Goldsmith comment: Since we launched Doc Eifrig's Retirement Trader in June, Doc has strung together an amazing performance... His readers are 12 for 12 on his trades. And he's done exactly what he set out to do: show subscribers unique ways to safely leverage gains in their retirement account.
Our editor in chief Brian Hunt has been watching Retirement Trader's progress closely. And he noticed almost every security Doc traded followed a unique chart pattern... So he sat down with Doc and asked him for the story.
Brian Hunt: Doc... I'm a big fan of using charts to help time my trades. And I've noticed most of the trades you've made in Retirement Trader exhibit the same chart pattern... which is one of the most powerful moneymaking tools I've ever seen.
Could you tell Digest readers more about this pattern?
Dr. David Eifrig: Sure... although charting is not something I pay a lot of attention to. My fundamental approach to picking stocks turns up investments trading in this sort of chart pattern. I've traded this way successfully for years... and we're 12 for 12 so far in Retirement Trader using it.
It all comes down to buying exceptional companies when they go on sale.
I'm always looking to buy dominant blue chips like Johnson & Johnson and Microsoft when they suffer substantial corrections. These corrections can be caused by general market selloffs, temporary declines in business, management missteps, product flops, or a handful of other things.
These corrections serve to wring a lot of risk out of holding these companies... They can knock them down to dirt-cheap values. As a general rule of thumb, if you can buy an exceptional company for eight to 10 times earnings and cash flow, it's a no-brainer. The market simply won't let a dominant company sink much lower than that.
I love to buy stocks when I see these situations... when a great company gets clobbered, then bounces along the bottom of its new range for a while.
This situation produces a chart like the one (below) of Microsoft. Most people recognize Microsoft's name. It's the world leader in software. It has giant profit margins and a pristine balance sheet. Sure, it's not growing like crazy anymore, but it's still growing... still selling a lot of software.
This summer, Microsoft fell from $30 per share to $23 per share... a big fall for such a large company. This fall was largely attributable to the drop in the general market. You'll notice the stock rebounded, then traded sideways for a while...
This period after the
big decline is often a terrific time to buy, provided the
business is still sound. That's where fundamental analysis comes in... buying a terrific business at a good value.
Microsoft was trading for around 10 times cash flow back in September... And it has a huge cash hoard. Buying the
stock was a no-brainer. We used the
opportunity to make a safe gain of 10% in about two months with a combination of stocks and options in Retirement Trader
You did the
same thing with blue-chip power company Exelon. DE:
You can see a selloff and sideways trading pattern, similar to the
one Microsoft went through, in the
one-year chart of Exelon (see below).
Back in July, Exelon was trading for about 10 times earnings... and we could easily double our money in dividends alone every 13 years. This was a stock we'd be happy owning at such a cheap price. We made a quick and safe gain of 10% in less than two months. BH
: Let's talk about the
August trade with Intel, for one more example, then we'll get to how you safely juice the
returns for Retirement Trader
Intel trade was a lot like the
Microsoft trade. The
general stock market had fallen. Most folks were worried about a double-dip recession, which would depress demand for Intel's semiconductors. The
stock fell from $23 per share to $18 per share... a drop of about 22%. This is a huge fall for a dominant blue-chip like Intel.
Folks were so worried about all this stuff, they forgot Intel is a money machine. It's the
dominant manufacturer of the
most essential component used in computers. All the
name-brand computer makers Microsoft, Dell, and even Apple rely on its processors. Intel controls 80% of the
global market for microprocessors.
Its nearest competitor, AMD, accounts for 10%. And AMD is dying a slow death. Its cash flows are rarely positive only once in the
past three years and twice in the
past four quarters. This means more market share for Intel. Other competitors exist, but they can't match Intel for quality, price, or brand loyalty. Its profit margin in the
third quarter was 23%.
For all practical purposes, Intel has no competition. It's a virtual monopoly.
With that in mind... Look at the
selloff starting in early August in the
We sold a put betting Intel would fall to less than $19. The
selloff sent Intel down to a laughably cheap level... around $18.
We used the
selloff to make a terrific short-term gain. We made 6.5% in little more than one month... Brian's note
: Tomorrow, you'll learn how Doc's readers have managed to make faster, safer gains than you can with outright stock purchases. These strategies help folks generate large amounts of income without taking large amounts of risk. And they're perfect for retired investors.
If you're interested in a safe approach to making 20%-30% a year in your retirement account, we encourage you to join us as a Retirement Trader
subscriber. To learn more about the
service... and about one of the
best deals we've ever offered on it... click here