Investors dream of buying on the exact day an investment bottoms... or darn close to it. Then, they dream of selling after it soars to incredible heights.
It's a fun dream. But there's a catch...
Buying near those bottoms is scary. Every part of your brain tells you that you're making a huge mistake. And most of the time, that voice in your head keeps you from getting in when the time is right.
Even worse, that fear keeps investors on the sidelines as the investment takes off. So not only do they miss out on the perfect time to buy... they miss out on buying at all.
That's exactly what's happening today on the opposite side of the world.
Hong Kong stocks are finally in a strong uptrend... yet investors aren't buying.
This fear is setting up an opportunity for contrarian investors. And Hong Kong stocks could rally double digits as a result.
Let me explain...
Hong Kong stocks are up 14% since bottoming in March. And while they haven't hit new highs yet, the uptrend is clearly in place.
Investors still want nothing to do with this market, though. We can see this through shares outstanding for the iShares MSCI Hong Kong Fund (EWH).
As an exchange-traded fund ("ETF"), EWH can create and liquidate shares based on demand. So when investors give up on Hong Kong stocks, EWH's share count will fall. And when demand picks back up, the fund creates more shares to accommodate it.
Importantly, when EWH's shares outstanding hit extremely low levels, it's often a buying opportunity.
Today, shares outstanding for EWH are the lowest we've seen in a decade. Take a look...
Folks hate the idea of owning Hong Kong stocks today. And EWH's shares outstanding are at a multiyear low because of it. This is a great sign for us contrarian investors...
We've seen situations like today's a handful of times over the last decade. Each case led to higher returns for investors in the coming months.
The table below shows what's possible when you buy after these kinds of setups...
We've seen four other major fear triggers since 2010. Each led to double-digit gains in the following year. The largest return was 31% following the 2011 low in shares outstanding.
Now, shares outstanding could fall even further from here. But with Hong Kong stocks in an uptrend and investors still sitting on the sidelines, the upside potential is impressive.
You can easily take advantage of this by owning shares of EWH – the fund we discussed above. It holds a broad basket of Hong Kong stocks. And it's the simplest way to take advantage of this situation.
I realize that might not seem like the smart move today. That's what the crowd thinks, at least. But if you're looking to put money to work outside of the U.S., history shows Hong Kong is a smart bet today.
Good investing,
Chris Igou
Further Reading
Markets all over the world have rallied since the pandemic-induced economic crash in March. And based on history, this often-ignored market is poised to rise double digits in the near future... Read more here: A Major Opportunity in a Market You've Never Considered.
"When something gets out of whack in the investing world, it tends to not just correct itself... but overcorrect," Chris says. Right now, things are so out of balance that we can expect triple-digit gains in one part of the market. And Chris has identified a one-click way to take advantage of it... Get the full story right here.
Hong Kong stocks aren't the only unloved market today. And with a strong uptrend in place, there's huge upside potential ahead...
ECONOMIC GROWTH IS A TAILWIND FOR THIS MINER
Today, we're highlighting a company that's thriving as the global economy rebounds...
When the coronavirus first hit earlier this year, global growth ground to a halt. But now, economic data is pointing to a strong economic recovery... And that's good for commodities like copper, which is often used in manufacturing. This trend has been a tailwind for today's company...
Southern Copper (SCCO) is the fifth-largest copper producer in the world. In 2019, it mined nearly 2.2 billion pounds of copper. When the price of copper rises, like it has in recent months, Southern Copper can charge more for the copper that it mines. That's exactly what we saw in the company's latest earnings release... Southern Copper's sales jumped 14.5% year over year in the most recent quarter, partly driven by increases in sales volumes and copper prices.
As you can see in today's chart, Southern Copper's shares recently hit new 52-week highs. Our colleague Bill Shaw also recommended SCCO shares to his Commodity Supercycles subscribers earlier this year... And readers who followed his advice are up 21% in three months. Congrats to Bill and his team!
