How I Built a $300,000 Stock Portfolio Before 30 (And How You Can Too). My 8-Step Wealth Building Journey

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*** My Best 15 Ideas for 2019 are up +14.6% YTD (Jan). Learn more. ***

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Welcome! If this is your first time on my blog, check out these top blog posts, too:

  1. My Interview with Francis Chou
  2. 22 Investing Lessons From Jason Donville
  3. How to Find Tenbaggers
  4. Beating the TSX (BTSX)
  5. How I Pick Winning Stocks
  6. Canadian Capital Compounders
  7. Next Capital Compounders
  8. Small Companies; Big Dreams – Future 60 MicroCaps

***PLUS Email Me Now for a FREE copy of my new book – Capital Compounders***

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How I Built a $300,000 Stock Portfolio Before 30 (And How You Can Too). My 8-Step Wealth Building Journey

youtube_32 >>>You can also listen to my 8-Step Wealth Building Journey on My YouTube Channel

When I was 12 years old I made a decision. I was going to be rich. I looked up to successful people and wanted what they had: financial freedom. They seemed to be happier than everyone else. But who was I kidding? Becoming rich would be an uphill battle. I was from a middle-class family of humble means. There was no trust fund. And my parents didn’t have work connections to land me my first job. The odds were stacked against me. But I still made the decision to be rich and started on my wealth-building journey. And the path I chose to get me there: do-it-yourself investing “DIY Investing”.

Today, I manage a $300,000 stock portfolio. I’m 29 (almost 30). And my stock portfolio grows by the day. My goal is $1,000,000 in stocks by the time I’m 35 years old. I’ll show you my 8-step wealth building journey and share how you can build wealth by investing in stocks too. Read on…

When I was 12 years old I made a decision. I was going to be rich

How I Became a Do-It-Yourself (DIY) Investor:

1) Study Successful Investors

I realized that if I wanted to make money by investing in stocks I had to study successful stock investors. Common sense, right? Isaac Newton said it best:

“If I have seen further than others, it is by standing upon the shoulders of giants.”

So, from age 12 to 18, I read around 50 books on the topic.

These were the six most important investing books for me:

  • The Intelligent Investor – It was through Benjamin Graham’s The Intelligent Investor that I was introduced to value investing, and the important concepts of Margin of Safety, Mr. Market, and Intrinsic Value. Warren Buffett called it “the best book on investing ever written”.
  • Common Stocks and Uncommon Profits – Philip Fisher opened up my world to growth stocks. It was after I read Common Stocks and Uncommon Profits that I started paying more for stakes in higher quality, and faster growing businesses.
  • One Up On Wall Street – There are so many easy-to-implement lessons shared in One Up On Wall Street. But what really stuck with me was Peter Lynch’s focus on ‘buying what you know’. That has saved me from many dog stocks in the market.
  • Market Wizards – Jack D. Schwager introduced me to some of America’s top traders in Market Wizards. But instead of telling us their favourite stock picks (what they buy) he explained their investment frameworks (why/how they buy).
  • Buffettology – There are many books that endeavor to explain how Warren Buffett invests in stocks but most come up short. Buffettology is the book that gets it right.
  • The Money Masters – A classic that is fun to read. The Money Masters shares winning strategies from some of the world’s best investors who ever lived. It’s a book that I’ll read every couple of years to brush up on investing essentials.

I would also study Forbes’ list of the 500 Richest People in the World and Canadian Business’ Richest Canadians. It then all became very clear to me. I could become rich by earning money, saving the proceeds, and investing in stocks as other rich people, such as Warren Buffett, had done before me.

It then all became very clear to me. I could become rich by earning money, saving the proceeds, and investing in stocks

2) Earn and Save Money When You Are Young

I had opened my first bank account when I was about 8 years old. As you can imagine there wasn’t much there; cash from birthdays, Christmas, and some chores. Maybe $500 in total from what I can remember. I had to earn/save more money fast! So I did what Warren Buffett had done at my age – delivered newspapers. At 12, I joined PennySaver and became a paperboy for three neighborhoods in my hometown of Mississauga. I deposited each paycheque, along with any other money, straight into my savings account.

3) Understand How to Compound Money

Once I turned 14, and just started high school, my savings account had grown to about $5,000. At that point, I wanted to invest in stocks. But because of my age I wasn’t eligible to open a brokerage account. So I started with bonds. After returning home from the bank, I placed those newly purchased Canadian Savings Bonds into a small but sturdy wooden box, hiding it safely under my bed. I was so proud. I knew that my bonds would generate interest for me on the principal amount ($5,000). “Compound interest is like magic”, I thought. “And the earlier I started investing money the longer my money would compound (‘work’) for me”. Throughout high school, I would work several odd-jobs (mechanic shop janitor, meat department clerk, and Best Buy associate), all the while saving money from each paycheque, and then buying more bonds to further compound my money.

