Let me ask you a question...
Who is the most successful investor of all time?
I'm guessing most of you are thinking Warren Buffett. But
Buffett's annualized return (as measured by growth in book
value) is "only" about 20% since he took over Berkshire Hathaway
in the mid-1960s. That's easily ahead of the market average, but
it's not even close to being the best.
You've probably never heard of him, but another money manager
has handily beaten Buffett.
His name is Jim Simons. He's the founder of Renaissance
Technologies, and he has the world's best math and science minds
on his payroll. Simons' Renaissance, which is not a name most
investors are familiar with, is one of the most successful -- if
not THE most successful -- investment managers of all time.
Simons has averaged a
annual return since 1988.
That's a great return... and one I would be happy with.
But Simons' and Renaissance (along with most brokers and money
managers) are missing out on one of the most powerful forces in
the market. And no, I am not talking about dividend reinvestment
or compounding. Both are powerful forces, for sure. No, I'm
talking about the other side of the equation.
What most investors miss today are the big winners -- the
types of stocks that can post triple digit returns in just a few
Why are so many people -- including some of the world's
brightest investing minds -- missing them?
The answer is simple. They aren't looking for them.
Sophisticated "quants" like Renaissance, for example, don't
worry about the economy, industry dynamics or a stock's
fundamentals... They look at pricing, studying not what a company
does but how its price moves and how it is correlated to other
Your stockbroker operates in a similar way. They use a
standardized tool to assess your risk tolerance, calculate your
"required rate of return" -- what you think you should be able to
earn on your money in a year, and then run something called a
"Monte Carlo" simulation -- to put various hypothetical
investments into a basket and calculate the odds of achieving the
expected return. When the odds look promising, he or she pulls
the trigger and invests your cash for you.
Does this approach work as well as Simons' models? For the
most part, yes.
But the problem is your broker is never going to shoot for the
biggest returns. He's only going to seek to deliver your expected
rate of return, which in most cases will be sub-market.
But at the end of each year, top-performing stocks routinely
post gains of 400%, 500% even 1,000% and more. Those gains are
all driven by the company's narrative -- the story of what it
does, who it sells to, the demand for its product and, most
important, what's next.
For most of the professional money management world, these big
winners are nothing more than outliers -- something that can't be
predicted by a statistical model, so they don't even try to find
That's where I stand apart. As editor of StreetAuthority's
newsletter, I try to zero in on these "Game-Changers" using a
nose for news and a careful read of each company's narrative.
Of course, most of these types of stocks are highly
speculative and risky ventures. But by following my 80/20
solution for allocating your portfolio, you maximize your chances
of beating even the savviest investors.
If you don't know about my 80/20 rule, here is the short
I suggest people invest 80% of their money in safe, reliable
assets -- the kind that will allow you to meet your needs and
feel confident knowing you can adequately provide for your
The other 20% is dedicated to the home-run picks... the
Let me show you how this strategy works...
Let's say you have $25,000 to invest. With $20,000, or 80% of
your portfolio, you match the market's performance. Over the past
decade the S&P 500 has returned about 7.95% on average per
year, turning your $20,000 into $43,000 after just 10 years.
Not bad, but look at what happens to that $5,000 if you invest
in the Next Big Thing. Let's say that part of your portfolio
returns 30% a year (there will be some big winners, but not
everything will go up, so 30% is a good return to expect). After
10 years, that $5,000 would turn into about $69,000.
And after 10-years, the original $25,000 you started with
would turn into $112,000.
But if you had simply put all of your money into the safe,
reliable investments most brokers recommend, you would only have
So now you know the power of the 80/20 rule, how do you find
the kinds of stocks that will power that 20% of your money into
That's where I come in.
Every year I come out with my predictions for the Next Big
Thing. For example, in 2009 we told our readers to expect a big
move in nanotechnology. We said, "This is an opportunity of
enormous proportions." Our nanotech pick, Starpharma (
), shot up 293%.
We claimed in 2010 that the "best sci-fi speculation of the
year" would be a powerful technology called RFID, or
radio-frequency identification... and that three stocks would
skyrocket because of it. A year later, my recommended picks were
42%... 89%... and 310%
I've compiled a new research report for this year called
The Hottest Investment Opportunities for 2014
. In it, we talk about a company developing a new tool that
will quickly replace the keyboard... the company profiting off of
"the death of cash," plus nine other shocking predictions...
In my latest report, I'll lay out the details of all of my
predictions for the coming year -- and the stocks that will
profit from these bold calls.
I've already told you about a few of these ideas in
StreetAuthority Daily. But to get the full details on all of my
ideas, and the stocks that could see triple-digit gains or more,
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