We’re always on the lookout for “asymmetric investments” here at the Cut.
These high-reward bets require you risk only a small amount of money.
But when they pay off… they can turn small grubstakes into small fortunes.
And over at our Strategic Trader advisory, colleague and renowned speculator Dave Forest has rolled out an asymmetric investment strategy that’s blown the lights out.
My guess is 99% of investors have never heard of it.
But it’s handed Dave’s paid-up subscribers the chance to lock in gains of 1,186%… 2,805%… and even 4,942%.
Dave calls this opportunity a “Double IPO.” He’s so excited about its profit potential, he’s put together a briefing all about it.
You can catch the briefing for free here. Then read on below for the Q&A I had with Dave earlier this week.
But before we get to that… a quick introduction is in order.
I think of Dave as the Indiana Jones of Legacy. He’s spent the last two decades with his boots on the ground, searching for new discoveries and breakthroughs in the natural resource sector.
It’s taken him to countries including Brazil, Uzbekistan, Myanmar, China, Russia, Colombia, Peru, Laos, Zambia, Madagascar, Indonesia, Portugal, and the Czech Republic.
Legacy’s own Indiana Jones hunting for copper and gold in Nevada
And Dave’s been killing it for paid-up subscribers of his three advisories: Strategic Trader, Strategic Investor, and International Speculator.
In addition to the gains I mentioned up top, he recently gave his subscribers the chance at ones as high as 346%… 382%… and 906% on tech-metal mining stocks. And just last month, Dave gave readers the chance at a 1,019% gain on a rare-earth mining stock, Rare Element Resources (REEMF).
But I’ve never seen him so excited about a speculative opportunity as he is about Double IPOs.
So I called Dave at his home in Vancouver, Canada. And he shared more on what his new strategy is all about.
Chris Lowe: Your Double IPO strategy is a way to play the boom in a type of IPO that’s been grabbing the headlines lately – SPACs. Can you break it down for folks who are new to the whole IPO and SPACs market?
Dave: Happy to. I know this is new to a lot of readers. And it can be hard to wrap your head around at first.
An initial public offering – or IPO – is when a private company goes public by listing its shares on a public stock exchange, such as the New York Stock Exchange or the Nasdaq, for the first time.
SPAC stands for special-purpose acquisition company. They’re also known as “blank check companies.” They’re another way for private companies to go public.
SPACs are publicly listed companies with no operating business. Their sole purpose is to take private companies public by merging with them.
Chris: So where do the Double IPOs come in?
Dave: You have the first IPO when the SPAC goes public.
The money it raises through this IPO then sits in a trust until the second IPO.
This second IPO is when the SPAC merges with its target acquisition and takes it public. From that point, buying shares in the SPAC is equivalent to buying shares in the company it merged with.
The second IPO has two important functions…
First, it lets private companies raise cash they need without the hassle, paperwork, red tape, and high cost of a “normal” IPO.
Second, it gives regular folks a chance to get in early on some of the most exciting businesses in the world.
Thanks to SPACs, they can do this alongside billionaire venture capitalists – all through their regular brokers.
That’s what I love so much about Double IPOs. They’re a way for regular folks to do an end run [an evasive football maneuver] around Wall Street.
I’ve had some extraordinary success with this strategy. For instance, my readers have had the chance to reap gains of 359%, 392%, and even 2,805%.
Chris: I know you target an unusual kind of security to profit from SPACs’ second IPO. It’s something most regular investors have probably never heard of. Tell me more about it.
Dave: Sure. My strategy focuses on a type of overlooked security called a warrant. Most people, outside of super-rich investors such as Warren Buffett, have never heard of them. But they’re hands down one of our favorite trading tools.
Buffett has made billions of dollars on warrants.
Warrants give you the right, but not the obligation, to buy newly issued shares in a company at a specified price or better.
The price above which you can buy the stock is the exercise price, or strike price.
Warrants allow you to speculate on a company’s shares going up. And you don’t have to put as much money at risk as you would with regular shares.
Chris: Why do companies issue warrants in addition to regular shares?
Dave: They use them to “sweeten the pot” for investors. If a company does well… and its shares rise above their exercise price… warrant holders can pick up shares in the company for nickels and dimes.
Even better… you don’t need special permission to buy and sell warrants. You can trade them through your brokerage account… just like with any other stock.
Chris: I mentioned a 4,942% gain on a Double IPO play in your Strategic Trader model portfolio. That’s enough to turn every $1,000 into over $50,000. Your holding period for this trade was a year and a half… Wow. Tell me a bit more about that trade.
