James Dines: Which Stocks To Buy?

Written by James Dines
Posted November 30, 2019

Publisher's Note: James Dines, widely known as "The Original Goldbug," brings his formidable experience and expertise with precious metals to his readers in the latest issue of The Dines Letter.

Read on for his expert analysis and a look at the kinds of stocks to be buying today.

To your wealth,

Nick Hodge Signature

Nick Hodge
Founder & President, Outsider Club

"Take calculated risks. That is quite different from being rash."

General George Patton, letter to his son on D-Day, June 6, 1944

A four-flusher is someone who pretends to be what he is not, a phony, a bluffer. In the card game of poker, a “flush” is a potential winner, a hand that contains five cards of the same suit. A bluffer who has only 4 is a “four flusher.”

The current stock market appears to be a four-flusher. It’s been making one new all-time high after another this year, driving Mass Psychology to a frenzy. However, being objective, the 2018 to 2019 comparative November highs table (below) shows the changes in these 7 leading averages as only marginally higher this year. How could this be?

tdl comparable gains tables

Indeed, there have been no fewer than three new cyclical upwaves this year by the S&P 500, topping on May 1, 2019, July 26, 2019, and November 7, 2019. The charts of the S&P display the visual evidence.

tdl nov19 sp500 chart

New all-time highs are important, but are not everything. For example, Nasdaq made a new high in early November. It also a reached a new high this April and July – both times the rally fizzled out and an abrupt decline followed — overall, net, net, flat.

In fact, this phenomenon was described in our book, Technical Analysis, as a type of deceptive Top Formation. We have frequently mentioned it in the last two years, and we call it the Dines Moonwalk Formation (DIMF). It is based on Michael Jackson’s famous moonwalk in which he dances backward while seemingly walking forward. This table is our example of it, an illusion of big moves that are relatively small, despite all the noise about “new highs.”

Further, we don’t observe the mass of stocks following the leading averages in Upside Breakouts. So how do we lead our TDLers to make money from the Upside Breakouts that leading averages are indicating? Where are the buying opportunities? We perceive too many vastly overpriced stocks, many of which have been rising for 10 years, which suggests continued caution, choosing opportunities very carefully, and focusing on precious metals mining stocks.

One of this financial newsletter’s specialties is “discovering” what is in plain sight, identifying opportunities to drink upstream from the Herd. It amazes us that so many investors simply don’t always perceive an obvious way to make money. Time and again TDL has discovered new bull markets, and long-term TDLers know by now how we handle them. Our latest was pot, as “The Original Cannabis Bug.” Huge-percentage profits were made by those who followed us into pot stocks, which admittedly took nerve to hold for a few years. For example, Canopy was up 2,569% at its high. Pot stocks are in another of their cyclical declines, now nearing tempting buying opportunities, using “scaling down.”

There has also been a quiet bull market, largely unnoticed, evolving in the precious metals sector, an opportunity for TDLers that has already been profitable. Palladium has been leading the precious-metals sector higher — screaming to new all-time highs almost daily, up 119% since August 2018 — but its performance is not in financial headlines yet despite its significance as to leading the precious metals higher.

It’s getting a bit late to do much new buying of palladium, so now is the propitious moment to detect the next group leader. There are spanking new uptrends, contagious to the other four precious-metals: gold, silver, platinum, and even rhodium.

Gold stocks are ready for choppy lateral motion, to absorb profit taking after recent jumps. For the moment, it’s “buy on dips.” Gold mining shares are oversold and bullish; we expect shares to lead gold bullion higher.

We suspect lonely and media-neglected silver might be the next leader. Silver bullion is calmly holding in the high 'teens, absorbing profit taking, and still very bullish. Still far below Major highs, silvers have nonetheless been impressive recently. Silver stocks are sporting far larger percentage gains, since November of last year, than nearly all the fabled FAANG stocks bruited in the headlines!

Investors miss the birth of new bull markets because they tend to slip in so sneakily and silently. Look around at the mass media — we haven’t seen any of them recommending silvers, although palladium’s near-vertical rise is beginning to edge toward a bit of mass awareness. And who’s even heard of rhodium? That’s what wise investors have been buying.

Please keep in mind — precious metals corporations are unique in that they produce money, specifically gold and silver, so that when prices of those bullion rise, the extra money flows directly into their profits without the company doing much extra.

It’s not easy leading TDLers to silvers, but that gives the advantage to investors who make the effort to decipher the hidden pearls. There are too many inefficient tiny silver mining companies, so a serious merger spree will eventually begin. Thus we must at least keep a close eye out for a good acquirer of small silver companies, as well as acquisition targets. We’re still studying that.

As always, we recommend selling small percentages on the way up, to lock in some profits. Also, silvers look slightly lower, due to their large previous rises. So scale in, buying a percentage more on each dip. Silver has a chance of doubling your money again.

James Dines is legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community. He is the author of five highly regarded books, including "Goldbug!," in addition to his popular newsletter, The Dines Letter, and videotaped educational series. Dines' highly successful investment strategies have been praised by Barron's, Financial Times, Forbes, Moneyline, and The New York Times, among others.

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