- This is my criteria for a great technology investment
- Here’s how we’ll be successful in biotech investing
- The end to genetic disease is getting closer
Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.
If you have a question you’d like answered next week, be sure you submit it right here.
But before we get to our questions, I’d first like to thank all Bleeding Edge readers who joined me Wednesday night for my special investing seminar, the One-Day Profits Summit. Thousands of readers tuned in to learn what I uncovered up at Cambridge, Massachusetts, the biotech capital of the world.
Bleeding Edge readers need no reminding, but we are entering a golden age of biotechnology. Breakthroughs that seemed years or decades away are now happening in a matter of months or weeks.
The 2020s will be the decade of biotech. Ten years from now, we’ll look back at the incredible technological advancements that were made during this time. And we’ll also marvel at the extraordinary wealth that was created by biotech investments.
During the event, I profiled the extraordinary work being done with CRISPR genetic editing technology. And I highlighted one CRISPR company that is on the verge of a breakthrough.
If I’m right – and I believe I am – this company will surge as soon as its clinical trials are made public. Based on my analysis, this is a “must-have” stock for any serious biotech investor.
If you missed the event, I’ve asked my publisher to make a replay available for a limited time. Go right here.
For today’s edition of The Bleeding Edge, I’d like to do something a bit different. During Wednesday’s event, we received more than 3,000 questions and comments. I answered a few of them on air. But I obviously couldn’t answer all of them.
Today, I’ll answer some of the common questions that came up during the event.
How I spot a great technology investment…
Hi, Jeff. What are the key indicators you look for in a high-tech company?
Thanks for your question.
As my longtime readers know, we have an advantage over Wall Street when it comes to technology investments. Most investors don’t fully understand the implications of certain technologies. They don’t fully appreciate how transformative technologies like 5G, CRISPR genetic editing, or artificial intelligence (AI) will really be.
An example is my February 2016 recommendation for NVIDIA (NVDA). At the time, NVIDIA was mostly known as a graphics card company for video games. This company was wildly misunderstood.
But I knew something most investors didn’t…
I knew that NVIDIA’s graphics processing units (GPUs) were perfect to run artificial intelligence programs. NVIDIA’s GPUs are the “workhorses” for AI applications in data centers today.
And that recommendation has worked out incredibly well. Since February of 2016, NVDA is up over 1,600%.
To find these types of investment returns, I look for a few things…
Is the technology doing something truly unique?
Is this company’s product or service a revolutionary upgrade? Or is it just a slightly better version of what already exists?
Is this company operating in a high-growth market?
In other words, is the company operating in a space that is growing rapidly? Or is it in a market that is stagnant or shrinking? This is precisely why we target high-growth industries like 5G, cloud computing, and biotechnology.
Does this company have a smart go-to-market strategy?
A go-to-market strategy is exactly what it sounds like. It’s a company’s plan to bring a product or service to market and scale that product. This question is especially important when investing in pre-product or pre-revenue companies. We need to fully understand the company’s ability to sell its product or service to the market it is addressing.
Does the valuation make sense?
This last question is actually the most important one. We need to understand if a company is trading at a reasonable valuation. Even the best companies are not a good investment if they are trading at too high of a valuation. Investing at an irrationally high valuation in a fantastic company will still lead to investment losses.
That is an incomplete list. There’s a lot more that goes into identifying a great technology investment. But at a very high level, those are the type of things I look for.
Thanks again for your question.
Proper position sizing for biotech…
Jeff, how much do I need to invest in biotechnology to see a decent profit? $1,000? Or could I start with $500?
This is another common and important question.
As you likely know, I can’t give personal investment advice. But I always encourage readers to use rational position sizing in any investments. Position sizing will mostly depend on the amount of capital an investor has to deploy and their risk tolerance.
Yes, any investor can start with just $500. Generally speaking, most early stage biotechnology companies tend to trade in the range of $10–30 a share. That means at an average price of $20 a share, an investor could buy two shares in 10 early stage biotechnology companies and invest about $400. This is a great way to get started.
As an investor’s portfolio increases in value, the amount invested in each stock can increase. I do recommend that investors build positions in stocks at roughly the same amount for all positions.
For example, an investor can target investing $50 or $100 into each biotechnology company. This is a smart way to position size and ensure that there is exposure to a basket of high-quality companies. That way, investors don’t miss out on the real winners that just take off.
And remember, I never recommend going “all in” on any one investment. This is always dangerous.
No matter how well we think we know a company and the technology, there are always factors that are out of our control. By not cherry-picking or going all in on one stock, we protect our portfolio. It ensures that there will never be a catastrophic loss.
And here’s another important point: No matter how much an investor chooses to invest, percentage returns will be the same. And we can always choose to incrementally increase our position sizes as we realize our returns and grow our portfolios.
Thanks for the question.
CRISPR could unlock the cure to 6,000+ diseases…
Jeff, are companies involved with CRISPR currently working on other cures? Or just this one you mentioned?
Thanks for the question. And the answer is yes, other companies are working to cure disease using CRISPR.
As a reminder, CRISPR is the genetic editing technology that allows us to “edit” our genetic code as if it were software. CRISPR has the potential to correct any “typos” in our DNA that cause disease.
During the event, I profiled one CRISPR company working on a therapy for a specific disease caused by a single unwanted genetic mutation. But CRISPR technology does not stop there.
There are more than 6,000 diseases caused by genetic mutations. Worse, 95% of them have no approved therapy or treatment.
To understand the scale of the problem, consider the following:
More than one million babies are born with a chromosomal abnormality each year.
More than five million babies are born with a genetic disease or major birth defect each year.
Birth defects or genetic conditions cause more than 20% of infant deaths.
About 10% of adults in hospitals are there due to genetically related problems.
About 30% of children in hospitals are there due to genetically related problems.
CRISPR technology has the potential to solve all these problems. It is a new tool that we now have to correct our DNA. And that makes CRISPR one of the most exciting investing trends of this decade.
And look no further than a comment from another event attendee to see for yourself.
Thank you for your help on researching [your CRISPR recommendation]. I have been doing great! It’s my No. 1 stock. I just wish I had bought it earlier.
That’s wonderful to hear. I’m always happy to hear from readers who have benefited from my research. Thanks for writing in with your feedback.
That’s all the questions we have time for this week. Remember, you can always write to me by going here. I’ll do my best to answer as many questions as I can.
And don’t forget that a replay of my biotech master class, The One-Day Profit Summit, is still live for a limited time. I encourage all interested readers to view it right here.
Have a wonderful weekend.
Editor, The Bleeding Edge
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