"Newsvesting" is not only the name of a book, it’s also a specific, easy-to-follow method of turning an interest in news and opinion into profitable investments in the stock market.
In my new book "Newsvesting: How to Use News and Opinion to Grow Your Personal Wealth,"
I applied methods I learned as a competitive national debate champion years ago with the commonly accepted method of analyzing legal cases that I learned in law school to create a way to put news and opinion to work in building my investment portfolio.
I then used by own funds to test the system for a year. The results turned me into a “Newsvestor.”
The details of "Newsvesting" are in the book.
First, you learn the simple steps of gathering news, identifying the issues to follow, and continuing to gather the “evidence” that news and opinion surveys provide. Apply simple logic to decide which stocks will benefit from your research and you are Newsvesting.
Here are just a few examples of short-term issues that presented great investment opportunities, longer-term opportunities, as well as instances where polls and surveys helped avoid costly market downturns.
Consider the short-term news issue of the threat of the Ebola virus in the U.S. Another was the sudden emergence in the news cycle of ISIS in September 2014. For Newsvestors, neither issue was a surprise.
I recognized that both issues were having a likely temporary impact on the stock market. On October 15, 2014, Newsmax reported that an Ebola patient with a fever had flown on a commercial jet days before being admitted to hospital.
I quickly put Newsvesting into action by purchasing shares of financially strong American Airlines (AAL)
at $31.66 a share.
The next day, the Ebola concerns, coupled with new developments about ISIS, continued a decline in the larger indexes. So I purchased the S&P Index Trust SPDR (SPY)
As for the American Airlines pick, it was simple. Even if Ebola spread into the general population, almost every expert said it could be contained. Moreover, airports would be better equipped to screen for the problem than, say, theaters, sports venues or malls.
My investment didn’t take long to pay off. Just six days later I sold AAL at $37.78, pocketing a profit of just under $6 a share.
As for the purchase of the S&P index, that was based on the logical conclusion that the overall market was dropping as a reaction to news stories that would soon disappear from the headlines. On December 2014, I sold my shares of SPY at a $17-per-share profit.
I don’t normally promote short-term trades. But at times, as with the Ebola scare, such moves can reap profits.
There are other times when longer-term investments can arise from "Newsvesting."
In following the aftermath of the so-called “Arab Spring” and the chaos that ensued in the Middle East, Newsvestors learned that while the Obama administration was cool to U.S. military spending, it was at the same time pushing other nations to arm themselves. And when President Barack Obama began aggressively to push a nuclear deal with Iran, the value of defense stocks began to take off.
In late 2014 and early 2015, I Newsvested in defense stocks that paid reasonably strong dividends and were solid names. They included Raytheon (RTN), Lockheed Martin (LMT),
and Northrop Grumman (NOC)
. All three companies offered defense systems, drones, and other essential military equipment and services. Year-to-date RTN is up by 9%, LMT by 13% and NOC by 26%.
Then there are Newsvesting once-in-a-lifetime opportunities. One of the latest is large-cap oil-related companies that also pay big dividends. Newsvestors knew that a worldwide glut of oil was developing as early as the spring and early summer of 2014, even as USA Today was telling readers that supply would tighten and prices at the pump would rise.
shares dropped from the mid-$80 range in July 2014 to nearly $41 in July 2015. Exxon-Mobil dropped from $104 to $72. But in between those drops prices recovered often, giving opportunities to bank nice gains or to hold on for a strong rebound in the future.
Finally, as a pollster I learned that certain public opinion surveys can actually help signal when you should reduce your exposure to the stock market.
For instance, when one publicly available survey index rises to an extremely high level, it has inevitably been followed with steep drops or corrections in the market. That high point was reached again in April of 2015 and was followed by the market correction of September.
Relying on that survey, I reduced my market exposure before the correction.
For those who follow the steps and pointers set out in my new book "Newsvesting,"
reading news and opinion has never been so much fun, or financially rewarding.
Matt Towery is a veteran pollster and chairman of the investment advice site InsiderAdvantage.com.
Get Matt Towery's new Book "Newsvesting: Use News and Opinions to Grow Your Personal Wealth" on Amazon.
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