One Simple Way to Find Great Trading Ideas

By Wayne Mulligan, on Thursday, June 26, 2014

Everyone has their own way of finding new trading opportunities.

Some folks swear by technical analysis.

Others trade on news or upcoming corporate actions.

We, on the other hand, are big fans of using our research into early-stage tech companies to guide our public stock market trades.

And it looks like we’re not alone.

Since January, traders have made a killing shorting a particular public company.

Today, I’ll tell you a bit about this stock, how these traders already knew that it would tank thanks to private market research, and how you can get in on the action.

"Private Alpha"

Back in March, I wrote an article about a trading strategy being used by some of the top hedge funds in the world.  It’s called “Private Alpha.”

It’s used to find public stock market trades by analyzing private equity trends.

For example, one fund manager we know of used knowledge of Groupon’s (NASDAQ: GRPN) early success – while it was still private – to find profits in a publicly traded small-cap company called TravelZoo (NASDAQ: TZOO).

TravelZoo had been around for a decade. They made money by advertising special travel deals.

Groupon, on the other hand, promoted discounted “local” deals (e.g. 30% off dinner at the local Italian restaurant).

Toward the end of 2010, impressed with Groupon’s success, TravelZoo decided to copy their “local deals” model.

This savvy fund manager bet big that TravelZoo would see results similar to Groupon’s.

Boy, was he right.

When it first launched its local deals program, TravelZoo was trading at $15.

9 months later it was trading at $94 – a 526% gain.

We’re seeing a similar opportunity shaping up now in the transportation sector...

Uber Progress, Uber Profits

If you live in one of the 131 cities on this list then I guarantee you’ve heard of Uber.

They offer a drop-dead simple way to hail a taxi, town car or limousine from your mobile phone.

Although the company is only a few years old, it’s already generating over $1 billion in sales and growing.

Furthermore, the company recently raised a massive round of financing...

Three weeks ago, The Wall Street Journal reported that Uber had raised $1.2 billion at a stunning $18 billion valuation.

Uber hasn’t even gone public yet, and its value has already risen by over 321,000%.

Early investors have made a fortune, and will almost surely make even more over time.

But you didn’t have to invest in Uber in order to make money off of its dramatic rise.

If you used the “Private Alpha” strategy, you could have locked in a quick 32% gain this year.

Here’s how...

TAXI’s are Dead

A great way to use the Private Alpha strategy is to ask yourself this question:

“If Uber wins, who loses?”

Answer: If Uber wins, traditional taxi services lose.

So how could you bet against the taxi industry?

A group of savvy traders knew how...

Medallion Financial Corp. (NASDAQ: TAXI) is a company that provides financing for taxi drivers looking to purchase a taxi medallion.  You need a medallion in order to drive a taxi in most cities.

In places like New York, medallions cost upwards of $1 million.

Over the last 6 months the short interest (the number of uncovered shares sold short) for Medallion Financial has increased by 244%.

Early short sellers are sitting on an estimated 32% gain right now.  All by leveraging their knowledge of the private markets.

More Public Market Profit Opportunities

But how does that help you?

Well, we think Uber is actually part of a bigger trend we’re seeing in transportation.

There are a number of services similar to Uber – services like Lyft, Hailo, SideCar, RelayRides, and the list goes on...

Many of these companies provide clear alternatives to taxis and public transportation.

But we believe some can also disrupt other forms of transportation as well… specifically, the rental car market.

Imagine skipping the hassle and cost of renting a car while you’re on vacation. Instead, you might just use Uber or Lyft to get around town.

Which means companies like Hertz Global (NYSE: HTZ) and Avis Budget Group (NASDAQ: CAR) are vulnerable.

I’d keep an eye on both stocks.  A dramatic increase in short interest for either company could be a good sign to jump in and ride a bearish trend.

More Private Alpha Opportunities...

The more attuned you are to what’s happening in the early-stage investing and start-up markets, the easier it will be for you to find Private Alpha opportunities.

Just continue to ask yourself the question, “If this company wins, who loses?”

... And you could end up the big winner.

Happy investing!

Best Regards,
Wayne Mulligan
Wayne Mulligan


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