A Contrarian Strategy to Earn 5X Your Money

your Strike Price issue A Contrarian Strategy to Earn 5X Your Money [By Stephen Mauzy] By Stephen Mauzy Saturday, August 20, 2022 [Elon Musk Reveals Secret Master Plan]( Tesla’s founder is just days away from revealing his CONFIDENTIAL Master Plan 3.0. You could’ve earned 1,766% - 24,017% profits investing after he released Master Plan Part 1 & 2. Now it’s time for you to BUY these 5 stocks – before Elon reveals everything. [Click here for details.]( --------------------------------------------------------------- Wow, is this kid precocious, or what? The Financial Times reports that a 20-year-old investor made roughly $110 million. He made it investing in one stock. He made it in one month. Is this a put-on? No, but there is more to the story, The 20-year-old investor, Jake Freeman, is an investing prodigy. When he was a teenager, Freeman interned for a New Jersey hedge fund, Volaris Capital. As for the windfall, Freeman invested $25 million – raised from family and friends – in Bed Bath & Beyond (NASDAQ: BBBY). He bought roughly 4.5 million BBBY shares at $5.50. He sold the whole shebang when the shares were trading near $29. Freeman bought his BBBY stake shortly after the company reported dreadful quarterly financial numbers. The share price had dropped 20%. Freeman was also buying a stock with a high short-interest ratio. Over 100% of BBBY shares were sold short. (To “sell short” means to sell borrowed shares first and then buy later to repay the loan.) Stocks with a high short-interest ratio, like BBBY, are fodder for the Reddit-Robinhood crowd. These are the individual investors who create a meme around a stock and then go to work buying that stock. Their buying creates a “short-squeeze.” A short-squeeze occurs when investors who sold short are forced to buy back the shares, thus creating additional demand. The share price frequently soars when a stock is targeted for a short-squeeze. Indeed, BBBY’s share price soared to $30 from $5 through the first two weeks of August. Now, let’s get real. Not to belittle young Mr. Freeman’s acumen, but his BBBY windfall is something of a lottery ticket win. To buy near the absolute low and then to sell near the absolute high rarely occurs. (It’s worth noting BBBY’s share price is already down 35% from that $30 high.) To have it all coalesce in your favor within a month is equally rare. I do like young Freeman’s strategy and chutzpah, though. I think investors can learn a thing or two. For one, analyze the situation. Freeman analyzed the situation rationally. He thought value could be created through a restructured balance sheet and cost reductions that would improve operating margins. Be willing to buy when everyone is selling. Freeman bought the shares after the price had dropped following the release of BBBY’s quarterly financial numbers. The shares were down 80% from the 52-week high. Focus on an established company. Bed, Bath & Beyond has been a publicly traded company for 30 years. It has been knocked down before and has recovered. To further improve your odds, I recommend focusing on larger companies – a market cap of $10 billion and higher. (BBBY’s market cap is around $350 million.) I disagree with Freeman on earnings. BBBY doesn’t have any. It has been a money-losing operation for the past four years. I like earnings because they signal staying power. Earnings favor a turnaround of fortune. I’ll concede that adding my recommendations to the mix would have eliminated BBBY from consideration. But when is the last time you won the lottery, anyway? Good Investing, [Ian Wyatt] Stephen Mauzy Contributing Editor P.S. While Freeman's return is a very respectable 400%... 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