I’m excited to introduce my list of US Compounders for the first time ever.

I’ve been invested in a number of these remarkable companies for some time now. They join the family of Canadian high return on capital companies – “Capital Compounders” – that I originally wrote about in 2017.

Among these 50 U.S. Compounders is Costco.

Charlie Munger, Warren Buffett’s long-time business partner, loves the company. In a recent interview, Munger said:

“Basically the Mungers have three stocks [/investments] – Berkshire Hathaway, Costco and Li Lu’s partnership….You don’t need to own a lot of different things to get rich.”

Costco is what Munger and Buffett call a “Compounding Machine”:

“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.”  — Warren Buffett

Indeed, Costco’s Return on Capital is high: 16% (5-yr avg.) and 17% TTM, and it’s maintained that for even longer (~15% avg. ROIC over 10+ years).

The magic of compounding capital at high rates of return has created ample wealth for Costco’s shareholders. Within a recent time-frame, its stock price has gone from $40/share (2001) to $303.76/share today. Costco’s almost an 8x bagger within the past 20 years alone, which is pretty darn good for a company founded in 1976 (under the “Price Club” name). And it’s still got growth ahead…

Let’s examine Costco’s underlying business performance (per share metrics); 2001 – 2018:

Source: Value Line, and Morningstar

This is why I personally love Compounders too. High return on capital drives share price performance over the long run…

“It’s obvious that if a company generates high returns on capital and reinvests at high returns, it will do well” — Charlie Munger

Though, the challenge in selecting Compounders today is applying ones best guess as to whether the business will continue to compound at those high rates into the future. Competition can be fierce, the pace of innovation / change destructive, and the business may be reaching its own maturation point. Certainly, past performance does not equate to future return. Which is why among my focus areas for selecting the 50 U.S. Compounders was each company’s future (re-) investment opportunities, and ability to continually compound intrinsic value.

It’s honestly more an art than it is a science. Thus, I won’t get it all right. The list of Compounders will evolve.

Let’s use Costco again as an example. Its future business is seemingly bright. Costco opened its first-ever store in Shanghai (China) on August 27th this year. 139,000 people signed up for memberships at the new store on day one, and the crowds got so big that Costco was forced to cut the opening day short.

That’s an exciting new development for a household-name retailer.

Interestingly, most of the 50 U.S. Compounders that I’ve selected are boring, simple businesses. They’ll probably continue to grow (until they don’t) despite future recessions, and technological change. You won’t win any points discussing them at cocktail parties. But boring can be beautiful.

On average, these US Compounders have achieved:
– 22% ROIC (5-yr avg., and TTM);
– 260% Avg. Cumulative Return (5-yrs), and;
– 27% avg. Compound Return (over 5 years)

The spreadsheet of 50 U.S. Compounders contains information to help you pick n’ choose stocks for your portfolio: company names, ticker symbols, business type, company overview, CEO / Founder, 5 years of ROIC, current P/E, PE/ROIC, and cumulative plus compound returns (over the past 5 years). It also includes my full list of criteria for selecting these Compounders over all of the other thousands of US stocks.

It’s back to school season soon, and I know that some of you have young kids at home, and others have lil’ nieces, nephews, grandkids etc.

I remember growing up, there wasn’t really anything available to get me interested in the stock market at a very young age (it wasn’t until high school). The schools in this country still don’t teach how to invest in stocks, so it’s up to the students themselves or their parents to provide that early inspiration.

So, I recently created from scratch what I call the “Stock Market Adventure“. It’s a printable activity sheet that your kids (or other young loved ones) can print, and have fun filling out. There’s lots to do: public company search, ticker look-up, exchange maze, industry match-up, math problems, and more!

Although, I think the little ones are already ahead of the game (and don’t even know it). Remember what Peter Lynch said: “Never invest in any idea you can’t illustrate with a crayon“.  It’s true!

