[Editor’s note: “Divergence Transforms Volatility Into Massive Market Gains” was previously published in May 2022. It has since been updated to include the most relevant information available.]
By now, you should know all about the very rare phenomenon of divergence that first appeared in the US stock market 14 years ago.
You know it’s all about stock prices deviating from their fundamentals. I’ve heard that it only appears during periods of peak market volatility. It has consistently provided the opportunity to double or triple investments in 12 months and 10x returns in five years. And you know it’s so strong that it lifts divergent stocks, even if the market crashes.
Of course, you know it’s a lifelong financial opportunity.
But Did you know that the difference we’re seeing developing is the biggest yet?
This is correct. We saw huge divergences in the US stock market in 1988, 2001 and 2008. But what we see now is a divergence larger than either of those – by a wide margin.
Our analysis indicates that the greater the difference, the Larger potential returns.
You can forget to double or triple your money in 12 months…
opportunity in Difference 2022 can be a lot, Many Larger.
The difference in shopping will bring huge gains in the market
The best way to tell the difference is to compare a company’s stock price to its revenue.
The two should always head in the same direction. If revenue is going up, the stock must go up, too. And if revenue goes down, the stock should go down as well.
Differences occur when this very strong relationship is broken. Revenue and earnings continue to rise, but the stock price is falling. This creates a generational buying opportunity in this differentiated stock.
Right now, we’re seeing some huge differences emerging in some stocks across the market. In fact, these are some of the biggest we’ve seen in the history of the US stock market.
Takes Shopify (a store), for example.
Shopify is an e-commerce solutions provider for small and medium retailers. The company is leading the wave of online selling trends and the democratization of retail. Its revenue has been and is expected to continue to grow very rapidly. However, the stock price has collapsed recently, resulting in a massive divergence between fundamentals and price. In numbers, this is one of the biggest differences we’ve ever seen.
See the chart below. Historically, what usually happens next is that the purple line quickly reverts back to the blue line. This paves the way for quick three-digit gains in inventory. Our numbers indicate that because of this difference, SHOP can double in a hurry.
The big difference in Roku
or consider Rocco (ROKU).
Roku is a maker of streaming devices. It operates a television programming ecosystem that connects consumers with their favorite streaming services. It is the “Broadcast Cable Box”. Roku has continued to grow rapidly and will continue to do so as more users, content, and ad dollars shift to the streaming TV space.
However, the stock price has recently collapsed – without a drop in revenue – resulting in a massive divergence. Our numbers indicate that this is one of the biggest differences in history. And it can lead to a rapid rise of over 400% in ROKU. Rake those market gains!
And the list goes on and on. Across the stock market today, we’re seeing some huge differences appearing in individual stocks with great growth potential. This creates a very compelling investment opportunity, the like of which we have not seen since 2008.
This is the good news.
The best news? Difference 2022 Bigger than anything we’ve seen so far. This means that returns from now on could be greater than anything we’ve seen so far.
The greater the difference, the higher the returns
One of the most interesting discoveries we’ve made about this phenomenon of difference is, in short, size matters.
We have found that Larger difference, and Larger convergence.
Check out the following scatter chart that tracks several historical examples from 1988, 2001 and 2008. It plots the magnitude of the various differences (the x-axis) along with the magnitude of the 12-month forward returns (the y-axis).
There is clearly a positive relationship between divergence and returns. The higher the divergence, the higher the forward returns.
And that’s important because what we’re observing across the US stock market right now is some of the biggest differences of all.
Of course, there’s Shopify and Roku. But relative to some of the other differences out there, those differences are small.
Some stocks report variance amounts of 500 percentage points or more.
These are the stocks that will win the most in Difference 2022. And it’s the stocks we’re looking at most closely now.
Final word on major market gains
The largest market phenomenon in the history of capitalism appeared on Wall Street for the first time in 14 years.
Investors connected to it can make a lot of money over the next 12 months. Those who are unaware – and those who ignore it – can lose a lot of money over the next 12 months.
Believe me. This is something you don’t want to miss – and frankly you can’t afford it. In fact, this window of difference will not remain open for long. It diminishes as we speak.
Take advantage of this rare market phenomenon as much as possible. And you will be able to Convert today’s market volatility into triple digit gains.
At the date of publication, Luke Lango did not (directly or indirectly) hold any positions in the securities mentioned in this article.