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The Conservative Way to Double Your Money

By Jeff Clark
Wednesday, February 21, 2007

When you're looking for triple-digit gains, you need to sift through the stock market's bargain bin.
 
The problem with a market that goes straight up for several months is that the bin is empty. Now, we have to choose between joining the momentum herd and chasing stocks higher... or exercising a bit of patience and waiting for new bargains to arrive.
 
Of course, we all know that it's smart to buy low and sell high. But when giddiness rules the market, it's tempting to try to buy high and sell higher.
 
Momentum investing – which involves buying stocks as they break out to new highs – can be a fun pastime and a quick way to make an easy 5%, 10%, or even 20%. But when the momentum turns – and it always does – you can lose that amount and more. For most investors, this style of trading simply isn't worth the risk.
 
It's much safer and, in the long run, much more rewarding to look in the clearance aisle for a cheap, unloved stock that has suffered a long period of decline but is starting to show signs of life.
 
It's getting more and more difficult to find the unloved bargains, but they're out there...
 
Six weeks ago, we told you about Wal-Mart (WMT). The stock was trading at the low end of its historical valuation range, and we thought it was unlikely to stay at that level for much longer.
 
Yesterday, Wal-Mart reported a better-than-expected 10% rise in fourth-quarter profits. And now, WMT shares are about 10% higher than when we first mentioned the stock.
 
 
While 10% in six weeks is a pretty good return, it's a far cry from triple digits. To get a double, you need to use options, pairing them with conservative stock ideas to create low-risk, high-reward scenarios.
 
In the S&A Short Report, we recommended an option combination trade that was designed to profit if Wal-Mart rallied, if it stayed the same, and even if it fell a bit. And, best of all, we only needed to put up 20% of the amount required to buy the stock.
 
The trade is up 50% in less than two months and well on its way to a double.
 
You don't have to chase the momentum stocks and you don't have to take on a lot of risk to generate high returns. Finding a good bargain-basement stock and then crafting the right options strategy around it will do the trick.
 
Best regards & good trading,
 
Jeff Clark




Market Notes
Shipping companies continue to rise: Teekay Shipping, Diana Shipping, Excel Maritime, and Eagle Bulk Shipping all at new highs.
 
Mexican homebuilder Homex hits a 52-week high.
 
Earnings today: Abercrombie & Fitch, Anglo American, Whole Foods.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%

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