It’s Friday, which means it’s mailbag day here at The Daily Cut.
All week, your fellow readers submitted questions about the biggest investment opportunities we bring to you at Legacy Research.
It’s the independent publishing group behind Jeff Brown, Teeka Tiwari, Dave Forest, and Jason Bodner.
Now, they’re standing by with answers.
Don’t forget, if you have a burning question to put to any of our experts, let us know at feedback@legacyresearch.com.
Coming up, some questions about private investing…
And we circle back to a debate that keeps raging in our mailbag… bitcoin or gold?
But before that, a quick shoutout to folks who joined my colleague Jeff Brown on Wednesday as he raised the curtain on our newest investment advisory, Day One Investor.
By the time a company goes public and lists on a stock exchange, venture capitalists and private equity firms have already taken most of the gains. There’s not much upside left for everyday investors.
For more than six years, Jeff Brown tried everything under the sun to get investors like you in while tech companies are still private. And he’s finally found a way…
He shared all the details at his event on Wednesday. So if you missed the big reveal… you’ll want to catch the free replay here.
Our first reader question is about Jeff’s own track record as a private investor…
Reader question: Jeff, I attended your Day One Summit. I look forward to learning more [from you on how to make gains]. However, I’d also like to hear about your losses.
I know losses aren’t something to brag about, but they give investors a much more complete set of facts for making investment decisions. I’d like to understand your results in total, not just your home runs.
– Conrad M.
Jeff’s response: Hi, Conrad. Thanks for attending my Day One Summit. I hope you got your answer there, but I’m happy to share it again in these pages.
I’m an angel investor – meaning I invest in early stage private companies. I’m active in over 260 private deals as of this writing. Many of those have been successes.
I’m up 35x on Axiom Space… 54x on Bestow… 111x on Bolt Financial… and 131x on JumpCloud. The best part is these companies are still growing and increasing in value. The final returns when there is an exit [when private investors can take out their money] will be astronomical.
These are merely a handful of the winners I’ve seen just in the last five years. I’ve invested in six companies that have gone on to billion-dollar valuations this year alone. That brings my total up to 12 of these “unicorns” over my history as an angel investor.
But I’ll be the first to tell you that not every private investment succeeds. It’s not uncommon for private companies to fail altogether.
Investing in a company’s earliest stages carries inherent risk. A business can fail for numerous reasons that are largely outside of the founder’s control. Several times, this has led me to lose most or all of my investment.
I don’t share this to scare you away from private investments…
Out of the 284 private companies I’ve invested in during the last 10 years, 13 have shut down. 13 out of 284 is about 4.6%.
For an angel investor, overall portfolio returns are most important… not whether any single investment fails.
I work extremely hard to find my readers investment opportunities with low risk and life-changing potential rewards.
I will never do anything that even remotely resembles mindless speculation or gambling.
That isn’t what I do as an angel investor. And that isn’t what we’ll do at Day One Investor. Every recommendation will have a clear investment thesis and strong reasons that make it a compelling opportunity.
Here’s a quick summary of the right mindset to have as an angel investor…
First, rational position sizing is key. Each position should typically be only a percentage of what you’d normally put into a public small-cap stock. And you should invest only money you can afford to lose in any single investment.
The good news is, you don’t need to throw your entire bank account into an investment to see amazing returns. If you’d invested a mere $500 alongside the earliest investors in Uber (UBER), for example, it would’ve returned nearly $2.5 million.
Second, invest in a whole portfolio of private deals. It can be tempting to think a certain investment is “the one” and go all in.
But the way to succeed and minimize your risk is by building a large, diversified portfolio over time. You should be prepared to invest in these private companies over a period of years – so you can get exposure to the latest and most promising companies.
A good number of these deals will profit modestly – perhaps doubling or tripling your investment. A few will fail completely. And some will be real “home run” investments with 100x or more potential.
Of course, those who join me at Day One Investor will have my guidance as we go through this process. I look forward to helping investors navigate this unfamiliar space.
Jeff’s not the only expert here at Legacy who targets private deals for his subscribers.
As regular readers will know, Teeka Tiwari recommends pre-IPO (initial public offering) shares at our Palm Beach Venture advisory.
And it’s been paying off. One company is up 130% since he recommended it there.
But one Teeka reader wants to know what happens if the market turns bearish…
Reader question: What would happen to these pre-IPO shares if the market had a big downturn that lasted for several years?
Would these companies still go ahead with their IPO plans, or would they put these plans on hold for years until the market recovered?
Or worse, would they cancel the IPO? If they did, what would happen to our money that we already invested in the pre-IPO shares?
– Michael E.
Teeka’s response: One of the good things about a successful pre-IPO campaign is it gives a company options. After raising funds, it can stay private and grow. Or it can pursue the opportunity to go public and list its shares on an exchange.
In the event of a market downturn, I wouldn’t be surprised to see companies pause plans to go public. I also wouldn’t be surprised to see them use their cash hoards to scoop up publicly traded competitors on the cheap.
This would be a great way to go public – buy revenues and strike when acquisition targets’ shares are selling cheap.
Regardless of the path a company chooses, your shares are secure. They won’t vanish if a company doesn’t go public in a set amount of time.
The biggest risk for investors in private deals is the same as the biggest risk for shareholders in any company – bankruptcy. With a bankruptcy, there’s a chance the share value will drop to zero.
Switching gears, Teeka caused a stir earlier this year when he urged his readers to dump most of their gold and buy bitcoin (BTC). He said the world’s first crypto has become a better protector of wealth.
Conditions seem ripe for a mammoth bull run in gold… The national debt and Fed money-printing are at all-time highs. Folks are worried about inflation.
But investors haven’t been flocking to the yellow metal as a crisis hedge. Instead, it’s been trading sideways… while bitcoin has climbed higher.
Not all your fellow readers are ready to throw in the towel on gold just yet, though…
Reader comment: Gold is real. Bitcoin is not. Gold has been around forever. I doubt its value will fall drastically. It has survived the rise and fall of empires. Bitcoin was invented by some guy who remains a mystery.
Bitcoin strikes me as a huge Ponzi scheme. Period.
– Bob M.
Reader comment: There’s a fundamental difference between gold and bitcoin. Gold is a physical asset. If the internet gets shut down in a state of war, gold will trump bitcoin.
– Jose J.
Others are convinced gold has had its day…
Reader comment: Gold is worthless. It’s finished. You’d need a 40-foot truck full of your chosen coins in your backyard for 70 years in order to retire!
– Joe F.
Reader comment: Gold seems to have lost its luster. It’s been overpromoted. Unlike crypto, desperate governments can seize gold. They can put their dirty little claws all around it and tear it from its rightful owner.
– Richard B.
While some are staying neutral…
Reader comment: Unlike gold, my crypto can create income. But a dead internet can kill crypto. Neither is safe from a government that has the guns. Ask an Afghan.
You cannot eat crypto or gold. So stock up on toilet paper and dried beans. Ask an Argentinian.
If you have gold, it needs to be in small pieces to be useful. You will also need a couple guns. Ask John Wick.
– Kenneth A.
Reader comment: I don’t think anyone can say with 100% certainty whether gold will last or bitcoin will fail. Today we live in a world where up is down and down is up.
The only way to hedge is to own both and be in the game. Too many folks will resist buying crypto, only to regret it. The same could be said for gold.
– Paul R.
Where do you stand in the gold-versus-bitcoin debate? Let us know your take… and if you have a question for anyone on the Legacy team… at feedback@legacyresearch.com.
That’s all for this week.
Have a great weekend.
Regards,
Chris Lowe
November 19, 2021
Barcelona, Spain