- Why I focus on nuclear fusion over fission…
- How we decide when to take profits…
- Keeping up with the world of technology…
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.
If you have a question you’d like answered next week, be sure you submit it right here.
But before we turn to our questions…
It pains me to say it, but Europe and the U.S. are swinging back to full panic mode right now with regard to COVID-19. No number of lockdowns has been able to stop the spread in Europe.
The panic is caused by the media and even parts of the medical establishment that are maniacally focused on cases, which is very misleading.
Belgium locked down completely twice, and it is still experiencing a spike in both new cases and deaths. Yet Sweden stands in remarkably good condition with the complete absence of any lockdowns or mask requirements, for that matter.
And here in the U.S., four weeks before the election, polymerase chain reaction (PCR) testing for COVID-19 spiked well above one million tests per day, and it has risen from there. Yesterday, almost 1.5 million of the tests were recorded in a single day.
But as we know, these are producing a false positive rate somewhere between 60–90%. The PCR machines are set to sensitivity levels that are simply too high. They identify old fragments of RNA from when a subject may have had COVID-19 or even influenza many months ago.
Even the antigen tests, which identify if COVID-19-specific antigens are present in our bodies, are grossly inaccurate.
I got a kick out of a tweet from Elon Musk yesterday. He said, “Something extremely bogus is going on. Was tested for covid four times today. Two tests came back negative, two came back positive. Same machine, same test, same nurse.”
Yet we are setting policy on such horribly inaccurate testing data.
And let’s look at the decisions being made…
Chicago’s mayor issued a 30-day, stay-at-home advisory and told her constituents that they “must cancel the normal Thanksgiving plans.”
New York City is just champing at the bit to shut down its schools entirely once COVID-19 positive tests hit 3%. This is despite the fact that the COVID-19 daily deaths have been at extremely low levels since June.
New York City looks better than Sweden right now. Yet it is preparing to shut down… again!
Two days ago, Philadelphia announced that it is reversing its reopening plans and will continue with e-learning “until further notice.”
I could go on and on…
But there is one place we can go to escape COVID-19 and the lunacy here on Earth… the International Space Station (ISS).
SpaceX is getting ready for its first official mission to the ISS with its Crew-1 mission. SpaceX received formal certification from NASA after its successful Crew Dragon mission earlier this year. It was the first time in nearly 40 years that a spacecraft has been certified by NASA for regular flights.
The mission is scheduled for tomorrow evening and will take four astronauts to the ISS for about 180 days. We’ll wish the crew and SpaceX a successful journey.
And just for the record, I am absolutely going to have Thanksgiving as normal.
Now let’s turn to our questions…
The energy of the future…
Let’s begin with a question on nuclear power…
You come across as against fission nuclear power. I understand that fusion will be more efficient, eliminate radioactive waste, and replace fission power, but overall, the waste (if properly controlled and managed) is actually fairly small for a fission nuclear power plant. Also, spent fuel is being reused at a high rate, so the waste from spent uranium is also incredibly lower than it was decades ago.
Risk to humans is also low. A typical navy nuclear operator receives a lower dose of radiation doing their job than the average person does from the Sun living a normal life. When fusion comes online, that will be incredible.
Do you consider fission nuclear power worse than fossil fuels? Do you have any concerns for the environment and habitats surrounding massive solar farms or wind farms? Keep up the great work. I’m greatly enjoying The Bleeding Edge and looking forward to the technological revolutions that are ahead of us.
– Anthony S.
Hi, Anthony, and thanks for writing in with this question. Energy production is a hot topic, and you’ve touched on a few interesting points.
As a quick refresher for new readers, nuclear fusion is very different from nuclear fission technology. In short, nuclear fission produces energy by splitting the nucleus of an atom into two – or several – smaller nuclei. When most people refer to nuclear power, this is what they mean.
Of course, this has trade-offs. Fission creates nuclear waste that – without proper storage – can poison our environment.
And history buffs know about high-profile nuclear meltdowns from fission reactors. This is a topic near and dear to me, as I was living and working in Tokyo at the time of the three nuclear meltdowns of fission reactors in Fukushima. I sent my family to the southern part of Japan to be safe while I led my company through months of crisis management.
So it might be a surprise, given my personal experience, that I am not against nuclear fission. Nuclear fission is one of the few technologies that could get the world off fossil fuels, reduce carbon emissions, and still provide all the power our electrical grids need to function 24/7.
Third-generation fission reactor technology has been around since the ’90s. These designs are far safer and even more efficient than the reactors the U.S. currently has online.
But where are these third-generation reactors being built? Mainly in India and China.
And there are even fourth-generation fission reactor designs that are more economical and even safer than the third-generation reactors. Technologies like sodium-cooled fast reactors (SFRs), gas-cooled fast reactors (GFRs), very high temperature reactors (VHTRs), and molten salt reactors (MSRs) all show great promise.
