Updated: Jun 30, 2019
In my over three decades of investing I have found there are two ways to beat the overall returns of the market over time. The first is to take on more risk. This involves investing in the higher beta parts of the market like biotech, tech and small caps. One has to have a very long time horizon and be willing to live with the extra volatility that course of action entails. Most investors do not have the patience or stomach for that type of strategy I have found. Which is one reason why low beta dividend articles are consistently the most trafficked here on SeekingAlpha.
The other way to beat the market over time is to find and invest in overlooked niches of the market. I have found two of these that have consistently beat the markets over the years. The first is to invest in attractive small and midcap stocks that have significant insider buying. These tend to be names that don't attract much analyst coverage, so insider buying can be great 'tells'.
This is what led to the launch of the Insiders Forum in the summer of 2016. Our model portfolio consists of 20-25 attractive small and midcap equities with notable insider purchases. As of the market close Friday it has outperformed the Russell 2000 by nearly 2000 bps (47.36% overall return versus 27.71%). It is a record we are proud of and are focused on continuing.
The other overlooked niche I have found most of my ten baggers within over the past 30 years is something I call 'Busted IPOs' which tend to have higher volatility than the holdings in The Insiders Forum.
Busted IPOs are stocks that have been public for 18 months to five years that are trading substantially under their IPO prices. I have found once the analyst hyperbole blows over and stock lockups expire around Busted IPOs, many of these “once loved” equities can be had for 25 to 50 cents on the dollar from when they first became public.
The nice thing about the part of the market is that a lot of bad news is 'priced in' the stock price of these beaten down shares. Even the 'whiff' of good news can send these stocks soaring which is why so many ten-baggers come from this overlooked part of the market.
Not surprisingly, the best performing stock in my portfolio this year comes from a 'Busted IPO' named Axsome Therapeutics (AXSM). It is also the reason we launched the Busted IPO Forum late in the summer of 2017. Its model portfolio consists of 15-20 'Busted IPOs' across different sectors of the market including biotech, technology, finance and energy at the moment.
How has this model portfolio of 'Busted IPOs' done?
While the portfolio has been volatile as expected, returns compared with our benchmark have been outstanding. As of Friday's market close, The Busted IPO Forum model portfolio has generated an overall return of 24.66%. This is a ten-bagger considering the same amount invested in iShares Russell 2000 ETF (IWM) which is a proxy for the Russell 2000, led to a return of just 2.35% over the same time frame.
Thanks to taking some profits recently in a couple of our winners, we will be adding two new selections to our model portfolio in coming weeks. We also just added a new 'Option Play of the Week' feature to our weekly portfolio updates.
We also are raising our annual subscription rate by $50 annually on July 1st to reflect this additional content, outstanding performance and bring the price of the Busted IPO Forum in line with the Insiders Forum.
However, from now until the end of June, you can initiate your free two week trial into the Busted IPO Forum. Not only will you get a risk-free 14 day trial to try this service with no obligation, you will also lock in our current low rates for the life of the product should you choose to stay past the free trial period. To sweeten the pot, we will even take 20% off the first year of membership.
You must act quickly!
This promotion will expire at midnight EST on Sunday, June 30th.
Thank You & Happy Hunting,