“Compound interest is like magic”, I thought. “And the earlier I started investing money the longer my money would compound (‘work’) for me”

4) Invest in Stocks for the Long Run

I turned 18, and was ready to enter University (party time! — NOT). In September, 2005, I moved into my “cozy” on-campus dorm room at the University of Waterloo. But even more exciting was that I finally opened my first brokerage account. By investing in stocks I could compound returns through both capital appreciation (i.e., stock price goes up) and dividend income (i.e., quarterly dividends from companies). I had already cashed out of my bonds; $10,000. So I invested that money evenly into 5 stocks, owning a $2,000 stake in each company. I felt like a true capitalist. This is how my idols, Benjamin Graham, Philip Fisher, Peter Lynch, and Warren Buffett, got rich; by investing in stocks. As I earned money though UW co-op job placements (which I recommend to every young person!), and bought more stocks, my portfolio grew, and grew, and grew. I was on top of the world. And then the financial crisis (’08) happened…

By investing in stocks I could compound returns through both capital appreciation (i.e., stock price goes up) and dividend income (i.e., quarterly dividends from companies)

5) Capitalize on Crises in the Market (i.e., Buy Low When You Can)

I was 21 years old when the entire world ended in 2008 (or so most people thought at the time). The financial crisis thrust economies around the world into recession. Stock markets collapsed. And my stock portfolio imploded. I suffered around a 50% decline from peak to trough. The financial press was all doom and gloom. “Sell! Sell! Sell!” Most people were scared and converted their stocks to cash. So I invested all of my savings into my existing stock holdings (crazy, right?). When I pulled the trigger I was scared stiff. But I’m glad I made that move as my stocks would soon rebound, pushing above pre-financial crisis highs into the years to come. I bought quality stocks on sale. 50% off! Was I a young genius; able to time the market? Nope. I simply learned from Benjamin Graham, the father of value investing, that economies and markets operate in cycles. Therefore, an investor could capitalize on manic markets, rather than become fearful and flee.

When I pulled the trigger I was scared stiff. But I’m glad I made that move as my stocks would soon rebound, pushing above pre-financial crisis highs

Indeed, 2009 was a great year to be a value investor. I would make a similar move in February, 2016 to capitalize on a bear market in Canadian stocks where the TSX declined close to -25% from its high in September, 2014. Why so confident? I know that the average bear market (on the TSX) has declined -28%, lasting 9 months, while the average bull market has advanced +124%, lasting 50 months. Based on this historical evidence then since 1956, I should eventually be rewarded in the long run when I take on “risk” (i.e., investing in cheaper stocks) during bear markets. As Warren Buffett said:

“Be fearful when others are greedy and greedy when others are fearful.”

6) Manage and Refine Your Stock Portfolio

In 2010, upon graduating from the University of Waterloo, I had about $50,000 in my stock portfolio. More money than any of my friends. This was certainly an inflection point for me as the magic of compounding started to take real effect and I was just about to enter a full time career and earn a much bigger paycheque (plus bonus), which meant more money for stocks. By 2013, three years into my first full time job, my portfolio had grown to about $125,000. However, I realized that I could build wealth faster if I compounded returns at a greater rate. So, at 25, I made it my mission to build a portfolio that actually beat the market. I started watching BNN Market Call, re-reading the best investing books, and magazines (Money Sense, Canadian MoneySaver, and Canadian Business) and following the top investors from around the world. From that I re-structured my portfolio into one that I’ve comfortably maintained since.

Here’s how my stock portfolio breaks-down:

  • Mispriced Large Caps
  • Speculative Takeovers
  • Small/Mid-Cap Capital Compounders

Mispriced Large Caps

For example, I started loading up on Starbucks stock in 2008 at around $15/share, at a time when Starbucks was oversaturating themselves in the market, with most “experts” doubting their strategy of selling high-priced coffee, especially with the financial crisis looming, and new entrants in the coffee business, such as McDonalds. However, when I bought Starbucks stock, after their huge decline on the market, I never witnessed a drop in traffic among the stores nearby me. Starbucks had huge competitive advantage then and now. I thought, “If Starbucks goes out of business, that’s probably when the world will end”. And, seriously, do you think business people would ever switch their coffee meetings from Starbucks to McDonalds?

