There’s a lot of Liberty on the line these days.
We’ve long said that wealth leads to freedom. That means the surge in stock market volatility this week has the meat it takes to either destroy or create a lot of Liberty.
For most folks, a whipsaw market spells trouble.
Buy-and-hold investors are keen on the sort of blind bull market we’ve enjoyed for the last nine years. It makes building wealth look easy.
But that bull has walked into a wall… and making money in stocks is no longer a given.
Volatility is back.
Investors who don’t adjust won’t be going anywhere… but down.
It’s time to use a different moneymaking strategy.
We’ve long believed that one of the best ways to get rich in stocks is to take advantage of market inefficiencies. It’s a strategy that hasn’t gotten much attention lately because just about everything has gone up in value.
But with that trend threatening to fall apart, it’s time to dust off our old playbook.
Many academics will tell us that the stock market is efficient – that all known data is already priced into a stock.
In theory, the idea has merit. But in reality, it leaves a lot of money on the table.
Think about a stock like General Electric (GE).
Every day, some 76 million shares of the company trade hands.
Of course, not every buyer knows everything about the company. It’s impossible.
It’s why we often see a single headline push a stock higher. As the news spreads, investors react and the stock price rises. In a truly efficient market, the stock would rise all at once and flatline until a new headline was created.
So if a behemoth like General Electric with 18 full-time analysts tracking it can trade “inefficiently,” wouldn’t it make sense that smaller, virtually unknown companies would trade with even less efficiency?
It sure does.
Take a tiny company that we personally bought shares of last week.
It has a market cap of a mere $11 million. Clearly the big boys of Wall Street aren’t following it. In fact, it’s far too small for me to even mention to the hundreds of thousands of folks who now receive these essays each day (our passion project is blowing up!).
Because of the stock’s size and the tiny amount of money flowing in and out of it each day, there’s little chance of the stock ever trading efficiently.
There are no analysts following it. A big surge higher won’t earn the company any ink in The Wall Street Journal. And the talking heads on TV won’t bother to bicker about its latest earnings report.
It creates market inefficiencies.
With penny stocks like this one… the little guy actually has the edge.
It’s why you see day traders turning a few grand into millions by simply watching the movement of a few dozen tiny equities. Those stocks are highly inefficient and therefore their price action is easy to predict with just a few key measures.
Our position is already up by more than 25%.
We expect it will double (as it already has once this year).
Small Stakes… Big Gains
Potential like this is why we personally own dozens of tiny stocks… at least four times the number of large caps in our portfolio.
Done right, the potential is huge.
But like we said, many of the stocks we track are far too small for the masses. The inefficiency would wane dramatically if thousands of investors jumped in.
But we’re working on a solution… an opportunity for what I expect right now (I’ll have the full details wrapped up next week) to create a way for 200 folks to be able to make these sorts of trades.
Expect an announcement soon.
In the meantime, forget what you heard about penny stocks and microcaps.
Many fortunes have been made by traders who pay close attention to these “inefficient” stocks.
The bull market we’ve enjoyed for nearly a decade is losing his breath.
He’s run too far for too long.
It means it’s time to change strategies.
We’re doing it by taking advantage of an inefficient market.
The smaller the stock… the more Liberty we’ll gain.