| I'm talking about people like Warren Buffett, Peter Lynch and John Templeton, individuals whose audited track records speak for themselves. Even though these individuals used very different approaches, they agreed that in the end there is only one thing that dictates where a stock will go: earnings. Earnings are the net profits of a business. They are what ultimately drive share prices. I challenge you to find a single company that increased its earnings quarter after quarter, year after year, and the stock didn't tag along. Conversely, try to identify a single company whose earnings declined quarter after quarter, year after year, and the stock advanced anyway. It just doesn't happen, even in a rip-roaring bull market. The reason is simple. A share of stock is not a lottery ticket. It's part ownership of a business. And just how much investors are willing to pay for those profits will determine what a company is worth in the market. Although there are always bumps along the way, you'll find there is a near-perfect correlation between a company's growth in earnings per share and the movement of its stock from quarter to quarter and year to year. So forget all the technical mumbo jumbo about market breadth, trading volume, put-call ratios, short interest, mutual fund inflows, advance/decline numbers and other market trivia. And instead remember that share prices follow earnings. Period. Stamp that on your forehead - act on it - and you'll be using the one tried-and-true investment discipline that always pays off in the end. Despite economic turbulence and volatility in the markets, there are plenty of companies in technology, e-commerce, food, pharmaceuticals, medical devices, healthcare services, defense contracting, gold mining and other recession-resistant industries that are currently making money hand over fist. Those companies are outperforming. And they're likely to keep outperforming in the weeks and months ahead. So this is the time to weed out the winners from the losers. I believe a historic convergence of two rare economic events has begun... and could set in motion the biggest investment opportunity in over a decade. And I'm not alone in thinking that... Empire Financial Research founder and CEO Whitney Tilson has also spotted this trend unfolding. Essentially, the market is splitting in two. What does this mean for your portfolio? RSVP here to find out on August 7. Good investing, Alex |
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