Speculative Takeovers

I also dabble in speculative takeovers. When Lowe’s first bid for Rona fell through, I bought a stake in Rona, and just sat on the position. I speculated that Lowe’s, or another company (maybe Home Depot), would eventually scoop up Rona, with the Quebec Government’s approval of course. When Lowe’s came back years later, bid on Rona a second time, and won approval to buy them out, my Rona shares shot up ~100% in one day. Well worth the wait.

Small/Mid-Cap Capital Compounders

But the most successful ‘bucket’ in my portfolio is the Small/Mid-Cap Capital Compounders. Why? I find that as long as the intrinsic value of these businesses grow every year, so does the price of the stock. I’m actually upset when one of my ‘capital compounder’ stocks get bought out, because most of the time there’s so much more potential for growth. It forces me to go out hunting for an equally remarkable capital compounder to replace the buy-outs. You can learn more about the criteria I look for in capital compounder stocks by reading How I Pick Winning Stocks.

7) Stick to Your Investment Strategy

From my ‘quarter life crisis’ (age 25) and onwards, I continue to earn, save, and invest in stocks using the same strategy. Now, at age 29, I have built a $300,000 stock portfolio. With a bigger capital base, it’s amazing how much more rapidly my portfolio can compound. For example, a 10% return will thrust my portfolio to $330,000 next year, without adding additional capital. I say “10%” because over the long run (since 1934), the TSX has delivered a 9.8% annual compound return, despite recessions, bear markets, and world crises. But there’s no guarantee. Nevertheless, $1,000 invested in the Canadian index in 1934 would have grown to $1,595,965 by 2014 with 9.8% compound returns. That’s “magic”, in my world.

$1,000 invested in the Canadian index in 1934 would have grown to $1,595,965 by 2014 with 9.8% compound returns. That’s “magic”, in my world.

8) Always Learn and Grow as An Investor

My DIY investing journey has been fulfilling so far. But I also know that I can further improve my odds of success by continuously learning, and improving my investing craft. This is why I recently met with some of Canada’s Top Investors. 28 in total. Those Top Investors told me how they invest in stocks, bonds, and options; sharing their proven investing strategies. It was enlightening. So I decided to put all of their investment advice into a book – Market Masters. You can now purchase Market Masters in Chapters, Indigo, and Coles stores across Canada as well as online on Amazon.ca and Indigo.ca.

I recently met with some of Canada’s Top Investors. 28 in total. Those Top Investors told me how they invest in stocks, bonds, and options; sharing their proven investing strategies.

My 8-Step Wealth Building Journey (Re-cap):

1) Study Successful Investors

2) Earn and Save Money When You Are Young

3) Understand How to Compound Money

4) Invest in Stocks for the Long Run

5) Capitalize on Crises in the Market (i.e., Buy Low When You Can)

6) Manage and Refine Your Stock Portfolio

7) Stick to Your Investment Strategy

8) Always Learn and Grow as An Investor

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If this is your first time on my blog, check out these top blog posts, too:

  1. My Interview with Francis Chou
  2. 22 Investing Lessons From Jason Donville
  3. How to Find Tenbaggers
  4. Beating the TSX (BTSX)
  5. How I Pick Winning Stocks
  6. Canadian Capital Compounders
  7. Next Capital Compounders
  8. Small Companies; Big Dreams – Future 60 MicroCaps

***PLUS Email Me Now for a FREE copy of my new book – Capital Compounders***

**************

MarketMasters

Robin Speziale is the national bestselling author of Market Masters, which is available at Chapters, Indigo, and Coles as well as Costco and Amazon.ca. He lives in Toronto, Ontario. Learn more about Market Masters.

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Next 10x Bagger

Investing

/// Picking stocks since 2005. Btw – I’m moving mostly to Patreon ///

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:

Bagger Gain ROI
2-bagger 100% 2x
3-bagger 200% 3x
4-bagger 300% 4x
5-bagger 400% 5x
10-bagger 900% 10x
100-bagger 9,900% 100x

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.

Here’s some recent multi-baggers that helped get me there:

– In my book, Market Masters (2016), I wrote that I had started a position in Tweed @ ~$1.50. Tweed evolved into Canopy Growth Corp, which is now a $60/share company — that’s a 40x bagger

– On Patreon, I wrote a feature in January 2018 titled “Robotics Ideas” where I shared the largely unknown Kraken Robotics, a stock that’s now up 4x times (I also included Kraken among My Best 15 Ideas for 2019)

– I told all of you in December last year that I was accumulating Bitcoin during the bear market. Bitcoin is now up +125% (double) since then. I called the most recent bottom

There’s more: Starbucks, Lassonde, Shopify, Tucows, Dollarama, Savaria, MTY Food Group, FirstService, Constellation Software… all multi-baggers.

