By Matt McCallFeb 08, 2020
I can’t wait for what’s to come here in the Roaring 2020s. I fully expect to look back at this decade as one of the largest wealth-creation opportunities of our lifetimes. And much of those gains will go to those of us who invest like venture capitalists.
That’s why in my investing services – and especially in my new Microcap Millionaire Portfolio for Early Stage Investor – we buy small, promising businesses with the potential to massively increase in value.
However, those massive increases in value don’t happen overnight.
That’s why sitting tight with the “coffee can” approach in mind is often the most useful thing we can do on any given day.
You remember coffee cans, right? Now that our days are filled with Starbucks (SBUX) trips and single serve K-Cups, it’s easy to forget that pretty much every American home once had them.
For investors, the coffee can method of portfolio management is simple:
You buy high-quality businesses with promising futures. But instead of doing what many folks do – which is check on share prices every day, stress constantly about short-term performance, and trade in and out of stocks – you just sit on the portfolio for years.
As told by Robert Kirby, an investment manager from days past, “The coffee can portfolio concept harkens back to the Old West, when people put their valuable possessions in a coffee can and kept it under the mattress.”
And once, Kirby himself had a client whose husband, a lawyer, had died. The client inherited the stock portfolio, which she brought to Kirby. Kirby writes:
I was amused to find that he had been secretly piggybacking our recommendations for his wife’s portfolio. Then I looked at the size of the estate. I was also shocked. The husband had applied a small twist of his own to our advice: He paid no attention whatsoever to the sale recommendations. He simply put about $5,000 in every purchase recommendation. Then he would toss the certificate in his safe-deposit box and forget it.
There were some losers in this portfolio, worth less than $2,000. But he had several large holdings worth more than $100,000 each. And get this: there was also one giant holding worth more than $800,000. That massive return was born from a small investment in Haloid, which became a large quantity of Xerox (XRX) shares.
If this client’s husband had been watching every short-term rise and fall in his Haloid/Xerox investment, he might have cashed it in long before. But then his wife wouldn’t be sitting on $800,000 in returns.
That’s no fluke, either. I have had my own personal experiences that helped me understand and believe in the merits behind the coffee can approach.
In 2003 at the ripe age of 27, I started my first investment firm, Penn Financial Group. I couldn’t have done it without my first client, a former consultant at my prior company who had told me he would be my first client if I ever went out on my own. I took the gamble and have never looked back.
With only a few clients, I felt the pressure with every investment. One of the first stocks I ever bought for Penn Financial Group was a little-known surgical robotics company called Intuitive Surgical (ISRG). At the time, in early 2004, the stock traded around $15 per share ($5 split adjusted).
In a few short weeks, it rallied to around $20 (pre-split), and the position was quickly up over 30%. Annualized out, we were looking at a big triple-digit gain.
Even though I believed the company was in its infancy stages, I felt the quick 30% was too much to risk losing, and I decided to bank the profit and make my clients happy. And they were very happy… at the time.
Over the next 15 years, Intuitive Surgical became the global surgical robotics leader. Adjusted for a stock split in 2017, the stock increased from the $5 entry in 2004 to a recent high of $615 in 2020. That is a 123X return.
It’s a little painful to look at what I missed out on, but in dollar terms, every $5,000 invested in Intuitive Surgical in 2004 would have been worth $615,000. Every $10,000 would have been $1.2 million.
You can see why I wish I had utilized the coffee can approach in 2004.
However, it is never too late. Odds are high that there’ll be more Intuitive Surgicals in the coming years. That’s what we’re aiming to capture in the Microcap Millionaire Project.
Intuitive Surgical is still a great company. It’s pretty big now, though (at a $67 billion market cap), and it’s tough for large companies to grow anywhere near what they did in their early days.
But with all the technological advances we’re seeing now – the Internet of Things (IoT) and artificial intelligence, powered by 5G – there are PLENTY of smaller growth plays. As those tech trends really rev up, I expect these stocks to take off for the stratosphere.
In my nine-stock Microcap Millionaire Portfolio, just released Wednesday, I’ve got recommendations for all those trends. Plus, there are special opportunities, too…like blockchain exchanges, and China’s electric vehicle revolution.
I don’t want you to look back with regret, like I do about selling Intuitive Surgical. I want you to be there when these companies become household names.
So, please join me and take even a small stake in these microcaps today. Any one of them could be the big winner that takes your portfolio gains to the next level.
P.S. So many people fall into the trap of avoiding these kinds of stocks. Actually, many of them never hear about them at all… until the real money’s already been made!
But, year after year, the best gains come from microcap companies that are seeing explosive growth.
You just won’t get that from large caps. Most folks aren’t willing to go on TV and tell everyone that, but it’s the truth. And after investing this way for decades, I’ve narrowed it down to a five-factor analytical model for finding the best microcap stocks.
Click here to listen to Matt McCall’s MoneyLine podcast! This week, Matt discusses Amazon’s (AMZN) ascent to the $1 trillion value milestone. What does its rise tell us about investing and, more importantly, how do we find the next Amazon? Matt also dives into the upside potential of microcap stocks and unveils a new portfolio aimed at the smallest stocks in the market.
You can subscribe to this podcast on iTunes, Stitcher, Spotify, or wherever you listen to podcasts.
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