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The Most Contrarian Opportunity of My Career

By Dr. Steve Sjuggerud
Wednesday, May 10, 2017

Today, we're staring at what could be the most contrarian idea of my career...
 
The potential upside is enormous... It's literally hundreds of percent.
 
The only question to ask is this...
 
Will you step up and take advantage of it?
 
Most investors think of themselves as contrarians. But when it comes time to make a truly contrarian bet, they freeze. They can't pull the trigger.
 
Do you have what it takes to go against the grain... and make enormous profits as a result?
 
Are you bold enough?
 
I've made a career of sharing out-of-the-ordinary investment ideas with my subscribers. These are usually ideas ignored by the masses.
 
That's what gives us an edge. We want to buy when no one else is interested.
 
When an investment idea is truly hated, it is usually cheap... And it has the opportunity to move dramatically higher once the general investing public gets interested.
 
Today, the most contrarian opportunity I see – and maybe the most contrarian bet of my entire career – is in China.
 
The headlines about China are based on fear... a slowing economy, growing debt, and the potential for a currency decline.
 
People are focusing on the fear and missing the opportunity. The entire world has given up on Chinese stocks. And nowhere is that more true than here in the United States...
 
U.S. investors have no interest in owning Chinese stocks. In fact, they've been selling in dramatic fashion over the past few years. You can see this selloff on the chart below...
 

This chart shows the shares outstanding of the largest U.S.-listed China exchange-traded fund (ETF) – the iShares China Large-Cap Fund (FXI).
 
Shares outstanding for funds like FXI increase and decrease based on investor demand. So a decreasing share count means U.S. investors are selling out of China.
 
Since peaking in 2013, FXI's shares outstanding are down 65%... In short, investors in the U.S. have zero interest in owning Chinese stocks right now.
 
You can see the same trend when you look closer – at individual companies...
 
Earlier this week, Bloomberg ran a story highlighting two more negative extremes for China's market... (Of course, as a contrarian investor, I see negative sentiment extremes as a positive.)
 
The article explained that "short selling" – betting against the market – recently hit a peak in China. It also showed that an extreme number of Chinese companies hit "oversold" levels based on the relative strength index (RSI), which measures a company's recent performance. (Of course, stocks often bounce after reaching oversold levels.)
 
The takeaway here is simple... And it's one I believe in strongly...
 
The entire world has given up on the idea of owning Chinese stocks. Both here in the U.S. and overseas, no one is interested.
 
It doesn't get any more contrarian than this. And that's why I believe China could end up being the most contrarian idea of my career.
 
No one wants to own China – that's why our upside is so large.
 
Today's opportunity is simple... Buy Chinese stocks. I hope you're bold enough.
 
Good investing,
 
Steve




Further Reading:

"China is cheap. And right now, it's also extremely hated," Steve writes. Investors have fled China's markets after its government crackdown on speculation. That means now is the perfect time for contrarians to get in the trade... Learn more here: China's Big Problems Are Creating a Big Opportunity.
 
Right now, you can buy shares of certain Chinese companies at an enormous discount. "I've called this 'the greatest anomaly in finance,'" Steve says. "Importantly, you can make a lot of money as this discrepancy goes away." Read more here: This Great Anomaly Will Go Away Soon – Take Advantage Now.

Market Notes


NEW HIGHS FOR THIS POPULAR FASHION BRAND

Today, we take a look at one of the few bright spots in retail...
 
Regular DailyWealth readers know we've kept a close eye on the retail sector of late. We've highlighted the struggles in L BrandsMichael Kors, and VF Corporation. But it isn't all bad news...
 
For example, consider the recent performance in Coach (COH). The company sells its luxury handbags and leather goods through retail stores, outlets, department stores, and the Internet, with North America accounting for more than half of its revenues. After appointing a new CEO in 2014, Coach has been closing poorly performing stores and revamping others. It's cutting costs, while still maintaining impressive, double-digit operating margins.
 
That has translated into a big rebound in its stock. Shares continue to march to new highs. They're up around 30% in 2017 alone and just touched their highest levels in more than three years. Earlier this week, shares surged even higher on news that the company would acquire rival fashion brand Kate Spade (KATE). While other retailers struggle, Coach outshines the competition...
 

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