Research Is the Key to "Good Luck" in Investing

[The Bleeding Edge]( Research Is the Key to "Good Luck" in Investing By Colin Tedards, Editor, The Bleeding Edge Dear Reader, Welcome to your weekly mailbag edition of The Bleeding Edge. Every Friday, my team and I respond to the questions and concerns you’ve been writing into our mailbag. So, if you have anything you’d like me to answer in a future edition, write to me by clicking [right here](mailto:feedback@brownstoneresearch.com). Let’s get started with a question from a reader on how much of success in investing comes down to luck… I enjoyed your story about early investing. The XPO stock helped you buy a house in the Central Valley, so you were ready to ride the elevator that has been California real estate. But my question is… how much if your success was just blind luck? I’ve seen plenty of companies with great management and a good business idea, like XPO, which have gone nowhere, or which have actually gone up a bit, then down. It’s hard for the average investor to keep on top of companies and really know how they are doing, and what the internal machinations may be. This is true especially when one has several issues in a portfolio. I owned a stock of a Hospital company, Tenent, buying in at $15. I watched it rise to nearly $50, thinking “I am such a smart stock picker!” Then it went down to $45, and I thought, “ Ok, long term trend is up, I’ll hang in there and watch it come back.” Then surprising news came out how the doctors were padding the numbers around operations to get more Medicare money than they were entitled to. I watched TEN break support line after support line, hoping for a comeback, but it never happened. I sold after a year, at $15.40, only making about $200 after all that. That round trip was unlucky— and I didn’t have the discipline to sell at a higher price. I have had other stocks where I knew very little about the company, but due to lucky conditions I had not anticipated, the stock went up, and I made money. So, bottom line, do you agree that, since it is impossible to know what is really going on in a company, “good luck” (i.e., unanticipated fortunate events) plays a major role in successful stock picking? Thanks. – Cliff G. Cliff, that’s a great question. And yes, I feel very fortunate to have purchased my home when I did! There will always be an element of “chance” when investing. Major events like pandemics and wars often happen at unexpected times. And as you said, sometimes we’ll discover something unsavory about a company that was being hidden from investors. Recommended Link [This Stock Could Go Up 66% or More.]( [image]( Marc Chaikin built the system that isolated NVDA before it became the best-performing stock of 2023. [Click here to get his latest buy.]( -- There are always risks in investing. That’s why I often include a “risk” section along with the recommendations I publish. But as the old saying goes, show me an investment with no risk, and I’ll show you an investment with no return potential. But by and large, we can shift the odds in our favor through research. That’s why my team and I spend so much time and energy reviewing every company we recommend. We read through SEC filings. Examine the balance sheet. Research the product or service’s market fit. And we speak with customers and other enterprises that deal with these companies. We aren’t just looking for reasons to invest in the company like cutting-edge technology or a moat. We’re looking for red flags like fraud or shady business practices. We don’t issue a recommendation until we’ve done exhaustive research. But even then, our job isn’t done. We follow our target price to know when to take profits. And we obey our stop-losses. Those protect us from missing out on gains or staying in a losing position for too long. These are all measures that tip luck or chance in our favor. I know that it can be difficult to manage all these activities as a lone investor. That’s why I have a dedicated team to help me stay on top of every position we recommend. And we share the latest news with readers as soon as it's available – regardless of whether it's good or bad. I understand there is a Vision Fund backed by Softbank. I’m interested in an AI ETF, preferably for healthcare specifically... your thoughts? Thanks. – Nina C. Thanks for your question, Nina. SoftBank’s Vision Fund is actually a venture capital fund. That means it’s not a publicly traded investment vehicle. And even if it was, you might not necessarily want to invest. The Vision Fund became notorious for investing in private companies at inflated valuations. In 2022, the fund lost around $27 billion. But all that’s a topic for another day… As for your question on AI ETFs… There isn’t a pure-play AI healthcare ETF available yet. For the most part, I don’t recommend buying ETFs. That’s because ETFs are stuffed with dozens of companies that are competing against one another. Some of these companies will be winners… and others will be losers. The entire reason I spend so much time researching companies, technologies, and markets is to identify who the next winner will be. When you buy an ETF, you’re buying the winners and the losers. That’s why most investors will only see average returns from an ETF. Another reason I’m generally not a fan of ETFs is that oftentimes they don’t give investors the diversified exposure they might expect. Case in point is the Robotics & Artificial Intelligence ETF (BOTZ). We might expect to receive broad exposure to the robotics and artificial intelligence market. But that’s not necessarily the case. When you look under the hood, you see something surprising. Nvidia makes up 14.5% of the ETF’s net assets. Intuitive Surgical makes up another roughly 9.5%. And the infrastructure technology company ABB makes up another 8.16%. Recommended Link [The One Ticker Retirement Plan]( Over the Shoulder Demo Now Available [image]( Market Wizard Larry Benedict crushed the market in 2022. But he didn't do it with a “traditional” method… For a limited time, he’s sharing a free over-the-shoulder “demo” of his strategy in action. It takes less than 10 seconds… [Watch it here.]