- Why I recommend a “basket” of stocks…
- Is extraterrestrial life just a hoax?
- SPACs could be the biggest trend of 2021…
Dear Reader,
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.
Before we dive into today’s questions, I’d first like to let readers know about an event that’s coming up. It’s one that I’m very excited about, and I want Bleeding Edge readers to be the first to hear about it.
On February 10, at 8 p.m. ET, I’ll be hosting my Investment Accelerator event. I’ll tell attendees about the top five investment opportunities I see over the next five years… including what might be my most ambitious project yet – the chance for investors to share in $1 billion of tech stock profits.
To make sure you don’t miss a thing, go right here to sign up. And please mark February 10 on your calendar. I’ll see you there!
And for readers who found yesterday’s story about the shenanigans surrounding GameStop interesting – or tragic – please make sure to check in on Monday’s issue of The Bleeding Edge.
What took place was even worse than what we discussed yesterday. The data and facts have been unfolding by the hour. It’s just incredible.
Someone will probably make a movie out of this, just as they did with The Big Short (book and movie highly recommended). I’m going to take the weekend to digest what has happened, and we’ll tackle it on Monday.
And if you have a question you’d like answered next week, be sure you submit it right here.
How to create a balanced portfolio…
Let’s begin with a question on our “basket” approach…
Hi Jeff, I’m new to your work and just became a Brownstone Unlimited member. I’m excited for the possibilities and hope you can add a little clarity to your suggestion that we buy using the basket approach as opposed to picking and choosing among your chosen stocks. I see some of the portfolios appear in sections – are those the intended baskets?
Using the Early Stage Trader portfolio as an example, there appear to be 16 stocks at varying prices. Are you saying it’s best to buy the same dollar amount of each of the 16 stocks when they reach the buy price, and that is the basket approach? Is there somewhere on your site I could find basket approach explained? I searched "basket approach" and found no results. Thanks!
– Hanna L.
Hello, Hanna, and thanks for joining us as a lifetime member. We’re happy to have you on board. We have lots to look forward to in 2021.
While I can’t give individual investment advice, here is my general response to your question. As you noted, I often advise against cherry-picking just a few stocks in our model portfolios. Rather, I suggest forming a “basket” of our companies.
And there’s a good reason for this…
I’ll use Early Stage Trader as an example. In backtesting, our Early Stage Trader system generated average gains of 227% per position. But those gains were only realized by having equal exposure to every trade.
That means investing the same dollar amount in each actionable recommendation. The amount itself is a personal decision depending on the particular investor – the percentage gains will still be the same whether an investor puts $50, $500, or $5,000 into each position.
After all, while many of our recommendations will deliver profits over time, there will be a handful of trades that deliver outsized returns for us. That’s why building a portfolio of my recommendations is so important. We don’t want to overweight ourselves on one position that returns 100% at the expense of missing out on another position that produces 1,000% returns.
By investing in all our actionable recommendations, we create the best odds for success.
And this is what I mean when referring to a “basket” of stocks. We want to gain exposure to many recommendations rather than just a few.
Hanna, you also mentioned I have subdivided our Exponential Tech Investor and Near Future Report portfolios into different sections – 5G, artificial intelligence, precision medicine, etc. These are meant to help investors know which recommendations fall under which of the technology trends we are following. But in general, I still recommend viewing the portfolio as a whole as your “basket” rather than picking one or two trends to follow.
Of course, some positions have risen above our buy-up-to price. For those, my recommendation is to wait for a pullback before investing in these companies. This happens more often in higher-reward small-capitalization equities that you’ll find in Exponential Tech Investor and Early Stage Trader. These have higher levels of natural volatility.
And I will continue to send out more recommendations over the course of this year. So there is no need to worry about stocks that are out of range. There will always be new and exciting investing and trading opportunities ahead.
We stack the deck in our favor by establishing good entry points when we are building our portfolios. It takes some discipline, but it always pays off in the end. And as we take profits on some positions, we can free up capital for new ones.
Thanks again for sending in your question.
Is there other life in the universe?
Next, a reader remarks on our recent discussion on the possibility of other life in the universe…
Jeff, I worked in Aerospace for over 50 years and have a lot of friends high up in NASA, the USAF, and DARPA. Over beers, we would sometimes discuss UFOs, and universally our opinion was that it was a hoax. The best data point is the total drop-off in local sightings once phones with cameras became universal. Keep up the good work. Best wishes.
– Dana A.
Hi, Dana. Thanks for writing in with your insight. I always appreciate that kind of boots-on-the-ground perspective. And for the record, I tend to agree with you.
That said, this is such a fun and interesting topic, and it’s one that has been debated for some time. And the recent declassification of Central Intelligence Agency (CIA) documents on UFOs has certainly stirred the pot.
But the real question is bigger than just UFO sightings… Is there intelligent extraterrestrial life out there?
While we haven’t yet received definitive proof, there are a few factors that give us reason to believe it’s possible… even likely.
