A Special Chat With Adam O’Dell
I’ve got a special chat for you this week.
I talked to my colleague and fellow editor Adam O’Dell.
Adam has been trading the markets for over 15 years now.
He used to run a hedge fund, but now he helps regular investors catch up on retirement.
In today’s video, we discuss GameStop and other meme stocks.
I’m excited to have this conversation with Adam. So, let’s dive in…
(If you’d prefer to read a transcript, click here.)
Ian King: Hey everyone. Ian King here with your Winning Investor Daily weekly YouTube video.
We’ve got a special chat this week. I’m going to be talking to my colleague and fellow editor Adam O’Dell.
We’re going to get into what’s been going on in the last year with all these different manias we’re seeing.
So, I’m excited to have this conversation. But before we get into it, I just want to remind you that if you haven’t subscribed to our channel yet, please hit the subscribe button. If you like what we have to say, smash that like button. And as always, feel free to leave a comment. We’ll be sure to address it on a future update.
All About Adam!
Adam, why don’t you tell us a little about yourself? How did you wind up here at Banyan Hill? I know you joined us a couple of years ago. Give us the viewers a little bit about your background.
Adam O’Dell: Sure. Well, first of all, thanks so much for having me on, Ian.
I’ve been trading the markets myself for over 15 years now. I used to run a hedge fund for institutional clients where I ran a diversified trend-following model across all four major asset classes: stocks, bonds, commodities and currencies. But I got a little disillusioned with the institutional trading world, and I really saw a lot of regular folks that were nearing retirement trying to play catch up and not really making it with the, you know, the 60-40 portfolio.
So, I was looking for some innovative ways to bring my ideas and strategies to the market and to regular folks like, you know, my parents that worked hard and were just trying to catch up on retirement. And so, really, when I found this business model where we can reach individual retail investors all over the world that want to take, you know, the bull by the horns, so to speak, and take matters into their own hands, that’s really when I found my groove. So, I’ve been doing this for 10 years now, and I absolutely love it.
Ian: Adam, I can’t agree with you more. It sounds like our principles are exactly aligned. And also, it sounds like we come from similar backgrounds as well.
But let’s talk about the last year. And you’ve been a trader for over a decade, like myself. I’ve been the markets … I don’t want to even mention how old I am. But this has been one of those years, I think, that you see once in a decade.
And, you know, give our viewers an example of just the craziness, the lunacy we’ve seen this year from your perspective.
Adam: Yeah, absolutely. I mean, I’m a trend follower and a momentum trader. I’m much more looking at the price action and developing models on that price action than anything else.
I’m also one to not fight the Fed. So, I’ve been bullish, you know, ever since 2011 really. And that’s run counter to a lot of the narratives. But stocks have climbed that so-called “wall of worry,” really, in this past year. I’m starting to see opportunities that I haven’t seen in my entire career.
And I’m really excited for the next 12 months because I think a lot of people thought that the retail participation that began, you know, kind of in late 2020 when folks were stuck at home … I mean, you’ve heard the narrative yourself, you know, that people are stuck at home with nothing to do. They’re getting stimulus checks. They’re going to put a little bit of money in the market, and they’re going to blow it up and go away.
But I think that people are underestimating the durability of this retail crowd. It’s not going to last forever, but I think that the best 12-to-15 month period is actually ahead of us rather than behind us.
Adam Gives Away One Of The Tickers In His Service “Green Zone Fortunes”
You know, I don’t actually try to follow the meme stocks. I think that they’re a bit too volatile. And with the way we work with our subscribers, that’s not really what I do. But just as one example, in my flagship service Green Zone Fortunes, we recommended National Beverage Corp. The ticker symbol for that is FIZZ. They make LaCroix.
Ian: Our family drinks LaCroix, by the way.
Adam: Yeah, I mean, it’s big with millennials and everybody else. FIZZ was a basically a very similar move to the GameStop move, where there was a ton of short interest in that stock.
If I remember right, I was about 34 days’ worth of short covering short interest in that stock. And we recommended it to our readers in mid-December, and we got a parabolic move within, like, three to four weeks and were able to take gains of over 100%.
So, when I see moves like this, I know that we’re in a retail-driven market. And that’s one of the frustrating things about just investing in the S&P 500 as a whole. It’s so dominated by institutional trading. You get a lot of mean reversion. You really don’t get those, you know, blast-off trends that you would get in a more infantile market or in a retail-driven market.
So, that’s really why I’m excited for the next 12 months. The retail crowd is here to stay.
I’m following Interactive Brokers. That’s one of our portfolio holdings. And in every single monthly and quarterly report, it comes out with its daily active revenue trades, its total account and its new accounts. Its account equity is just growing like gangbusters.