The activity sheet (PDF) is inside my Patreon package, which also includes:

23+ Independent MicroCap Research Reports (as of August 2019):
AcuityAds (AT.v) – EnWave (ENW.v) – Hamilton Thorne (HTL.v) – Intrinsyc Technologies (ITC) – Kraken Robotics (PNG.v) – NamSys (CTZ.v) – Redishred Capital (KUT.v) – WELL Health Technologies (WELL.v) – XPEL Technologies (DAP.U) – Swiss Water Decaffeinated Coffee (SWP) – Sangoma Technologies (STC.v) – WOW! Unlimited Media (WOW.v) – GreenSpace Brands (JTR.v) – Titanium Transportation Group (TTR.v) – Organic Garage (OG.v) – FLYHT Aerospace Solutions (FLY.v) – Good Natured Products (GDNP.v) – Hill Street Beverage Company (BEER.v) – Enthusiast Gaming Holdings (EGLX.v) – Western Investment Company of Canada (WI.v) – TIMIA Capital (TCA.v) – PowerBand Solutions (PBX.v) – National Access Cannabis (META.v) – Plus: LightSpeed POS (LSPD)  *more coming…*

20+ Exclusive Audio Interviews w/ Top Investors (as of July 2019): 
Jason Donville – Francois Rochon – Aubrey Hearn – Gerry Wimmer – John Ewing – Martin Braun – James Telfser – Iain Butler – Roger Dent – Barry Schwartz – Jason Mann – Matt Kacur – Jason Del Vicario – Alex Sasso – Benj Gallander – Richard Rooney – Keith Richards – Steven Ko *more coming…*

Private Chat Group w/ Bots & Level-up Powers:
Meet other DIY investors who are hunting for their next multi-baggers, and interact with the bots inside that will automatically send you alerts throughout the week: new 52-week highs, recent financial filings, IPO listings, and more. Also, you can level up! You’ll gain XP and levels by participating in the chat; posting updates / news on stocks that you follow etc. It’s lots of fun.

Best 15 Ideas, and Updated Top Stock Lists:
Future 60 MicroCaps, Canadian Capital Compounders, and U.S. Compounders (coming soon)

Toolkit for DIY Investors:
75+ Investor Presentations (Future 60 + Capital Compounders), TSX Venture Rolodex (1,600+ company contacts), Capital Compounders Club, Guest Features (e.g. top ideas), Punch-card Picks, Capital Compounders Audiobook, Market Masters ePUB, and Ask Me Anything

Plus: Dividend Growth Machines excel; 70 curated CDN Income Stocks

Why my Package?
– Researching & picking stocks since 2005 (with battle scars to show)
– Focus on growth companies (mostly micro / small / mid-cap companies)
– Pick n’ choose what works for you; F60 MicroCaps & Capital Compounders
– No exposure to Resource-based (e.g. Oil & Gas) / cyclical companies
– Content is updated for members on a monthly basis (always fresh)
– No compensation from any companies (ever)

Give it a try.  See you there!

/// Hunting for that Next 10x Bagger? Join us ///

I’ve been investing in the stock market now for almost 15 years, and have made mistakes along the way. Still do. I’m only human after all.

Because investing is essentially the act of trying to forecast the future and placing respective bets, there’s always some element of luck involved. With luck also comes misfortune. It’s an ebb and flow, where investors are really only meaningfully rewarded in the long run. If investing in stocks wasn’t arduous, more people would be doing it for much longer.

Amidst the day-to-day action of the market, and flurry of emotion that it can conjure up, it’s easy to commit the seven deadly sins (applied to investing) below; sometimes without even being mindful. We can’t control everything in this game, but we can control our own actions, and reactions. Let’s discuss..

Pride. The stock market is the great humbler. It doesn’t know whether we’re white, black, or purple. It will take our money just as quickly as it makes us money. Unless we use privileged information (insider trading), everyone in the stock market starts out on the same level. It’s easy to feel like a genius after we ride a stock all the way up, so we need to be careful not to ride it all the way back down, or think that we now have the golden touch and then go on to invest in a series of speculative, questionable companies. We’re only as good as our next trade, so let’s choose wisely. I’m always reminding myself, “past performance is no guarantee of future results”.

