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This contrarian trade produced triple-digit gains... and today's setup is even better
Saturday, May 10, 2014

 "The last three years have been the most terrible time in India," Indian hedge-fund manager Rahul Saraogi recently told our Steve Sjuggerud.
 
"India has endured corruption scandals, political scandals, high interest rates, lower investment, a weak currency, inflation..."
 
Steve turned bullish on India in February... His friend Rahul – whom Steve calls the "Warren Buffett of India" – thought the country presented a huge opportunity.
 
Rahul runs a small-cap Indian fund in Chennai. He has made huge profits after Indian stocks have gotten hammered. From the February issue of True Wealth...
 
He was born in India, and lives in India, but he received an Ivy League education in the United States. He knows both countries well. And he doesn't think things are so bad in India...
 
"The problem that every observer or commentator looking at India has, is that India has so much potential. Just because India has the potential to grow at 12%-15%, but it does not, people somehow believe that India is a basket case."
 
"India has had everything going against it. All of this negative sentiment has depressed stock-market values terribly. And yet, the country is STILL growing at 5%."

 Steve invested with Rahul in late 2008 after Indian stocks had fallen 80%. In early 2010, Steve withdrew his money with a triple-digit gain. And today, Rahul says the values are even better...
 
I can find hundreds of small-cap companies trading at half of book [liquidation] value.

 Rahul appeared on an episode of Stansberry Radio with Porter and Steve last week... And he says India is the cheapest he has seen in his career...
 
Now, what we don't realize is it has been six years since December 2007, and over the last six years, Indian companies have doubled, tripled, sometimes even quadrupled in size. And valuations are much, much, much below 2007. So you have a situation where companies and portfolios are, in valuation terms, at 15-year lows.
 
You combine this with a potential to have strong leadership, and that's why I told Steve that it's looking better than I've seen it in my career.

 Porter agrees, saying "this is absolutely the time to allocate to India."
 
The strong leadership Rahul referred to is India's likely new Prime Minister, Narendra Modi. Modi is the current Chief Minister of the Indian state Gujarat. Since Modi took the helm, Gujarat has led India in GDP growth, with around 16% of the country's total industrial output and 22% of exports. That's impressive, considering Gujarat is responsible for just 5% of India's total population.
 
That's because Modi is business-friendly... He convinced Indian billionaire Raja Tata to build a car factory in Gujarat by removing the typical red tape. He has heavily invested in the state's infrastructure. And he has shunned the typical backroom dealings and bribery in India and the country's socialist ideals (for example, bidding for government contracts in Gujarat is done online). And he supports privatization of ports, water, and power.
 
 In addition to a potential change in government, India is also growing like crazy... And its people are getting richer. As David Nadel – portfolio manager of the Royce Funds' International Smaller Companies Fund – told Barron's...
 
In eight years, India will have as many households with disposable income of $10,000 or more as the U.S. or the eurozone. And the nation is rapidly integrating into the global economy in such fields as pharmaceuticals (half of the world's FDA-approved pharmaceutical facilities are in India) and high-value-added information technology.

 Thanks to government subsidies, rural land values are rising, giving the 70% of India's population that lives in rural areas more wealth. As Nadel said...
 
You have to just look at the uptake in mobile-phone adoption in India, where subscriptions have jumped from practically zero at the beginning of the millennium to over 900 million, to see the potential.

​Barron's cited a report from a local Indian brokerage house saying the penetration rate for cars, computers, laptops, and air conditioners is less than 5%. It's less than 15% for refrigerators, washing machines, and motorbikes.
 
 Meanwhile, Steve's True Wealth subscribers are up nearly 20% on the Market Vectors India Small-Cap Fund (SCIF) in less than four months.
 
 Steve hosted a live webinar in Baltimore this week. He explained the strategies he uses in his custom software-based service, True Wealth Systems, to produce huge gains...
 
Steve and a team of "quants" (financial engineers) spent years back-testing data to find trading strategies that produce safe and consistent gains in the market... Thus, True Wealth Systems was born in 2011. Since that time, Steve has amassed an astounding track record... As of May 8th, all 14 positions in the True Wealth Systems portfolio are winners, up an average of 53%. And last month, he closed out of his biotech position for a 184% gain in less than 16 months.
 
 On the webinar, Steve discussed his secret trading strategy... He's looking for situations that go from "bad to less bad." But that's just the beginning...
 
In addition to further discussing his True Wealth Systems strategies, Steve explained why stocks don't equal the economy. Investors can often get better returns when the economy is bad. And he explained why investing in exchange-traded funds often makes more sense than simply investing in individual stocks.
 
 If you missed the webinar, you'll find the recap – plus an opportunity for one free year of True Wealth Systemsright here. I recommend you take Steve up on his offer today... The event "extension" is only good until Tuesday at midnight.
 
Regards,
 
Sean Goldsmith




This Week's Winners
S&P 500 Symbol Change
Electronic Arts EA +19.3%
Motorola Solutions MSI +7.6%
Humana HUM +6.7%

Countries Symbol Change
Russia RSX +5.8%
Brazil EWZ +4.0%
Turkey TKF +3.4%

Sectors Symbol Change
Real Estate IYR +1.2%
Defense PPA +0.7%
Basic Materials IYM +0.6%

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Nickel +6.1%
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Orange Juice +3.4%
Date Range:5/1/2014 to 5/8/2014
From The Crux
This Week's Losers
S&P 500 Symbol Change
Whole Foods Market WFM -22.6%
Teradata TDC -13.8%
Perrigo Company PRGO -13.1%

Countries Symbol Change
Thailand TTF -4.0%
Chile CH -2.7%
Hong Kong EWH -2.4%

Sectors Symbol Change
Clean Energy PBW -8.4%
Internet FDN -5.2%
Biotech PBE -4.2%

Commodities Change
Coffee -4.2%
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Date Range:5/1/2014 to 5/8/2014
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