“Goldman Sachs is one of the world’s biggest investment banks, but it is arguably also a major technology company. About a third of the firm’s employees are engineers. With hundreds of thousands of cloud computing processors working on its behalf, Goldman crunches more data each day than many Internet companies.”
Meet the Internet’s Newest Cloud Startup: Goldman Sachs? – The Information, October 15, 2014
Goldman Sachs is just one of many institutional investors that have become extensively digitalized. It’s probably safe to assume that much of that digitalization is committed to the discovery of market moving information.
Note the date on the quote above. Information technologies have advanced dramatically since 2014. Today, companies like Goldman Sachs can use technologies like Artificial Intelligence (AI), Machine Learning (ML) and sophisticated logarithms to unearth market moving information from the tsunami of data that grows daily.
Using these new technologies, many institutional investors have become uniquely qualified to discover legitimate market moving information. When these discoveries are compelling, the institutions do what any investor would do . . . they buy the stock. And, because of the huge level of investment assets managed by these firms, they buy an extraordinary number of shares, involving the investment of millions – sometimes billions – of dollars. Because their investments in specific stocks are so extraordinary, they typically result in unusual percentage increases in both price and volume. In short, they leave discernible “footprints”.
At UV Metrics we search for those “footprints” by reviewing the daily trading activity on all U.S. exchanges. This represents the first step in our due diligence. We believe that bullish market trends are optimized by this tacit imprimatur from institutional investors. In our continuing research we attempt to determine the total addressable market (TAM) for the company’s products and/or services, and the possible unique competitive advantage (UCA) for the company’s products and/or services. In addition, we look at the bios of key management to determine if their prior experience qualifies them to successfully lead the company.
Above all else, we want companies that have demonstrated the ability to grow year-over-year quarterly revenues by at least 20% for a minimum of 4-consecutive quarters, with annualized revenues of at least $100 million. These metrics illustrate to us that the company is on a solid growth path and is beyond the start-up stage.
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 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.
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 as of the end of December2022:
S&P 500 + 41.9%
Nasdaq Composite + 40.5%
EGS Portfolio + 44.2%