What a Game!

What a game last night! Sure looked like San Francisco was on its way to a championship with its amazing run game and dominant defense. It’d already gotten two interceptions from Mahomes and had him on the ropes with a pretty critical third-and-15 situation. Fail there and give the ball back to the Niners with eight minutes to go, ooh boy, not looking good…

But, somehow, Chiefs wide receiver Tyreek Hill finds the open space, Mahomes hits, and they convert a huge, critical, unlikely, game-changing first down. It was all Chiefs after that. The speed and talent of Mahomes and the savvy of head coach Andy Reid — nobody’s showing up to work in Kansas City today. 

Am I gonna offer up a Super Bowl investing lesson? You betcha! And it is this: do the best you can to come up with a plan and then trust it. That’s how you get to the promised land. 

Investing isn’t a straight line; nothing in life is. And we humans have an amazing ability to navigate the strange and wonderful turns our lives will take. But, it’s totally different when you’ve got money at risk in the stock market. We become wracked with self-doubt, panic that we’re holding the next Enron when a stock falls $2, and sell it all because you know, the Fed…

I get it. There will always be stuff that you don’t know. The global economy is ridiculously complex. Hedge funds put out misleading reports about companies. Wingnut talking heads tell you it’s all a bubble and the next crash starts tomorrow. One analyst says sell Netflix, another says buy it… what the hell?!?

Let It Go

You (we) simply have to come to grips with the fact that there is more info out there than we can possibly get our amazing brains around. So let it go. Turn away and slam that door…

Ok, you don’t really have to slam any doors. But the best thing an individual investor can do is to realize that much of what comes at you as “investing news” every day is just noise. Is the coronavirus really gonna mean fewer subscribers for Netflix? Are interest rates gonna have any impact on Cisco’s dividend? 

The vast majority of businesses are successful because they sell products and services that people want. And they are able to manage all their expenses to the point that they sell stuff at an attractive price and still make a profit.

It really can be that simple. And what’s more, why invest in a company that isn’t that simple? 

Fidelity founder Peter Lynch is famous for saying, “Buy what you know.” And that’s some of the best investment advice ever. Keep it simple. Invest in companies you can understand. Focus on the long term. Stick to your plan (even though it is always wise to reevaluate and tweak when necessary). And no matter what happens, do not lose your confidence. 

There’s obviously more to successful investing than believing in yourself, but I’ll tell you what: If you don’t believe in yourself and your ability, you simply aren’t going to make money in the stock market.

Do all this, and you’ll probably manage a third-and-15 conversion at some point that gets you where you want to go. 

Now I’ve gotta shift gears a little this morning because my Real Income Trader subscribers had a third-and-15 trade conversion…

Where There’s Smoke…

News always shows up first in the charts. It is one of the basic tenets of technical analysis. There will always be people who know about an event or development before it hits the wires and becomes actual news. And if you look for it, you can see the telltale signs of early buying.

So last week, I sent my Real Income Trader subscribers this alert to buy some call options on Gilead Sciences (NASDAQ: GILD):

On Friday, news hit that Gilead might have a coronavirus treatment. This news didn’t just spring up overnight. I’m sure the very smart people at GILD figured out they may have a contribution to make with this new virus very early. After all, GILD makes leading AIDS drugs as well as Tamiflu. 

So it is perfectly reasonable that people would start buying GILD shares before the story hit the wires. 

I’d love to tell you that I just knew GILD was gonna be a coronavirus player, but that would be an outright lie — and a poorly planned lie, too…

Because if I claimed that I had special knowledge, or some highly placed sources that feed me tradable info, well, how reliable is that, really? And how illegal might it be? 

No, I recommended GILD call options last week because I could easily see on the chart that people were buying the stock. And I believe that if it’s getting a little smokey, ya might wanna look around for a fire.

This morning, our GILD calls are en fuego. I had Real Income Trader subscribers in at $0.63, and they have hit a high of $2.50. Two things: One, don’t worry that the shares have backed off early highs. Remember this from the buy recommendation: 

We know from our history of trading GILD that it makes big intra-day moves. We’ve watched it gap higher, sell off to breakeven, and then move back up to the gap. The lesson is: You don’t buy the open for GILD and you don’t sell the early drop. 

Two, GILD shares haven’t been above $70 in a year. This news seems the type of catalyst that could support a breakout move. I think we should stick around for a couple days and see what happens.

That’s what I got today. Talk to ya on Wednesday…

Until next time,

Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.