The holy grail of traders is a foolproof market timing tool. It helps you buy at the bottom and sell at the top. Now of course this is impossible to do in practice, but that does not mean I'm going to give up my hunt for that elusive market timing indicator. The potential profits are just too alluring.
Now that I've piqued your interest, here's my new market timing tool: Whenever T-3 Energy Services (TTES) files an S-1 for a secondary, you sell all your stocks. Then when they drop the secondary, you buy everything back. Sounds crazy, but in the last year this strategy would have made you well over 100% on your money without much effort or stress.
For those of you who are unfamiliar with the name, T-3 Energy Services is an oil service company that is 86% owned by First Reserve, one of the largest energy-specific hedge/private equity funds in the world. I've been involved with TTES for over a year and have endured a lot of volatility. Up 100%, down 30%, up 100% again. It's been a crazy and yet so far profitable ride.
What's the deal here? Well it's actually quite simple. The folks over at First Reserve have been trying to dump their shares in TTES for quite a while, but try as they may absolutely nobody wants to relieve them of their holdings, especially since they never fail to time the secondary at the top of the market.
For some reason First Reserve waits till the market goes up dramatically and then they file for a secondary of TTES, just as the smart traders are selling their shares to a new bunch of suckers buying at the top. Inevitably, stocks plummet and then TTES pulls the offering, just when smart traders are buying stocks from the suckers who are selling at the bottom.
So when will the current market correction finally be over? You guessed it: When First Reserve pulls the plug on the new TTES secondary. Since I'm quite sure First Reserve is determined to get the secondary done this time around, I'm quite concerned that we may not have smooth sailing for quite some time.
In the interim, I'm sticking with my basic plan of buying cash-rich companies, with strong business potential over the next few years, selling at extremely low valuations and managed by proven operators. The pessimists currently have the upper hand in the market now, but the optimists always win out in the end. That's because as the philosopher Gracian says: "What was feared as ruinous soon comes to seem tolerable." So pessimism is almost always short-lived and over exaggerated, and at some point reality surpasses our lowered expectations, leading to a new bout of optimism and long-term growth.
TTES 2-yr Performance
Disclaimer: I'm sure the market timing tool mentioned in this post will suffer the fate of all other such tools and cease to work immediately after it is discovered. In that case, I'll be happy to participate in the next bull run.