I like to look for what are called contrarian investments. That is, trades where Wall Street is piled into one side of the ‘boat’. When this happens, the ‘boat’ has a tendency to ‘capsize’ turning into very large profits for taking the opposite side of the trade that Wall Street is on.
There are several of these trades going on right now including shorting U.S. Treasuries, being long the U.S. dollar, being short commodities, and also shorting overseas markets and using the proceeds to go even longer with even more leverage in the U.S. on favorites like the FANG stocks.
The reason for the latter trade is that Wall Street’s perception is that the tariffs imposed on foreign products will hurt those economies even though history says just the opposite – that the country imposing the tariffs is hurt the most. So what I have done in my personal account is scour the globe for companies that are actually benefiting or may gain from the tariffs imposed by the Administration.
Don’t Ignore ADRs
This really isn’t hard, with many of these type of companies trading right here in the U.S. in the form of American Depository Receipts or ADRs. Some of these are large, well-known companies such as Alibaba (NYSE: BABA). Here is a quick overview of ADRs.
ADRs can be sponsored or unsponsored and have three different levels, depending upon foreign companies’ access to US markets, as well as disclosure and compliance requirements. Level 1 ADRs cannot be used to raise capital and are only traded on the over-the-counter market. Level 2 and Level 3 ADRs are both listed on an established U.S. stock exchange, with Level 3 ADRs having the ability to be used to raise capital.