Consider first the size of the galaxy. About a year ago, I wrote about a new picture of the universe taken by the SOFIA flying telescope. This is a modified Boeing 747 that can capture images from an altitude of 38,000–45,000 feet. That’s above 99% of Earth’s infrared-blocking atmosphere.
These high altitudes enable NASA to capture images that simply wouldn’t be possible on Earth. Just have a look at this photograph of the core of our Milky Way galaxy, more than 600 light-years across…
Infrared Image of the Center of the Milky Way Galaxy
Source: NASA
For comparison, our own solar system is only about one light-year across, measuring from the Sun to the Oort cloud. This really puts into perspective how small our solar system is in the grand scheme of things… and how large the Milky Way galaxy is.
And we are discovering thousands of exoplanets within the Milky Way galaxy. These are inhabitable planets. They have all the necessary elements for life. They exist in what is called the “habitable zone,” or the optimal distance from a star for water and organic life forms to exist on a planet’s surface.
In fact, this past November, a team of astrophysicists released some incredible research.
This team painstakingly went through all existing data on exoplanets in our galaxy. This data was collected by NASA’s Kepler space telescope and the European Space Agency’s Gaia project, which seeks to map out every star in the Milky Way galaxy.
Prior to this research, we believed that there were about 4,300 exoplanets in the Milky Way. But we didn’t know how many of those planets were rocky, likely to have water, and in the habitable zone capable of supporting life.
But this new research showed there are at least 300 million Sun-like stars with habitable planets orbiting them in our galaxy. That’s astonishing.
What’s more, the research estimates that there could be as many as 4.1 billion Sun-like stars in the galaxy. When the researchers widened their parameters a bit, the model suggests that up to two billion of these stars may have an Earth-like planet orbiting them.
And that means there are far more habitable planets in our galaxy than we ever dreamed.
Of course, this doesn’t mean we will find human-like aliens. But there’s a great chance we’ll find plants or bacteria living on another extraterrestrial object. And perhaps we will also find some form of intelligent life…
The far bigger issue to me is not whether there is extraterrestrial life. As for that, I am certain that there is.
Given the scale of our universe and the number of exoplanets we have already discovered (and those that we can infer), it is the only logical conclusion.
The real question is whether or not we will ever come in contact with it.
The distances just within our own solar system are so vast – let alone our galaxy. And Earth has a long way to go before we can develop spacecraft capable of traveling anywhere near the speed of light or faster.
That said, I believe this decade will be the most exciting period for space exploration in history.
We are sending more probes out to Mars. We will have our first manned mission to Mars this decade. We will have a manned presence on the Moon in just a few years. We will see a new space station launched. We will see the world’s first commercial space station and with it the birth of space tourism.
And perhaps we’ll find intelligent life out there…
If any readers would like to write in with their thoughts, please send them my way. This is such a fun topic that I’d love to hear more about what readers have to say.
An exciting opportunity for investors…
Let’s conclude with a question about SPACs…
For various reasons, I have not been current with your reports. Just yesterday I read about SPACs and am very interested in these. Are there opportunities now, or do I need to wait for the next recommendation?
– Dale T.
Hi, Dale, and thanks for writing in. I’m glad to hear you’re eager to explore these exciting investment opportunities.
But before I get to your question, let me provide some background for unfamiliar readers.
Special purpose acquisition corporations – known as SPACs or “blank check” companies – are a huge trend we’re following at Brownstone Research.
In simple terms, a SPAC is a holding company that exists purely for the purpose of combining with a private company to take it public. That allows regular investors the rare opportunity to invest in a company before it goes public, which is when the greatest gains are possible.
And SPACs had a record-setting year in 2020. Of the 522 initial public offerings (IPOs) last year, a whopping 248 were SPACs. And through the first two weeks of this year, 53 of the 63 IPOs were SPACs. So we’ve got a lot to look forward to in the coming months as a number of promising companies go public this way.
Of course, many of the SPACs hitting the market are, quite frankly, trash. Especially the ones run by fast-money Wall Street shysters. These are people who have never built a product or service and then brought it to market.
That’s why I just launched my Blank Check Speculator research service. This new service will specialize in discovering the highest-quality SPACs with the best management teams that are focused on the sectors with the best growth potential. That’s going to be critical.
In essence, I’ll be guiding subscribers to the most promising SPACs while avoiding the duds.
Any Brownstone Unlimited or Blank Check Speculator charter members who want to catch up on my first official recommendations can find our model portfolio right here. And paid subscribers can find the special reports detailing our investment theses on these recommendations – as well as our “manifesto” that shares all about how SPACs work – right here.
And I’ve already got our next recommendation in mind. Once I finish my research and vetting process, I’ll send that out to subscribers in short order.
My publisher officially closed our charter offer for this service last week. But I’ve asked them to allow readers of The Bleeding Edge to view the offer for a limited time. If you’ve any interest in joining us, please go here to learn how.
That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.
Have a good weekend.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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