Thanks for your well-thought-out notes!
Earlier today, Luke, my customer care director, reached out to you asking what questions you've had about our first-ever "whisper traders" week here at Empire Financial Daily.
For those of you who responded, thank you. I'm poring through all your questions now and will make sure I do my best to answer them in our big event for Thursday (more on that in a moment). But first...
You've likely heard the classic expression that imitation is the highest form of flattery...
I like to joke that imitation is the easiest form of profiting.
I say this from personal experience...
I'm fortunate that my longtime friend and Harvard classmate Bill Ackman turned out to become an investing legend.
One of his best investments ever occurred during the global financial crisis in early 2009, when mall operator General Growth Properties filed for what was then the largest ever real estate bankruptcy. Its shares plummeted from above $40 to pennies. I remember the decline well, as my fund profited from it thanks to a well-timed short position.
At the time, just about every investor who had the misfortune of owning the stock wrote it off in disgust.
But we actually saw potential value amidst the rubble and had not only covered our short, but established a small long position in January 2009 at an average cost of $0.67 per share.
Then, in May, Bill gave a brilliant presentation, which clearly showed that the company's assets were worth far more than its liabilities. Therefore, unlike most bankruptcies, there would likely be a substantial recovery for shareholders.
Bill calculated that the stock was worth at least $10 per share and could be as much as $30. Meanwhile, the stock was trading around $1, so we added substantially to our position.
By the end of the year, the stock was trading at $11.50, and we had made more than 17 times our money!
But Bill isn't the only investor whose ideas I've profited from...
For years, shares of airline JetBlue Airways (JBLU) languished after the stock collapsed in 2003. But my outlook on the stock flipped after I saw a presentation from a hedge-fund manager who owned the stock at the Ira Sohn investment conference in May 2014.
He explained that JetBlue was doing five things that would boost profitability significantly:
- It had the lowest cost structure in the industry thanks to the youngest fleet.
- It was rolling out first class (Mint) seating on transcontinental flights, which would boost depressed margins to industry peers.
- It was redeploying planes to higher-margin routes.
- It was starting to charge $25 for a first checked bag, something almost all of its peers had already done.
- It was adding two rows of economy seats on most planes, resulting in seat "pitch" that matched most of its peers.
I did my diligence, spoke to my industry contacts, and became convinced that JetBlue's earnings were on the cusp of turning around.
Sure enough, earnings tripled – and so did the stock – over the next 16 months...
The truth is, everyone pulls inspiration from somebody else...
Generations of investors – myself included – have closely studied Warren Buffett's value-focused approach to investing.
As for Buffett? He learned investing from his mentor, Benjamin Graham.
But copycats aren't limited to investing. Legendary visual artist Pablo Picasso went so far as to say, "Good artists copy, great artists steal." And famed physicist Albert Einstein built his theory of relativity around the works of Dutch physicist Hendrik Lorentz and French mathematician Henri Poincaré.
In other words, success is built on others' prior successes. The greats learn from the greats.
Which leads me to my main point...
At the end of the day, the goal of investing is to grow your wealth...
When Buffett is backing up the truck and buying billions of dollars' worth of a stock like Apple (AAPL) or Chevron (CVX), don't let your pride stand in the way of you riding his coattails.
This is equally true when you're tailing company insiders and other smart investors... the folks who know the companies inside and out, better than the Wall Street analysts who cover them.
I've said it before and I'll say it again: When insiders buy their own stock, it's because they believe it will rise...
Sometimes they know something we don't.
It could be a catalyst on the horizon – such as a sea change in the evolution of the business. Or maybe they simply think their stock is far too cheap.
Either way, they know more than us, which is why paying close attention to their activity can lead to big gains – and fast.
Consider the following examples...
Jared Isaacman is a name you've likely never heard of before, but he's the founder and CEO of Shift4 Payments (FOUR), a payment processing company. Nobody knows the company better than him.
Between March and June of last year, Isaacman accumulated more than $12 million worth of FOUR shares with a cost basis between $30 and $50 per share, buying $845,000 as the stock bottomed in mid-June.
Over the next several months, the stock went on to more than double...
Here's another example...
You may not be familiar with apparel company PVH (PVH), but you've surely heard of its brands, which include Calvin Klein, Tommy Hilfiger, Van Heusen, and IZOD, among others.
CEO Stefan Larsson, who joined the company in early 2021, waited patiently before buying $1 million worth of the stock in September 2022. He nearly perfectly timed the bottom, as shares rose almost 75% over the next five months...
Finally, there's Tidewater (TDW), which provides offshore and marine support services to oil and gas companies throughout the world.
It has practically zero analyst coverage on Wall Street, so almost nobody noticed last August when board member Bob Robotti, a longtime friend of mine and veteran of the natural resources industry, quietly bought a $4.3 million stake. He followed that with another $2 million purchase in late November.
As you can see, the stock went on to more than double over the next six months...
Decades of data prove why trading these 'whispers' are by far one of the most powerful opportunities I've uncovered in my 20-plus years of investing...
And it's not just me saying that...
- H. Nejat Seyhun, a University of Michigan professor, published a paper showing how you can substantially increase your returns using "whisper trades"...
- A study from the University of Northern Iowa proved how regular investors can "earn abnormal returns" using these trades...
- Finance professors and PhDs Josef Lakonishok and Inmoo Lee proved substantial outperformance of these shares. Their findings were so powerful that Lakonishok went on to found LSV Asset Management and today manages $80 billion of client funds...
- Other university studies and prestigious journals have reported similar findings: Boston University School of Management, The University of Chicago, Wharton, the Journal of Financial and Quantitative Analysis, the Journal of Business Finance and Accounting, and on and on...
On Thursday at 1 p.m. Eastern time, I'm doing something I've never done before...
We've been working around the clock here at Empire Financial Research to compile all the best "whisper trades" for you to take advantage of...
In fact, with no less than 15 people assigned to this project internally, we've identified five trades we believe everyone should make right away...
There's a 'whisper trade' on a small energy company that one of the world's greatest investors is buying hand over fist...
This legendary investor now controls more than 10% of the shares of this small company... Surely, he must know something!
There's a 'second chance' to get into a history-making trade with Bill Ackman, similar to the one which made me 15 times my money back.
With this "sequel" trade, Bill is again buying up shares like crazy, just like he did with the original trade for General Growth Properties. You couldn't ask for a stronger "whisper" than this! And unlike General Growth Properties, this stock is on extremely solid footing, making it even more of a sure bet...
There's a small-cap life sciences company working on blood tests for cancer screening...
I'm sure you've heard hundreds of "stock pitches" in the past about companies with cures for cancer and other wild medical claims. And yet, two executives just bought $5 million of shares of stock. If they know something big is coming, and they are putting their money on the line, then surely this is an opportunity worth checking out, right?
And more...
I'll tell you more about each of these trades on Thursday at 1 p.m. Eastern time...
Mark your calendar now. Save the date and time. I'll have about an hour's worth of information to share with you that you won't want to miss.
Best regards,
Whitney Tilson
April 25, 2023