Dave: Thanks. It was our top-performing recommendation of 2020. In fact, it’s one of the greatest calls of my career. Readers made crypto-like gains on a “boring” mattress company.
You see, these warrants were issued by Purple Innovation (PRPL). It’s an online mattress retailer out of Utah. You may have seen its ads on TV. The company upended the mattress industry by selling directly to consumers.
Purple Innovation went public via a SPAC in July 2017. This created shares and warrants in PRPL.
My chief analyst, John Pangere, and I liked its prospects. Annual sales were growing by double digits. We figured it was a matter of time before mainstream investors caught on. And we decided to play this setup with warrants.
Chris: Why warrants and not the regular shares?
Dave: When we first recommended the Purple Innovation warrants, the company’s regular shares were trading at $5.75. But warrants were trading for just 19 cents.
That’s an incredible bargain. Every $1,000 investment would have given you 174 PRPL shares. But it would have bought 5,263 PRPL warrants.
Over the next year and a half, PRPL shares rocketed higher by 431%. That’s enough to turn your original $1,000 into more than $5,000.
But the PRPL warrants soared 4,942%. That’s a more than 10x return over the regular shares. It’s enough to turn $1,000 into more than $50,000.
That’s life-changing for most folks. But that’s just the beginning. John and I have done this over and over again.
Readers also had a chance at a 29x gain in the warrants of electric-vehicle-charging company Blink Charging (BLNK). And they’ve had the chance to make a 7x return in six months on 5G-boom play Nesco Holdings (NSCO).
Chris: What are some of the characteristics you look for in a warrant with maximum profit potential?
Dave: John and I use a unique strategy. It helps us find the safest warrants with the most upside potential. We call it our T-U-V system. It stands for time, underlying stock, and volume.
Before we consider any warrant trade, we want it to meet three criteria…
T stands for time. Our sweet spot is warrants that expire in three to five years. That gives the shares plenty of room to rise above the exercise price.
U stands for underlying stock. The underlying stock needs to be strong and have plenty of upside ahead. We never recommend our readers buy warrants on a stock we wouldn’t also be happy buying.
V stands for volume. We eliminate even the best warrants if they don’t trade on high volume. That allows our readers to get in and out of these trades easily. If trading volume is too low, that can be complicated.
Chris: Sounds to me like a great asymmetric setup. Warrants are much cheaper than stocks. But the upside potential, when these speculations pay off, is much higher.
Dave: Definitely. Most of my career has been looking for opportunities to make an outsized return with only a small amount of money.
It’s especially important that folks look for asymmetric opportunities today. As you’ve been writing about in the Cut, stocks are very expensive right now compared with any other time in history.
On a price-to-sales basis, the S&P 500 – a bellwether for the U.S. stock market – is more expensive than it was during the dot-com bubble at the end of the 1990s.
In other words, investors are willing to pay more now for every dollar of sales the S&P 500 companies produce than they were during the last stock market bubble.
Everybody’s a little worried about a crash in the stock market right now… and with good reason.
Do you want to have a huge amount of money invested in stocks, when there’s a high risk of a crash?
Or would you rather have a small amount of money invested in something that can deliver even bigger upside?
You could risk investing $100,000 in the S&P 500.
Or you could aim for an even bigger return by investing a few hundred dollars in a warrant that might go up double, triple, or more.
Sure, you can get a 100-bagger with stocks. But that could take decades. Just look at Amazon.com (AMZN). It took 20 years to go 100x.
Warrants, on the other hand, give you the chance to do the same in just a few years… or even months.
Don’t get me wrong. You still want the bulk of your retirement nest egg in stocks. That’s what will help you live comfortably into retirement.
But a speculative portfolio of warrants like John and I recommend in Strategic Trader can change your life. They can help you buy that sports car you’ve always wanted… take a dream vacation… put a down payment on a house… even pay off your kids’ student debt.
If you want to put this life-changing strategy to work in your portfolio… I urge you to check out my free briefing here. I go over everything you need to know about what warrants are… and their explosive profit potential… and reveal my top three picks to get you started.
We ended 2020 on a high note. Now, we’re looking to do even better in 2021 and beyond.
Chris again… That’s all for this week. Remember to send your questions and comments for any of our Legacy Research experts to [email protected].
Have a great weekend.
Regards,
 |
Chris Lowe
March 19, 2021
Barcelona, Spain