Honestly, at the time I made most of these big bets (especially on the cannabis industry w/ Tweed, and recently with Bitcoin), it seemed crazy. I had so many doubters; that’s not about to change anytime soon. In my latest newsletter issue, “Market Gobblers”, I said that Uber would make it to the trillion dollar market-cap club. Some readers scoffed, but I think I’ll be proven right (and not crazy) in time… (stocks don’t just shoot straight up)

What’s my secret? It’s not rocket science. I focus on (1) the business model, (2) the vision, and (3) the growth potential. I do not focus on today’s current valuation — that’s why accountants don’t get rich, and why CFAs repeatedly fail to beat the market with their mutual funds.

The truth is that: I’m always on the hunt for the next 10x Bagger.

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”.

No doubt; it’s tough — there’s thousands of stocks out there, and only some will become multi-baggers. It can be overwhelming. So I want to help.

Do you want to come along my journey? 

I’ll show you the 60 small companies that I’ve been tracking since last year, and also post regular updates for you. Here’s the latest: four companies have already been taken over for an average 47% premium (I’ve since made new additions to the roster). One stock has doubled, and 6 others are almost there. I’m confident that there’s some long-term multi-baggers in this roster of “Future 60” small companies, but obviously the journey will take time, and there will be some duds too (all part of the game).

That’s not all. 

I’ve also been meeting with top investors all year and recording exclusive conversations, where they reveal their strategy, investing process, best ideas, and more to me. I’ve posted 15+ new streaming audio interviews (over 20 hours) to Patreon, with more coming soon. You don’t want to miss what these hedge fund managers and investors have to say:

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 – (new interviews coming….)

Plus, My Best 15 Ideas for 2019 are all beating the major benchmark indexes — S&P500, DJIA, and TSX Composite. Not bad for an all-Canadian model portfolio.

And soon I’ll be introducing my list of U.S. Compounders for the first time ever, joining my list of 40 Canadian Capital Compounders that I revealed at Prem Watsa’s Fairfax Financial Shareholders Dinner in 2017.

Honestly, there’s just so much going on… 

100+ Patreon members have access to (in addition to the above):

– a private chat group on Discord
– seven model growth portfolios
– capital compounders club
– guest features (e.g. top ideas)
– select stock research and quarterly updates
– hedge fund insights
– punch-card picks from other DIY investors & analysts
– complimentary copies of my books (including audiobook)
– starter bitcoin
– giveaways (this month it’s a fire tablet to read the investment classics)
– events and get-togethers
– one-on-one conversations where you can ask me anything
– 50+ member only posts from the past one+ years I’ve been on Patreon

I’ve put everything into one package to help you find the next 10x bagger, and compound your portfolio’s returns. “The more you learn, the more you earn”, as they say. I’ve met over 50+ hedge fund managers and investors through writing Market Masters (Globe & Mail Bestseller) and recording these new audio interviews. It’s so true — knowledge + experience is what separates the small portfolios, from the big portfolios! Having that edge makes all the difference.

What are you waiting for?

There’s already 100+ members on Patreon who have access to everything I’ve mentioned above, plus monthly updates and new benefits along the way. These current members will be grandfathered into the $5 plan forever, but soon (for new members who sign up), the new membership rate will go up to $10! It’s still only $5 for new members so please do hurry 🙂

Patreon is such a great platform. It’s a monthly plan, and so you can cancel anytime just like Netflix. I love the flexibility, and the members do too.

Join here.  Don’t miss out  😉

P.S. if you’ve followed me for long enough, you’ll know that I don’t get paid by companies, institutions, or investors to say anything. I only discuss what interests me, and I what I want to share with you. Through Patreon, you’d be an important supporter of my content, including future books that I write for DIY investors — you! I also make regular donations to the SickKids Foundation, where I was once a patient (learn more on Patreon). Thank you.

Regards, and Happy Investing,

Robin Speziale
(If you want to chat, email me at r.speziale@gmail.com)

Market Gobblers; The Disrupted vs. Disruptors

Investing

“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 (W)
– Xiaomi (1810)
– Bonus: Bitcoin/ Blockchain

/// I recently interviewed 12+ Top Investors in 2019. Listen nowJason 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. ///

Beating the TSX (BTSX) – 2019

Investing

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).

