Chris’ note: Our mission at the Cut is to help you really move the needle on your wealth. We do that by plugging you into the best moneymaking ideas from the Legacy Research team.
And tomorrow night at 8 p.m. ET, our tech expert, Jeff Brown, will lift the veil on what he says is the single best way to make life-changing wealth in the stock market. It’s a chance to make venture-capital-like gains for folks who don’t already have millions of dollars to invest.
If you’re interested in learning more about a subset of small tech stocks that can spike hundreds… or sometimes even thousands of percent in just days, make sure to sign up for Jeff’s free presentation here.
Then read on below for more from Jeff on the importance of choosing versatile stocks… especially in today’s volatile environment.
When we face a society-altering event, we must react accordingly.
In the wake of COVID-19, our society has come to a standstill. The world has been forced to change. And as investors, we must learn to adapt as well…
Let me say up front that things are absolutely going to get better. As I’ve been showing readers of my free tech-investing e-letter, The Bleeding Edge, there are plenty of reasons to be optimistic.
By this time next year, I believe COVID-19 will be in the rearview mirror.
But while the world gets COVID-19 under control, many industries will suffer.
Hotels have shut down. Cruise liners have been sitting dormant at their ports. Rental car agencies face tough times ahead. This certainly is not the time to invest in the hospitality industry or in any companies that depend on consumer travel.
However, that doesn’t mean we can’t adapt and find incredible investments in this environment.
Companies involved in cloud computing services and wireless infrastructure are seeing a spike in demand. With the world on lockdown, we need these services to supply the massive demand for wireless bandwidth.
But there’s one more area of the technology markets also in overdrive.
In my nearly 30 years as a technology analyst, I’ve never experienced a time when this industry was as elevated as it is right now.
Every venture capitalist and private equity house has just woken up to how powerful these technologies are and how quickly their stocks can move.
And here’s the important part…
Companies in this subsector aren’t affected by supply-chain problems as a result of the worldwide lockdown.
They don’t care if the market is volatile. All that matters is that they make progress on their research and development. And when they do, their stocks run higher.
In fact – as history shows – some of these stocks are immune to shocks.
For example, in the downturn of 2008 – smack dab in the middle of the last crisis – three stocks in this subsector rose by 84%, 108%, and even as much as 382%.
And recently, in the midst of the coronavirus scare…
For the last week of February – one of the worst weeks for the market ever…
Only seven stocks out of the S&P 500 showed positive gains…
And the two biggest gainers?
You guessed it…
Both came from this same sector.
One of these has gone up as much as 197x in recent years…
And the other has risen as much as 557x.
We’re going to see investment accelerate in this area. More and more of these early stage companies will hold initial public offerings (IPOs). [That’s when a private company first lists its shares on a stock exchange.]
And unlike the overhyped, overpriced tech IPOs we’ve seen recently, these “forgotten” tech companies do things a little differently…
Uber (UBER) was the premier IPO of 2019. This was a “hot” company that investors were champing at the bit to get a piece of.
What few retail investors considered, however, was that Uber was nearly nine years old when it went public. It had already raised nearly $20 billion in venture capital as a private company. That valued Uber at $67.6 billion before its IPO.
Then, it went public at $45 per share, raising another $8.1 billion. That valued the company at a whopping $75.7 billion.
For comparison, Amazon (AMZN) was valued at just $438 million when it went public in 1997. That means Uber’s IPO valuation was more than 154x larger than Amazon’s.
And there was another problem with Uber. The company was hemorrhaging money like a small-cap firm. In 2018, the year before the company went public, Uber reported losses of $1.8 billion.
I warned my readers to steer clear of Uber’s IPO. And I’m glad I did. Nearly a year and a half after going public, Uber is still down over 17%.
This is the problem with buying overvalued, overhyped IPOs. They are almost always a bad investment.
That’s not the case with the technology subsector I mentioned above. These companies still go public early. Very often, they are the same size as Amazon when it held its IPO.
For this reason, I refer to these investments as “Penny IPOs.”
The potential return from these is exponentially higher than anything we will ever see from IPOs like Uber.
And I believe “Penny IPOs” will be one of the best ways to profit in the coming months.
What precisely is a “Penny IPO”? And why is the technology more critical today than at any other time in recent memory?
I’ll share the full story at my upcoming event, Penny IPOs: The 4X Window. It’s happening next Wednesday, September 23, at 8 p.m. ET. Go right here to reserve your seat.
Editor, The Bleeding Edge