These 10 Top Trades Might Surprise You

I recently came across the International Business Times' list of the 10 greatest trades of all time. And what I saw surprised me.  You see, I thought I'd find Warren Buffett's buying of Geico or Coca-Cola -- or some of Peter Lynch's 10-bagger stocks like Fannie Mae or Taco Bell.

Both investors failed to make the cut.

The trades that did make the list, in hindsight, make sense because of how uniquely contrarian they were. And I think they could provide a key piece of advice that -- if you're like most investors -- you'd do well to implement today.

After I share these top trades with you, I'll share with you a unique solution for putting the lessons they offer into practice today.

IBT's 10 greatest trades of all time

Number Trade Tactic
1 John Paulson's bet against subprime mortgages Short
2 Jesse Livermore's call on the Crash of 1929 Short
3 John Templeton's foray into Japan Long
4 George Soros' breaking the Bank of England Short
5 Paul Tudor-Jones' shorting of Black Monday Short
6 Andrew Hall's $100 oil prediction Long
7 David Tepper's 2009 bet on financials Long
8 Jim Chanos' prescient shorts Short
9 Jim Rogers' early call on commodities in the 1990s Long
10 Louis Bacon's geopolitical play on Saddam Hussein's invasion of Kuwait Long & Short

Source: International Business Times.

Surprised? Five and a half of the most lucrative trades were bearish shorting plays. Only four and a half were long-only strategies -- though those typically took longer to pan out than the short calls. And most of the longs were concentrated sector bets.

Now I don't think this makes the case that shorting stocks, commodities, or sectors are on par with going long. After all, "shorting" and "hedging" can be risky strategies if you aren't fully aware of the risks involved.

But I do think this chart speaks to the fact that, if you're not using a variety of both bullish and bearish tactics in your portfolio, you're missing out on lucrative profits when the market dips, stays flat, or one sector takes off.

After all, these ten trades alone netted these men billions of dollars.

And it's something you can easily replicate yourself
With the exception of Paulson's shorting of subprime mortgages through credit default swaps and perhaps Soros' shorting of pound sterling, nearly all of these moves could have been made by an individual investor like you.

In fact, a colleague of mine here at the Fool, Jeff Fischer, is making similarly diverse bets using a mixture of stocks, options, and ETFs, by going both long and short. And he's been quite successful -- turning $1 million into over $1.4 million in just over two years.

He went long GrafTech International (NYSE: GTI  ) at the end of 2008, then again in 2009. It's the largest manufacturer of graphite electrodes, which are used to heat steel used for infrastructure and other construction by companies like Arcelor Mittal (NYSE: MT  ) . Its technology also produces other metals and chemicals for big-tech names like Apple and MEMC Electronic Materials.

He's up 130% as management continued to execute in the midst of an industry downturn.

Jeff makes concentrated sectors bets as well. He recently bought shares of WisdomTree Emerging Markets Small-Cap Dividend ETF (NYSE: DGS  ) . His thesis on this ETF is threefold: small caps outperform large caps by an average 2.1% per year, companies that pay dividends outperform those that don't, and emerging markets have outperformed U.S. stocks by 9% annually in recent years. Together, these three truisms should work in his favor -- and let the fund pocket 2.7% in dividends annually.

Lastly, Jeff dabbles in both bullish and bearish options strategies. One of his recent bold bets was to write naked calls on iPath S&P 500 Short-Term Futures (NYSE: VXX  ) . He noticed how poorly this ETN tracks the VIX index, and thought investors could profit nicely from this lag. This investment couldn't have been more prescient -- he's up over 90% in less than two months!

If these investments sound interesting, and you'd like to learn more about his strategy for generating absolute returns in up, down, and flat markets by going long and short stocks, options, and ETFs, here's some good news: we're opening Motley Fool Pro to new members for the first time this year.

If you'd like to learn more about Jeff's approach, track record, and how to join, simply click here and tell us how to get in touch with you.

Adam J. Wiederman owns no shares of the securities mentioned above. Apple is a Motley Fool Stock Advisor recommendation. The Motley Fool owns shares of Apple, GrafTech International, and WisdomTree Emerging Markets Small-Cap Dividend ETF. The Motley Fool owns naked calls on iPath S&P 500 Short-Term Futures. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1426855, ~/Articles/ArticleHandler.aspx, 10/22/2016 8:07:13 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 22 hours ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:00 PM
DGS $41.72 Down -0.07 -0.17%
WisdomTree Emergin… CAPS Rating: *****
GTI.DL $0.00 Down +0.00 +0.00%
GrafTech Internati… CAPS Rating: ****
MT $6.68 Up +0.15 +2.30%
ArcelorMittal CAPS Rating: ***
VXX $31.57 Down -0.71 -2.20%
iPath S and P 500… CAPS Rating: *