Lance Spicer's Trident Confidential - The World's #1 Investment Advisory

“Be greedy when others are fearful, and be fearful when others are greedy” – Warren Buffett.

I wonder what he’s thinking right now? Do you think he’s considering being fearful or greedy? I think the answer is obvious.

Arguably the greatest investor in history would probably be doing some “shopping”. I know he’s still buying up certain bank shares (they are on our buy list too), but he’s probably buying all sorts of stocks at the silly prices that the market has provided right now.

But what has made Warren so successful particularly in light of what’s going on now?

The answers are simple:

He invests at times when others are selling – when everybody else is running for the doors, he’s running the other way. He buys low.
When he invests, he stays put, he doesn’t jump in an out of the market as most investors do. He has staying power and stays in the market under all conditions. Time in the market counts for a lot of his success.
He buys stocks that simply make sense. He uses common sense and logic. He doesn’t allow emotions to get the better of him.

What's in store for the year ahead?

The worst is truly over after the carnage of 2008 and early 2009. The "easy money" was made by the brave souls who invested in early 2009 when most investors were panicking. As of December 2009, Trident Confidential had made 113% since January 2009. However, 2010 will be a lot harder than 2009... unless of course you are good at picking stocks. You need to be looking for stocks with great fundamentals, solid sales growth and even better earnings growth. Investing in the same old stocks you invested in during the last bull market, are not the right stocks for the new bull market.

At Trident Confidential, we have always out performed the market by a huge margin simply because we choose stocks very differently to everyone else. We don't look at stocks as your typical analyst or broker would. We buy stocks like we are making an full merger or acquisition. We look at the balance sheet, the profit and loss, the cashflow statements and their business model and management. We don't care about charts or other people's opinions - just the facts. Our approach shows in our results.

See our Performance Here

We don't follow trends - we try to identify new trends. We look at stocks from not only their value perspective, but also how they fit into the broader macro-economic situation. We look ahead and ask ourselves what will be happening next economically. When you move ahead of the "herd" you will always pick up the best opportunities and that's what we try to do at Trident Confidential.

However, there will still be some challenges.....

Oil may still be a problem even though it is well off it's highs.

Oil supply at the moment is fine (as we now know). There is plenty of oil and the producers are saying so. No-one has complained that there was no fuel available when they tried to fill up, so what’s the problem? The simple truth is there are no supply – demand issues, yet. That’s the problem, the “speculators” or as they prefer to be called, Futures Traders, are betting this supply – demand situation won’t last and that supply will fall and demand will rise. They do have a point.

The way I see it is - this problem started in the 80’s when oil was "cheap as chips" and because of that no-one invested money in new exploration or new fields. Then in the 00’s along came eastern Europe, China and India with their growing middle class. This of course meant a requirement for more fuel, and we simply didn’t see it coming early enough. While the US still uses 25% of the world’s fuel, their consumption hasn’t caused a great increase in demand, but China and India are now increasing their use dramatically. This is where the problem lies. Couple that with problems in Nigeria, Iran, Venezuela, reducing outputs from Mexico, Indonesia and some middle east oilfields, and we have an expectation that there will be a “supply problem” down the track, as early as next year maybe? This where the futures traders come and bid up the price.

Is the world running out of oil? No. The world is running out of cheap oil. Oil, will never return to under $40 a barrel and stay there for very long. Oil will be more expensive to produce because most of it lies offshore, which means drill rigs, lots of them will be needed. But it takes time to start new oil fields in the ocean – about 6-10 years. Companies in the oil industry are working as fast as they can to get this extra supply online, and will be successful, but it will take another year or two before we start to see the increase in supply come on line. So, I suspect we’ll see high oil prices return by 2010. Alternative fuels will become more viable the longer fuel remains high.

