Today, we’re going whale hunting…
In the sports world, a “whale” is a superstar player who’s entering free agency. Teams hunt these valuable whales because they can change a franchise’s fortune.
Think of Michael Jordan in basketball, Peyton Manning in football, and Alex Rodriguez in baseball.
You can ride these whales to championships and glory.
The investing world has its own whales, too.
David Tepper is one of them.
His Appaloosa fund has averaged returns of 30% a year for the last 24 years. That means his original investors have made 545 times their money.
Now, we can’t sign Tepper as a free agent. But we can do the next best thing.
Back in March, we told you about a little-known way to see what the best investors in the country—like Tepper—are buying.
By using this strategy, we’ll be able to take a sneak peek inside the portfolios of one of the greatest whales in the investing game.
The Simple Way to Hunt Whales
There’s a simple way for the average guy to piggyback on the returns of the world’s top investors without hiring them…
All funds that have more than $100 million under management need to file a quarterly report with the U.S. Securities and Exchange Commission (SEC).
The SEC calls it a 13F filing. It requires large funds to disclose the stocks they own 45 days after every calendar quarter.
These reports are public record. So you can look at them yourself. (If you want to read through the 13F filings yourself, check out WhaleWisdom.)
Just last week, Tepper’s fund released its 13F report. And he added a big position.
To be clear… we can’t exactly match Tepper’s returns simply by following his 13F filings. He invests in some markets we don’t—like distressed debt.
But if we bought his stocks after each of his 13Fs were released, we would have made 20.6% per year since 2000.
That’s more than quadruple the returns of the S&P 500, which returned only 4.8% (including dividends) over the same span.
But right now, what we care about is Tepper’s latest catch. And it’s a doozy…
The Catch of the Day
This quarter, Tepper’s biggest addition was Bank of America (BAC).
We don’t know why… Like we told you in the past, he’s a private individual and doesn’t speak much publicly.
But he’s good at timing his purchases of bank stocks.
During the 2009 financial crisis, Tepper loaded up on banks.
While many investors feared a banking crash, Tepper bet the government would bail out the industry.
He bought financial stocks at fire-sale prices and his gamble paid off… He made $7.5 billion for his fund in 2009.
We think he’s onto something again…
Banks Are Primed to Go Higher
In February, we told you President Trump would cut banking regulations and that it could send financials 151% higher.
While they haven’t taken off yet, it’s only a matter of time. But when he does cut the red tape, banks will be able to operate more efficiently.
And we’ll see financial companies rocket like they did in the 1990s.
Banks typically trade off their price-to-book (P/B) ratio. The P/B ratio measures the price of the stock against the value of the company’s assets.
The higher the P/B ratio, the more you’re paying for the bank’s assets.
When banks are growing, investors are willing to pay more. As you can see in the chart below, investors were willing to pay a lot more for banks in the 1990s than today.
If we see a return to those levels, financials would explode by 151%. And we think it could happen this year.
Tepper is positioning himself with Bank of America.
If you want broad exposure to this trend, consider the Financial Select Sector SPDR ETF (XLF).
XLF holds some of the biggest banks in the nation, including Bank of America.
Nick Rokke, CFA
Analyst, The Palm Beach Daily
P.S. Tomorrow, I’m embarking on a trip through the Rust Belt to get a boots-on-the-ground view of President Trump’s “America First” policies. I’ll be looking into the best ways to profit from these policies. And I need your help…
I’ll be making stops in Illinois, Indiana, Michigan, Ohio, Pennsylvania, New York, and even Ontario, Canada. I want to hear your stories.
If you’re a small businessperson, own a mom-and-pop store, or are an expert on the local economy, tell me if protectionism is creating a renaissance in your city or turning it into a ghost town. No industry or community is too small. You can reach me right here…
By Jeff Clark, editor, Delta Report
The S&P 500 closed Friday just below its nine-day exponential moving average (EMA) at 2,383.
[Moving averages are used to gauge the general trend of a stock’s price by smoothing out the daily ups and downs.]
And the daily chart has the look of a bear flag pattern. (The bear flag is a downtrending pattern. It’s named for the resemblance of an inverted flag on a pole.)
Take a look…
Wednesday’s big decline had the look and feel of an “impulsive” move—meaning there was plenty of volume and plenty of selling pressure behind the decline.
But since the decline started with most technical indicators in “neutral” condition, they quickly reached oversold levels and set up for a solid one- or two-day bounce.
That’s exactly what we got.
In two days, the S&P recovered almost 50% of Wednesday’s decline. It jumped back above the 50-day MA line. Now it’s challenging the resistance of the 9-day EMA.
If you’re leaning bearish, then this is an ideal spot from which to take a short trade. You’d be shorting stocks at resistance, and you could keep a tight stop loss on the trade.
P.S. If you’d like to receive my free daily market insights, Jeff Clark’s Market Minute, click here and I’ll automatically add you to my list. You’ll also receive a link to my “Guide to Options Trading” just for signing up. This free report will teach you how to trade options the right way… and dramatically boost your overall returns.
Broker Adds Cryptocurrencies to Exchange: One of the world’s largest foreign exchange (forex) brokers is adding several cryptocurrencies. The forex market is the largest and most liquid financial market in the world. And AvaTrade is one of the biggest players in this space. AvaTrade recently announced that it’s adding several cryptocurrencies. So along with dollars, yen, and euros, you can now exchange bitcoin and Dash. You can learn more about the new cryptocurrency options on AvaTrade right here.
Another One Biting the Dust: Last week, office supply giant Staples reported that same-store sales plunged 6% in North America for the first quarter. That follows last year’s same-store sales drop of 5%. As a result, the company has aggressively closed stores to try to bolster its bottom line. Staples plans to close 70 stores this year, which would bring its store count to about 1,167. Like other brick-and-mortar retailers, Staples is getting Amazon’d. That term refers to retailers falling victim to the Amazon steamroller. And Staples looks like the latest to get bulldozed…
Surviving the Retail Apocalypse: Meanwhile, there’s a retail sector that seems “Amazon-proof.” These companies sell stuff like paper towels, hand soap, and canned goods for bargain prices, often for $1 or less. And they are growing rapidly while most brick-and-mortar retailers are failing. Plus, they’re not afraid to take on Amazon. In fact, these businesses are building more stores. Our friends over at Casey Research say you should consider picking up shares in two of them. You can get the story right here…
Chris Mayer is the top analyst at Bonner & Partners. In fact, longtime PBRG friend Bill Bonner has entrusted $5 million of his own family’s money to Chris’ recommendations.
This week, Chris is inviting you to take part in his free four-day investment masterclass. And just for watching the webinar at 8 p.m. on Thursday, he’ll give you six LIVE STOCKS from his current watch list…