To Win the Biggest Chips, Follow the High-Rollers

by Andrew Zatlin May 24, 2022 11:00 am ET

We can learn a lot about the market by studying what happens in Vegas…

Specifically, what happens on the casino floor!

Today, I’ll show you what I mean…

Then I’ll show you where the biggest chips are hiding.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

To Win the Biggest Chips, Follow the High-Rollers

What the heck keeps driving the market down lately?

To explain, look what happens in Vegas:

When the high-rollers gamble in Vegas, they take out a line of credit — say, $1 million.

If they lose it, they just take out a bigger line of credit. That way, they can keep playing until they (hopefully) win it all back. Then they can pay off their debt.

But sometimes, they can’t get more credit. Instead, they’ll get a visit from Big Vinny, the casino’s “muscle.” And Big Vinny’s message will be clear:

You’re not getting another dime until you’ve paid back every cent you owe.

Well, this is exactly what’s happening in the market right now…

“No Way, Jose”

The big hedge funds had already borrowed huge sums. But when the market went against them and they tried to borrow even more, the lenders said, “No way, Jose.”

So the hedge funds had to sell whatever they could — at any price they could get — just so they could pay off their debts.

This is creating huge downward pressure on stock prices. The thing is, prices haven’t fallen far enough that the deep “value buyers” are stepping in yet.

But in one particular sector, prices are down so low, that buyers are circling — and I think they’re going to jump in very soon.

Should we join them? Let’s take a look.

Growth: All Day, Every Day

The sector I’m referring to is semiconductors.

This sector has crashed — but now it has a lot of room for a huge run.

Last year, the industry grew 26%. This year, it’s up another 23%. And 95% of semi companies are seeing signs of at least 10% growth.

Hey, I’ll buy that kind of growth all day, every day.

But where’s all this growth coming from? Two key places…

Semi Companies Are in the Driver’s Seat

The first relates to supply.

You see, five companies control a whopping 90% of the world’s supply of semiconductors.

And these companies are in the driver’s seat. Because not only do they control the supply of semis, but they also control the price.

And that explains why revenues for semi companies are soaring.

But revenues aren’t the only thing that’s soaring in this sector…

Look at These Hiring Numbers

Hiring is soaring, too.

For example, look at companies like Advanced Micro Devices (Nasdaq: AMD) and Intel (Nasdaq: INTC):

The thing is, as you can see here, hiring and revenue numbers (shown below as “billings”) are typically correlated:

And if you know how, you can use this correlation to your financial advantage.

Here’s how…

Play This Unprecedented Gap

A handful of semi companies are hiring furiously, yet their stock prices are falling.

If hiring and revenue are up, but the stock is down…

The company is oversold. That means we can invest at a steep discount.

In fact, there’s an unprecedented gap here, where the stocks are so far below where they should be based on historical metrics.

We’re seeing this gap with companies like Applied Materials (Nasdaq: AMAT):

And we’re seeing the same thing with On Semiconductor (Nasdaq: ON):

Bottom line: there is so much money to be made in this sector.

And when it’s time to pull the trigger and start putting money into the market (beware: it’s not time yet!), this is where we should be focused.

If you’d like to see my #1 way to take advantage of this opportunity — and you want to know exactly when to pull the trigger — check out my “Moneyball Pro” recommendation below.

In the meantime, Zatlin out. Talk to you soon.