Envy. Sometimes we can feel inferior and jealous towards other investors, especially during a poorly performing year in the market. Maybe our portfolio is down -12%, while other investors’ portfolios and even the index is up 20%. It’s those feelings of resentment deep down inside that hurt, and can cloud future actions. But I like to remember this lyric from one of Bob Dylan’s songs whenever I’m feeling down; “for the loser now will be later to win”. Not everyone is right, and doing well all of the time. That’s impossible. Investing is about the long game. We’re doing this to build wealth, and achieve financial freedom; not to feel like the smartest guy or gal in the room.

Gluttony. Good investing comes down to focus; applying knowledge to a select group of stocks that we come to know very well after careful research, and due diligence. It’s easy to get bored, adding too many stocks to one’s portfolio. But that’s when performance suffers. We can also go astray consuming too much information about things that don’t matter in the long run. We might hear about famous investors who “read 100s of pages everyday”, but that’s probably just a result of too much time on their hands, sheer boredom, or for whatever other reason. Read what you need to know, and don’t muddy your thinking.

Lust. Let’s fend off our primal instincts, and stop chasing hot stocks that everyone wants in the moment, especially if they’re outside of our circle of competence. Buying a stock just because it’s going up will lead to a broken heart, and regret. We need to get to know companies better before we commit, because beauty (fundamentals) are skin deep. Equally disconcerting is when we find ourselves sulking over ‘the one that got away’. Just because a stock on our watchlist went up 50%, doesn’t mean it’s too late to buy now. But remember; good companies keep on growing until they don’t. That’s life.

Anger. We’ve all had losers. Those stocks that crater, falling out of favour seemingly after we finally decide to buy, and then let languish at the bottom of our portfolios. This anger we let harbor in ourselves is unhealthy. It doesn’t mean that we’re incompetent. As I’ve said before, there’s an element of chance in the investing game. Even the conventionally ‘smartest’ people make poor investment choices in their careers. It’s easy to give up, but never forget; compounding takes time, and a small bump in the path doesn’t stop the snowball from rolling down that mountain, and getting bigger over time.

Greed. Money is a means to an end. It’s to build the life that we want, freeing ourselves from a system that rents our valuable time… time that we’ll never get back. However, along the way we can get blinded by our pursuit of money. Investing in and effectively supporting companies that build war machines to kill people isn’t what good people do. Who are they kidding with names such as the “Defense Industry”. Sounds noble, but it’s really masking true intent. The beautiful thing about the stock market is that we can invest in companies changing the world, and doing good things. There’s so many positive growth companies out there. We don’t have to sacrifice performance for virtue, and we certainly don’t have to invest in morally corrupt companies to generate returns.

Sloth. Gaining confidence, and achieving success in the stock market takes time. This isn’t something like sports where some people are simply more physically well endowed, and naturally gifted in the athletics department than others. Whereas a trust fund kid who won the family lottery won’t generate higher returns in the market just because he starts out with more money. Investing success is a mixture of intelligence, skill and daring. We must put in the research, be willing to make mistakes, and take calculated bets along the way. The market is constantly evolving. Businesses come and go, and so we must be aware of all of the changes taking place right in front of our eyes.

I think that investing in the stock market is such a positive, and empowering thing, and I’m always encouraging more people to become DIY investors. We’re building wealth, which leads to financial independence (i.e. more options) but it also means that we must take responsibility for our actions, and learn from our mistakes to be the best investors that we can be.

On this topic, as part of my giving pledge, I’m going to donate an additional $1k to the SickKids Foundation once we pass the 200 member mark. Learn more.

I’m going to make an assumption about you: buying lottery tickets was never your thing.

Rationally, you always knew that the odds weren’t in your favour (getting struck by lightning was more likely!), so you didn’t bother. Instead, you plowed your money into the stock market and never looked back. It worked.

Life lesson: you would rather bet on a sure thing, than a hope and a dream.

But here’s the problem.

