The following was in an email received in August 2020, advertising a Forbes magazine sponsored webinar.
“Make no mistake, we are in the middle of the biggest technology transformation in history. It has ushered in a radically different kind of market. One that has the capacity to not only improve lives but has also created an explosion of tech-driven profit opportunities. What lies ahead has the potential to create the greatest economic boom where real wealth is made, surpassing the period when we harnessed electricity, developed the magic of flight, or the invention of computers themselves.”
The cornerstone of the UV Metrics investment strategy is that consistently increasing revenue growth drives increasing stock market values.
Most emerging growth companies follow an S-curve growth pattern, beginning with launch and eventually achieving maturity (See chart below).
The highest investment risk in that pattern is obviously within the launch segment of this chart.
The largest percentage increases in revenue growth are typically occur within the growth segment.
That part of the curve is what the UV metrics have been designed to capture. Specifically, no company qualifies for an investment unless it achieves at least 4 consecutive quarters with year-over-year minimum percentage increase of revenue growth with a minimum annualized revenues of at least $100 million. Those two qualifiers ensure that a company has moved beyond the start-up phase and is following a strong upward trend in revenue growth.
Over the years I have learned that there are ample opportunities for investors to discover and invest in these wealth building investments. It’s important to keep in mind that these companies spend a lot of money to sustain their revenue growth and to capture their share of the potential market for their product or service. Therefore earnings – and particularly earnings per share – the conventional metric for assessing investment merits – are irrelevant when making investment decisions regarding high growth stocks.
In July 2018 we launched a model portfolio which was designed to test the efficacy of our due diligence. Like any new endeavor, trial and error prevailed over the ensuing weeks and months but, overall, the performance since launch has justified the name we gave this portfolio – Extraordinary Growth Stocks.
The following shows the performance of our portfolio from launch, July 1, 2018, to December 31, 2021:
S&P 500 + 76.2%
Nasdaq Composite + 109.9%
EGS Portfolio + 225.3%
Percentages don’t always resonate with many investors, so let’s convert those percentages into dollars. If the original $500,000 had been invested into each of the market indexes and the EGS portfolio, the following shows the dollar values for the same period:
S&P 500 $881,000
Nasdaq Composite $1,049,500
EGS Portfolio $1,629,516
And then came the 2021-22 correction
Market values rarely advance interminably upward and to the right. A steady stream of good news had generated euphoric expectations (greed) and market values become irrationally inflated. In late 2021 and early 2022, several negative macro-economic events began to dominate the financial news. Fears of inflation, rising interest rates, the Russian invasion of Ukraine, and supply-chain disruptions all contributed to significant declines in the S&P500 index and the Nasdaq Composite.
I can’t predict that our investments will return to the end-of-year values indicated above, but our group has opted to remain invested in most of those stocks. You can follow the performance of our investments at the bottom of this page.
There’s a wonderful Warren Buffett quote that illustrates the importance of focusing on revenues:
“Writing a check separates commitment from conversation.”
Revenues are generated by customers writing checks. That’s why our investment “picks” will lead you away from conversations – opinions appearing in the financial media and blogs – and enable you to laser focus on quarterly financial reports – which illustrate commitments.
So, has the opportunity to profitably invest in extraordinary growth information technology stocks left the train station?
“In terms of the internet, nothing has happened yet! The internet is still at the beginning of its beginning. It is only becoming. If we could climb into a time machine, journey 30 years into the future, and from that vantage look back to today, we’d realize that most of the greatest products running the lives of citizens in 2050 were not invented until after 2016.”
The Inevitable, Kevin Kelly
Also, consider the first and last sentences from the article, Top 10 Digital Transformation Trends For 2023 appearing in the October 10, 2022 issue of Forbes:
“Digital transformation is never going to be done.” “2023 is setting up to be another fascinating year in technology and while markets continue to make us all a bit uneasy, it’s all but certain that technology is our best path forward as we seek to return to the next period of economic growth.”
To learn more about our research methods I can offer two options:
One, you can buy my newly published book – Investing in the Age of Digitalization – which is available on Amazon.com.
Two, you can become a Member and receive all of the research and stock selections shared with other Members.
Most importantly, as a Member you will often discover stocks before most other individual investors – and in some instances before institutional investors.
Whether you read my book or opt to become a Member, not only will you have fun in your quest for discovering tomorrow’s winning stocks – today – the process will also be a wonderful learning experience for you.
The following represents performance from launch to the end of February 2023:
S&P 500 + 46.8%
Nasdaq Composite + 53.7%
EGS Portfolio + 74.2%