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Frequently Asked Questions

I’ve noticed that many of the stocks you follow are either small or mid-caps. Why is that?

In my NexGen newsletters, our strategy is to look for stocks that have big upside potential in powerful mega-trends that are changing our world. That often leads to smaller, lesser known companies, so by default the majority of the stocks we follow are either small- or mid-cap companies. Many people believe these stocks inherently have more risk, but not only is that a very broad generalization, it is also completely untrue. At one point in time, all large companies were small caps that flourished and grew into today’s leaders. Our goal is to find tomorrow’s leaders now in their early stages and own the stock before Wall Street has caught on to the big picture. We can make a lot of money that way.

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How do you keep emotions out of investing? I tend to panic easily!

I completely understand – I can get pretty emotional, too! After all, we’re human beings and not robots. But emotions can be a good thing sometimes and even play into the themes I’m watching. The key is to control them, not try to eliminate them altogether.

How often have you heard someone say, “I’m waiting to invest until we see a correction”? Given the multi-year bull run we’ve been on, I’m willing to bet you’ve heard it a lot. But when we finally saw a correction in late 2015, what did everyone do? They sold and headed for the hills! They let their panic overtake what they knew deep in their gut was actually a great opportunity. As a result, so many individual investors have missed out on the incredible ride higher the market has taken since.

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I understand that you have to weather the storms when it comes to longer-term investing, but how do we make sure we’re not catching a falling knife? I don’t want to be stuck in a name that’s never going to bounce.

That’s a great question, and the key is implementing a risk management strategy. Many think that risk management is all about managing downside, and that’s true. But it’s not all stop-losses and support levels. It actually starts with the timing of our entry.

When it comes to stock analysis, there are two sides to the coin: fundamental and technical. Fundamental analysis looks at the company itself and takes macroeconomic factors into consideration.

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Is investing in an ETF a good strategy to gain broad exposure to early stage trends?

ETFs have exploded in popularity in recent years. They’re easy to invest in, give you instant diversification and can be highly focused. I was an early adopter of ETFs and have invested in them for myself and my clients.

Diversification is smart. It’s very important to not put too much of you money in any one stock. At the same time, you don’t want to put your money in bad stocks, and that’s what can happen with an ETF.

You are forced to buy every single stock in that ETF, and at that point it becomes over diversification. You’re stuck owning all of the laggards that will inevitably weigh on your returns.

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Is there any opportunity in the world of sports gambling after the Supreme Courts repeal of the federal ban?

The Supreme Court has just created a $1 trillion opportunity. How often does that happen? I would say pretty much never. Over my 25 years of investing experience, I cannot remember anything that even comes close to the magnitude of the May 14 ruling.

The court decision opens up a lot of opportunity in an industry that probably wasn’t on a lot of investors’ radar. In fact, Bank of America (BAC) predicts that the gross revenue from legal sports betting will increase from the current $200 million annually to $5-$10 billion in the next five years. The low end of that range represents a 25X gain and suggests that there will be some big winners if this growth comes to fruition.

There are a number of players in the industry that can all succeed and take a big piece of the growing sports gambling pie.

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If you look for stocks that Wall Street isn’t focusing on, what factors do you consider when deciding to buy?

That’s a good question, and my answer is: It depends. I’m not trying to be funny, so let me explain.

It all starts with what I sometimes refer to as the three-legged stool that incorporates macro and micro analysis. The big three are fundamentals, technicals and intangibles.

I’ll be explaining much more about these in the coming days and weeks, but to really find the best NextGen stocks, I want to see strong fundamentals that show growth (among other things), a solid chart that indicates buyers are in control and intangibles to drive the stock higher. These can be everything from a sweeping theme (like the millennial boom we’ve been talking about) to a specific event to, quite honestly, gut feel sometimes.

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Do you think pot stocks are a good investment?

The marijuana industry has already brought in billions of dollars in tax revenue and created more than a hundred thousand jobs in the United States, but what makes that so intriguing is the fact that its use is not currently legal in the country. That may change sooner than later, though, as President Trump recently assured a Colorado senator that the federal government will be hands off when it comes to the 29 states that have voted to legalize marijuana on either a medicinal or recreational level.

Whether you’re for or against its legalization is your business, and I am not here to try to change your opinion. That said, I do believe this is a space with a lot of investment potential. According to New Frontier Data, marijuana sales (both medical and recreational) will reach $11.7 billion this year and climb to $25 billion over the next seven. To put that in perspective, last year wine sales brought in $60 billion.

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Do you see opportunity outside of the United States?

I am a huge fan of China as many of its stocks are currently trading at valuations well below those of their comparable U.S. peers. China already boasts the second-largest economy in the world and continues to have one of the best GDP growth rates of all emerging and developed nations, and yet looking out over the long term there is no question that the upside potential of its economy is still far greater than that of nearly any other country.

But investment opportunities don’t only come from emerging markets. Prior to graduating to emerging market status, countries are first referred to as frontier markets, and a lot of these smaller nations are also on my radar for investment potential. It’s a lot like investing in companies – if you get in early, you can make a lot of money.

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What do you think about the artificial intelligence trend I’ve been hearing a lot about?

That's a great question. Artificial intelligence (AI) is a growing topic on Wall Street right now, and I also consider it one of the top NexGen mega-trends for the next decade and beyond. In fact, research firm Tractica expects global revenue to increase from $1.4 billion in 2016 to $59.8 billion by 2025.

When most people think about this space their minds still automatically go to robots and science-fiction products. That’s only brushing the surface, though. You get to the really exciting stuff when you drill down even further, specifically into two niche subsectors called machine learning and deep learning.

The purpose of artificial intelligence is to use computers to complete tasks that would normally require human input, and machine learning gives the technology the ability to learn on its own – without having to be explicitly programmed.

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I’ve read so many different commentaries about what is going on in the market right now that I don’t know what to believe. What is your take on the volatility?

I understand your frustration! In my nearly two decades of writing newsletters and managing clients’ portfolios, I have experienced my fair share of turbulent markets and the primary link between them is emotions. Even the best investors and traders in the world have to manage their feelings when volatility picks up because as difficult as it is to have a losing day in your portfolio, it will inevitably happen many times throughout the year. Those who come through a pullback successfully have learned how to control their emotions and stick with a system that works. Unfortunately, those investors are in the minority and that’s why we see emotional price swings as the majority sell into the panic rather than basing their decisions on facts. Continue Reading…
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