That’s what some still think about MicroCap stocks: a hope and a dream. Heck, even I was cautious in my early days as a DIY investor, especially with micro-caps labelled as “penny stocks”.  *shudder*

But I’ve gone through my epiphany stage, and happy that I changed my perception because there’s just so much untapped opportunity out there in MicroCap land, especially in Canada! There’s treasures to be found…

Today, micro-caps represent a growing part of my portfolio (~20% now).

Here’s why I changed my thinking:

MicroCaps might seem risky at first, but once you get to know them better, some aren’t so bad, and a select few might become Canada’s Next Billion Dollar Company. It’s possible, and it’s happened before.

It’s like that saying: “don’t judge a book by its cover”. Some of these MicroCaps are very compelling once you look deeper inside.

But don’t take my word for it; you be the judge…

Here’s some examples (in a nutshell) of actual MicroCap companies, based on my multi-bagger blueprint:

1. Future-ready Business Model
2. Founder / Operator’s Big Vision
3. Growth Potential (Can it scale?)

What do you think?  Which of these MicroCaps stand out for you? 

HoldCo that’s investing in strong, stable and profitable Berkshire/Buffett-esque Canadian companies (ice cream, insurance, and more interesting similarities). The current founder/CEO built his previous company into a $1 Billion revenue generator that one of Canada’s largest financial institutions acquired for $440M.

Consolidator of clinics, and acquirer of digital (EMR) assets within the primary healthcare sector. Management has aspirations to leverage more technology throughout their clinic network (e.g. telemedicine) to administer patient care. Mr. Li Ka-shing (HK billionaire) is a strategic investor, and the founder/CEO’s previous company was acquired by PayPal for $304M.

Leader in unified communication solutions (cloud and on-premises) that boasts customers in 170+ countries around the world, with 5 million users of their open source software, and an average of 50,000 new installs per month. In FY2019, it will officially become a $100M revenue company, with aspirations to grow as high as $500M in revenue within the next 4 years.

Innovator of advanced sensors, software and underwater robotics, with $300M+ of current contract pursuits in the pipeline. The company has achieved 4x revenue growth since 2015 ($2M -> $8M), and management & insiders are aligned with shareholders, owning ~30% of the company. Their annual revenue is expected to double this year.

Global eSports and gaming media leader, now that the company has merged with two others (this combined company now generates $22M in pro forma revenue and holds $36M cash). It owns and operates Canada’s largest and most successful gaming expo that hosts 55,000 gamers, including 100+ sponsors. Its website properties reach over 200 million monthly visitors, making it a top 5 video game website network worldwide.

Programmatic advertising platform that empowers businesses to make smarter marketing decisions as they shift to digital channels. The company serves Fortune 500 enterprises and small to mid-sized businesses in the U.S., Canada, and Europe. It’s achieved 79% Revenue CAGR since 2011, with $90M in projected revenue for 2019. Insiders own ~35%.

Animation and children’s content producer with a recent strategic partnership (Bell Media) that now makes them the exclusive curator of kids programming for CraveTV, Canada’s leading streaming service (the “other” Netflix). Current founder/CEO previously built a media company that Corus Entertainment purchased for $554M.

Expanding specialty grocery chain of organic & natural groceries. Management believes that Ontario can support 25-30 locations (5x current footprint), and the founder and operator (20% insider stake) is a seasoned, fourth generation grocer. An ex-SVP from Loblaws now sits on the Board of Directors.

Canada’s largest recreational cannabis retailer with a current portfolio of 35 licensed retail locations nationwide. Management continues to execute on its plan to have 40 stores operating by the end of calendar 2019, and 110 by the end of calendar 2020, with a $300M revenue forecast by that time.

Transportation and logistics company servicing Canada and the United States, with approximately 475 power units, 1,400 trailers and 600 employees & independent owner operators. Management has communicated aspirations to become a $500M+ revenue company through organic growth, and strategic acquisitions.

