Where I See 500%+ Gains Over the Next Four Years
By Dr. Steve Sjuggerud
October 23, 2007
Greetings from the New Orleans Investment Conference – "The World's Greatest Investment Event" (or at least that's what it calls itself).
"Nice speech," an attendee told me as I walked the halls. "But you're wrong about the homebuilders," he said. "We have years to go before this housing thing is over with."
He missed my point completely.
But I don't think he's alone… I think many people don't believe me. I urge you to let me make just one point here.
If you're willing to listen, I think it could be worth 500% or more to you in profits over the next four years. While 500% sounds like a huge promise, we've actually seen gains like that twice before in times like these.
Here's my one point…
Shares of homebuilders actually soar the most just after new home prices start to fall.
The chart below tells the story… New home prices have only fallen twice in our generation… from 1979-82 and from 1989-92.
Home prices fell during horrendous times… For example, in 1981, mortgage rates peaked near 20%, and unemployment peaked near 10%. Not only could people not find work, they couldn't afford a home. Who in his right mind would by shares of homebuilders when nobody was buying a home?
Yet look what happened to shares of homebuilders back then… they soared by more than 1,000%.
Shares of Homebuilders soar before home prices bottom |
|
The same thing happened in the 1990-1991 recession… New home prices fell. But shares of homebuilders soared, rising by more than 500%.
Now we're seeing the same setup…
| • |
Today, shares of homebuilders are just as cheap as they were in 1982 and 1990, trading at a huge discount to book value. |
| • |
Investors are just as afraid of the future of homebuilding as they were in 1982 and 1991. |
| • |
New home prices have started to fall. |
Many people don't believe that shares of homebuilders could soar until after the housing market bottoms. That's wrong. Waiting until the housing market bottoms is not the right way to go. By then, it's too late. You've missed it.
History shows that we've got to buy homebuilders now, or at least very soon.
If you're bold enough to step up to the plate and buy, you could see gains in excess of 500%. Sounds crazy – until you see that it's happened the last two times we've been in this position…
Buy shares of homebuilders now…
Good investing,
Steve
Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
Sign up today to read more investment ideas from Steve Sjuggerud.
| 
