The Last Great Buying Opportunity of the 'Melt Up'

More than 15 years ago, I made a trip to a small town in Minnesota...

I didn't go there on vacation.

I went because I wanted to meet – in person – the man who is the best in the world at one specific thing. That thing is investor sentiment... and it's extremely important to me.

You see, while small-town Minnesota is far from the city bustle of New York, Jason Goepfert's work on investor sentiment is better than anything coming out of Wall Street.

That's why I knew I had to meet him...

Jason was doing the same kind of sentiment research I was... but he was further along than me. I felt compelled to meet him in person, compare notes, and make friends.

We hit it off on that trip. Jason and I had the same type of "aha" moment early in our careers. It was a simple realization, but it made a huge difference in how we understood the markets.

Today, I'll show you why this idea is setting up a huge opportunity right now...

While I was studying finance and economics in college, I was taught that people act rationally. That's one of the basic assumptions in finance and economics.

But my real-world experience was completely different. My first job out of school was as a stockbroker specializing in international stocks. I learned very quickly that investors don't act rationally at all!

Jason had a similar experience, at about the same time. It drove him to study sentiment. He built dozens of indicators to track the markets.

Jason eventually started a website called SentimenTrader.com. Today, SentimenTrader.com tracks hundreds of sentiment indicators and analyzes them. Jason even sends out a daily report through the site... I read his letter every day.

But who cares about market sentiment?

I do! Why?

It's the last, best way to outperform the markets. And today – based in part on Jason's work – it's setting up the last great buying opportunity of the "Melt Up."

You see, investors are not excited about stocks yet. In fact, it's just the opposite...

"Sentiment has dropped to a rare level since the 2009 low," Jason wrote to his customers last month.

On a scale of 0 to 100, investor sentiment sat at just 5, according to Jason. (That was as of April 13. It's moved up a bit since then... but with the new reading at just 16 out of 100, it's still pretty extreme.)

My jaw dropped when I read this. I never imagined that we could be nine years into a great bull market, and stocks could be THIS hated.

Jason's scale comes from his "Advisor and Investor Model" – one of his key indicators. It is primarily built on surveys of investors and advisers.

The recent reading of 5 out of 100 means investor sentiment has been downright terrible lately, according to the surveys.

So... is this useful information? It is...

This indicator has only been below 10 just 14 times over the past 20 years (that's excluding overlapping occurrences). The average gain just three months later was 8.5%... And stocks were higher 13 out of 14 times three months after it hit an extreme like we saw in April.

Eight percent gains in three months might not sound like much... but that's a 39% compound annual rate of return. It's hard to find any investing technique that comes close to gains like that.

When we talked about this recently, Jason told me that whenever you have extreme pessimism along with an uptrend – like we have today – the implications are really good for "at least the next several months."

I agree!

At this moment, stocks are hated, and they are in an uptrend. Chances are good we won't see this moment again in this bull market.

To me, this moment is likely the last great buying opportunity of the Melt Up. Don't miss it.

Good investing,

Steve

P.S. The latest Stansberry Investor Hour podcast features Jason, along with Porter Stansberry, Buck Sexton, and myself. It's a great chance to learn more about Jason's work with sentiment... Don't miss it! To listen, subscribe to the podcast for free right here.

Further Reading

"The fear that keeps investors up at night is usually less likely than they expect," Steve writes. Learn how negative sentiment is setting up another great contrarian opportunity right here: How to Profit From Investors' Biggest Fears.

"It feels scary out there today. But the opportunity is huge," Steve says. As he explains, his "early warning" indicators have been showing lately that investor fears are overblown. Read more here: 'The Silence of the Bulls': Fund Managers Are REALLY Scared Right Now.

Market Notes
THIS SPORTS AND LEISURE BUSINESS HAS COME A LONG WAY FROM ITS HUMBLE BEGINNINGS

Today, we highlight a company that’s expanded its business model…

Earlier this month, 15 million people tuned in to the Kentucky Derby at the Churchill Downs Thoroughbred racetrack in Louisville. The track, owned and operated by Churchill Downs (CHDN), has served as the home to the Kentucky Derby for more than 100 years… But it’s just one facet of the business…

The company’s name has become synonymous with the well-known race. However, Churchill Downs now counts casinos and online wagering among its major operations. This expansion has been a good choice… As of its first-quarter earnings report, the company’s net revenue of $189.3 million represents a 13% increase over the prior year. What’s more, earnings before interest, taxes, depreciation, and amortization (“EBITDA”) – one of our favorite gauges of financial strength – jumped 36% to $49.2 million.

This impressive growth has spilled over to shareholders… Over the past year, the stock has soared around 85%, recently hitting a new multiyear high. Churchill Downs’ efforts to grow its business have clearly paid off…

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