As a difficult and deeply disrupted year enters the home stretch, Wall Street needs to stop dwelling on the recent past and obsessing over looming uncertainties. It is time to focus on the future.
More than ever, that means clearing a little space in every portfolio for the newest and most dynamic stocks on the market. The trillion-dollar giants that dominate Silicon Valley and the S&P 500 alike have been huge, but now they’re prisoners of their own success.
That’s why I’m going to spend the remainder of this year, and 2021, capturing much smaller and more obscure stocks that actually have room to grow. And I’m far from alone.
The companies that went public this year are up an average of 40% since their debut. That’s good, better than what the S&P 500 or even the technology-heavy Nasdaq can support.
But the three companies in my IPO Edge portfolio that have gone public in 2020 have, on average, doubled since their debut. We’re not only beating the broad market or the hottest sector funds. These are the hottest of the hot stocks, the best of the breed as well as the best in the entire show.
And in a year of pandemic, recession and fear, their shareholders don’t even feel the weather. It’s as though 2020 never happened.
New stocks are hot. Old stocks are running dangerously close to the edge.
Yesterday’s Giants vs. Tomorrow’s Stars
Amazon.com Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL) and Microsoft Corp. (NASDAQ:MSFT) are going to have a hard time doubling again in the foreseeable future. One way or another, their business models are hitting mathematical walls now.
And when you’re looking at what’s now $5.5 trillion in market capitalization concentrated in just three of the 5,000 publicly traded U.S. companies, I for one do not relish the prospect of hitting that wall.
Amazon is big. It is on track to book close to $370 billion in revenue this year. Maybe by 2025, that cash flow will double, at which point we could be looking at a $6,000 stock without straining valuations one cent.
Likewise, pivoting to services has helped Apple squeeze 5% sales growth out of its loyal user base this year. That’s as good as it gets. Tim Cook can’t sell twice as many iPhones and he probably can’t charge double the current price, so he’s stuck with the market he has.
Everything else being equal, Apple might scrape together enough revenue to justify an 18% upside over the next five years. That’s not the growth profile that people who remember the iPod revolution would recognize.
Apple is a value stock now, coasting on its size and its dividends. Microsoft is a little better, but even its growth gets harder with every passing year.
How many billion-dollar revenue centers can the company buy? Each of them moves the expansion needle less than 1% at this stage.
Growth is a Journey, Not a Destination
On the other side of the scale, a company so young that it cheers when it books its first $1 billion in sales doesn’t have to become a titan instantly. We can generate a lot of wealth along the way.
That’s why I’m thrilled to see Palantir Technologies Inc. (NYSE:PLTR) finally become available to retail investors as it joins that $1 billion club. In theory, it would need to rack up 36,900% growth before it can even aspire to Amazon’s lofty status.
Maybe it will reach that point someday and give shareholders a 36,900% ride. It is more likely that we’ll see sales plateau somewhere below $100 billion, but that’s still room for enormous upside.
If I were Jeff Bezos, frankly, I’d rather own PLTR than AMZN at this stage. Amazon has been a great journey for him, making him the richest man in the world.
Now it’s time to look for the giants of the next generation. They’re small stocks today but their best days are in the future.
I like PLTR. I like Unity Software Inc. (NYSE:U). I love Sprout Social Inc. (NASDAQ:SPT).
The list can go on and on. But with over 150 companies hitting the market this year alone, it takes a lot of effort just keeping all the new names straight.
And if 2021 plays out even a little like 2020, I can’t wait to meet a whole new wave of new stocks and introduce the best of them to my IPO Edge subscribers over the coming 12 months.
Want a taste? I’ll be talking about a few of my favorite names on Oct. 22. You can register for the exclusive event now. Just click this link.
I suspect 2021 will be even better for deal flow. It’s got to be better for investors. We look beyond the news cycle every week on my Millionaire Maker radio show. Now there’s a podcast as well to keep you focused on opportunities to build real wealth while avoiding obvious threats. (Click here for a list of stations and archived episodes.)
Update on Private ‘Off the Record’ Post-Election Summit
Finally, we are really excited to let you know about what is the first actual, in-person get-together we’ve had since very early this year, and it is the just-confirmed, just-verified and ready to rock and roll financial event of this post-lockdown year.
Today, we are cordially inviting you to our private, in-person “off the record,” financial summit sponsored by the Investment Club of America. This confidential meeting will take place on Nov. 6-7 (right after the elections) in an undisclosed location in Las Vegas.
Why is this gathering so secretive? Because our First Amendment rights are being abridged by power-hungry politicians, and we need to maintain a low profile in an era of big government.
We live in dangerous times, in which our freedoms and wealth are threatened as never before. The November 2020 election has become the most important election of the 21st century due to the stark differences between the two parties. Trump and the Republicans are struggling to maintain power in the face of a never-ending pandemic. Their policies of tax cuts, deregulation and appointing conservative justices could be overturned soon.
As it stands today, the election betting odds still favor the Democrats. If the Biden/Harris ticket wins and the Democrats take over the House and the Senate, what will this mean for investors, entrepreneurs and the citizens of America? Will the stock market crash and gold soar?