20190407_125359.jpg

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) 

20190407_125251.jpg

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

Market Masters II: Sequel

Investing

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

Small Cap Ideas II

Investing

///  Update: One of My Best 15 Ideas for 2019 is up +124% YTD ///

I recently caught up with Gerry Wimmer, founder of Investorfile. Gerry is a DIY investor, and shares all of his stock picks online. I think he’s a very honest, and credible guy. Gerry runs a concentrated portfolio. Plus, he’s got a lot of conviction. Since 2012, Gerry’s only picked 20 top ideas (2-3 per year), and as of Dec 2018, his average current price return (with dividends): +185%. We also happen to have overlap in our portfolios (five of his current picks).

I first met Gerry a couple of years ago, and wrote about his stock selection process (short summary) in “Small Cap Ideas“. However, now that I’m working on my new Investor Interview Series (streaming audio), I invited Gerry for a follow-up conversation. It’s 60+ mins, and we discuss his scope & strategy (micro / small-cap), stock selection process, industry focus (technology, services, industrial), best ideas for 2019, and all 13 current ideas (seven companies were taken over since 2012) including his best performer; Questor Technology QST.v (+1215%; 13x return).

In the Interview, Gerry talks about his current top picks (among other topics):
– Sangoma Technologies (TSXV: STC)
– Avante Logixx (TSXV: XX)
– Caldwell Partners International (TSX: CWL)
– Questor Technology (TSXV: QST)
– Intrinsyc Technologies (TSX: ITC)
– Quorum Information Technologies (TSXV: QIS)
– Posera (TSX: PAY)
– Gatekeeper Systems (TSXV: GSI)
– AirIQ (TSXV: IQ)
– Intouch Insight (TSXV: INX)
– Destiny Media Technologies  (TSXV: DSY)
– Novra Technologies (TSXV: NVI)
– Titan Logix (TSXV: TLA)

It was definitely a fun interview. Lots of new insights.

P.S. Sangoma Technologies (TSXV: STC) was the #1 favourite punch-card project idea for 2019 (4 / 60 submissions).

Ideas for the 2019 Punch-card Project

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///  Warren Buffett: “I always tell students they’d be better off when they got out of business school to have a punch card with 20 punches on it. And every time they made an investment decision, they used up one of their punches, because they aren’t going to get 20 great ideas in their lifetime. They’re going to get five or three or seven, and you can get rich off five or three or seven.” ///

There were 60 MicroCap idea submissions for the 2019 Punch-card Project. 50 Canadian, and 10 U.S.. Out of the 60 submissions, 9 stocks had overlaps, and the most popular idea was Sangoma Technologies STC.v (four overlaps).

Fellow DIY investors, and some from the industry submitted their ideas. It was the thrill of the treasure hunt! “Small companies; big dreams”…

Do you want to see all 60 Punch-card submissions?  Learn more here.
(P.S. I’m working on my first-ever list of U.S. Compounders and will be releasing that soon, as well as new in-depth audio interviews, and more..)

Punch-card Project

Investing

/// Submit your stock idea ///

Let’s try something fun. I call it the “Punch-card Project”, where DIY investors from around the world come together to share stock ideas (there’s 4,400 of you who subscribe to this newsletter).

I’m inspired by something that Warren Buffett said years ago:

“I always tell students they’d be better off when they got out of business school to have a punch card with 20 punches on it. And every time they made an investment decision, they used up one of their punches, because they aren’t going to get 20 great ideas in their lifetime. They’re going to get five or three or seven, and you can get rich off five or three or seven.”

So, how does this work?

Let’s take it to the next level….
You get one punch, and must pick among the MicroCap universe:
– U.S.; under $300M market cap; or
– Canada; under $100M market cap

Small companies; big dreams. It’s the thrill of the treasure hunt!

Reply to me via email (r.speziale@gmail.com), submitting your one Punch-card stock idea. You just need to provide the name of the MicroCap stock to enroll in the project; no explanation/thesis is required. I will compile ideas from everyone who enrolls. Once the list is compiled, all those who enrolled will get to see the list (via email), as well as any of my Patreon members. The full list, plus performance updates will then be shared here throughout the year. If you do not wish to disclose your identity for any reason, you’ll have the option to pick an alias.

Please send me an email (r.speziale@gmail.com) in the following format by March 6, 2019:

Punch-card Project Stock Idea: Insert a MicroCap stock
Identity: Insert First Name & Last Name or Alias name

I’m looking forward to seeing everyone’s ideas, and sharing them all back with you in the month of March… maybe this will become an annual tradition.

