Stack This Selection Criteria To 3X Your Investment Returns

If you’ve read our last article, we talked about the first step to a profitable portfolio.

You do that by layering your defenses.

This keeps out all the junk, leaving you with only the good ones.

From this list of profitable companies…

How do you find companies that can potentially 2X, 3X or 5X your money?

This is really where everything gets interesting. Because at this point, it’s a little bit of art, estimates, experience as well as the data that you’ve dug up.

Here’s a quick tip:

Their GROWTH Potential

So the next thing you want to do…

is to look at the total addressable market.

How big is the industry/sector the company is operating in?

What is the growth rate of the industry?

How big will the estimated total addressable market grow in the next 10 years?

This not only tells you how much runway the business has for growth…

You are also leveraging the growth of the macro market economics.

Instead of looking at companies in a mature, slow growth industry…

You get to invest in what’s shaping the world we live in.

Instead of fighting headwinds, you are now riding the momentum of tailwinds.

And if there is one thing you want to take away from reading this article…

This is it: “Don’t Fight The Market Force…“

Next…

Their Market Dominance

So you’ve found a company that passed all the defensive litmus test.

The next thing you want to check is the company’s position in the market.

Is it one of the top players in the industry or just another ‘me-too’ company?

You want to make sure that the company has already solidified its position in the industry.

And is able to SCALE along with the industry.

As one of the ‘go to’ brands, they already have a business relationships with other companies, they’ve established top-of-mind awareness and they probably already have a firm business model in place.

Let me give you an example…

CASE STUDY

Here’s a quick question…

What are some of the most common complaints we all have?

Slow wifi…

Computer hang…

In today’s information age, there is a strong demand for performance.

Let’s be honest…

We want faster processing speeds…

We want better graphics…

We want smarter computers…

The interesting thing is, this doesn’t happen overnight.

And you probably already foresaw this coming about 10 years ago.

Company X manufactures high-performance chips used for rendering graphics, video editing, machine learning, and blockchain mining.

Let us look at the company’s revenue and earnings to make sure it’s products are in demand:

You can see that the revenue and earnings of Company X are growing…

The numbers tell their performance…

But as a consumer, if you are observant… you can more or less spot the tell-tale signs that the industry of which Company X operates in… is growing…

Play station 3, Play station 4…

Cinematic visual effects in film making (Avatar 2)…

The Crypto boom (mining)…

And what was needed to make all these work…?

GPUs…

And who is the leader in making GPUs?

Yes, you’ve probably guessed it by now…

Over the course of 10 years…

Nvidia’s share price went from $3 to $1107.26 today…

That’s 369X in return!!

Just $10,000 alone would have turned into $3.69MM today.

It may look like hindsight today but think about this…

The tell-tale signs were already there…

You saw it, you experienced it.

Their revenue and earnings numbers reflected their demand and profitability.

And even if you didn’t buy them 10 years ago…

There were so many other entry points.

For example, if you got in just five years back…

You would still have 31X your returns!

Now you’re probably asking…

If Nvidia is so good, why didn’t we find it…?

Well… we did =)

We covered Nvidia and shared them as an undervalued Quality Compounder exactly 2 years back.

This was before ChatGPT (which nobody foresaw obviously) and the AI Boom…

If you’ve invested in Nvidia then, you would still have 6.6X your money today.

Yes, We don’t ride on hindsight to ‘justify’ our theory. We actually walk the talk.

So layer your defenses to find the good companies…

Assess their growth potential…

And classify their market dominance.

Anyway, If you love this kind of returns…

We’ll show you how to filter out all these great, growing companies. (*Hint: There is a set of metrics that gives you all the clues to these companies)

We’ll show you how to look at their growth drivers…

And we’ll even show you how to accurately calculate their intrinsic values…

Heck, there’s also a checklist that gives you all the steps…

Find Out More About Alpha Quadrant 2024 Here

For now, keep in mind what’s discussed here in this article.

The addressable market…

A growing industry that’s already on its way…

And the market share…

Till then…

To your investing success,
The Fifth Person