The numbers are in: Disruption Investor had an 80% win rate in 2023⦠[The Jolt with Stephen McBride] Special: The Disruption Investor Report Card Editorâs note: Today, RiskHedge Publisher Dan Steinhart sits down for a special one-on-one interview with Stephen McBride to discuss his flagship service, Disruption Investor, and its performance over the past year. *** Dan Steinhart: Alright, Stephen. Iâm holding in my hand an audit report. It shows the overall performance of the investment recommendations made inside our flagship Disruption Investor service in 2023. Letâs review it publicly and talk about what we got rightâand wrongâthis past year, and what you see as the big opportunities as we enter 2024. Then Iâll give you an overall grade, between A+ and F. Stephen McBride: Letâs do it. Hereâs the backdrop: 2023 was a strong year for markets. The S&P 500 gained 24%, well above its long-term average of 9%â10%. Although I suspect many investors wonât feel so cheery looking at their brokerage accounts. A lot of folks stayed out of stocks after a brutal 2022, which was the worst year for a balanced portfolio ever. Dan: Well, the Wall Street forecasters didnât do them any favors. Almost everyone was bearish coming into 2023. A recent Fortune headline sums it up: âStocks fool nearly everyone in 2023 with the S&P soaring 24%...â You zigged, though, and [were quite bullish]( in January 2023. Nice call. But we donât put a whole lot of faith into anyoneâs forecastsâeven our own. Iâm a big believer that the best investing strategies remove the need to get forecasts right. Stephen: Agreed. The market will do what it does. We focus on controlling what we can. Dan: Like a good Stoic. In Disruption Investor, you recommend only profitable disruptive companies. This is a change we made at the beginning of 2023. You had always focused on profitable companies, but we made it an official pillar of Disruption Investor this year... Stephen: We try to get better every year. In 2022, I had some misses that boiled down to recommending companies that were growing very, very fast and had phenomenal business prospects, but werenât yet profitable. These kinds of stocks can be all-time great investments. Amazon (AMZN) wasnât profitable from 1997 to 2003, yet it soared 840%. Tesla (TSLA) wasnât profitable from 2010 to 2020, yet it soared 18,421%. Dan: The worldâs fastest-growing companies are unprofitable almost by definition. They tend to re-invest every cent into their blistering growth. Stephen: Yes. And again, they can be great companies. But they tend to be fragile. Factors they donât control must go their wayâinterest rates, economic growth, sentimentâfor their stocks to rise. Instead, in Disruption Investor, we only recommend profitable and growing businesses in disruptive megatrends. The kinds of stocks we expect to do great in good times, but that youâd also be happy to ownâor buy more ofâif we ever get that recession everyoneâs waiting for⦠Dan: Letâs talk results. Weâll get to the overall return of the portfolio vs. the market in a minute. First, letâs talk win rate. In 2024, you and Chris Woodâyour partner in Disruption Investorârecommended 25 investments: 24 stocks and 1 crypto. 20 of these were winners. Good for a win rate of 80%.. Congrats. Stephen: Thanks. Dan: Anything to add? Stephen: Readers may not know we invested heavily in Disruption Investor this year. We brought on Chris Wood. Heâs the best fundamental investor and financial analyst Iâve ever worked with. We only recommend stocks that we unanimously agree on. Our research analyst, Alex Toussaint, is a whiz too. Dan: We also have an app now⦠along with a growing list of Members Only events inside Disruption Investor. Back to the results. Readers might be tired of hearing about Nvidia (NVDA), but it was the best-performing stock in the S&P 500 last year. Up 233%. You held it in Disruption Investor all year. But aside from that, I think youâve written more about Nvidia than any other analyst. In 2018, you now famously titled an article picked up by Forbes: âIf I could only buy one stock for the next 5 years...â Here we are five years later, and Nvidia is the second-best-performing S&P stock since 2018, having gained 1,132%. The only better-performing S&P 500 stock is solar company Enphase (ENPH). But it wasnât always easy, was it? Stephen: I was about to say⦠everyone forgets what happened in 2022. NVDA declined almost 75% at its lows! Dan: Howâd you know to hold on? Stephen: Well, we took profits during the blow-off market top in November 2021, which made our position risk-free. Itâs a lot easier to ride out a tough period when you canât lose money, and the only thing in question is how much money youâll make. On a deeper level, it was clear to me that Nvidia was an all-time great business uniquely positioned to benefit from the coming explosion in artificial intelligence spending. Although its stock retreated, the quality of its business was never in question. And this was very clear in its financial results. Even today as we talk in January 2024, Nvidia has actually gotten cheaper over the last two years. Dan: The stock has gone from $140 to $500, yet itâs gotten less expensive. Explain that, please. Stephen: âExpensivenessâ is about what you get vs. what you pay. Is a $1,000 watch expensive? Well, is it a Timex or a Rolex? With stocks, what you âgetâ are earnings and cash flow, which ultimately result in capital gains and more money in your pocket. Nvidiaâs stock price has grown fast. But its earnings have grown faster. Hence, Nvidia is cheaper today than it was two years ago, even though its stock price is much higher. âTo be continued on Fridayâ Editorâs note: If youâre reading this, youâre eligible to join Disruption Investor at a $100-off discount when you act during this Report Card series. [Click this link to review your special deal.]( Stephen McBride
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