Thirty years ago, I was introduced to a wonderful financial guru. He seemed like an ordinary enough stockbroker at the time, but I came to discover that he had been a star at a major brokerage house in New York, and more importantly, he had been trained by a genius investor. At the time, I was just looking for a relatively inexpensive middleman who would offer me a single yearly fee for unlimited trades and, frankly, a voice who might keep me from doing something stupid. I got far more than I ever expected. My broker became my friend, and he passed on what had been passed on to him.
He wanted me to see a bigger picture than the stocks we were investing in. He wanted me to understand the real power of buying low, the power of trends, how the market often fails to let go of a rally when it should, that the markets aren’t really rational in the short run, how to use options for almost guaranteed income and other wisdom of evaluating a company that only time and experience provides.
He wanted me to understand risk/reward ratios and how seven out of 10 stocks could be bad investments, but if the other three were spectacular, you could come out a winner. He also taught me to recognize when something was too good to be true. When WorldCom started paying 10% dividends, he wouldn’t let me buy it: “Too good to be true,” he said. Eight months later, WorldCom stock was worthless.
The disruptive technology you think you see…is not the big picture.
Two concepts my guru taught me are underlying themes of how I pick investment ideas — and I recommend you adopt them as well. First, it’s important to see the big picture. I want you to get good enough at recognizing big changes in the world of science and technology to identify innovation worth investing in — with or without a newsletter editor, financial advisor or anyone else. Second, I want you to get a feel for appropriate risk/reward.
To learn about investing in tech stocks, you must open your mind to the big ideas in science today. If a company is developing a new cancer drug, you must understand the cancer before you even think about investing in the company. Therefore, it’s important to choose investments the way Magellan Fund guru Peter Lynch did it: He wandered into a mall and watched consumers. Then he bought Gap Inc. We will wander into the world of science and technology and observe.
Storytelling among humans is at least 40,000 years old, and it remains the most developed interface for transferring information. Storytelling makes investing compelling, understandable and fascinating. Last month, you may have read my story about a breakthrough idea about how two different fuel cells could complement each other.
It had nothing to do with any specific stock, and I mentioned none at the end of the article, but I am confident fuel cells are going to be very big in your life as we move away from petroleum-based energy. I want you to know about the trend toward fuel cells. It will make you a better investor.
As it turned out, my timing was fortunate. Honda Motor Co. recently showed off a sexy new prototype automobile that runs on the most plentiful element in the universe — hydrogen. But it doesn’t burn hydrogen in an internal-combustion engine the way a prototype Mazda did 15 years ago. That technology is old.
The Honda FCEV (Fuel Cell Electric Vehicle) Concept, first shown in December 2013 at the Los Angeles Auto Show.
This Honda makes electricity by passing hydrogen through a fuel cell. Honda’s surprise wasn’t the technology itself — auto companies like Mercedes and independent firms such as Ballard Power Systems (BLDP) have been experimenting with fuel cells for decades — it was the announcement that Honda will introduce a fuel cell auto you can buy in two years.
Tetsuo Iwamura, CEO of American Honda, said his concept car “hints at” a new direction for the company. Just when you thought the Nissan Leaf and the Chevy Volt and Tesla cars were the future, a Honda with a small tank of hydrogen shows up that can go 300 miles before it needs refueling, which takes three minutes.
I’m not recommending Honda stock, or even Ballard Power Systems, though you could do worse. I just wanted you to see a big picture that’s forming and embrace a revolutionary idea that will show up as investment opportunities.
The disruptive technology you think you see — the conversion of automobiles from internal-combustion engines to electrics — is not the big picture. That is yesterday’s big picture. Technology has already moved past the electric vehicle.
The truly disruptive trend is where the electricity to power these vehicles will come from. Who wants to rely on batteries? Who wants to wait for a charge cycle? Who wants to worry about building enough new power plants or installing 50-amp, 220-volt circuits in our garages? Wouldn’t you rather make your own electricity on the fly? You can with fuel cells.
And while we’re at it, just how far-fetched is the final scene in the movie Back to the Future Part II, in which Doc Brown picks up an aluminum soda can from the garbage and pops it into his car’s fusion reactor?
I can’t gaurentee that our additional science and technology features will offer immediate relevance and connectivity to daily life the way our usual stock coverage does.
But if you keep reading, one day soon your own brain will get it — the perfect investment opportunity based on a better general knowledge of science and technology. You’ll connect the dots and nobody will be able to take that away from you.
for The Daily Reckoning
Ed. Note: The future of technology is one of the most important and potentially lucrative bits of information you can know. And readers of Tomorrow in Review know that better than anyone. It’s a free service dedicated to examining the most incredible technologies the world has to offer… and to giving its readers regular opportunities to profit from them. Sign up for FREE, right here, and start getting tomorrow’s news today.
In his ongoing search for the world's most exciting energy technologies, Josh Grasmick has discovered one of the industry's biggest new developments... Literally. In fact, the object at the heart of this story is nearly twice the size of the empire state building, weighs 1.2 billion pounds... and floats. Read on...
Stephen Petranek’s career of over 40 years in the publishing world is marked by numerous prizes and awards for excellent writing on science, nature, technology, politics, economics and more. He has been editor-in-chief of The Miami Herald’s prestigious Sunday magazine, Tropic, as well covering a wide range of topics for Time Inc.’s Life magazine. His presentation, 10 Ways the World Could End, is one of the most original and most watched TED talks of all time. He is now the editor of Breakthrough Technology Alert, for which he finds the investment opportunities that create true value and move the human race forward.
You sound like a guy with skin in the game, Patrick. Too bad you’re wrong. Fuel cells are it. Your little plug in Prius is yesterday, Dude.
“I’m not recommending Honda stock, or even Ballard Power Systems, though you could do worse” Not much worse, BLDP is below its 1996 IPO price.
That’s what I was thinking: hydrogen isn’t free and isn’t an energy source in itself.
Ben Bernanke has a blog now (not an April Fool's joke). David Stockman takes "The Bernank" the task, using his first-ever post to refute all of central banking...
Getting into space is getting more complex, and a lot cheaper. A recent launch typifies the new power of private rocketry as well as the ability of competitors like SpaceX and Boeing to cooperate to make the price tag of a launch cheaper. Stephen Petranek has more…
Companies go public to rake in a few billion dollars for themselves and the underwriters. And the suckers-- sorry, investors who gobble up shares when these things come out-- usually end up losers. The stock sinks once the initial euphoria wears off. Then it levels off at a much lower price before maybe rising at a normal pace again.
A money illusion sounds like something a prestidigitator performs by pulling $100 bills from a hat shown to be empty moments before. In fact, money illusion is a longstanding concept in economics that has enormous significance for you if you’re a saver, investor or entrepreneur. Jim Rickards explains...
Traders bid up oil prices this week, based on reports of major escalation of hostilities in Yemen, just south of Saudi Arabia. It’s part of Iran’s long-term strategy to surround the Saudis. Which is why Byron says the Saudis’ primary motivation in crashing oil prices last November was to weaken Iran...