Eric Fry’s subscribers just had a huge win … while investors in this “old guard” stock are seeing their wealth destroyed
124% average returns in roughly three months …
Eric Fry just made good on a promise to his Speculator subscribers … and they more-than-doubled their money — in about a quarter.
More details on that remarkable accomplishment a bit further in this Digest, but let’s begin with Eric’s recent work on the Technochasm.
If that’s an unfamiliar word to you, it’s Eric’s term to describe the widening wealth gap that’s happening in America (and around the world), thanks in large part to huge investment gains coming from select, technology investments.
We detailed this in Digests last week, but here’s the quick synopsis if you’re playing catch-up.
Technology has become a great wealth-sifting machine … and it’s intensifying.
On one hand, cutting-edge tech products are simplifying our lives, making them far more convenient. This is why Americans are happy to open their wallets for tech — and this means most Americans, even those who aren’t necessarily earning high incomes.
For example, according to Pew Research, the percentage of U.S. adults who make less than $30K a year yet still own a smartphone is a whopping 71%. If we bump that income level to between $50,000 – $74,999, the smartphone ownership percentage leaps to 90%.
This is acting like a funnel, channeling wealth from the masses into one corner of the market — technology.
For example, over the last 10 years, the S&P has climbed over 200% … meanwhile, XLK, the SPDR Technology Sector ETF, has returned more than 450%, as you can see below …
This is a wealth-transfer, benefiting a select group of technology business owners, key employees, and investors. It’s creating a sharp wealth divide …
The Technochasm.
As we noted last week, 45% of Americans don’t own a single stock, so they’re not benefitting from these tech gains at all — rather, they’re merely funding it.
And of those Americans who invest, most are not concentrated in technology; worse, they might be exposed to underperforming sectors, like energy, which, over the last five years has lost 31% while tech stocks have climbed nearly 200% …
Here’s how Eric described this growing divide to his subscribers:
… the economy is humming, we’ve got nearly full employment, and the stock market keeps rising.
Yet … the net worth of America’s lower and middle classes keeps plummeting.
As one of my wealthy friends said recently, it’s as if a giant drawbridge is dividing our country in half.
***The wealth gap is growing increasingly stark
CNBC recently reported on this growing wealth division.
As you can see below, more wealth is flowing into the pockets of the wealthy few. Make sure to note how the bottom 50% of Americans now own just 1% of all wealth.
(And the numbers today are certain to be even more exaggerated than what you see below, given that these results ended in 2016.)
Most individuals reading this won’t fall into this “bottom 50%” of wealth, but that doesn’t mean you’re not at risk of being left behind by the Technochasm
Remember, part of the growing divide is based on how certain sectors, or stocks, aren’t measuring up to technology.
This results in one of two things — either a lost opportunity cost (being invested in “average stock A” when you could have been in “extraordinary tech stock B”), or it results in an actual loss of capital as “average stock A” loses value.
As Eric predicted nearly three years ago, this loss-of-capital just happened to a stock with an iconic brand.
From his update to subscribers on Tuesday:
On Thursday, Kraft Heinz Co. (KHC) reported a 5% drop in quarterly sales.
That knocked shares down 8% Thursday … and another 4% Friday.
This was just the latest in a long stretch of similarly miserable results for the company … (which) has plunged over 70% in the past three years … and 40% in the past year alone …
In mid-2017, I urged my subscribers to bet against Kraft Heinz by buying long-term put options on the stock.
I based much of that recommendation on the fact that Kraft’s debt was rising, while its revenues were slumping. But despite these obvious negative trends, the stock was trading at very lofty valuations …
Less than one year after issuing that alert, Kraft Heinz stock was down more than 35%. Two years later, the stock had plummeted more than 60% … and now it’s sinking further.
This is an illustration of an “old school” stock that has had a hard time adapting to current consumer trends and preferences. While tech is all about the future, too many of these old-guard-companies are still trying to get by with business as usual.
Unfortunately, in Heinz’s case, Eric notes that today’s American diet looks very different from the 1960s version. And as diets evolve, yesterday’s iconic brand is at risk of being left behind if it doesn’t adapt. After all, in this era of “gluten-free, sugar-free, organic,” when’s the last time you ate dried mac & cheese, or Jell-O, or a Lunchable?
Back to Eric:
Imagine if you purchased $10,000 worth of Kraft Heinz on June 30, 2017, while another investor simply purchased $10,000 worth of an S&P 500 Index fund.
Today, less than three years later, the investor who bought the index fund would be sitting on $14,650, while the investor who bought Kraft Heinz would have just $3,500 left from the original investment.
You certainly can’t build wealth by turning $10,000 into $3,500.
You can’t escape the Technochasm once you fall in …
I’ll throw in one added wrinkle. Imagine that same investor purchased $10,000 worth of XLK instead of the S&P 500 index fund …
He’d be sitting on $19,400 instead of the S&P’s $14,650.
This is the Technochasm at work.
Eric is at the forefront of this wealth gap research and its impact on investing. He’s put together a special video presentation on what he’s found which you can watch for free by clicking here.
***Let’s return to the promise Eric made to subscribers just a few months ago …
This past fall, Eric made a promise to investors considering signing up for his newsletter, The Speculator. In this service, Eric uses his decades of macro investing experience to place trades using both stocks and options. He considers any market, any asset, and frankly, any direction (Eric has made huge profits betting against certain stocks). Regardless, his goal is triple — or quadruple — digit returns.
The promise Eric made to new subscribers in the fall was that a basket of stocks and options he recommended — six in total (three stocks, three options) — would, on average, return 10-times the market, and a minimum of 100% within 12 months.
It turns out, Eric only needed about three months …
Yesterday, one of Eric’s recommended companies reported blockbuster earnings, sending the stock up 35% … which sent the options Eric had recommended into the stratosphere.
As the numbers shake out, as of yesterday, Eric’s basket of recommendations is up an average of 124% in about three months.
As to the second part of Eric’s promise, this 124% is about 10.4-times the return of the S&P over the same period. So, both aspects of the promise are now officially checked-off.
A huge congratulations to Eric’s subscribers for these winners.
For Eric, it’s just the latest in a career of winners that has seen him find over 40 1,000%-gaining investments.
If you’d like to learn more about Eric’s approach to the market in The Speculator — and hopefully, be a part of his next 1,000%+ winner — click here.
In any case, keep your eye on the Technochasm and old-guard stocks that are falling into it.
I’ll give Eric the final word of caution here:
You simply can’t afford to hold these stocks in your portfolio any longer.
Today there are so many ticking time bombs in so many people’s portfolios, because of bad business structures … heavy debt loads … and completely outdated business models that are being disrupted by fast-moving and creative, technological startups.
If you own doomed firms like these you are all but guaranteed to miss out on the biggest gains of the years to come.
Have a good evening,
Jeff Remsburg
