Capital Compounders How to Beat the Market and Make Money Investing in Growth Stocks Revised & Expanded Second Edition Robin R. Speziale National Bestselling Author, Market Masters [email protected] | RobinSpeziale.com Copyright © 2018 Robin R. Speziale All Rights Reserved. ISBN: 978-1-7202-1080-1 DISCLAIMER Robin Speziale is not a register investment advisor, broker, or dealer. Readers are advised that the content herein should only be used solely for informational purposes. The information in “Capital Compounders” is not investment advice or a recommendation or solicitation to buy or sell any securities. Robin Speziale does not propose to tell or suggest which investment securities readers should buy or sell. Readers are solely responsible for their own investment decisions. Investing involves risk, including loss of principal. Consult a registered professional. CONTENTS START HERE vi INTRODUCTION 1 1 How I Built a $300,000+ Stock Portfolio Before 9 30 (And How You Can Too!) My 8-Step Wealth Building Journey 2 Growth Investing vs. Value Investing 21 3 My 72 Rules for Investing in Stocks 28 4 Capital Compounders (Part 1/2) 77 5 Next Capital Compounders (Part 2/2) 88 6 Think Short: Becoming a Smarter Investor 96 7 Small Companies; Big Dreams 106 8 How to Find Tenbaggers 123 9 How I Manage My Stock Portfolio and Generate 131 Outsized Returns – The Three Bucket Model 10 How This Hedge Fund Manager Achieved a 141 24% Compound Annual Return (Since 1998!) 11 100+ Baggers – Top 30 Super Stocks 145 12 Small Cap Ideas – Tech Investor Interview 150 13 Knowing More Than Everyone Else 155 14 Keynesian Beauty Contest 157 15 Big Error of Omission 162 16 My Daily Routine 167 17 Interview with a Growth Hedge Fund Manager 173 18 Key Events That Move Stocks 193 19 Future Predictions 197 20 My Universe of Growth Stocks 204 CONCLUSION 217 ADDITIONAL WISDOM FOR YOUNG 224 PEOPLE JUST STARTING OUT BONUS – MY DIY INVESTOR FRIENDS 228 SHARE THEIR GROWTH INVESTING STORIES, TIPS & STRATEGIES 100+ DIY INVESTOR RESOURCES 272 ABOUT THE AUTHOR 278 ACKNOWLEDGEMENTS 279 BUY MARKET MASTERS 280 SUBSCRIBE (DON’T MISS ANYTHING) 283 2 START HERE Thank you for reading Capital Compounders. If you have the eBook version, please pick-up the Paperback on Amazon too – I think it will look great on your bookshelf! I’ve been picking stocks since 2005, and it’s certainly been a fun, humbling, and rewarding journey. Along the way I write books, blogs, newsletters, and do other things to help you – the DIY Investor – on your own journey. Learn More: READ: Market Masters, Blog SUBSCRIBE: Newsletter, YouTube Channel JOIN: Club, Patreon CONTACT: Email, Twitter Go to RobinSpeziale.com for all of this and more… “Whatever the mind of man can conceive and believe, it can achieve” – Napoleon Hill v i INTRODUCTION love the stock market. It’s like a treasure hunt – digging deep, trying to find the winning stocks among I all the others. I’ve been investing in stocks since 2005 (13+ years), and building wealth throughout this fascinating, humbling, and rewarding journey. I’m just like you – a Do-it-Yourself (DIY) Investor – and similar to most DIY investors, Warren Buffett was my first teacher. But then I discovered Philip Fisher and Peter Lynch, and their respective books; Common Stocks and Uncommon Profits, and One Up On Wall Street. So while value investing provided me with a foundation early on, it was both Fisher and Lynch’s teachings on growth investing that shaped me, and my stock portfolio for years to come. I don’t see this changing in the foreseeable future. I am a growth investor. Investing in publicly-traded growth companies helped me build a $300,000+ portfolio before 30. Today it’s closer to $500,000 and my portfolio goal for age 35 is $1,000,000. Interestingly, if I can maintain a 15% compound annual return in my portfolio from age 30 – 85 (55 years), that $1,000,000 can turn into $1,000,000,000 (yes – possibly $1 Billion!). That’s without the infusion of new money – from 1 2 INTRODUCTION capital appreciation alone. Compounding is a wonderful thing. In reality this is wishful thinking. Building wealth takes patience, and one must remain active in the market and allocate capital to new wealth-creating opportunities over time, in order to continually achieve an above average compound return. But I’m a dreamer. How a 15% Compound Annual Return Can Turn $500,000 into $1,000,000,000 in 55 Years (rough math – portfolio doubles every ~ 5 years using the rule of 72): Age Portfolio 30 $500,000 35 $1,000,000 40 $2,000,000 45 $4,000,000 50 $8,000,000 55 $16,000,000 60 $32,000,000 65 $64,000,000 70 $128,000,000 75 $256,000,000 80 $512,000,000 85 $1,024,000,000 For starters, what I will share with you in this book is how you can also build an achievable $300,000+ portfolio (and possibly more), by investing intelligently in growth stocks. Anyone can make money in stocks; the market doesn’t care about the colour of your skin, your culture, or sex. However, there’s some important things you need to CAPITAL COMPOUNDERS 3 first learn about the stock market, otherwise you’ll find yourself fighting in a treacherous battlefield. You must not only master the market, but most important – your own doubts, biases, and behaviour. I wrote this book to be the guide in your DIY investing journey. If you’ve been reading my free investment newsletter on RobinSpeziale.com/Subscribe (there’s 3,500+ subscribers; join now!), you’ll know that I call the top growth stocks “Capital Compounders”. Stocks that double, then double again, and again… achieving tenbagger ($1 turns into $10), 100-bagger ($1 turns into $100), and 100+ bagger returns. Think Apple, Netflix, and Amazon. Investing in future Capital Compounders is the goal. But let’s be honest – it can tough. There’s so many stocks (1,000s) trading on multiple exchanges, in various countries around the world. Plus, identifying a future Capital Compounder is not a binary process, where if a company checks off all of these boxes it’s a winner, and if it doesn’t, it’s a loser. Most Capital Compounder companies start out as new ideas, centered around a disruptive product and / or service, with a pioneering Founder / CEO at the helm who successfully executes the company’s grand but achievable vision. But by no means is this the definitive mix of winning factors. Bagging the big winners is not formulaic, nor is it easy. The discovery, and stock selection process involves a whole lot of intuition and luck, as much as it requires intellect and hard work. Imagine buying Amazon in 1997 (IPO), and having both the conviction and wherewithal to hold the stock through its ups and downs (-50% + drops in the stock in multiple years). You would have had to either 4 INTRODUCTION be crazy, genius, or you simply forgot to login to your brokerage account for all those years. But holding Amazon from 1997 until 2018 would have made you a multimillionaire. That’s why investing is more an art than it is a science, and why it’s possible that virtually anyone can make money in the stock market – sometimes the most unassuming ones. Luckily for me, successful investing doesn’t require a Mathematics degree, 180 IQ, or any special certifications (e.g. CFA). This is not widely known but many of the world’s top investors do not hold conventional degrees for the world of finance. You will find B.A.s (Bachelor of Arts) among the degrees of famous investors, and hedge fund managers. Case in point: Warren Buffett earned a B.A. in economics, and then was rejected for enrollment by the Harvard Business School. “I spent 10 minutes with the Harvard alumnus who was doing the interview, and he assessed my capabilities and turn me down”, said Buffett years after being rejected by Harvard. Today, Warren Buffett’s net worth is north of $90 Billion, making him one of the richest people in the world. These are some of the other notable investors who hold (“only”) a B.A. degree: Bill Gross (B.A. in psychology) George Soros (B.A. in philosophy) Carl Icahn (B.A. in philosophy) Peter Lynch (B.A. in history, psychology, classics, and philosophy) Bill Ackman (B.A. in history) I repeat – anyone can make money in stocks. But the top investors continually pick more winners than losers, beat CAPITAL COMPOUNDERS 5 the market over time, and stick through the good times and the bad times in the market. I’ll cover some of the top growth investors’ principles, and investing strategies through this book that you can apply in the stock market. You will also learn what the commonalities are among today’s top growth stocks (Small / Mid / Large Caps), and emerging growth stocks (Micro Caps) so that you can more easily find the future Capital Compounders – whether that’s in 2018 (when this book was published), 2020, or 2050. For background, I gave this book the same title as my talk from the Fairfax Financial Shareholder’s Dinner (April, 2017), where I shared with the audience my selection of 25 market-beating stocks (Capital Compounders) and their outstanding managers / owner- operators (“capital allocators”). This outperforming group of companies had over the long run (average 15+ public years) compounded capital at exceptionally high rates, in turn generating vast amounts of wealth for their shareholders.