Is it inflationary? Yes, it is, and this has the markets worried. However, there will be a point when the price of fuel will actually cause people to do things differently and this will ease it’s upward movement. Once the price stops going up, the inflation effect will stop and the market will calm down. The new cost of oil will hurt for a while and then will simply be accepted as part of business and will be built into the cost of goods. As long as it doesn’t keep going up forever, we’ll be just fine, and so will the markets.

You see, the world is changing. We now have Brazil, Russia, China and India. We have 300 million more consumers in this commodity cycle than we had in the last one back in the 1970’s. Specifically, we have the industrialisation of China & India, which is why this commodity boom has legs. It will last longer than any other commodity boom in history, I suspect out to at least 2014.

The investment themes for the next 5 years as I see them will be:

Agriculture Equipment – Farm equipment and technology.
Agriculture - Farming – Fertilisers, Seeds and chemicals
Crops & Food - more meat consumption, sugar, corn, wheat and bio-fuels
Heavy Construction Equipment – building infrastructure - cities, roads, bridges, and hospitals need to be built.
Oil Service – Rigs, maintenance, drill ships, welders, ship builders - there are huge backlogs of business.
Industrial Metals and other commodities – Iron ore, Aluminum, Copper, Zinc & Coal
Energy – All alternative energy, wind, solar, nuclear and geothermal
Biotech/Nanotech/Healthcare – Baby Boomers are getting old

And the return of Technology!

While I believe a “rising tide lifts all boats”, some “boats” have holes in them, so they are best avoided, but generally being in the stock market from this point forward for the next 2 years will be very wise and profitable.

Stocks to avoid?

This is never easy to pick as so many companies with promise simply drop the ball and don’t fulfill their investment potential. In my opinion, it’s always easier to pick the stocks that have a good chance of doing well not only because of their great products and good management, but because their “time has come”. But I would be avoiding companies that are exposed to high levels of debt and leverage, and any company carrying "dodgy assets", like sub prime loans for example. Don't touch merchant banks, small banks, mortgage companies or over leveraged insurance companies.

Choosing the right industry or stock to be in at a certain time is all important if you want to “beat the market”, as I have shown over the last few years. I still believe infrastructure, commodites and agriculture have along way to go in the current cycle, however there is another area we need to consider. This sector is always one of the first to recover after a period of slow growth…. It’s Technology.

The Next Big Thing

In addition to the sectors that I think will do well over the next 5 years and form the core of our Trident Confidential stocks, there is one other forgotten sector......

Not only is it a “cyclical” play, but I believe it to be a “generational shift”. What I mean by this is, a permanent change to how we do things. Like when cars became mainstream. We adopted the new technology and never reverted back. Same with aviation, then computers. Can you imagine not having a computer or the Internet? Can you remember what it was like? I have to admit I wonder how I got anything done in those days.

To give you an example of a generational shift, some weeks ago I was wondering if my son was coming home for dinner, so I picked up my Blackberry and sent him a text asking him what his plans were. He texted (is that a word?) back that he would be home for dinner and asked what we were having. I then sent back a text telling him what we were having and what time to be home. He then text back “Ok”. I sent a further text asking what time he’d be home. He sent back a text, “I’m in my bedroom”. What?…. he’d been 20 feet away the whole time! I had no idea he had been at home the whole time.

Does this sound familiar? This is what I’m talking about. Teenagers are the first to popularise new technology and will always be open to new ideas so the task you have as an investor is to discover these new trends and work out which ones will work and which ones won’t. Investing in companies that are developing this technology is a very good move. However, there are thousands of technology stocks out there. Picking the right ones is vitally important. My subscribers and I have made great profits in this area. For instance:

A chip maker I invested in recently has made me 76% because it supplies a vital component to mobile phone makers.
Two mobile phone makers have returned 51% and 47% respectively in just a couple of months.
A company that makes components for Flat Panel TVs has returned 38% since March.

These are just some examples (there are more in the portfolio) of the money that can be made in “high tech” stocks right now. In the latest edition of Trident Confidential, I have discovered 4 more technology stocks that I believe will emulate the same kind of returns above or better, over the next few months.

