Editor’s Note: As Chief Investment Strategist of Total Wealth, Keith believes in making his track record of recommendations easily accessible to all readers within seconds – and that’s why he’s compiled an Archives page. Here you’ll find links to every Total Wealth article Keith has published since Total Wealth’s creation on October 2, 2014, posted in reverse chronological order.
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Millions of investors and everyday Americans have discovered Shake Shack’s high-end hamburgers. They taste great, and the new chain is a snazzy place to hang out.
Logically, they assume that the novel experience will translate into a great investment. Indeed, SHAK gained 8.47% in yesterday’s trading session to close near $90 (an all-time high), thanks in part to headlines from this week like these:
Is Shake Shack The New Chipotle? – Yahoo! Finance
Shake Shack Is Considering a Chik-Fil-A Killer – Business Insider
Shake Shack Continues to Defy Gravity, Surges to Fresh All-Time Highs – Briefing.com
My favorite piece of punditry this week came from CNBC’s Jim Cramer, who dubbed Shake Shack “the Tesla of burgers.”
Nonsense – sure both stocks are volatile, but TSLA investors can be glad the similarities stop there.
Recent investing history has been very clear about the ultimate fates for companies like Shake Shack – and investors should pay attention. There are undeniable parallels between Shake Shack and another infamous stock story in investing circles.
Here’s why investors would be wise to avoid Wall Street’s new darling.
We’ve spent a lot of time talking about how to identify great companies with huge upside potential. No doubt you’ve got the 3-Step Total Wealth Process down by now: 1) identify the trend, 2) pick your trade, and 3) control your risk.
So today I want to shift gears and talk about the one metric you can use to identify seemingly pristine companies that are ripe for a fall.
Our timing couldn’t be better. Janet Yellen has just taken off the blinders and the markets charged higher… at a time when corporate profit growth is about to go negative for the first time since the Financial Crisis began and QE started. Meanwhile, there are fears of another recession, flat wages, and even flatter consumer credit.
Obviously the stronger companies will survive and that’s in large part why we concentrate on them. But the weaker ones… whoa Nelly, they’re in for a wild ride.
How do you know which is which?
Fortunately, that’s not hard – there’s one number that can tell you which way to play it.
Learn to “read” it properly and you’ll have a tremendous advantage over most investors, for whom hope is unfortunately a viable investment strategy.
Here’s the indicator that makes the difference between a “buy” and a “short.”