Biden & Co. have promised massive tax increases on wealthy entrepreneurs, elimination of the long-term capital gains ‘break’ on stocks, bonds, gold, silver and real estate (with tax rates exceeding 50%).
They have also promised socialistic programs like Medicare for All, free college tuition, a New Green Deal, a wealth tax, severe limitations on free speech, a new Supreme Court, all on top of out-of-control government spending. The Great Suppression has begun!
That’s why we are holding this Post-Election Summit. It is critical to your pocketbook and your way of life.
And to help make sense of it all, we have brought together some of the world’s top experts to discuss the outcome of the November elections. What will it mean in terms of our citizens’ rights to speak out, to run our businesses, to invest, to travel, to assemble and to be left alone?
Will our freedoms and standard of living be curtailed due to new government policies? Will our wealth come under attack with new taxes, inflation and regulation? Will tech and gold continue to be the favorite stocks after the November elections?
We have brought out the best and the brightest analysts in finance, economics and politics to provide their analysis and answer your questions.
The Post-Election Global Financial Summit is an “in person,” face-to-face event — not a “virtual” conference. Due to legal restrictions, attendance at this in-person event will be limited. We urge you to register now and not be disappointed.
The price for this two-day event is $299. There are no discounts and we expect to sell out quickly. To learn more about the conference, go to https://globalfinancialsummit.co/.
After you register, you will be given the name and location of the Las Vegas hotel, and you then can reserve your room and make your travel arrangements. The hotel is only $99 per night, plus tax. There is no resort fee. Parking is free. We arranged a great deal for you!
Special Note: Please do not discuss this conference on social media. This is a private conference by special invitation only. Thank you.
Our Confirmed Speakers for This event:
Mark Skousen, veteran editor of Forecasts & Strategies and the producer of FreedomFest, will analyze the impact of the November elections on the economy, the dollar, taxes and your wealth. He will give specific recommendations — what to buy, what to sell and what to expect in the next year for stocks, bonds, the dollar, real estate and commodities.
Jo Ann Skousen, associate editor of Forecasts & Strategies and director of the Anthem Film Festival, will discuss her greatest concerns for the future — the protection of the twin pillars of freedom.
John Fund, senior editor of National Review and the nation’s foremost authority on politics and elections, will assess the good, the bad and the ugly coming out of the November elections.
Sean Flynn, economics professor at Scripps College (Clermont) and principal author of the top economics textbook in the country, will assess the “New Normal” after the elections — how to survive and prosper in an age of higher taxes, growing deficits and more regulations. As the author of “The Cure That Works,” he will update us on the future of health care and the pandemic.
Jim Woods, known as the Renaissance Man, the #1 financial blogger in the world according to Tip Ranks, and co-editor of Fast Money Alert with me, will discuss his favorite investment strategies for 2021.
Hilary Kramer, editor of the popular 2-Day Trader, a talk show host and a graduate of the MBA program at the Wharton School of the University of Pennsylvania, will discuss how the November elections will be a “GameChanger” (the title of her most popular book that was #1 on Amazon this year and was also on the Wall Street Journal bestseller list).
Bryan Perry, editor of the prestigious Cash Machine advisory service, will offer his best post-election investment choices in high-tech and high-income.
Adrian Day, founder of Adrian Day Asset Management and the world’s top authority on global investing and mining stocks, will offer specific advice on the outlook for global investing, the dollar, and commodities, with specific recommendations from blue-chip miners to penny stocks that are likely to double or triple in the coming year.
We just confirmed Barbara Kolm, vice president of the central bank of Austria, who will give us an update on Europe.
More speakers will be added soon and Roger Michalski, publisher of Eagle Financial Publications, will moderate.
Time is short, and now is the time to act if you wish to be part of this historic gathering. Attendance is strictly limited, so sign up today at https://globalfinancialsummit.co/.
CANNABIS CORNER: APHRIA STUMBLES
Sometimes cannabis investors do silly things. For example, this week the big cultivators gave back about 3% of last week’s Kamala Harris-inspired rally, and the catalyst has nothing to do with the plant they produce.
Aphria Corp. (NASDAQ:APHA) triggered the retreat with an 18% post-earnings loss. While some of that selling was deserved, actual cannabis sales remain both brisk and profitable.
Unlike some of its counterparts, APHA saw net revenue on that side of the company swell 18% from the previous quarter, and that business is already big enough to make money. It costs $1.41 to produce each gram of cannabis, which the company can then sell for $4 to $7, depending on the sales channel.
The COVID-19 pandemic did not interfere with that core cannabis calculation. Ironically enough, the problem came from APHA’s more conventional pharmacy distribution subsidiary, where the virus has pushed all other medical concerns to the sidelines.
That’s what APHA’s management classifies as “distribution” revenue. And since it accounts for half of the company’s top line, that weakness spawned an overall miss.
It happens. Management already sees conditions improving. But because cannabis investors are so jumpy, the stock cratered.
I’ve said it before, and I’ll say it again. APHA is my favorite of the big cultivators. Pricing on medicinal marijuana is improving where more recreationally oriented rivals like Aurora Cannabis Inc. (NYSE:ACB) are struggling to achieve any kind of price power at all.
APHA will be a winner when the weak hands finally fold, and the cannabis wars are over. You’ll just need to hang on a little longer for that scenario to play out.