Again, it won’t last forever. But the next 12 months, I think, is going to be ripe.
Ian: Sure. And you know, I wrote about something similar, you know, last year during the depths of the coronavirus sell-off. And I really thought that the mother of all bubbles was ahead of us. And, you know, “bubble” doesn’t have to be derogatory. I mean, you just have to know how to play the game. You know, you have to be an active trader, you have to be able to get in and get out.
What’s interesting, though, is, like, it’s not like everything’s inflating all at once. Right? So, one month you might have kind of these, like, zany stocks that have no earnings go up the next month. It might be electric vehicles next month, maybe cryptocurrencies. And it seems like there’s just hot-money retail traders that are just moving from one trend or one hot sector to the next.
And, you know, I really agree with that. You said that you have to be able to ride that momentum. You have to find that momentum. You know, you have to get in there before other traders, and you have to sort of find that catalyst, which is why I love that trade in FIZZ.
You know, you see something with high short interest like that, and you know that those hedge fund traders, for the most part, are just going to get squeezed. And this has been a year where you just throw fundamentals out the window, right?
Adam: Absolutely. And you said something important. You said, you know, jumping from one hot sector to the next, and it’s not all at once.
And really, I’ve been running this service for 10 years now, Home Run Profits, where it was based on sector rotation, this idea that each of the nine major sectors of the U.S. economy go through periods of underperformance and outperformance. And if you can time the period of outperformance, even if it’s just a two-to-three-month window, which is our typical holding period in that service, you can time that correctly. You can basically jump from one market-beating sector to the next.
I mean, obviously, tech stocks have gotten a lot of press in the past several years, obviously meme stocks in the past year. But I mean, we also saw industrials and materials companies go gangbusters in the last six months. So, it’s not just tech stocks that we’re targeting for this.
I’m agnostic to sector. I’m agnostic to what type of technology is underlying the company. I’m basically a price-action guy. I’m all about momentum. My goal is to figure out when a stock has reached this point of maximum momentum and then try to get into that trade for two to three months at a time. Take my wins, try not to be greedy and then get out and move on to something else.
Ian: Yeah, I love it. So, you know, a specific question: I guess a lot of viewers are probably like, well, aren’t markets efficient?
I mean, if you’re able to exploit this, like, are you proving the Efficient Market Hypothesis wrong here? Is market theory wrong?
Adam: Well, I mean, it comes from Fama and French, and Fama already admitted himself that momentum was the biggest embarrassment of his career, and that was in ‘96.
So, yeah, I mean, markets are very often efficient on the aggregate level. I think they’re mostly efficient, but that doesn’t mean that there aren’t pockets of inefficiencies. There are absolutely pockets of inefficiency. And I mean, all you have to look at is the price action of stocks like GameStop and AMC and Hertz, even Tesla.
I mean, I know you’ve got people on both sides of Tesla. But if you look at the price action, Tesla can’t necessarily be explained by fundamentals alone.
I remember speaking at an investment conference in 2019, and somebody did this, you know, real fundamental analysis of the debt load and how Tesla would never be able to pay back its bondholders. And I mean, if you look at how much it’s been able to raise capital in secondary market offerings since then, I mean, it’s clearly not a fundamentals-driven market, as you said.
Ian: No, I believe the market’s driven much more by the narrative.
And also to your point on inefficient markets, if markets are efficient then you wouldn’t have these quantitative funds that have outperformed the market for so long.
I mean, if you look at, like, the returns of Renaissance Capital, which, I think, since 1985 has made something like 60% or 80% a year just because they work with more data and have smarter quants than everybody else.
How You Can Follow Adam O’Dell
But if our viewers want to learn more about the strategy, tell us exactly how they can follow you. Or do you have an upcoming webinar or something they can join?
Adam: Yeah, I mean, I’m actually put together a webinar on November 4 about this specific period of time in the market.
As I’ve mentioned, there’s been a lot of doubters the whole entire bull market. And if anything, I think that’s just added kindling to this fire that we’re about to experience. And a lot of retail traders came in during the pandemic, and a lot of people were doubting them. But now I think that the people that have been left out are starting to look at this market make higher highs and new all-time highs.
Everybody thinks that, you know, the way you get rich is to buy low and sell high. So, they’ve waited for the next crash. and they’ve been waiting year after year. I’m all about buying high and selling higher. Last time we talked, I mean, you talked about if you feel like we’re in a bubble, then start buying with both fists.
I’m all for, you know, finding a window of opportunity and exploiting it in a safe way. But it’s all about convexity. If you can risk $1, so to speak, and gain $4 or $5 or $6 or $10, that’s a trade you should make every day because your hit rate doesn’t have to be 50% or 80%. You can get one out of five trades right and still make a lot of money.