( -- That means that approximately one-third of the ETF’s holdings are composed of just three companies. These companies aren’t necessarily “bad.” But it means the fund will be leveraged to the success of these three stocks. And it begs the question, why wouldn’t investors just buy the three stocks themselves? There are a few exceptions to this rule, though. I will occasionally recommend an ETF based on commodities. That’s because it can be difficult for the everyday investor to invest in most commodities. An ETF offers broad and easy exposure. And in some sectors like biotech, I think an ETF can be okay. That’s because the fate of biotech companies often hinges on the results of a clinical trial. Unless you’re a physician or a researcher with deep experience in a given field, it’s difficult to gain an edge in the biotech sector. I have been reading your articles as I am subscribing to two of your services. One thing that concerns me is companies that are too “woke.” I feel that when management is overly concerned with virtue signaling this not only goes against my core beliefs but also is bad for long term growth. Many currently successful companies such as Meta, Nike, Starbucks, and Alphabet are some I would avoid in the long term. This is just a comment I want to make, and I don’t think I am alone in those that are really tired of this wokeness and will try to avoid using and investing in these companies whenever possible. – Paul C. Paul, I totally understand where you’re coming from. Over the past decade, companies have devoted more and more resources to environmental, social, and governance (ESG) – aka “woke” policies. I don’t buy the hype around ESG investing. The iShares ESG Aware ETF has ExxonMobil, Coca Cola, and 3M among its top holdings. The fact that companies like these could make any ESG list is laughable. That’s why I don’t pay attention to ESG scores during my research. I look at each company on a case-by-case basis. If I think it’s damaging its own business just to virtue signal, it won’t become a recommendation. Recommended Link [September 20th: The End of the U.S. Dollar?]( [image]( There have been a few moments that changed the course of America forever: JFK’s assassination… 9/11… The Nixon shock of 1971. What’s scheduled to take place on September 20th, at 2 pm ET, could be another one of those moments. And those who don't prepare could end up holding a bunch of worthless U.S. dollars. [Click here for the three critical steps to take right now or risk losing everything.]( -- At the same time, I don’t advocate investing in companies that are having an outsized negative impact on the environment or communities it's involved with. Ultimately, irresponsible behavior becomes a liability. At a high level, my feeling is that corporate virtue signaling is probably on the downtrend. It’s easy for companies to wade into social issues when stocks are trading near all-time highs. But in a higher-rate environment with more difficult economic conditions, investors start demanding that management gets “back to basics.” Thank you for the introduction of the subject roadmap by Brownstone Research analyst Phoenix Van Zutphen. I viewed your AI adoption by industry chart with great interest. Am I missing something though? Where are the sports teams represented? Clearly AI will play an increasing role in play selection and player performance metrics. Is there not an investment opportunity here? Thank you, – Bob S. Hi, Bob. It’s a fair question. I asked our analyst to weigh in on your question: Phoenix here. Thanks for writing in, Bob. I am glad you enjoyed the [Road Map](. The role of AI in sports prediction, play selection, and statistical analysis of players is well underway. In fact, a recent Exponential Tech Investor recommendation is doing just that. And they’ve inked deals with the NFL, NBA, CFL, and more. Subscribers can catch up [right here](. In terms of the Road Map, sports teams can also adopt AI for marketing and advertising. You also see the sporting sector pop up in both the tech and consulting sectors in the form of analytics data. As AI expands everywhere, we’ll see even more adoption across the sports industry. That’s all the time we have this week. Thanks to everybody for writing in with your questions. Regards, Colin Tedards Editor, The Bleeding Edge --------------------------------------------------------------- Like what you’re reading? Send your thoughts to feedback@brownstoneresearch.com. IN CASE YOU MISSED IT… [“Shadow CIA” Insider Releases Tell-All Book on the End of the World]( This is how the world will end. According to best-selling author, Peter Zeihan, massive changes are brewing which could turn the world as we know it – and the financial markets – upside down. His latest prediction is so important… We’ve reached out to him and secured a copy of his latest book for you, at a huge discount. For details on what he’s predicting now – and how to claim your discounted hardback copy… [Click here.]( [image]( [Brownstone Research]( Brownstone Research 55 NE 5th Avenue, Delray Beach, FL 33483 [www.brownstoneresearch.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Brownstone Research welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-512-0726, Mon–Fri, 9am–7pm ET, or email us [here](mailto:memberservices@brownstoneresearch.com). © 2023 Brownstone Research. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Brownstone Research. 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