Your Best Chance For Triple-Digit Gains In 2017

Jimmy Butts's picture

Thursday, February 2, 2017 - 12:00am

by Jimmy Butts

After flirting with the major psychological milestone of 20,000, the Dow Jones Industrial Average finally eclipsed the mark on Wednesday, January 25. It seems as if nearly everything has been going up since the financial crisis of 2008-2009.

With this bull market going on eight years, it's hard to believe there's any stock out there that hasn't seen a surge. After all, a rising tide lifts all boats, right?

But believe it or not, there's one sector that's fallen for six straight years -- a feat that hasn't been accomplished since the Great Depression.

At some point, the pain and suffering have to end. There is no lower low. The bad luck runs out eventually... and when such a hated and beaten down sector finally turns the corner, huge returns typically follow.

Consider coal. After five consecutive down years -- and an 87% plunge -- coal stocks finally turned the corner and rallied 98% in 2016, making it the best-performing industry of the year.

Gold shares a similar story. From highs in 2011, prices dropped about 45% to the 2015 lows before rallying about 30% in the first half of last year.


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This brings me to the latest pick I made for readers of my premium advisory, Maximum Profit. The pick comes from a sector that is down nearly 90% from its highs. It would have to go up more than 700% to return to its 2011 peak. Now, I can't promise that we'll see a 700% rise from this pick, but huge gains are possible in the next six to 12 months.

Here's why...

First and foremost, momentum for this once hated sector has turned the corner. In the last six months, it's jumped more than 30% compared with the broader market's 6% return. This surge is what led my proprietary Maximum Profit system to flag today's pick.

This market-proven system combines two indicators that assess stocks from technical and fundamental standpoints. It identifies picks with solid price momentum and the underlying earnings to maintain that trajectory and then assigns each one a rating. In all, the system has helped my Maximum Profit newsletter subscribers and I beat the S&P 500 by an average of 14 percentage points over the last decade.  

What excites me about this pick, aside from the fact that it's passed the rigorous criteria of my proven system (which you can read about here) is that it is experiencing a concept that's known as "mean reversion." In financial theory, mean reversion suggests that prices will eventually move back toward the mean, or average. This can be an incredibly powerful force. When coal stocks reverted away from the mean for five years, they snapped back violently in 2016 -- returning nearly triple-digit gains in 12 months.

Today, we have a similar setup in the uranium industry, and my system has recently identified a stellar opportunity in it. This pick is one of the largest uranium producers in the world, providing almost a fifth of annual global output. The company also provides processing services required to produce fuel for nuclear power plants.

Here's the thing when it comes to investing in uranium and uranium stocks specifically. Only a handful of companies around the world mine uranium. It's a business with a high barrier to entry -- requiring specialized skill and infrastructure for ore handling, storage and processing.

Of the few uranium-producing companies, even fewer are available to investors. That there are so few choices for investing in the uranium space is providing a nice tailwind for this company's share price... and should continue to do so in the future.

Investors who want to reap gains from the gold, copper or coal industry have a plethora of big-name companies to choose from. Uranium buyers don't. So when the sentiment in uranium turns -- as we're beginning to see now -- there's a herd of stock buyers piling into only a handful of companies, which can have a big and sudden effect on the share price.

The last big run in uranium, between 2004 and 2007, caused this stock to shoot up an amazing 645% in three years.

Compare that performance to a big-name company in a more populated space such as gold. Between 2002 and 2008 -- when the gold price had its big run from $300 per ounce to $1,000 -- the world's biggest and most recognizable gold miner, Barrick Gold (NYSE: ABX), appreciated a still-impressive 300%. But that, of course, pales in comparison to 645%.

And it gets better. In the commodity-producing space, when the price of the raw material tanks earnings and cash flow follow suit, with many companies report losses -- often for multiple years. But my pick has reported positive earnings and cash flow for the last 10 years.

This investment has potential for massive upside for the foreseeable future, especially with an estimated 14-year supply of uranium reserves sitting in its mines. In all, this could be one of our best shots at a triple-digit return in 2017, courtesy of simple reversion to the mean and solid scores in the Maximum Profit system.

My advice: be on the lookout for beaten-down companies and sectors that are likely to experience this sort of mean reversion. It could be one of the few chances you have to bag triple-digit gains in this market. In the meantime, if you'd like to know the name of my pick, which is only available to my Maximum Profit subscribers, go here.

Jimmy Butts does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.