So, while we have made huge returns from investing in Commodites, Infrastructure, Oil Services, Agriculture and most recently Financials (and will continue to do so for some time yet), Technology stocks will be the next “cab off the rank”… so whatever you do, don’t miss out on the opportunities this market is going to provide in early to mid 2009.

After mid 2009, you may have missed the best opportunity to buy some great stocks in the last decade.

Other NEW Stocks in a recent issue:

A company with an innovative patented system to reduce fuel costs by converting vehicles to alternative fuels - Could be huge very soon. Wall St hasn't noticed yet.
A medical device company that has made signifcant breakthrough in cancer treatment. The device can treat (succesfully) inoperable cancer that all other treatments can’t. Do you have any idea what this will mean to people with inoperable cancer?
2 Agricultural companies that have great potential as the food crisis worsens into 2009.
An Australian company geared to any bounce in the stockmarket and is currently trading at less than half its value. I suspect this will produce a 100% return over the next year.
2 leading companies in the alternative energy industry that have been overlooked by the market even though their profits are soaring.
A company involved with discovering skin cancer (Melanomas). My sources tell me that FDA approval is imminent within 3 months. When this happens, they’ll have a worldwide monopoly as no other device is so convenient to use and as accurate.
A “forgotten” Australian industrial company with good management and improving profits, but a share price that doesn’t make sense.
2 industrial companies manufacturing innovative products for the oil services, energy and agricuture industries. Profits and margins are accelerating quickly. The PE’s are still low.
Plus our 4 technology stocks I mentioned earlier…..

While the market is still “range trading” don’t miss the opportunity to invest in the market before reality overtakes fear.

You can read all my Bear Market Strategies if you Click Here

Right now, I'm looking for companies with following fundamentals (which my Trident Confidential Stocks all have).......

1. Positive Earnings Revisions. I like to see stocks that have had their earnings estimates increased by Wall Street analysts. This usually tips us off to a stock that’s about to “beat earnings.”

2. Positive Earnings Surprises. Speaking of beating earnings, I also look to see if a stock has been able to beat its earnings estimates, and by how much. This is an important number to watch because it often tells me about a stock that Wall Street isn’t paying much attention to or doesn’t yet “get.”

3. Increasing Sales. I also like to see a company that can grow its sales over time. Why? Because it’s one number that is hard to fake. My background is in accounting, and I’ve always made sure to steer away from companies that use questionable accounting practices. Sales growth is a solid indicator.

4. Expanding Operating Margins. This simply tells me if earnings are growing faster than sales. A company that’s able to expand its operating margins is usually a company that has a dominant position in its industry. This company can raise prices without seeing a drop-off in sales. That’s a nice place to be.

5. Free Cash Flow. This tells me how much money a company has left over after paying for the costs of its business. Having a strong cash flow is important because it allows a company to invest more resources in growing its business.

6. Earnings Growth. This is at the heart of all good financial analysis, and I rely on it as well. As long as any company is able to grow its earnings consistently, its stock will do well.

7. Positive Earnings Momentum. It’s not enough for me to see a company's earnings growth—I also want to see its rate of growth increase.

8. Return on Equity, or ROE. This is the gold standard. ROE tells me how efficiently a company is managing its resources. I can’t interview every senior manager at a company, so I like to think of ROE as a report card for management.

If you find a stock with all these fundamentals, you're looking good.

If you'd like to know about my favourite stocks and the one's I'm buying right now....

"By the way I just like to thank Trident Press and Lance Spicer for the dedication and hard work you put into providing the Wealth Creation books. As a Trident Confidential member that has just joined recently, I am very impressed at the quality information you have provided. Just recently I have read the entire library of books 3 times. I have never learned so much. I have enjoyed the Underground Knowledge series, simply mind blowing and the Asset Protection Guide. You don't know how much this will change the lives of my family and myself". - Pierre T. QLD, Australia