And I wrote just this September about a small company producing small modular reactors (SMRs) that would make the construction of nuclear reactors much easier and cheaper than it has ever been.
Nuclear fission technology is based on mature technology and releases no CO2 into the atmosphere. So why isn’t the U.S. and most of the Western world building third- and fourth-generation nuclear fission reactors? One word… politics.
It’s not logical… it’s not rational… but the ignorance and negative emotions around nuclear fission technology are very real. This is why I simply don’t see a path forward in the U.S. and other developed markets with nuclear fission.
It’s not that I don’t believe in the technology. But I don’t believe that there will ever be a way politically to get the approvals to upgrade the U.S. power generation infrastructure with modern, safe fission technology.
Fusion, on the other hand, is the “power of the Sun,” which I see as far easier to sell. More specifically, nuclear fusion is the combination, at very high temperatures, of two separate nuclei to form a new nucleus. In that process, huge amounts of energy are released.
My favorite approach to nuclear fusion uses a proton-boron (pB-11) fuel. The advantage of using pB-11 is that the reaction produces no neutrons. The output is just three helium nuclei and a whole lot of clean energy. No radioactive waste at all.
These advanced reactors are immensely complex, but I believe with our advancements in materials science – and more specifically in artificial intelligence – we will be able to optimize the magnetic fields required to control the plasma reaction in the reactor.
This will change the political debate entirely and put the world on a path to clean energy. It will be capable of feeding the world’s electricity grids for baseload power… what we all need to keep the global economy humming.
And one final point…
You are correct that solar and wind farms also have negatives. This is something that the industry has not been honest about.
These technologies can be highly disruptive to natural ecosystems, and solar panels are made with toxic chemicals. After about 15 years, the efficiency of solar panels drops significantly, and they have to be replaced.
There will be a massive issue with how to safely dispose of and/or hopefully recycle these panels so that we aren’t just dumping most of them into a landfill.
When is the right time to sell an investment?
Next, a reader wants to know more about when to sell…
Reading some subscribers who claim to be making fantastic earnings on the same stocks that I got when following your recommendations, I am frustrated. Obviously, I see some stocks rise and others fall, but I never get to making anywhere near such profits. I wonder: How do they do it? What do they do that I do not? What do they know that I do not? Do they go in and out as day traders?
Specifically, for example, I see impressive growth on [two of our Brownstone Unlimited recommendations], and I am confused. Should I sell now when they are at a high point or continue to hold? If so, for how long and until when? Along the way, I have been adding more units to these stocks. Is that a good strategy? And when would be the right time to sell them anyway? Kindly clarify this to a novice like me.
– Hagitte G.
Hey, Hagitte. Thanks for writing in and for being a subscriber. As you likely know, I can’t give personalized investment advice. But I can offer some general advice about your questions…
First, an individual investor’s gains will be based on the prices at which they buy and sell. Some subscribers may get into a recommendation at slightly different prices.
Obviously, the actual share price of any company that I recommend will change throughout the day, day by day, and this will ultimately affect the percentage gains.
While I don’t officially recommend averaging down, some of my readers have been able to use their own strategies to improve their cost basis. And indeed, some proactive readers have shared creative methods for using my research, such as active trading and options, which they’ve used to increase their profits.
But in general, subscribers who follow my buy-up-to prices and my buy and sell alerts should be able to achieve results similar to what we see in our model portfolios.
As for when to sell, the context of each individual investment is highly relevant. With every investment that I recommend, I have a predicted increase in value and a rough timeframe to expect those returns. If my recommendation hits its targets sooner than expected, that might be a good opportunity to take profits and reassess the investment thesis.
Did something change with the company? Did it release a new product or service that will add to the growth that I originally forecasted? Or does the company have an expected lull in future product releases?
The growth status of the industry that the company provides products or services to can also be a good indicator. A simple example is 5G wireless technology.
We are about a year or two into a multiyear boom of 5G wireless deployments around the world. This market is receiving extraordinary investment levels.
But a few years from now, the investment will slow down, and stocks that once benefited from those trends will also likely pull back. Knowing when those trends start to decelerate is useful in finding a good time to sell.
And the answer will be different for each investor depending on their time horizon and tolerance of risk and volatility. There is certainly nothing wrong with taking profits off the table, especially if someone’s risk tolerance has changed.
Another important factor I consider is valuation. In other words, has this company become overvalued and vulnerable to a fall?
A great example is DocuSign (DOCU). This is a company that specializes in electronic contracts. I recommended it to readers of my large-cap investing service, The Near Future Report, in June 2019.
DocuSign has been a great investment for us. In 13 months, readers had nearly tripled their money.
But by July of this year, I began to take a close look at DocuSign’s valuation. At the time, it was trading at an enterprise value (EV)/sales ratio of 36. That means the company’s valuation was equivalent to 36 years of sales (not profits).
Over longer periods of time, a valuation that high just isn’t sustainable. So I recommended readers sell half of their investment. That way, we could lock in a great return and enjoy any further upside using “house money.” We’re still up nearly 275% on DocuSign.
