I was in college in the late 80’s when Domino’s Pizza was the fastest growing franchise business in the country because of their promise to deliver a pizza to your door in 30 minutes or less.
It was clearly a quantity over quality play … and the lack of quality caught up with them. For me, Domino’s was what you ordered when there wasn’t anything else available.
That’s why I was astonished when I asked my team to find a great example of a stock that captured some of the highlights of our research this year … and they came back to me with DPZ – Domino’s Pizza.
Unbelievably, DPZ went from a low of $3.86 per share back in late 2008 to a recent high of $169.24 per share. That’s a gain of over 4,200% … a 42-bagger. Here’s the latest SSI chart on DPZ. (Note that the chart uses a log-scaled vertical axis … each vertical gridline is a 100% gain.)
Those are the kinds of profits that all of us need to experience at least a couple of times in our lives as investors … and they are exactly the kinds of profits that the tools of TradeStops are designed to capture.
TradeStops triggered an SSI entry signal on DPZ way back in January 2010 at just under $10 per share … and it hasn’t been stopped out since.
I love seeing these kinds of charts because I know that had I been faced with an SSI entry signal at $9.85 per share on a stock that had been trading at $3.86 per share just a year ago, it would have been hard to pull the trigger.
Who wants to buy a stock that is already up nearly 200%? Today I can happily say, “I do!”
Clearly, DPZ is a great example of the research we’ve been sharing this year on the power of Going Green. Had you bought when the SSI on DPZ first turned green back in early 2010, you’d be sitting on gains of over 1,500% today. That’s the kind of green that anyone can love.
DPZ also beautifully demonstrated how a buildup in volatility “energy” can be a trigger of multi-year gains. Over the past 20 years, the average VQ on DPZ has been 25%. That’s reasonable volatility.
From 2007 to 2010, the VQ doubled from a low of 20% to over 40%. For the past 6 years, DPZ has been feeding off that peak in volatility to fuel its multi-year profitable trend.
Gorgeous.
The final piece of our 2016 research that is illustrated by our DPZ example is the concept of adding to a winner. We introduced this idea in our November piece on Doubling Up … On your Winners.
It’s a very common practice to “double down” on investments that have fallen in price. It’s almost unheard of to “double up” on winning investments. Our research showed that this can be a very powerful strategy.
Had we followed our “add to a winner every 2 VQ’s” on Domino’s, we would have added another leg to our position at each of the blue arrows here.
The chart below shows the extra profits that this “adding to winners” strategy could have generated in DPZ. All of the “buys” used in this study are based on a risk of $250.
The black line is the profit generated from buying once at the initial SSI entry signal. Risking $250 back in 2010 generated profits of about $9,000.
The blue line is the profit generated by adding to a winner and risking an additional $250 every time DPZ made another 2 VQ’s of gain.
These types of gains don’t happen often. I’ve said a number of times that to be a successful investor, you must know how to “unlimit” your gains. In other words, let your winners run for as long as they will keep moving higher … and consider adding to your winners along the way.
Domino’s may be known for delivering pizzas, but TradeStops is known for delivering profits.
To tasty investments,
