How to Land 528% Gains in Spite of Doomsayers

Dear Member,

To this day, flying fills me with a sense of awe.

Not only because I’m traveling miles above the earth in a metal tube going hundreds of miles per hour (which is nonsensical when you think about it), but also because I get a bird’s-eye view of the world.

Rivers are these wild, meandering veins… seemingly dark threads dropped from above that no one bothered to straighten out – nobody removed the kinks and needless twists and turns.

But in reality, the water simply flowed – over eons – taking the path of least resistance and gradually wearing through any obstacle in its path.

Bruce Lee was onto something when he said, “Be formless, shapeless, like water… Water can flow or it can crash… Be water, my friend.”

As investors, we should be like water, not like a stone or a rock.

We move with the markets – navigate their twists and turns, ups and downs – looking for our path to something greater. Which, in this case, is financial freedom.

Riches shouldn’t dominate our thoughts and behaviors. But finding and enjoying the liberty that comes through wealth should be at the forefront of our minds.

I have a philosophy that every dollar I earn takes me that much further from the hardships I overcame.

It’s a single step forward at a time. I don’t need to run or sprint. I don’t need a winning lottery ticket (though I wouldn’t turn one down).

I just need to focus on what opportunities are being offered… recognize that there will be bends, twists and rapids ahead… and flow with them.

Investing successes aren’t born from remaining stagnant… from standing like a rock or boulder in the middle of a river, hoping to be solid enough – strong enough – to not be swept away. Riverbeds are graveyards of such boulders, eroded by time as water rushes over them until they’re eventually ground down to sand.

This is why we advocate for a market-neutral strategy at The Oxford Club.

And it’s why I joined the Club back in 2009, when everyone still believed the world was on the precipice of disaster.

In January of this year, when the markets plunged, RBS Capital exclaimed, sell everything! Except high-quality bonds.

It predicted equities were going to fall 10% to 20%.

Crude oil was struggling as fears bubbled up over China and the ongoing glut. RBS Capital’s analysts said it was going to $16 per barrel.

The research note was apocalyptic, a harrowing forecast of another 2008.

And they weren’t alone…

Morgan Stanley said oil would fall to $20 per barrel.

Standard Charter went a step further and told the world crude was going to $10 per barrel.

Macquarie Capital Markets said the loonie would fall to $0.59 to the U.S. dollar and stay there.

Everyone rushed to sell.

They thought the bend in the river was a drop-off to the end of the world. They didn’t see it for what it was…

At The Oxford Club, we took a different approach. From mid-January (when these doomsday predictions were made) to mid-February, we added 28 new positions across all of our portfolios.

We flowed with the market, knowing that there are always twists and turns, and targeted opportunities.

Two of the positions – PVH Corp. (NYSE: PVH) and Ellie Mae (NYSE: ELLI) – are up more than 40%.

Three positions are up between 20% and 30%. Another five are up between 10% and 20%. Six are up by single-digit gains. And four have been closed for gains.

Admittedly, not everything has been a winner. One position is down for a slight loss, and seven positions closed for losses.

But on the options side, we closed out seven positions opened between mid-January and mid-February for gains of more than 100%. We closed out the biggest – Emerson Electric (NYSE: EMR) – with a gain of more than 528%.

Today, the Dow is trading above 17,900. That means the index is less than 2.5% away from the all-time high it set in May 2015. And it is nearly 16% above the multiyear low set in January… when the doomsayers emerged from the woodwork to exclaim, “The End Is Nigh!”

If you find yourself being influenced by the headlines – if your emotions are rising and falling with every tick of red or green, every headline that predicts doomsday or nirvana – you’ll soon realize you’re a stone being hammered by the current.

But if you flow with the current – if you know and understand that there will always be bends, and some will be sharp ones – you’ll continue moving forward. You’ll grow your wealth while so many others find themselves stagnant and sinking.

Good investing,

Matthew

News@TheOC

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