Top 5 Investment Ideas from Cantech 2019 (Guest Post)

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My friend, and fellow DIY Investor, Liam Zerter, visited the Cantech Conference in Toronto this year (2019), and wrote about his thoughts on five of the MicroCap companies that were there (three of which are included in my Future 60 MicroCap stocks list – Good Life Networks, Kraken Robotics, and Patriot One Technologies).

***

(Updated on February 27, 2019)

By Liam Zerter:

I got a chance this year to participate in the 2019 Cantech Investment Conference, a showcase of multiple innovative and relatively unknown small cap technology companies. Here is my quick review and ranking of the most interesting companies on my visit.

1. Good Life Networks – “A digital advertising company that operates the world’s highest-speed programmatic video ad exchange”. Unfortunately, I did not get to speak to anyone from this company, but it was fellow Capital Compounder member Thomas Birnie that brought it to my attention. When he mentioned it was trading at 2x EBITDA, my Spidey senses picked up immediately (Even though I am not a fan of adjusted EBITDA as a metric). My first introduction to this company was from diving into the latest conference call in which the CEO’s voice appeared to have been subbed in by the voice guy from all those movie commercials. I quickly found out this was the actual CEO Jesse Dylan. He just happened to be a radio show host in his past life. Apparently completing his work day at 9:30 a.m. led him into becoming a proficient business dealer and negotiator, simply because at 9:30 a.m. there “was no one around to play with”. There is a lot more to dig into for assessing the talent of this company, but at first glance, it looks promising with competencies in sales and programming capabilities.

If the company The Trade Desk is a stock market equivalent of a broker, just in selling online video advertisements, then Good Life Networks would be the actual technology integrating and providing the activity for the act of selling and buying. Consider it as the stock exchange equivalent, but for online video advertisement. The competitive advantages right now are in the speed to make advertisement video streaming decisions, the ability to weed out false advertisement space, protecting the anonymity of user identity (which has become a significant issue for the likes of Facebook and Google that are under fire for this by governments), and higher quality audience targeting through the use of AI learning. Of their two acquisitions of Impression X and 495 Communications, it is my opinion that Impression X is the more accretive acquisition to Good Life Networks strategy. Impression X connects video streaming to smart TV’s and devices like Roku, and Apple TV, which could be a great expansion avenue.

Good Life Networks currently trades at trailing 1x sales, and 0.5x sales after adjusting in the two new acquisitions. 2019 and 2020 are forecasted to hit $67 million and $100 million in revenue respectively. Good Life somehow picked up a very good deal in debt financing at prime +1 ¼% (This blows my mind! It should not be possible for such a small company with little history to get such a good rate). Dilution to acquire the two new acquisitions caused the share count to jump up to 93 million with all warrants and options factored in. It has 0% attrition of clients (though the company has only been around a short time). I expect further acquisitions as this company attempts to string together a full-service company, perhaps similar to that of its competitor AppNexus which was bought out for $1.6 billion. At a market cap of just over $20 million, there is a lot of potential for this company, and it is clearly mispriced when considering its potential and quick success. By the end of 2019, the company could reasonably trade at 1.5x to 2x sales if it hits its targets, putting a price target on the company between $1.09 to $1.45 (Which….is a price target that makes me sound like a complete and utter nutcase as it trades at $0.31). The concern I have is how defendable a moat it currently has. A company like AppNexus or The Trade Desk with significantly more resources could move into Good Life’s space and crush their main business. I currently hold a new position in Good Life Networks.

2. Xebec Adsorption – A manufacturer of equipment that transforms raw gasses, such as the emissions from landfills, wastewater treatment facilities and farms into renewable natural gas and hydrogen. The company has a strong backlog of business contracts to fill in Italy and France as a result of EU governments’ pursuit to reduce the impacts of climate change. Strong future growth potential exists in the U.S. and Canada through contract wins for new builds and tuck-in acquisitions of smaller companies in the $1-$5 million range. This will allow Xebec Adsorption to build out its recurring revenue servicing arm. The company’s competitive advantage is in its technologies’ ability to recover gasses more efficiently than its competitors, leading to more profitability by its users who collect higher gas volumes for resale. The company currently trades at $1.05 with a $71.4 million backlog, and a market cap of $68 million. Revenue in 2017 of $14 million growing to a projected $28 million to close out 2018 shows the company has finally hit an inflection point. 2019 revenue targets are $40 million with 25% as recurring revenue.

