Investing

The Potential of Investing in Crisis Stocks

By John Del Vecchio  |  November 8, 2019

Americans are homebodies.

This is true when it comes to travel as well as our investments. Only 42% of Americans own a passport.

The best thing I have ever done in life is travel the globe. I’ve even been to many far-flung third world places. Those experiences have shaped my perspective on life.

As far as investments go, this homebody attitude may be costing us big money and an easier path to retirement bliss.

In my upcoming book, Unbounded Wealth, I outline a strategy for investing beyond or borders that crushes our domestic market.

The world is a big place. There’s never been a better time to be an investor with greater access to markets all over the world. The world presents opportunities each day. In 2019, you can act on those quickly on those same opportunities for cheap. Anymore, brokers are falling over themselves to lower fees and provide greater access to global markets.

Let’s look at some of the facts.

The Opportunity in Foreign Stocks

Most U.S. investors aren’t positioned to take advantage of those opportunities. According to Forbes, the average U.S. investor has about 15% allocated to international stocks.

Sure, that’s up from 5% in the 1980s. But it’s still not enough.

Studies show that you can improve returns and lower risk by a few percentage points a year adding foreign stocks to your portfolio. Over a long period of time, that will add up to a much bigger bankroll for yourself.

I would argue you should not buy just any international stocks. You should buy stocks in crisis. If there’s one thing I learned over the years, there’s always a crisis somewhere.

One of the greatest crises trades ever was the Templeton trade.

Sir John Templeton, an investor and bank manager, ultimately made billions of dollars investing all over the world in areas of crisis.

His most famous trade was in 1939. The Germans were advancing rapidly through Europe. Naturally, the fear that Germany would take over all of Europe was very real. As the Germans advanced through Europe, nothing good happened. The markets got scared, and the stock market plunged.

The Germans easily overpowered other nations. Wresting control of those countries is a crisis if the ever was one. When markets are scared though, they tend to overshoot. There’s a lot of overreaction since people sell stocks with reckless abandon. It’s like anything else in life. When there’s lots of sellers and no buyers, prices fall way more than they reasonably should.

In that moment of fear and desperation, Sir John saw opportunity — a huge opportunity. He saw the chance to make his first fortune. It turned about to be a high reward with low risk opportunity following simple guidelines. So simple, a third grader could do it.

Here’s what Sir John did.

The Templeton Trade

He bought 100 shares of every stock trading below $1 a share.

That’s it.

It was nothing fancy or elaborate. He didn’t even need a calculator. As long as he could count to one, he was set.

And the result? A 400% return in five years.

That’s how Sir John Templeton made his first fortune.

Ever since I heard the story about Sir John, I have been inspired by it. It’s one of the most famous examples of making a fortune in crisis investing.

Sir John obviously had brass balls to plunk down a bunch of money in the middle of a crisis and buy stocks that had been clobbered, and supreme confidence to ride through the ups and downs to fortune as about a third of the stocks he invested in went bankrupt.

He knew he could take the punches in the nose and watch stocks go to zero if he had a few huge winners with a solid average.

That’s exactly what happened. Sir John walked away with his first load of cash.

The inspiration from that trade led me to create a global strategy. I don’t just blindly buy every stock below $1. There are a few other twists and turns, but it’s not overly complex.

When you pick up your free copy of Unbounded Wealth, you’ll see the simple strategy I lay out to invest in crises all over the globe from the comfort of your own home. When I was testing these stocks, the return was over 5,400% in a period where the S&P 500 was up about 260%. The potential to profit awaits.

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John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Fortunes newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR