 has slid 7.4% during the same period. That’s the benefit of looking for quality stocks at discount prices during a tough market. I’ll show you how to get a piece of the action for yourself in a minute – and hop on board with my latest pick, too. Meantime, here’s another effective strategy you can use to hunt for “bear bargains”… Rewind: The Best Bear Market Bets From 2000-2002 When you’re faced with a challenging market, one option is to look for the stocks that historically perform well during downturns. You’ll often find that the companies that not only weather the storm, but thrive during it, are the ones that lead the pack once the market stabilize and heads higher again. Here are some examples of stocks that held up well during the last bear market, which growled from March 2000 to October 2002. During that time, the S&P 500 lost a whopping 50.4%. Ventas (NYSE: VTR): Check out these results. While most other stocks were in freefall, Ventas gained a sensational 578% and then went on to post additional gains of 356% at the stock’s high. THQ Inc (Nasdaq: THQI): Investors who held on to THQI during the last bear were rewarded with a return of 68%. But that pales in comparison to the 178% gains at the stock’s high afterward. Manor Care: Shares jumped 36% during the last bear market. However, by the time the Carlyle Group bought the company in 2007, its shares had rocketed another 255% since the end of the bear market. But I imagine you want the best stocks to invest in during a bear market today. Below are a few stocks to look into. They are all trading well during what has been a treacherous market. That should be some indication that their prospects are especially bright. Fast Forward: The Best Bear Market Bets Today From solar power, to biotech, to healthcare and hospice services, these four companies are currently battling the bear head-on… and winning. Canadian Solar (Nasdaq: CSIQ): Shares of this Ontario-based manufacturer of solar modules have skyrocketed over the past year. Although currently 25% off its high, the stock is still well-placed to profit from high oil prices, and with the company having recently raised its revenue outlook, there’s no reason to think that solar stocks will quit any time soon. Note: Solar power is still a young, up-and-coming industry in stock market terms. Our newly added technology expert Paul Moore is cautious on the sector and I’m sure he’ll have more to say about solar in coming months. Moving to the healthcare area, several names have recently hit 52-week highs… Allos Therapeutics (Nasdaq: ALTH): Shares of this biotech company have recovered nicely since the firm’s brain cancer drug failed Phase III trials last summer. At the moment, its leading candidate, PDX, is in Phase II trials for T-cell lymphoma. The company raised over $65 million this spring, so it should have enough cash to fund its research in the near-term at least. Allos is not expected to generate any revenue this year, though. Amedisys (Nasdaq: AMED): This profitable provider of home health and hospice services is projected to earn $2.73 per share this year and $3.32 next year. However, not everyone is bullish on AMED. Over 26% of the float is sold short. So either the bears know something, or there could be a big short squeeze coming if the stock continues to rise. Note: The company’s earnings report is scheduled for July 29, which should provide more clues. Sequenom (Nasdaq: SQNM): This genetic and molecular diagnostics company has seen its shares quadruple since April. But the stock really started cooking in June when the company announced very strong results in tests to determine Down Syndrome in fetuses using the mother’s blood. The Down Syndrome testing market is at least $1 billion and if Sequenom’s tests are proven superior, the company could be in the position to grab much of that revenue. The Next Company You Should Add To Your Portfolio Before I sign off, just a quick note to let you know that I’m about to unleash my next stock pick on Xcelerated Profits Report readers. I’ve spent the past few weeks deep in research on a medical device company that has racked up some outstanding sales growth this year… has just cornered a crucial market… and boasts terrific prospects, with earnings growth expected to rise by more than 20% annually over the next five years. What’s more, its stock has completely ignored the current market downturn and set off in a solidly higher direction. I believe this is just the beginning, with its shares poised for an 18% rise over the next month or so – and significantly higher after that. I invite you to join me here. Finally, do keep in mind that cycles change and the sectors that may perform well now, might easily be next year’s laggard. But keeping tabs on the strong stocks during this year’s bear market is a good way to get a jump-start on the next bull market. Hoping your longs go up and your shorts go down. Marc Lichtenfeld
P.S. Update On Karim’s South America Trip: As Karim mentioned here last week, he’s off to Argentina and Uruguay this November in search of some much-needed “bang for his buck.” And he wants you to join him on his venture. He just told me that only SIX of the 16 places on the trip remain, so you must be quick if you want to take advantage. Personally, I’d love to hit South America in November, but my Stateside duties call. For you, however, it’s a chance to discover some real investment value and diversify your portfolio away from the ailing dollar and into some long-term, high-return investments. Hit the beach… drink some fine wine… tour some geographical and architectural wonders… it’s the perfect mix of business and pleasure. You’ll even travel on a private, chartered plane, so you can jet across the continent in style and with ease and speed. I’m officially envious! You can get all the details about the trip here: http://www.agoratravel.com/investsouthamerica/ And be sure to tell me all about it! If you have any questions, or would like to reserve one of the remaining spots, please call Agora Travel Director Barbara Perriello. Dial: 800-926-6575 or 561-243-6276 – extension 104. It’s her direct line.
Today’s Smart Profits Notes: While Marc Lichtenfeld picks through the stock market rubble to find stellar companies during a bear market, our commodities expert Lee Lowell is riding the commodities bull market. Today, in fact, he instructed Xcelerated Profits Report readers to cash out of a bull spread position in the gold market – a 37% gain in just six weeks. To enjoy the kind of investment diversity and professional strategies that can lift you above the fleeing bear market crowd, click here.
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