Global leader in environmentally responsible decaffeinated coffee, with distribution across the United States, Canada, and 56 different countries around the world, including some of North America’s largest roasters, roaster-retailers and leading coffee brands, including Tim Hortons, and McDonald’s.

Producers of alcohol-free beverages (wine & beer) that are available in Loblaws, Shoppers Drug Mart, Sobey’s, and Zehrs (~8,000 stores). Management now strives to become ‘the preeminent global cannabis beverage company’.

Emerging company that produces and distributes one of North America’s widest assortments of consumer products and packaging made from the highest possible percentage of renewable and plant-based materials, with no BPAs, phthalates or other chemicals of concern.

Safety and efficiency (Hardware & SaaS) company that operates in the aviation industry, providing solutions to more than 70 customers (including airlines, leasing companies, and OEMs) worldwide. Notably in October 2018, the company’s management acquired Panasonic Weather Solutions’ assets to fuel future growth.

Makers of industrial-scale dehydration technology for commercial applications in the food, cannabis (entirely new market), and pharmaceutical industries. One of the Big 3 Cannabis Producers recently invested $10M, and so this company is now positioned with a debt-free balance sheet and cash in excess of $20M.

Doesn’t sound so bad, right?  Most of these companies above are still trading below $100M market cap. Small companies with big dreams.

… Imagine being one of the early shareholders in any of these companies before they end up in the mainstream news… before there’s countless analyst coverage, and before funds and other investors start to buy en masse?

Because as I said before; maybe, just maybe some of these MicroCaps become Canada’s Next Billion Dollar Company.

This is what Steve Jobs said to Pepsi executive John Sculley, convincing him to join Apple at the time (1983):

“Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?”

It’s the truth.

I ❤️ new tech & software. Innovation is exciting, and makes my life better / easier / more fun. Drinking more soda-pop, though, just makes me fatter 😛

We all know about the FAANG (U.S.), and BAT (China) Tech Superstocks, but what about Canada? We’re often overlooked, and that would be a mistake…

Canada, and Canadians (+ abroad) have been pioneers of some of the world’s most important technological innovations ever throughout history:

– Electric Lightbulb; Henry Woodward (1874)
– Telephone; Alexander Graham Bell (1876)
– Telephone Handset; Cyrille Duquet (1878)
– Electric Car Heater, and Oven; Thomas Ahearn (1892)
– Wireless Radio; Reginald A. Fessenden (1900)
– Medicinal Insulin; Frederick Banting, Charles Best and James Collip (1922)
– Snowblower; Arthur Sicard (1925)
– Television Camera; F.C.P. Henroteau (1934)
– Snowmobile; Joseph-Armand Bombardier (1937)
– Walkie-talkie; Donald L. Hings and Alfred J. Gross (1937)
– Anti-gravity Suit; Wilbur Rounding Franks (1940)
– Pager; Alfred J. Gross (1949)
– Cardiac Pacemaker; John Hopps (1950)
– Computer Trackball; Tom Cranston (1952)
– Electric Wheelchair; George Klein (1953)
– Alkaline Battery; Lewis Urry (1954)
– Instant Replay; George Retzlaff (1955)
– IMAX; Graeme Ferguson, Roman Kroitor, and Robert Kerr (1967)
– Prosthetic Hand; Helmut Lucas (1971)
– Canadarm; George Klein, and others (1981)
– Archie (first search engine); Alan Emtage, Bill Heelan, J. Peter Deutsch (1988)
– Java Programming Language; James Gosling (1991)
– 56k Modem; Dr. Brent Townshend (1996)
– BlackBerry Smartphone/Messaging; Mike Lazaridis (1996)

Where would the world be without these inventors, and their inventions?

Life would suck..

Seriously.

But wait… I haven’t even mentioned the Canadians behind some of today’s biggest tech companies in the world:

– Uber; Garrett Camp
– Slack Technologies; Stewart Butterfield
– Alibaba; Joseph Tsai

I’m not making this up. Honest.

