It’s Tuesday … which means I should be getting in touch with the latest episode of MoneyLine.
But as many of you know, I’m working from my “southern office” in Nicaragua for the next couple of months, and unfortunately I’m dealing with some connection issues. So I won’t have a new podcast for you today, but I do expect to send it to you soon.
Just because I don’t have a new podcast, though, doesn’t mean I didn’t want to get in touch to discuss some important investment ideas …
For nearly two decades, my goal has been to find the next big winners in the stock market.
That does not mean taking on an inordinate amount of risk.
I dig deep for stocks with a high probability to increase in value … and a high potential for huge gains.
Stocks that can multiply 10X or even more and help you build true wealth.
There is no perfect recipe for finding the next 10X stock. Heck, in my book The Next Great Bull Market: How to Pick Winning Stocks and Sectors in the New Global Economy, I highlighted several stocks that went on to be 10X winners. One of them was American Water Works (NYSE:AWK) … and a water utility is one of the most conservative businesses in the world.
Still, it’s not just a shot in the dark or a gut feeling. I look for various characteristics when hunting for our next 10X or even 100X winner.
Let me share some of the most important and tell you about one stock in particular that fits the bill …
Actually, I’ll start with a bonus. Big winners are often unappreciated and almost always undervalued. You can buy them at a big discount.
I’ll never forget going on Fox Business Network on March 6, 2009, right as the market was hitting bottom in the depths of the financial crisis. I highlighted several beaten down stocks I felt could be huge winners during the next bull market.
One was Advanced Micro Devices (NASDAQ:AMD), which at the time had a market valuation of only $1.2 billion. Since then, the stock has grown into a leader in the semiconductor industry and is up 3,500% — or 36X.
The point of this is not to brag but to show you first that my goal of finding stocks that go up 10X or more is not empty words. It’s very real, and it’s very doable.
The next 10X winner is out there right now … waiting for us to find it, invest in it, and profit from it.
So what makes a 10X stock?
Here are five important factors to consider when you’re looking for that next big winner:
- Make sure the company is hunting elephants, not mice. This is why I write frequently about total addressable market, or TAM, which is the analytical term for it. I want to know how big the opportunity is that a company is going after. For example, Amazon (NASDAQ:AMZN) went after global e-commerce, an industry with a monster TAM. The opposite would be a more niche business like a vegan restaurant, which has a limited TAM.
- It is important to know whether the company has either a superior product or service or has figured out how to dramatically cut the cost for its customers. Otherwise, how could it take customers away from competitors and grow its market share?
- Future value is more important than present value. I look at what a company is worth today. But more importantly, I analyze the company’s potential worth in 10 years. A lot of investors get tripped up because most early stage companies trade at above-average valuations as investors price in the possibility of big gains in the future. This is why I rarely use traditional metrics when analyzing small stocks. Instead, I look ahead at where I believe revenue will be in a few years and value the company on what’s to come. As hockey great Wayne Gretzky said, “Skate to where the puck will be, not where it is.”
- Potential 10X companies usually lose money in their early stages because they reinvest most of their sales into growing the business. This is a great model as long as there is a clear path to profitability. It could come in two years or five years, but I must see that path. Without it, a company will be forced to constantly raise additional capital and dilute shareholder value.
- Think long term! You will not make 10X profits overnight. Most 10X stocks will suffer at least one bear market (if not several) along the way to big gains.
I consider those factors every day in my research, and they’re a great starting point for hunting elephants instead of mice.
These are the kinds of stock I love to be able to recommend. The kinds of stocks with the potential to significantly impact your wealth thanks to the world’s biggest hypergrowth trends.
On the date of publication, Matthew McCall did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now.