Total Wealth Weekly. November 19, The 1970 s Crash Gives Us a Warning

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1 Total Wealth Weekly November 19, 2017 The 1970 s Crash Gives Us a Warning Welcome to Total Wealth Weekly for Sunday, November 19. We just finished up the new edition of the newsletter. You ll receive it in your early this week, and I m excited for you to see what we re buying this month. As I promised last Sunday, this month we have two new recommendations. I m concerned about a pending sell-off in the broader stock market in the coming year. So, we re exploring two deep value ideas among smaller cap stocks One is a profitable cybersecurity company with no debt and lots of cash. It has two hot new products in the field of identity authentication that are starting to get traction with banks and insurance companies. The second is an undervalued tech company. It dominates its niche by selling advanced digital products to the likes of Cisco Systems, Dell and, really, any company with large data networking needs. It too has little debt and lots of cash. I see both companies rising 50% or more in the next 18 months Value Plays Protect Us From a Sell-Off One reason for my focus on deep value companies is because despite the headlines about new record highs in the stock market there s a trend we should take note of. Basically, fewer and fewer individual stocks mostly the very biggest of the so-called megacap companies, like Wal-Mart, McDonalds, Amazon, Microsoft and the like are still churning higher. Everything else is either going sideways or lower. Take a look at this chart (on the next page). It shows the number of companies in the S&P 500 where their stock prices are still headed higher over the last 200 days. In other words, we re looking at the long-term price trends of these individual stocks. Back in March, about 80% of the companies in the S&P 500 had stock prices above their 200- day average. Today, it s less than 70%. BANYANHILL.COM 1

2 It doesn t mean the stock market will necessarily collapse, or fall into a bear market next year. It s quite possible that buyers are waiting until the start of the New Year before putting their money back to work in the rest of the stock market. But historically, when bull markets get gray-haired (and this one is nearly nine years old now), more and more money typically piles into fewer and fewer stocks. In the last stage of the early 1970s bull market, investors pursued the so-called Nifty Fifty stocks 50 large fast-growing companies of the time that investors wanted to buy at any price. BANYANHILL.COM 2

As you can see in this chart, the Nifty Fifty era ended with a run to new all-time highs in January 1973.

3 As you can see in this chart, the Nifty Fifty era ended with a run to new all-time highs in January Over the next two years, the Dow Jones Industrial Average fell 50% as investors priced in the impact of the Arab Oil Embargo, a slowing U.S. economy and the political uncertainty of Watergate. My point is to add a little perspective. Most people on Wall Street are very bullish. Bull markets do not last forever. Don t let yourself get carried away. Your Portfolio Review That said, the Total Wealth Insider portfolio is well-positioned either way... AES (NYSE: AES) our energy storage and electric utility stock had been sliding a bit. But the shares rallied sharply higher this week, up about 4%. The stock got so cheap last week that the CEO and other executives all stepped in and started buying. On the next page, I have the record of the new stock purchases what we call open market buys, meaning executives were using their own personal funds to buy the stock. The CEO alone bought 25,000 shares at around $10.15 a share. I love to see this sort of thing. BANYANHILL.COM 3

This position remain a hold for the time being. I d like to draw your attention to last month s recommendation, E.L.

4 A lot of executives receive stock options. Companies use options to sweeten their executives pay packages. But when executives are willing to risk their own money to buy stock, it shows they have real confidence in their business plan. This position remain a hold for the time being. I d like to draw your attention to last month s recommendation, E.L.F Beauty (NYSE: ELF) as well. Last week the stock dropped sharply even though it had a tremendous quarterly earnings report. I said to take advantage of the drop and buy the shares. BANYANHILL.COM 4

And it looks like someone is doing just that, because the stock is up more than 4% over the past five days. The stock still has a little more ways to go before it gets to break-even in the portfolio.

5 And it looks like someone is doing just that, because the stock is up more than 4% over the past five days. The stock still has a little more ways to go before it gets to break-even in the portfolio. But I like that this stock has pushed higher, despite the overall stock market having a little trouble in recent days. This position is still a buy. Wheaton Precious Metals (NYSE: WPM) is another one posting gains over the past week as the price of gold moved higher. It was trading at $1,285 an ounce on Friday. A move over $1,300 an ounce would be great for gold, and great for shares of this gold-mining stock as well. This trade is also a buy. Finally, let s talk about our cybersecurity stocks most gave back some ground this week. The weakest has been Barracuda Networks (Nasdaq: CUDA). It s down about 8% in the portfolio. I m moving it to a hold for now. The company acquired a private firm, Sonian Networks, for an undisclosed amount of money. I want to see how this pans out, but rest assured that this company is still set for 100% gain in coming 18 months. BANYANHILL.COM 5

IBM (NYSE: IBM) and Palo Alto Networks (NYSE: PANW) were basically

back a little as well, over 10% in value, but still have positive

6 IBM (NYSE: IBM) and Palo Alto Networks (NYSE: PANW) were basically breakeven over the past week. They re each down 7% to 8% in the past month. And CyberArk Software (Nasdaq: CYBR) and Rapid7 (NYSE: RPD) both gave back a little as well, over 10% in value, but still have positive price trends. If you don t own these stocks, these are good places to buy them. Both remain buys in the model portfolio. BANYANHILL.COM 6

7 You can find my analysis in the Special Report section of the website. That s a good place to wrap it up for this week. I m Jeff Yastine for Total Wealth Insider. BANYANHILL.COM 7

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