But I’ll admit; Canada has also had some of the biggest public stock blow-ups in the technology sector; Nortel, and BlackBerry among the most notable in recent history. Lots of tears 😢 + broken hearts 💔. However, that shouldn’t scare you. It’s the nature of innovation. “Innovate or die“, as the saying goes. So let’s focus on the Canadian technology & software companies that are building big things today ,and into the future.

I’ve curated my favourite Canadian Technology & Software Superstocks (see below), most of which originally appeared in my list of “Capital Compounders” (est. 2017). You won’t find any Canadian tech/software micro-capcompanies in this list, but you will if you join Patreon. There’s already 150+ members who have access to the Future 60 MicroCaps that I track and update (> 70% are technology/software stocks), and you can also download my new research report on Lighstspeed POS (LSPD) from Patreon.

*drum-roll*

Here they are…

Canada’s Technology & Software Superstocks:

*Ceridian HCM (CDAY) is a U.S. company, but is also listed in Canada (TSX), and has significant Canadian influence

/// Challenge: can you come up with an acronym ala “FAANG” / “BAT” based on this list of Canadian Technology & Software Superstocks?

Hey readers! It’s been a while. I’ve been busy building something special on Patreon. There’s now 20+ exclusive audio interviews w/ top investors, 18+ micro-cap research reports, and lots more:

20+ Top Investor Audio Interviews:

Jason Donville – Francois Rochon – Aubrey Hearn – Gerry Wimmer – John Ewing – Martin Braun – James Telfser – Iain Butler – Roger Dent – Barry Schwartz – Jason Mann – Matt Kacur – Jason Del Vicario – Alex Sasso – Benj Gallander – Richard Rooney – Keith Richards – Steven Ko

18+ MicroCap Research Reports (based on my “Future 60” list):

AcuityAds (AT.v) – EnWave (ENW.v) – Hamilton Thorne (HTL.v) – Intrinsyc Technologies (ITC.to) – Kraken Robotics (PNG.v) – NamSys (CTZ.v) – Redishred Capital (KUT.v) – WELL Health Technologies (WELL.v) – XPEL Technologies (DAP.U) – Swiss Water Decaffeinated Coffee (SWP.to) – WOW! Unlimited Media (WOW.v) – GreenSpace Brands (JTR.v) – Titanium Transportation Group (TTR.v) – Organic Garage (OG.v) – FLYHT Aerospace Solutions (FLY.v) – Good Natured Products (GDNP.v) – Hill Street Beverage Company (BEER.v) – Enthusiast Gaming Holdings (EGLX.v) – PLUS: LightSpeed POS (LSPD.to)

Everything else:

– Best 15 Ideas for 2019 (beating the market)
– 75+ Investor Presentations (Future 60 + Capital Compounders)
– TSX Venture Rolodex (1,600+ company contacts)
– Private Chat Group on Discord (w/ bots, and level-up powers)
– Model Growth Portfolios (U.S. Compounders coming soon)
– Capital Compounders Club
– Guest Features (e.g. top ideas)
– Hedge Fund Insights
– Punch-card Picks from other DIY Investors & Analysts
– Complimentary Copies of my Books (including audiobook)
– Starter Bitcoin
– Future 60 Performance Updates (top 20 stocks +50% avg. return since Jul ’18, w/ one 4x bagger, and 5 takeovers)
– Giveaways
– AI Interactive Interviews (words stitched to audio) – beta
– Get-togethers (pub night soon)
– Updates on the 40 Capital Compounders; 16% avg. ROIC
– One-on-one Conversations; ask me anything
– 70+ member only posts from the 1+ years I’ve been on Patreon

Join us 🙂 We’re 150+ strong, and growing… plus, if you sign-up before August 6 (my birthday!), I’ll send you a bonus excel file — Dividend Growth Machines (70 income stocks).

Don’t you hate it when you miss a stock that’s gone up?

Maybe you:
– didn’t know about the company until much later
– researched the stock, but didn’t invest in it
– owned it but sold out way too soon

It’s not a good feeling… missing a multi-bagger — any stock that doubles or more. Here’s the math:

I’m guilty of it too (missing out).

