Rachel’s note: Today, we have a special edition for you… it’s an insight from another famed market timer, Mason Sexton.
If you haven’t heard of him, there’s good reason: after famously calling the Black Monday crash of 1987, he withdrew from public eye.
Since then, he’s reserved his market timing calls for clients who pay him $5,000-10,000 a month for his insights.
Now, he’s sharing his insights with regular investors.
Tonight at 8 p.m. ET, he’ll appear in a broadcast hosted by his son, national radio host Buck Sexton. And he’ll discuss an event, not seen in decades, that he says will hit over the next eight weeks…
You can add your name to the attendee list here. Then read on for more from Mason about a simple law that governs all markets… and is responsible for the success of every legendary investor and trader.
In the summer of 1896, Italian economist Vilfredo Pareto noticed something odd…
He was an avid gardener. And he saw that a small number of his pea pods were producing an outsized proportion of the crop yield.
He noticed the same thing with his fruit-bearing trees. A small percentage was producing most of the harvest.
On closer inspection, he discovered that about 80% of the crop yield was being generated by only 20% of the plants.
This was the start of what we know today as the Pareto Principle, also known as the 80-20 rule.
It states 80% of all outcomes are derived from 20% of causes.
And you can find it everywhere…
Pareto discovered that 20% of the Italian population owned 80% of the land
In business, 20% of salespeople produce 80% of sales
Eighty percent of charitable donations come from 20% of those who donate
Microsoft reported 80% of system crashes were fixed by addressing 20% of system bugs
In 1992, the United Nations reported that 20% of the global population owned about 80% of the wealth
In the Amazon rainforest, 20% of the trees provide about 80% of the shade cover
It was a remarkable finding. And it’s shaped economic thought and business practices ever since.
For us, as investors, it has profound implications, too.
What we will find is that about 20% of our investments will be responsible for about 80% of our returns.
And this simple rule that has created some of the greatest fortunes in history.
Wait for the Sweet Spot
My name is Mason Sexton. Since 1984, I’ve been publishing market timing research for wealthy investors.
I won’t name names. But two of my clients were two of the top 10 performing hedge funds last year. Another is a self-made billionaire.
And over the past four decades, I’ve discovered something important. It’s something that few everyday investors grasp.
For almost every legendary investor you can think of, you’ll find that the great majority of their success was generated from a minority of their investments.
Same goes for legendary traders.
Warren Buffett, for instance, runs a concentrated portfolio. As of February, just five stocks made up 75% of the portfolio at his investment vehicle, Berkshire Hathaway.
And George Soros made more than $1 billion from just one trade in 1992. He famously took on the British central bank and bet that the British pound would fall in value versus the deutschmark (Germany currency at the time).
Buffett used a baseball analogy to explain how it works…
The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling, “Swing, you bum!” – ignore them.
It’s a simple strategy. But few have the patience to follow it.
Most folks believe they must load up with dozens of stocks in the hottest sectors or whatever new thing the bobble heads on CNBC are talking up.
But if our goal is to see great returns, there’s an easier path.
Great Returns in a Terrible Year
I specialize in spotting important trend changes stocks, sometimes down to the day.
And I’ve had considerable success…
I’m most famous for calling the top in stocks – to the day – ahead of the catastrophic Black Monday crash on October 19, 1987.
On August 14, 1987, I predicted the market would top out on August 24-25… followed by a minimum of a 15% to 20% correction.
The Dow plunged 22.6% on Black Monday, just two months after my prediction.
I also nailed the top of the stock market before the Covid panic and told my clients to sell at the exact peak in 2022…
In early February, I predicted the market to put in a bottom in March. The S&P 500 dropped 31% following my prediction. It put in a bottom on March 23.
I asked my analysts to review my recommendations for 2022. Had you followed my signals, you would have had the chance to make an average return of 38%.
Was every trade a winner?
But last year, I recorded a win rate of 79%. The other 21% were small losses.
If those figures sound familiar, they should. It’s Pareto’s Principle in action once again.
Keep in mind this was during the worst year for stocks in more than a decade. And it was a year when many investors took bruising losses as “Everything Bubble” of the pandemic years burst.
So how did I do it?
I would like to show you tonight, at 8p.m. ET. I’ll be hosting a special event I hope you can attend.
You can add your name to the reservation list here.
Editor, New Paradigm Research