So, I think this next window of opportunity in the next 12 to 15 months is going to be gangbusters, and I’m just trying to get the message out. I know that a lot of folks are on the sidelines, so I’m trying to bring people in that, you know, want to be in this market but aren’t exactly sure how. I have a system that I’ve used for over 10 years now to do exactly what this market is presenting to us.
Ian: That’s exciting stuff. So, I’ll make sure that we link to your webinar below this video.
Anyone that wants to view it or sign up for November 4.
What time again on November 4?
Adam: I have to check with my team. It’s probably 4 p.m., but I’ll get you that information.
Ian: So, if they just sign up with the link, they’ll find out more.
Adam: Absolutely. Yeah, we have some information that will drip out to folks who sign up. You want to get your name on the list, and we’ll give you some extra information leading up to the event.
I want to make sure everybody is educated about this opportunity so that when they’re ready to trade, they’re ready to go.
Ian: Yeah, I’m on board that.
Higher Market = More Momentum
You know, one stat that I follow … it’s some crazy statistic. The Wall Street Journal published back in March of 2020 — my God, what year is this? Yeah, right in the depths of the coronavirus, March 2020. Working from home is like every day is the same — it was like in the middle of the coronavirus. It said something like 60% of individuals 65 and older, like, sold all their stocks right at the bottom, or some crazy stat like that. And I just thought at the time, like, the same investors are just going to charge back into the market as we go higher, you know, and that’s just going to lead to more and more momentum.
And then there’s the macro backdrop of it, which is the Fed is going to leave the punch bowl out for longer. The Fed is OK with higher inflation, it said. It wants higher inflation. You know, we haven’t had inflation in 15 years, so that’s like another impetus for the market. The momentum to keep going is that we’ve got $8 trillion of capital sloshing around this market. That has to go somewhere, right?
So, I love that idea of being more active in stocks that have lots of momentum. And the short- and medium-term trades for two to three months for the next year or so.
Adam: Well, that’s the thing. I mean, ever since 2011, there have been doubters about the bull market. There have been reasons to point to underlying weaknesses in the global macro economy picture. But, you know, in 2011, I made two decisions.
First of all, don’t fight the Fed, because the Fed is behind us. And if the trend is higher, go with the trend.
Second of all, I made the decision to show everyday retail investor folks a way to make short-term gains. This isn’t day trading. I’m not expecting anyone to be on their screens, you know, all trading day. But if you can make bets over a two-to-three-month period of time, and if the market starts to turn over in reverse and roll over, then you can get out of that batch of trades and re-evaluate without too much harm. You can’t do that with buy-and-hold.
If you’re staking your whole retirement on 60-40, then you basically have to hope that you don’t get another 50% drawdown. But that’s why, you know, medium-term trading over a two-to-three-months period of time, I think, is a much safer way to go than buy-and-hold. And I’m just trying to get the message out to as many people as possible.
Ian: Yeah. And I’ll say, you know, this year has been a great year for sector rotation. It started with the tech stocks earlier this year and rotated into energy stocks. And then you had the reopening stocks, the airlines and hotels, in the last couple of months, and bank stocks have been in play again.
So, it’s definitely been one of those years where, you know, if you had an actively traded system where you’re moving from one sector to another, you would have really outperformed the indexes.
Adam: Oh yeah. Every single sector you just mentioned, we’ve made plays on.
I mean, we got into a trucking company toward the end of 2020. We got into a small regional bank at the end of 2020. We got into energy stocks earlier this year, and then got out of them as they went sideways. We’re in consumer discretionary stocks right now.
You see Tesla, you know, making new all-time highs. Elon Musk is now the richest man in the world. So, we certainly got a boost of about 140% off of that trend.
Ian: No GameStop, though, right? No GameStop? No AMC?
Adam: The thing with those is, you know, if you’re not on Reddit, and if you’re not in early and you’re not part of the colluding crowd, I don’t want to bring my subscribers late to something that’s going to fizzle too quickly.
So, the thing is, in my opinion, you don’t have to play those stocks. The retail crowd is in the market. So, if you can find momentum plays that aren’t the most popular ones, I think the gains are just as good with less risk.
Ian: Yeah. And speaking of risk, I mean, with GameStop, there was a one-week period where it went down something like 60%.
You know, you save that type of volatility for your cryptocurrency portfolio, not for your stock portfolio.
Adam: Yeah. At least the upside’s worth it in the crypto market.
Ian: We’re going to link to your email list below, so please click the link and sign up for Adam’s list.
Adam, thank you so much for joining us this week. I’m actually going to tune in to your webinar on November 4, so I’m going to sign up as well.
And thanks everyone for tuning in this week. We’ll talk to you next week. Take care.
Adam: Thanks, Ian.
Editor, Strategic Fortunes
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