A Slam-Dunk Short-Term Trade

Tuesday, November 18, 2014 A Slam-Dunk Short-Term Trade   by Jamie Dlugosch   Every investment has a thesis, a belief as to what will transpire next.   Get a clear picture of what happens next and buying the appropriate investment vehicle is the least of your worries.   The trick with any thesis is timing. Some stories are longer term and some are short term.   In this market environment I would stick to the short-term investment thesis.   For example, many bond investors have been burned in 2014 predicting that interest rates will increase.     FURTHER READING OPEC's Worst Nightmare Comes True   The U.S. has been forced to deal with backward, oppressive regimes, like Saudi Arabia, for decades -- simply because geography had blessed them with massive reserves of the life-blood of modern society -- oil. Well, that dominance is now over. Because the United States is set to become THE leading energy producer in the world. This is the day the Saudi's -- and every other OPEC nation -- prayed would never come. And we've found a great way for the average guy to cash in.   Click here for all the details.     They did not and as a result, owning bonds -- not selling bonds -- was the right strategy.   I came across a more recent theory in the gold market that on the surface makes a ton of  sense, but again it's a long-term story.   The idea is that the pain of falling gold prices have already been priced into the mining companies that have been crushed in the current market.   At some point it will turn and thus, for the long-term investor, it makes sense to buy gold-mining stocks.   That may well be, but again it's a theory for the long term, and perhaps even the very long term.   With the short-term risk being to the downside, how can any investor trust such a thesis?   Instead consider this slam-dunk short-term thesis that you can trade with much less downside risk today.   Specifically, consumer savings on gasoline will be spent this holiday season and one of the first places consumers spend money is in the restaurant business.   It's an easy affordable treat that is even more so with crude prices plummeting.   And don't be fooled at the obviousness of the trend. The growth in sales from extra consumer spending will likely be greater than most believe and is not currently priced into restaurant stocks in particular.   It is estimated that for each penny decline in gas prices, a billion dollars of extra cash is saved by the consumer.   I'm already seeing the effects in my local community. Try dining out without a reservation. You cannot get a table ... not like you used to be able to.   The one stock that I would target to play this trend is Darden Restaurants (NYSE: DRI).   Recent hedge fund activism at Darden has resulted in a new board of directors and a new vision for the company.   KeyBanc Capital Markets just raised its rating on the stock to buy with a price target of $62 per share.   Analysts there see a company that is far from broken and instead is poised to benefit from the trend in increased dining due to lower gas prices.   I could see Darden moving to that price within three months. If so, you could pocket an easy 10% to 15% from current levels.   The trigger for those gains will be earnings for the fourth quarter that should easily surpass expectations.   It's going to be a good holiday season for Darden. That is a thesis you can count on rather than wait around for whatever well-intentioned longer-term thesis that may be out there.   Jamie Dlugosch Editor Investor Research Institute   To Read More From Investor Research Institute Click Here
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