• Keep an eye on this Silicon Valley defense contractor
  • The legacy insurance companies should be very nervous
  • We finally know Amazon’s master plan for grocery stores

Dear Reader,

I’d like to start the week with an important update concerning The Bleeding Edge and the name it publishes under.

I made a life-changing decision back in 2014. I decided to step down from my role as an operating executive at high-tech companies and step back from the 70–80-hour workweeks of the corporate world.

The decision was an easy one. I needed to be present as a father. I couldn’t control my schedule at all, which meant that I couldn’t be there when my sons needed me.

And when I stepped back, I suddenly found that I had the time to pursue things that I was passionate about. And I threw myself into research on bleeding-edge technology and investing.

I made some of the best investments of my life, many of which are continuing to grow into multibillion-dollar companies.

While I was having a lot of fun, it didn’t take long for me to become restless. Where was my deadline? I was missing out on great business opportunities. And I was suddenly full of incredible investment ideas… so many that I felt like they were going to waste.

One morning, while I was still living in Tokyo, I was reading some editorial by Bonner & Partners. At the bottom was an advertisement for investment analysts. I didn’t reply, but it got me thinking. What I did do might surprise you.

I spent a month researching the information technology sector, picking out a company that I liked. I wrote an entire investment research newsletter about it.

That company was Procera Networks. I wanted to understand what the process felt like. I wanted to see what my work looked like. I even hired a designer to format it into a finished product.

It felt natural. I can’t tell you why, but the process went easily. It was still hard work, and I put in some long hours, but I knew exactly what to do.

I sent the completed issue to Bonner & Partners’ publisher. She replied to me in hours. We scheduled our first call together.

The rest is history.

I got hard at work in the summer of 2015, and the first thing I published was about bitcoin. At the time, it was trading in the low $200s. In late 2017, bitcoin traded as high as $19,000. Even today, it is trading near $10,000.

I launched Exponential Tech Investor in the fall of 2015. In 2017, the team and I launched The Near Future Report. And last year we launched The Bleeding Edge and Early Stage Trader.

During that time, we’ve created a lot of wealth for subscribers and helped quite a few family offices.

My goal is simple. Every day, I want to give normal investors the kind of insights into the world of technology and investing that have historically been available only to high-net-worth individuals. I want to stack the deck and give the advantage to normal investors rather than the other way around.

To continue that mission, my team and I have just launched a new publishing venture. We’re calling it Brownstone Research.

The team is the same. There are no changes for subscribers other than a new website for readers to access all of my research (www.brownstoneresearch.com). If you’re a subscriber to one of my premium services – or if you’re a member of Legacy Research’s lifetime membership – you’ll still get all your promised content.

I’m still working those same 70–80 hours a week, but now it is on my own time.

Brownstone Research will allow us to widen our scope. I’ll still be writing about technology and biotechnology, but we also plan to bring other ideas to readers as well. I’ve been investing since I was 16. There are more than enough topics in the world of technology and biotechnology to research, but that isn’t the limit of my ideas.

Brownstone Research will enable us to pursue new lines of research and incredible investment opportunities. The team will grow, and we will launch more investment research products.

I already have one of the most unique products I have ever seen in the works right now. I can’t wait to share the details with readers.

The Bleeding Edge will always remain free. Can investors make money from it? Absolutely. So why publish it for free? Because I value your time. Whether we agree or disagree with one another, I want to provide my readers with objective analysis that makes us think, question, and get smarter one way or another.

And for investors who would like to have a longer-term relationship, I’ve created Brownstone Unlimited, our lifetime membership program. It gives readers access to anything and everything that I’ll ever publish.

It would be great to have you join me. But if readers simply stick with The Bleeding Edge, I’ll still be just as happy. Thanks as always for being a reader.

And some readers might be wondering what happened to Procera Networks…

Well, the stock went up just as I predicted. It was acquired by a private equity firm for the same reasons that I recommended it.

