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These Stocks Are Easy Money

You know what I like most about investing? It's easy money! Pick a ticker, buy some shares, sit back, and ... lose your shirt.

Whoa. That didn't come out the way I meant it to.

But it's true. Whenever I've gotten into that mind-set, whenever I've thought, "This will be the easiest double I'll ever make," I ended up losing a huge chunk of what was supposed to be the foundation of a fortune.

Sound familiar?

Easy money
Remember when JPMorgan Chase made its $2-per-share offer for Bear Stearns earlier this year? That Monday, shares were trading at about $4. "What the heck?" I thought. "Short that puppy and make some easy money -- the price has to drop to the purchase price!" Luckily I didn't, because foot-dragging from major Bear Stearns shareholders and the threat of an employee exodus forced JPMorgan to raise its offer to $10 per share.

Biotech investing is rife with promises of easy money. Speculation about "sure" FDA approval for a new drug drives the price up, people get excited about the trajectory... until the FDA turns it down and the stock crashes. Dendreon, anyone?

But when ideas like the above don't pan out, where can you turn to get some of that easy money that truly can be made from investing?

A better way to find easy money is to think about obvious trends that can point to great investment ideas.

One highly visible area is oil. You could invest in an oil giant like ExxonMobil (NYSE: XOM  ) and get some payback from that $4-per-gallon gasoline.

Prices will probably stay pretty high because of increasing worldwide demand and limited supply. India and China need energy to continue growing their GDPs at breakneck 8% and 10% rates, respectively. But it will be years before new drilling projects are ready. Even then, most of the new finds will be in obscure or unfavorable places like the Arctic.

That was easy.

But with a bit more discipline and thought, you'd realize there's more to the oil story. For instance, who helps extract the black stuff, anyway?

Well, companies like Transocean (NYSE: RIG  ) do. It helps Chevron and ConocoPhillips drill offshore. By doing this unglamorous job, it has rewarded investors with a 130% return over the past three years. And its growth isn't over yet. The company recently agreed to a deal with Petroleo Brasileiro (NYSE: PBR  ) to help extract the oil from Brazil's newly discovered offshore oil fields.

Easy, but not so obvious
So that was an obvious area, but it led to a less obvious investment possibility. What about looking for trends in less obvious areas where not everyone is playing?

A great example is Quality Systems (Nasdaq: QSII  ) , a small-cap company that is playing a role in the movement away from paper records in doctors' offices and toward electronic ones. Five years ago, Fool co-founder Tom Gardner saw the wide market opportunity, liked the company's accelerating revenue and free cash flow growth, valued the company, and recommended it to our Stock Advisor members. That suggestion is up more than 620% so far.

Here are three more ideas for you and some reasons why they might be interesting:


Need or Trend

Current P/E

Trailing 5-Year Annualized Revenue Growth

Trailing 5-Year Annualized Free Cash Flow Growth

Abercrombie & Fitch (NYSE: ANF  )

Clothing, return of retail




Marvel (NYSE: MVL  )

Superheroes, nostalgia, entertainment




Yamana Gold (NYSE: AUY  )

Gold as inflation hedge, commodity, mining




Data from Capital IQ, a division of Standard & Poor's.

Now, you might not like these particular ideas, but they should get you thinking -- because it's so much easier to make money when you invest alongside predictable trends or conditions.

Now is the perfect time to think about which companies will do well coming out of any recession we may be in. Retail, a beaten-down sector at the moment, will turn around. Gold's time may or may not be past, but other mining companies are digging metals and coal out of the ground, and economies like ours and China's still require these things in huge quantities.

As for Marvel? Well, everyone needs a superhero around.

Need more easy ideas?
Of course, if you're squeezed for time between your job, your family, and your other responsibilities, another source for stock ideas is our Motley Fool Stock Advisor service, where David and Tom Gardner have spotted more than a few trends since the service began six years ago. Since 2002, their recommendations are outperforming the market by more than 40 percentage points.

You can find out what they're recommending today by clicking here for a free 30-day free guest pass to Stock Advisor. There's no obligation to subscribe, so don't delay.

Fool contributor Jim Mueller isn't a superhero, but he did sleep at a Holiday Inn the other night. He owned shares of Marvel at the time of publication, but not of any other company mentioned. Quality Systems and Marvel are Stock Advisor recommendations. JPMorgan and Petrobras are Income Investor selections. The Fool's disclosure policy thinks easy money is the hardest to earn.

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Related Tickers

10/27/2016 4:02 PM
ANF $15.08 Down -0.32 -2.08%
Abercrombie and Fi… CAPS Rating: *
AUY $3.60 Down -0.08 -2.17%
Yamana Gold CAPS Rating: ***
MVL.DL $54.08 Down +0.00 +0.00%
Marvel Entertainme… CAPS Rating: ****
PBR $12.08 Down -0.08 -0.66%
Petroleo Brasileir… CAPS Rating: **
QSII $12.38 Up +0.82 +7.09%
Quality Systems CAPS Rating: ****
RIG $10.38 Up +0.06 +0.58%
Transocean CAPS Rating: ****
XOM $86.92 Down -0.17 -0.20%
ExxonMobil CAPS Rating: ****