Oversold 'Free Money' Companies Could Jump 12%

Investors fled one of the world's best business models last month. But history tells us that flight could be setting up a year of big gains... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [DailyWealth] Editor's note: The markets and our offices will be closed tomorrow in observance of Good Friday. Look for your next issue of DailyWealth on Monday after the Weekend Edition. We hope you enjoy the holiday. --------------------------------------------------------------- Oversold 'Free Money' Companies Could Jump 12% By Sean Michael Cummings, analyst, True Wealth --------------------------------------------------------------- Investors fled one of the world's best business models last month... Legendary investor Warren Buffett credits this type of business as "the engine that has propelled [Berkshire Hathaway's] expansion since 1967." Buffett explained the magic of these businesses in a 2011 letter to shareholders. Here's what he said... [This] model leaves us holding large sums – money we call "float" – that will eventually go to others. Meanwhile, we get to invest this float for Berkshire's benefit... When such a profit occurs, we enjoy the use of free money – and, better yet, get paid for holding it. This industry isn't just a pillar of Buffett's investing strategy, though. It's a huge part of the U.S. economy. In fact, it generated $1.36 trillion in annual premiums in 2021. If you haven't guessed yet... the industry I'm talking about is insurance. In March, droves of investors bailed on insurance companies, pushing the entire industry into "oversold" status. But history tells us that flight could be setting up a year of big gains. Let me explain... --------------------------------------------------------------- Recommended Links: [If You Own Any Stocks, Read This Immediately]( Marc Chaikin is known on Wall Street as the guy who makes eerily accurate predictions – like last November, when he warned we were heading for a banking crisis. Now, he's stepping forward with a new warning: ["Americans are about to do some DANGEROUS things with their money..."]( --------------------------------------------------------------- [FBI Consultant: 'The Government Could Take Over Your 401(k)']( A professor and consultant for the FBI just stepped forward with a major new warning... which could make some Americans vastly wealthier but have serious negative consequences, too. He says there's even the possibility that the government could soon make huge changes to retirement accounts like IRAs and 401(k)s. [Get the details here](. --------------------------------------------------------------- The Nasdaq Insurance Index gives us a good idea of the insurance sector's performance. This index contains a basket of insurance companies. And it has a long history, going back to 1971. March's banking turmoil caused a sell-off. The index plunged almost 11% between the start of February and mid-March. And that drop sent it into "oversold" territory, based on the relative strength index ("RSI")... The RSI is a simple but useful tool for investors. It tells us if an asset's or index's price has moved too far, too fast in either direction. Overly bullish investors piling into an asset can push the RSI above 70 – to "overbought" levels. Once an overbought setup happens, a price drop often follows. On the other hand, an overly bearish move can drive the RSI below 30 – to "oversold" levels. And when that happens, a snapback rally is likely. These signals are especially strong once the RSI rises back above oversold levels. On March 15, the index hit an RSI of 26 before bouncing back. Take a look... It's easy to look at the decline in insurance stocks and want nothing to do with them. But that's not the right decision according to history. Instead, setups like today's can lead to outperformance. To see it, I examined this index's performance after similar oversold bounces since 1971. Check it out... Insurance stocks have been "steady Eddies" for the past 52 years. On average, they have returned 3% a year. But buying after an oversold bounce can quadruple that gain... Similar instances have led to 4% gains over three months, 7% gains over six months, and 12% gains over the following year. Investors have great odds of making a profit, too. Since this index's creation, its RSI has bounced from oversold levels 162 times. And insurance stocks were positive a year later 73% of the time. Investors are fleeing insurance stocks today. But as contrarians, we see their mistake. History shows we can expect a fantastic year for these companies after the March sell-off. Insurance companies have a well-earned reputation among the world's best businesses. Combine that with this signal, and the outcome is clear... This is a group of stocks you should consider right now. Good investing, Sean Michael Cummings Further Reading Sentiment swings can lead to incredible opportunities. Recently, mom-and-pop investors turned bearish at one of the fastest rates on record. And as contrarians, we should pay attention – because in the past, these reversals have led to fantastic gains in stocks... [Get the full story here](. One coveted precious metal has crashed, sending prices near oversold levels. Investors have given up. Based on history, this move might not come to much in the short term – but in the coming year, it could set the stage for major outperformance... [Read more here](. --------------------------------------------------------------- [Tell us what you think of this content]( [We value our subscribers' feedback. To help us improve your experience, we'd like to ask you a couple brief questions.]( [Click here to rate this e-mail]( You have received this e-mail as part of your subscription to DailyWealth. If you no longer want to receive e-mails from DailyWealth [click here](. Published by Stansberry Research. You're receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized investment advice. © 2023 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [www.stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.