Last week, tiny Windstream Holdings Inc. (Nasdaq: WIN) unveiled a “game-changing” strategy that turned the entire telecom sector upside down.
The rural telephone company announced a breakup plan that will transform the company from a sleepy dividend payer into a dealmaking broadband firm.
Windstream shares jumped a stunning 12.4% in a single session. And telecom stocks soared across the board as folks grasped the sector-wide windfall opportunity this makeover strategy has created.
Several rural carriers experienced single-day price spikes of as much as 16%. And even the big boys – AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) – reaped the benefits.
We had you there first.
We recommended Windstream back on May 2. And folks who followed our lead are now sitting on a 29% gain.
But this is just the start. With this single move, the Little Rock, Ark.-based Windstream has rewritten the rules on telecom competition. Rivals will have to react or fall behind.
Now it’s time to look at where Windstream will take the sector next: The money that’s been made to date will be dwarfed by what’s to come.
You just have to understand how to play this…
About a dozen years ago, I found myself having a stimulating conversation one sunny day in San Francisco with the great economist Milton Friedman.
It’s a conversation I’ll always remember.
I studied economics in college – in fact, I’m the recipient of an honors degree in that subject – and the tireless free-market advocate was and remains one of my big heroes.
We were standing on the balcony of his spacious Nob Hill condo taking in the sweeping Bay views and talking about economics and Washington politics – as I eyed the huge portrait of him standing in a corner that Friedman’s wife hated and wouldn’t let him hang. Then he looked me in the eyes and said, “You know, Michael, I’d like to see the Federal Reserve replaced by a computer.”
As the 1976 Nobel Prize in Economic Sciences laureate explained it, he felt the Fed had become too obsessed with micromanaging the nation’s economy. Remember, this was a dozen years ago, before the Fed started quantitative easing and heavily manipulating interest rates.
Of course, I’m not suggesting we replace the Fed chair with a robot.
But I always recall Freidman’s thought experiment whenever the markets get choppy, as they have in the past few weeks. And when I see the markets become volatile because of the Fed and the news, I know it’s time for defense.
I’ve before shared with you my five “Choppy Market Tools.” But today, I want to share with you a classic investment strategy that I’ve given a brand-new nickname to reflect our focus on the “New West” of Silicon Valley tech stocks.
I call it the “Cowboy Split.”
And today I’m going to show you that when employed properly the Cowboy Split will protect you from volatile markets.
But that’s not all.
If your stocks go down, on the recovery, you make more money…