But I’ve also had my share of multi-baggers since 2005. That’s when I started investing in the stock market from my dorm room at the age of 18. It only takes a handful of long-term performers to really compound your portfolio’s returns.

My stock portfolio is up 50x since then.

I have a strong passion and instinct for finding promising micro-cap, small-cap, and mid-cap companies that have what it takes to grow bigger. But it’s taken years of practice, and persistence…

As legendary investor, Peter Lynch said: “the person that turns over the most rocks wins the game”.

“gob·ble” / verb / definition: to eat (something) hurriedly and noisily

/// Listen to 12+ New Audio Interviews with Top Investors (2019) ///

There’s the disrupted and then there’s the disruptors.

RIM (BlackBerry) 💥 —-> Apple
Blockbuster 💥 —-> Netflix
Yahoo! 💥 —-> Google (Alphabet)

History proves that the disruptors (e.g. Apple) gobble up their direct competitors (e.g. BlackBerry) and then leap-frog them not just technologically, but also in market share & capitalization. These are large-scale, multi-year transfers of wealth. For example, while Amazon hasn’t completely gobbled up Walmart (time will tell..), it’s already surpassed it in size; $944B (AMZN) vs. $288B (WMT). Amazon is over 3x bigger than Walmart, and still growing on the strong tailwind that is eCommerce…

Some investors find it hard to fathom that a household name can go away. But that’s the reality. To illustrate, between January 1, 1963 and December 31, 2014, 1,186 S&P 500 index companies were replaced by other (new) companies.

So here’s a question; what’s in your portfolio? Is it mostly disruptors or companies that are ripe for disruption?

We’re living in interesting times:
– Pace of disruption has accelerated (shorter business cycles);
– Increasingly, it’s winner takes all (bigger companies; little competition); and
– Advancement, and leverage of technology means seemingly limitless scale

I think this year is significant. In 2019, a group of five big disruptive companies will IPO (some already have) on the stock market. This is probably a good opportunity to add new disruptors to ones portfolio; companies that are gobbling up their respective competition, and entire industries:

– Uber
– Lyft
– Beyond Meat
– Airbnb
– WeWork

These five companies are disrupting transportation, food, lodging, and workplaces, respectively.

There’s some other companies that will IPO (or already have) in 2019, but I don’t think that they are nearly as significant, or will grow as big in the long run:

– Pinterest
– Casper
– Instacart
– Slack
– Robinhood
– Postmates
– Palantir Technologies
– Zoom Video Communications

As humans, it’s tough to accept change. I’ve had to teach myself along the way to adapt more, and be open to new opportunities. For example, Warren Buffett was my first teacher. He’s invaluable to me as a role model. However, it would be unwise, especially as a growth investor, to blindly follow Buffett’s current stock holdings. Buffett has admitted that since the early 2000s (advent of the “internet age”), he’s missed some big opportunities, namely Amazon and Google – relatively new companies that are changing the world. It was just recently this year that Buffett’s company, Berkshire Hathaway, announced a position in Amazon, after many doubles in the price of its stock since IPO (1997).

The key takeaway from this newsletter issue is that DIY investors should own the companies that are gobbling up market share from direct competitors, plus entire industries (the disruptors), and divest the companies that are getting gobbled up (the disrupted). Also, that today it’s increasingly possible for big companies to grow much bigger (with little competition), and scale with advances in technology.

Naturally, because of sheer addressable market, wide sphere of influence, and advancement in technology, it will continue to be the big American, and increasingly Chinese companies that dominate markets and grow much bigger. Because most of my readers are in Canada, I’ll point out that there’s also a few Canadian companies that can possibly get there (but nowhere near the size of an American or Chinese company).

Just ten years ago it was tough to fathom that companies could reach $1 trillion in market cap, but in the future there will be an increasing number of companies in the trillion dollar club. Actually, my big bet is that among the new IPOs this year, Uber will make it to the trillion dollar club (I know.. crazy).

