Nick’s Note: Last week, we introduced you to one of the smartest minds in finance: former hedge fund manager Whitney Tilson. He’s the guy who bought Apple at $1.50 per share, and also called the dot-com crash… the housing crisis… and more.

And today, we’re sharing more of Whitney’s investing wisdom from his 20 years on Wall Street. Below, he covers one of his favorite investing tools—and how you can use it to profit…

By Whitney Tilson, founder, Empire Financial Research

I’ve learned a lot of things over my 20-year career on Wall Street.

But perhaps nothing is as valuable as talking about investing with average folks. I call it the “cocktail-party indicator.”

Whether it’s your trainer at the gym, a neighbor who’s never shown any interest in the markets, or the proverbial shoeshine guy… when you hear these folks talking about how much money they’ve made in bitcoin, 3D-printing companies, or the latest hot initial public offering… run—don’t walk—the other way.

I’ve found again and again that when the least knowledgeable investors among all the people I know are piling into whatever’s hot, it’s usually very near the top of a bubble.

Today, I’ll give you an example of how you can use the sentiment of average investors to your benefit—instead of riding the bandwagon to disaster…

You see, while the rest of the investment crowd is busy looking for the next way to get rich quick, I strongly suggest taking a different route.

I buy investments that are so hated, you’d be embarrassed to say you own them at a cocktail party.

The best example that comes to mind is the only time in my life when I bought an oil stock… You guessed it: BP in 2010, just after the Deepwater Horizon oil spill. Shares had gotten absolutely clobbered, falling from around $60 in April to a low of $27 in June.

Indeed, it was an environmental calamity, and a number of people lost their lives in the tragedy. CNBC’s Jim Cramer went so far as to call the stock “unownable.” That week, The New York Times wrote…

It seems unthinkable, even now, that the disastrous oil spill in the Gulf of Mexico could bring down the mighty BP. But investment bankers get paid to think the unthinkable—and that is just what they are doing.

The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street.

The fear in the market—bordering on hysteria—was music to my ears. After analyzing the fundamentals, I was convinced that the company wouldn’t have to file for bankruptcy… and that the stock was an incredible opportunity. So on June 9, 2010, I appeared on CNBC’s Fast Money…

Whitney on CNBC’s Fast Money

BP deserved the anger and blame. But when it came to the company’s future, the crowd was just flat-out wrong. Here’s what I told viewers that day:

What everybody’s missing here is, this is truly one of the most profitable businesses on the planet. They’ve managed to screw everything up. There’s really no excuse as best I can tell in terms of allowing this disaster to happen. The PR has been horrific ever since. And BP is going to pay billions and billions—maybe even tens of billions—of dollars for this debacle.

But what everybody’s missing is, this company consistently earns well north of $20 billion a year in profits; and keep in mind, all the damages are paid for with pre-tax money—so now we’re talking close to $30 billion a year. And it’s trading at five-and-a-half times earnings, paying a 9% dividend yield…

We fully expect the headlines to be horrible for a good, long time. But the stock is just too cheap.

That day, BP shares closed around $29. By early August, the stock was trading around $41. Folks who took my advice were up 40% in just two months.

When I looked at BP, I saw a company that anyone would be embarrassed to own… And yet, it was a huge, profitable business—the kind that can weather a storm. Not only that, but it was trading at a dirt-cheap price compared to what it was worth, too.

Those are odds I like in an investment. And as my years on Wall Street have taught me, it’s a setup you should always be searching for in the markets.

Remember: When you find an investment so hated that you’d be embarrassed to talk about it at a cocktail party, you might just be onto something good…

Regards,

Whitney Tilson
Founder, Empire Financial Research

Nick’s Note: Recently, Whitney was joined by longtime PBRG friend Porter Stansberry for a special investing event…

Not only did Whitney reveal the secret to his investing success, he also announced the biggest prediction of his career. And if you want to find out how he discovers the ideas that could double—or triple—your money, just go right here…

IN CASE YOU MISSED IT…

The mainstream media isn’t ready for this special event…

You see, the man who helped create Wall Street’s fastest high-speed trading system is back. And he’s about to unveil his new breakthrough system that’s even faster.

Forget milliseconds… He spots the market’s biggest (and potentially most lucrative) trades up to 30 days in advance. And he can show you how to do the same.

Get all the details right here.