Now our insights…

The founder of Oculus is back with a new early stage company…

Palmer Luckey is the entrepreneur who founded Oculus, maker of the Oculus Rift series of virtual reality headsets. Founded in 2012, Luckey sold Oculus to Facebook for $3 billion in July 2014. Talk about an incredible payday.

Luckey stuck around for a little while after the acquisition, but he didn’t like working for a corporate giant like Facebook. So he left and started a company called Anduril in 2017.

Tolkien fans may recognize Anduril as the name of a sword from The Lord of the Rings. Apparently, Luckey is a big Lord of the Rings fan. And it is somewhat fitting…

Anduril has become a prominent military contractor. The company developed an amazing suite of technology that uses artificial intelligence (AI). This AI powers autonomous drones as well as solar-powered surveillance towers.

Anduril’s top customers are the U.S. government, U.S. Customs and Border Protection, U.S intelligence, and allied intelligence agencies. The company just won a five-year contract to provide autonomous surveillance towers for the U.S.-Mexico border.

These towers use AI to identify cars, people, animals, and activities like drug smuggling. And they will alert the proper authorities as soon as illicit activity is spotted. All using AI. Manned guard towers are a thing of the past.

Here’s what they look like…

Anduril’s Towers

Source: Anduril

What I like about Luckey is that he is very focused on the customers he services. He made it clear that he doesn’t want this technology to get into the hands of U.S. enemies.

And for good reason. Anduril’s technology is bleeding edge. Its products make those produced by the giant, legacy incumbents look ancient.

Luckey did catch some flak from the venture capital (VC) community because he is now developing tech for military agencies. Many in Silicon Valley openly oppose any tech companies that support the U.S. government military and intelligence agencies.

But appearances are everything in the Valley. Reality can be quite different. In fact, some famous venture capitalists love Anduril. Andreessen Horowitz, 8VC, XYZ Ventures, Founders Fund, and Lux Capital (NYC) are among the big names that have invested in Luckey’s new company.

And that includes a $200 million Series C round that was just completed on July 1. With this latest round, Anduril is now valued at $1.9 billion. That’s incredible for a company that launched just three years ago.

So this is absolutely a company to watch. And Luckey is a big-time tech executive to follow.

I’m interested to see if the current board sells out to an incumbent defense contractor or chooses to keep Anduril independent. I hope it’s the latter. That could lead to a fantastic investment opportunity when the company goes public.

This brand-new IPO will rapidly disrupt traditional insurance companies…

If you’ve ever had a bad experience with an insurance company, pay close attention to this next story…

An early stage insurance company called Lemonade (LMND) just went public on July 2, raising $319 million in the process. Amazingly, shares of LMND spiked 139% on the very first day of trading. How could a “boring” insurance company more than double on day one?

Well, Lemonade isn’t really an insurance company. It’s an artificial intelligence (AI) company.

Lemonade provides homeowners’ insurance, renters’ insurance, and pet insurance. And it is all driven by several AIs.

There’s an AI that takes in data from customers, provides customized price quotes, and processes customer payments.

There’s a second AI that’s designed just to handle insurance claims. Right now, it can handle about one-third of all claims that come in without any human assistance. And for cases the AI can’t handle, it collects all the key information before passing the case on. That makes it easier for a human to make the correct decision.

Then there’s a third AI that’s designed to answer customer questions on the website and build a profile that will support the other two AIs. Lost count? I know, one AI is hard to comprehend, but three? Lemonade has them all.

To test out Lemonade’s service, I went to the site to buy pet insurance on my puppy. I have a very energetic nine-month-old Hungarian Vizsla. It’s wicked smart and a professional athlete to boot. The entire process took no time at all. I answered a few simple questions and had a quote within 90 seconds. No kidding.

What an amazing platform. And the experience is far more convenient than anything that I’ve seen from traditional insurance companies. Lemonade’s AI-driven model is absolutely going to disrupt the incumbents.

At traditional insurance outfits, the customers who are “better” insurance risks subsidize those who are greater risks. In other words, the customers who are least likely to have a claim still pay similar premiums compared to those who are more likely to have a claim.