Management has a target for EPS of $.05 – $.07 for 2019. My favorite insight into this company came from my discussion with CEO Kurt Sorschak about his greatest fear. His concern was if his company gets taken out before it gets to realize its full potential. If a takeover offer occurred, let’s say 50% above market price, his 14% ownership won’t be enough to defend against the instant gratification that shareholders would most likely accept if such a scenario occurred (Kurt is hungry, I like this guy!). In my opinion, considering the defensiveness of the industry and the growth Xebec could experience, trading at 20x 2019 eps would be a fair valuation. If Xebec can deliver, and come out of 2019 with $.06 cents in clean diluted EPS, I see no reason for the company not to trade at $1.20 at a minimum. However, on the risks side, Xebec could experience cost overruns during this high growth period. I currently hold a new position in Xebec Adsorption.

3. Kraken Robotics – “A marine technology company engaged in the design, development and marketing of advanced sensors”, software and underwater robotics for Unmanned Maritime Vehicles used in military and commercial applications. I spoke with Greg Reid, CFO and their Investor Relations Consultant at the conference – this company is easily the smartest collection of people attending the conference. I heard a stat once that there were over 450 separate air based drone manufacturers. Think of Kraken Robotics as underwater drones that sell for $1 million plus, and in most of the different forms of servicing there are really only 2 competitors that can provide any one type of service effectively. The reason behind this is that lithium batteries under a great deal of pressure are going to explode at major ocean depths. Their acquisition of a German company manufacturing lithium gel batteries was transformational in that this allowed Kraken to fully manufacture a subversive drone, and now at a cost far less than the competition.

Kraken robots are more efficient than their competitors at scanning the bottom surface of the ocean, and one unit can be built and sold with a healthy margin. Talking to the CFO, his big dream in 5 years is to have revenue at a stable minimum of $100 million a year with 30% coming from recurring revenue projects. I believe this is one to watch for a dip in order to get a position, as at a market cap of $93 million the company might be a little bit ahead of itself. I like management and I think it has a great defensible niche where it is positioned to dominate its market. If their devices start getting used in military applications at just a fraction of the scale that air based drones are used, this company could take off. Kraken Robotics is on my watch list.

4. Patriot One Technologies – Covert weapon detection systems. This is simply a great idea. This company has built a smart scanning system that scans to pick up trace metals and signature patterns that make up the identity of dangerous weapons. When it scans for signals, it measures all items across a database and alerts security when it comes across a dangerous object. The great thing about this product is that you can hide it inconspicuously. Patriot One also entered into a joint venture to develop a chemical detection scanner for narcotics, chemical agents, and volatile organics. Furthermore, the business has a smart video surveillance system leading to a potentially even broader service offering.

Currently, the PATSCAN covert weapons detection system is still in the research phase. The true positive rate is only at 91.6% and the true negative rate is at 94.4%. I see the true negative rate as a bit of an issue. If 1/20th of the signals are ghost signals identifying that something dangerous has passed through an area, the system will essentially be “crying wolf” too frequently to be trusted. However, this technology is still in the early stages and likely will improve in time, and the video monitoring AI is a great complement to follow up and reassess the potential threat. At a market cap over $300 million, the market has already priced in some big expectations for this company. Patriot One Technologies is on my watch list.

5. Timia Capital – Recently I came across a podcast on esoteric lending on Patrick O’Shaughnessy’s Invest Like the Best. Essentially esoteric lending is the process of using different data metrics to identify clients that were deemed risky by traditional banking risk measurement procedures, but in reality are actually low risk clients. Timia Capital has an interesting niche in lending out with credit terms of 20% interest to high growth technology companies. When you think about a technology company’s assets in today’s world, they essentially don’t have any hard assets. A technology company’s patents, goodwill, and people are what make up the value of these companies’ balance sheets, which is not the kind of asset make up that a traditional bank considers high quality.

Using complex algorithms Timia Capital invests in companies that are growing very quickly with high cash flows, but have little in real assets, and subsequently have nowhere else to turn to for getting the working capital needed to expand. Timia also structures the deal so that they get payments to the loan as a percentage of the revenue that comes in. If the company theoretically defaults they would take ownership and could sell the company off at a decent return.

This company has a great concept; however it’s a bit too small. It needs to grow a larger lending book to have the economies of scale to show decent profitability before I’ll invest. Management mentioned they were planning to meet with Constellation Software that week in Toronto for reasons they did not divulge, which caught a bit of my attention. Timia Capital is on my watch list, and I expect it to take some time until it can become attractive.

***Information above was pieced together using company websites, yahoo finance, presentation materials, and discussion with management. The accuracy of information is to the best of my knowledge.