In addition to the five new IPOs that I’ve highlighted above (Uber, Lyft, Beyond Meat, Airbnb, and WeWork), I believe that most of these 40 big companies (see below) will continue to disrupt, gobble up market share, and grow bigger in the years to come (but don’t hold me to these names fortoo long, because as history has shown, companies come and go!):

– Adobe Systems (ADBE)
– Alibaba (BABA)
– Align Technology (ALGN)
– Alphabet (GOOG)
– Amazon (AMZN)
– Apple (AAPL)
– Baidu (BIDU)
– Booking Holdings (BKNG)
– Canopy Growth Corp (WEED)
– Constellation Brands (STZ)
– Constellation Software (CSU)
– CTrip (CTRP)
– DocuSign (DOCU)
– Facebook (FB)
– Intuitive Surgical (ISRG)
– IQiyi (IQ)
– JD (JD)
– Lightspeed POS (LSPD)
– Mastercard (MA)
– Match Group (MTCH)
– Meituan Dianping (3690)
– Microsoft (MSFT)
– Momo (MOMO)
– Netflix (NFLX)
– NVIDIA (NVDA)
– PayPal (PYPL)
– Salesforce (CRM)
– Service Now (NOW)
– Shopify (SHOP)
– Spotify (SPOT)
– Square (SQ)
– Tencent (TCEHY)
– Tencent Music (TME)
– Tesla (TSLA)
– Twitter (TWTR)
– Upwork (UPWK)
– Visa (V)
– Walt Disney Company (DIS)
– Wayfair
– Xiaomi (1810)
– Bonus: Bitcoin/ Blockchain

/// I recently interviewed 12+ Top Investors in 2019. Listen now: Jason Donville – Francois Rochon – Aubrey Hearn – Gerry Wimmer – John Ewing – Martin Braun – James Telfser – Iain Butler – Roger Dent – Barry Schwartz – Jason Mann – Matt Kacur – Jason Del Vicario – Alex Sasso. ///

In my book Market Masters (2016), I interviewed Ross Grant, who took over from David Stanley to manage the Beating the TSX (BTSX) portfolio.

BTSX has achieved a ~12% annual compound return, beating the index (TSX 60). Here’s a chart that tracks the performance of BTSX vs. TSX 60 (total return, including dividends).

The new 2019 Beating the TSX (BTSX) portfolio was released (see all 10 stocks below), and the overall dividend yield is 5.59%, with utility  telecom, and bank stocks making up the core holdings (as should be expected). The prices below are as of Jan 2, 2019.

Beating the TSX (BTSX 2019) 

The BTSX portfolio has done well, considering it’s a very passive strategy. $10,000 invested alongside the BTSX portfolio 30 years ago would have grown to $229,902 by 2019, vs the TSX 60 ($106,469).

Source: Canadian MoneySaver

I’m trying something new…

I’m working on somewhat of a sequel to my National Bestselling Book, Market Masters (2016), however; it won’t be in book format this time…

All of these new interviews will be in streaming audio format (60+ mins each), and shared with you as they happen (same week), rather than months, or even a year later because it needs to go to the printing press. You’ll get em’ fresh on Patreon!

Plus, I love the audio format, because it means you can listen to these interviews while driving in your car, working out, or relaxing in bed after a long day.

Since the beginning of the year, I’ve uploaded seven (7) new exclusive audio interviews with Fund Managers, and Investors (as of March, 2019).

Here’s who I recently met, and interviewed:

– Jason Donville (DKAM)
– Gerry Wimmer (Investorfile)
– Aubrey Hearn (Sentry Small/Mid Cap Fund)
– John Ewing (Opportunities Fund)
– Martin Braun (JC Clark Adaly Fund)
– James Telfser (Aventine Canadian Equity Fund)
– Francois Rochon (Giverny Capital)

There’s more interviews coming throughout the year, but they’re only going to be released to my Patreon subscribers. My mission is to give my Patreon subscribers inside access to all of these investors’ strategies, stock picking processes, and best ideas. I hope these interviews can add value to your own investment process. Learn more.

Regards,

Robin