Lemonade’s model will change that. It will offer lower prices to less risky customers. And it will charge the risky customers higher prices, which will also limit how many high-risk customers sign up. That will keep Lemonade’s claim costs far below the industry average simply because its pricing model will weed out the worst customers.

Traditional insurance companies will be forced to adopt this AI-powered model if they want to survive.

That said, they still have plenty of time to do so. About 70% of Lemonade’s customers are under 35-years-old. I suspect older consumers will be much slower to move in this direction.

But the shift is inevitable.

Lemonade will be a fun company to follow. I’m excited to see how it does over the next few quarters.

An update on Amazon’s midsized supermarket…

We talked back in February about Amazon’s plan to open a chain of midsized grocery stores. At the time, a picture had just leaked out from the first store being established in the Woodland Hills neighborhood of Los Angeles.

Amazon Store

Source: Bloomberg

Looking at this picture made it clear that Amazon did not plan on utilizing the AI-powered cameras used to automate its Amazon Go stores.

We’ve talked about Amazon Go before. To bring new readers up to speed, Go stores are powered entirely by AI and computer vision. There are cameras strategically placed throughout the store on the ceiling. These cameras use computer vision to track the activity of each customer.

When consumers walk in the store, they scan a barcode on their smartphone’s Amazon Go app. That links them to their Amazon account, which is how the cameras know who they are.

From there, consumers are free to browse and take any items they wish. The cameras keep track of which items they take. Then, when consumers are ready to leave, they just walk out with the items. Amazon charges the credit card they have on file and emails them a receipt.

That’s it. No lines. No checkout counters. No self-scanning counters. Walk in, grab what you want, walk out.

It’s a beautiful experience. I was a little surprised that Amazon wasn’t planning to use this tech in its midsized stores.

Well, we just found out that Amazon’s midsized stores will be automated also. But they will use “Dash Carts” instead of ceiling cameras.

Dash Carts have the cameras built right into them. Consumers scan their QR code on the cart’s screen and then the cart will keep track of everything that’s put into it.

So the experience is the same. Walk in, grab a cart, grab your items, walk out.

And because these carts link to consumers’ Amazon accounts, they can also pull up premade shopping lists. No more fumbling with notepads or smartphone apps.

This is a great approach. It’s one thing to load up a small Amazon Go store with cameras on the ceiling, but it would cost significantly more to do the same thing in a midsized store.

Putting the technology in the shopping cart instead will save Amazon in expensive infrastructure costs. And it’s likely a more scalable option for larger stores.

So I’m excited to see how Amazon’s first midsized store does. I’m betting it will be a smash hit. After all, who doesn’t want this hassle-free experience when shopping for groceries?

I am also betting that this model increases customers’ overall cart value.

When you can take what you want and walk out without going through a checkout line, it “feels” like you don’t have to pay for your items. Because of this, consumers are likely to buy more than they otherwise would.

So this is a brilliant move by Amazon, and I think we’ll see this tech adopted throughout the industry.


Jeff Brown
Editor, The Bleeding Edge

P.S. Once again, thanks to readers who showed up to watch my Timed Stocks Accelerated event last week. I’m always excited to share my research in the area of early stage biotech.

Biotechnology has been one of the hottest sectors of the market this year… and for good reason. We are witnessing a generational shift in the industry right now.

Historically, biotech was a lot more “bio” than “tech.” Images of white lab coats and test tubes come to mind.

It’s a whole new game today, however. The top biotech companies are utilizing bleeding-edge technology like artificial intelligence (AI), machine learning (ML), computational biology, CRISPR genetic editing, and more.

And that’s why some of the best opportunities for investing in 2020 will appear in the biotech space. We will be well-positioned to capitalize on this massive trend.

If you haven’t had a chance to catch my presentation yet, make sure to do so before midnight tomorrow when the video goes offline. Go here to watch now.

Like what you’re reading? Send your thoughts to [email protected].