And investors should also think about the tax implications of their investments. If investors have held a stock for more than 12 months, they can capture long-term capital gains and, thus, lower tax rates. This is often overlooked. And trading off any short-term losses against some long-term capital gains can also be a smart approach.
It is always good for investors to consider the tax implications of every financial decision they make. I recommend talking with a tax adviser to determine what’s right for an investor’s specific situation.
Finally, rest assured that I will always send out an alert any time I believe it is time to sell a company held in the model portfolio of any of my services.
Thanks for your question.
How to research technology investments…
Let’s conclude with a question about how I do my research…
Hi Jeff,
Firstly, let me say I’m a subscriber and I love reading your Near Future Report and Bleeding Edge newsletters. I started investing a year or two ago in a few companies and have found myself increasingly gravitating toward your recommendations, which always provide a strong thesis for each investment.
I am very interested in how you manage to keep up the flow of high-quality material. The subject matter always feels extremely well researched and really insightful. I just can’t imagine that any one person would have enough time to do the amount of research required to produce it, so my assumption is that you have a team around you? If you do have a team, is it possible there would be an opportunity for somebody like me to help you do what you do?
And it would really make my day if you could spare a moment to give me a few pointers on how you monitor and decide on the topics for research. What are your go-to sources? How do you organise yourself? What does your workflow look like, given all the videos you also record and events? I struggle to imagine how you fit it all in!
Secondly, what advice would you give to somebody who wants to get involved in something like what you are doing?
Keep up the good work. It’s kind of inspiring! All the very best,
– Alex L.
Hello, Alex, and thanks for your kind words and questions.
In fact, other team members who work with me often ask the same questions.
And there is no easy answer. My days start at 5 a.m. every morning – and sometimes much earlier – and usually finish late in the evening. It requires a tremendous amount of discipline.
This type of analysis, research, and editorial work takes a tremendous amount of effort. I cover a wide range of technologies in order to ensure that we are gaining access to the most exciting insights and investment opportunities.
With the help of my team, every month I publish two monthly issues with complete portfolio updates, weekly updates, usually several recommendations, and even this free newsletter every weekday. Plus, I’m working on a couple of new research products that are still in the pipeline.
And I can tell you that my team and I work countless hours to make sure that we are putting out high-quality investment research. I regularly put in 70–80 hours every week researching, writing, traveling, and filming.
All of that adds up to a lot of content, but there is so much happening in the world of technology and biotechnology right now.
Even with all my publications, I still have to pick and choose the timeliest insights and recommendations to share. The truth is, I’m drinking from the fire hose every day.
Even with 30 years under my belt in high technology, the pace of technological development makes me feel like I need to work even harder to keep up.
My approach to investment research is probably different than what is normal. I don’t come from Wall Street; I come from the technology industry.
In my past positions, my teams and I have sold billions of dollars of technology to companies around the world. Being a customer-facing enterprise provides fantastic insights into how and why technology is bought and sold.
My experience changes the way that I look at investment opportunities. Product strategy, product road map, and go-to-market strategy are very important to me.
I also track technologies from the time that they are just being written about in scientific journals. I pay close attention to how certain technologies are advancing and, of course, how they can be commercialized.
I’m always looking for an edge. That’s why I’ve spent so much time with my “boots on the ground” research. My personal network spans the globe, and my industry contacts range over just about any high-tech sector we can think of. And there is nothing like getting into the field and seeing how things are actually working and being used.
Plus, I’m always in learning mode… I regularly attend the best universities in the world for continuing education and professional certificates. It keeps me on my toes and ensures that my network continues to grow.
Just this past February, I attended an invite-only weeklong class at the University of California, Berkeley, School of Law, and earned a professional certificate. Also in February, I had the opportunity to experiment with IBM’s quantum computer during two courses on quantum computing that I took at MIT.
And last year, I graduated from a 10-month program through Yale University’s School of Management for postgraduate business studies.
All of the work and research I do is with purpose. Some of it yields value in the short term… and much of it over longer periods of time.
The hard part is being disciplined enough to work on things that return value over longer periods of time because there will always be a more urgent distraction today. But without doing so, I’d be missing out on an incredible pipeline of ideas and opportunities.
As for hiring, we are always open to adding new team members, either on my team or with one of my colleagues. If anyone would like to express interest, feel free to submit your answers to the following questions here: [email protected].
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The net gain on 10 shares of McDonald’s stock purchased Jan. 2, 2007, and sold Jan. 2, 2017, assuming all dividends were reinvested.
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The return on equity (ROE) for the five largest U.S. banks, ranked from best to worst.
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The best three U.S. airline stocks to buy based on the price/earnings-to-growth (PEG) ratio.
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Why you would or wouldn’t buy Tesla stock in 50 words or less.
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.
Jeff Brown
Editor, The Bleeding Edge
Like what you’re reading? Send your thoughts to [email protected].