Future 60 Canadian MicroCaps – Update (2019)

Investing

/// Top 10 Winners +55% Since Inception (July 10, 2018) ///

Let’s check in on the Future 60 Canadian MicroCaps that I wrote about in the Summer of 2018; “Small Companies; Big Dreams“. It was a fun newsletter (and one of the most popular, breaking through the top 5 most-viewed issues of all time).

Some stats, since inception (July 10, 2018):

Future 60 MicroCaps: -8.4%

  • Top 10 Winners: +55.5%
  • “Highest Growth” (1/3): +5.2%
  • Takeovers (3): + 61.6%

S&P/TSX Venture Index: -17%
S&P/TSX Composite Index: -5.5%

Shortly after writing “Small Companies; Big Dreams”, markets around the world started to correct, and so -8.4% since inception (Future 60 MicroCaps) doesn’t concern me. These are very small companies (< $100M market cap), and mostly listed on the TSX Venture, which was down -17% over the same period (July 10th – Feb 12th). What excites me is the growth potential in some of these small companies. In the original issue, I segmented 1/3 of the Future 60 into a “Highest Proven Growth” sub-list, because those 21 out of 60 stocks had all achieved the following hurdles:

  • >= 0% Latest Quarter YoY Revenue Growth (Average = 26%)
  • >= 0% Latest Annual YoY Revenue Growth (Average = 39%)
  • >= 0% Last 5-Year Revenue CAGR (Average = 21%)
  • >= 0% Cash Flow Yield (Average = 8.6%)

Here’s how those “Highest Proven Growth” stocks have done since July 10, 2018:

Company  Ticker Since Inception
Bevo Agro* BVO 163.5%
Evergreen Gaming TNA 73.9%
Xpel Technologies DAP.U 25.6%
Redishred Capital KUT 21.0%
Caldwell Partners International CWL 18.2%
Hamilton Thorne HTL 16.9%
Sunora Foods SNF 16.7%
Cortex Business Solutions* CBX 12.3%
Namsys CTZ 9.7%
Symbility Solutions* SY 8.9%
Intrinsyc Technologies ITC 5.7%
Quarterhill QTRH -8.5%
Avante Logixx XX -12.4%
Titanium Transportation TTR -15.5%
Swiss Water Decaffeinated Coffee SWP -17.3%
Wi2Wi YTY -25.0%
AirIQ IQ -26.3%
Partner Jet PJT -34.3%
Diamond Estates Wine & Spirits DWS -38.2%
Nanotech Security NTS -43.1%
Organic Garage OG -43.5%
Average  +5.2%

The above “Highest Proven Growth” sub-list of Future 60 MicroCaps gained +5.2% (v.s. -17% for the S&P/TSX Venture Composite Index), and contained all of the companies (3) from the Future 60 list that were taken-over(*) since July 10, 2018: Bevo Agro (+163.5%), Cortex Business Solutions (+12.3%), and Symbility Solutions (+8.9%). Naturally, I expect more of these MicroCap stocks to be taken over. Note: I wrote about Bevo Agro (BVO) for the first time in an earlier issue (Aug, 2017), and since then it’s gained +345%.

There were some surprises in the Top 10 Winners (+55.5%), which I recently posted on Patreon, along with the complete spreadsheet of Future 60 MicroCaps that you can check out, and follow as the list evolves. There’s 85+ members now, and more goodies, including new audio interviews with Jason Donville, and Francois Rochon (more coming soon…), My Top 15 Best Ideas for 2019 (+14.6% YTD), and more.

$5 VIP Investing Package (Patreon) – Join Now

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I’ve partnered with Patreon to give DIY Investors & Readers the VIP Experience. For only $10 $5/month, I will provide you with exclusive access to the following:
  • Best 15 Ideas for 2019 (+14.6% YTD – Jan)
  • Seven (7) Model Growth Portfolios
  • In-Depth Investor Interviews (audio) – Jason Donville, Francois Rochon, plus more coming soon
  • Capital Compounders Club (700+ Members)
  • Talkin’Stocks Private Chat Group – Discord
  • One-on-One Conversations
  • $19.95 CAD Free Paperback Book – Capital Compounders
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  • Subscription to My Investment Newsletter
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  • Other Freebies, and More!

Update (Feb, 2019): I recently uploaded a bunch of new content for on Patreon.com/RobinSpeziale. My Best 15 Ideas YTD Performance (+14.6%), Audio interview with Francois Rochon, Jason Donville’s Top 10 Ideas for 2019, and a 1 Year Free subscription to Wealthica’s Premium Sheet.

How to Join:

Click on ‘Become a Patron‘ now! You’ll immediately get access to everything. Plus, you can easily cancel anytime. If you have any questions, email me at r.speziale@gmail.com.