My #1 Secret to Picking Stocks...*

Before I explain my main method
of picking stocks...

I'll be releasing my new stock
pick this February.

I know, I know...

I said January. And I've delayed
it yet again.

But trust me - This pick will be
worth the wait.

In the mean time, let me tell you
how to pick explosive stocks
yourself:

Do you know what a "5-bagger" is?

It's a stock that rises five-fold
from your original purchase price.

A $1 stock becomes a $5 stock.

A $5 stock becomes a $25 stock.

You get the picture.

When I invest in a stock I'm always
looking for a "5-bagger or better".

If I'm going to put my capital at
risk, I want huge upside (500% gain?)

Why am I telling you this?

Good question.

Today, I'm going to teach you the
"secret" to finding these 5-baggers.

You' see to make a stock rise
5-fold something drastic needs to
happen.

You won't make 5 times your money
on an undervalued stock.

You won't make 5 times your money
on big companies like Walmart.

In fact, most stocks that rise
5-fold have a market cap of
$100m or less.

And the biggest reason a stock
rockets 500% or more is because
of EARNINGS.

If earnings are rising a stock
has nowhere to go but up.

And the secret to finding these
5-baggers is something I call...

Gearing.

(Most people call it "operating
leverage" - But I like to think of
it as gearing.)

Think of when you're driving.

You start off in first gear and
gradually work through the gears.

In the lower gears you accelerate
quickly, but you only reach top
speed in the highest gear.

This is very similar to the plight
of rapidly growing companies.

They start off in 1st gear, probably
with NEGATIVE net income.

As they progress they grow very
rapidly (i.e. accelerating in
lower gears.)

Before long their growth (read:
acceleration) slows down, and
they start producing positive
net income.

At this point they're in 4th or
5th gear.

This is the point you sell,
hopefully for 5-times your money.

I think I've taken this analogy
as far as it will go.

But you see my point:

The trick... is to identify these
"fast growers" when they're in
1st or 2nd gear.

And the hallmark of a 1st or 2nd
gear company is either low or
negative net income.

If you invest in stocks based
solely on earnings multiples,
you'll never find a 5-bagger.

By the time the stock is earning
huge amounts - It's too late.

You've missed the boat.

So let me explain how this
"gearing" works.

Companies have both "variable
costs" and "fixed costs".

Variable costs are the costs of
producing each item. The labour,
the materials etc.

Fixed costs are the costs of
being in business. The salaries
of upper management, building
rent, property taxes etc.

Let's say a business manufactures
and sells cigars.

Each cigar sells for $10.

But each cigar costs $4 to make.

The $4 is the variable cost
(variable because it rises and
falls with revenue.)

Each cigar has a 60% gross profit
margin, and contributes $6
towards covering fixed costs.

If the cigar company has fixed
costs of $10m a year.

Selling enough cigars to contribute
$10m is the companies break-even
point.

Any cigars sold over and above
this figure contribute $6 in
pure-profit.

The entire $6 drops to bottom
line net income!

Here's the trick:

Once a company gets to the point
where they're covering fixed
costs.

Earnings can ROCKET.

First the stock will rocket as
earnings turn the corner from
negative to positive.

THEN...

As the company sells more and
more cigars each year.

Earnings continue to rise.

In this way, a company growing
revenues at just 20% a year...

Can actually be growing earnings
at 50% a year.

This is because of Operating
Leverage or GEARING.

In this regard, accounting is
backwards looking.

The financial statements of a
fast grower won't tell you to
invest.

In fact, the financial statements
will show the company to be
bleeding red ink.

And this is your opportunity.

You need to know the story.

You need to know exactly WHY
earnings will continue growing.

Then you need to plot at exactly
what point earnings will turn
positive.

And how fast you expect earnings
to grow based on the effects of
Gearing.

It's a simple concept.

But if you understand gearing
it can make you a fortune.


Yours Sincerely,
John Meriwether

P.S. If the above email was
boring to you.

I don't blame you.

Stock picking is only fun
when you don't do the work.

And I know how boring a 150
page annual report can be.

If your idea of fun is letting
someone else do the work...

I'll be sending you my new stock
pick in February!




1042 N EL CAMINO REAL
SUITE B
ENCINITAS, CA 92024
*John Meriwether