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Greetings from Cape Town South Africa
Greetings from Cape Town South Africa where the summer warmth has made for a timely escape from the chilly Northeast. We are with a group of NBT friends and family for our 12th annual Wine, Dine and Stocks Adventure…judging by the first few days of laughter this year is going to be tough to beat. FULL report on our wine and dine discoveries to follow!
We start another year of NBT Week with a quick answer to the #1 question we get from subscribers: "What's the best way to buy our "public venture capital" emerging growth stocks."
The short answer is…by the dozen.
This asset class is unique—late stage venture capital and growth stage private equity in publicly traded securities. They way I've consistently made money in this part of my portfolio is what I am calling in my new book Next Big Thing Investing: Make 25%+ Profits Every Year in Emerging Growth Stocksthe 30/12/70 Strategy:
#1 Build an industry diversified portfolio of 12-15 DIFFERENT emerging growth leaders with 30% of the capital allocated to this asset class.
#2 Let the management skill of the company SHOW you who to keep and who to dump during the "traction phase" of the company's life cycle.
#3 Take the remaining 70% of your capital and the proceeds of sold stocks (which is KEY to this strategy) and place the balance on your winners who have proven themselves in the marketplace.
Here is the analog: in Next Big Thing investing we are playing "blackjack" and not roulette—and we are counting our cards too. NOBODY is a fortune teller or enough of a visionary to know which emerging growth company is going to be a winner and which one's strike out and fail.
Yes that includes me of course too. What we CAN know upfront about an emerging growth stock prospect is a LOT of things that would eliminate the stock from our portfolio—I call these the "Fatal Flaws" of public venture capital. I'll get into this list in detail in the upcoming book.
But the point here is in this asset class it's IMPOSSIBLE to win owning one or two of our NBT portfolio stocks—you are putting the odds WAY against you. In traditional venture capital the odds are 6-2-2 for every 10 investments: 6 fail, 2 break even and hopefully 2 are big enough winners they make up for the 6 who fail to make it into real companies.
In public venture capital (PVC) we have ONE distinct advantage on our side: if we stay on top of our portfolio companies and let THEIR results dictate to us who to keep and which shares to dump…THEN we do NOT lose 100% of our investment in the failures.
THIS is the key to our superior returns. In private VC the money lost on losers is 100%--that capital goes to money heaven and is a 100% total write-off in most cases. Those "zero return-100% loss" failures create a huge hurdle for your winning investments to make up for—which is why private VC returns since 1995 have been SO dismal for most VC funds (less than 2% annual returns according to recent research by the Kaufman Foundation on Entrepreneurship).
In the NBT strategy (focusing on publicly traded mid to late stage venture capital investing) we do NOT lose 100% of the capital allocated to our losers. Because we hold back 70% of the capital allocated to this space to in effect "double down" on our WINNERS…and because we preserve 40-70% of our initial 30% capital allocation by SELLING off our losers QUICKLY if their operating results are not coming as we expected (this is the "counting the cards" part of our blackjack vs. roulette analogy) we do NOT lose 60% of our capital on our losers.
Done correctly (and I have back tested the 30/12/70 plan back now over 5 and 10 years) the NBT strategy doubles an investor's return from the traditional buy and hope approach most investors take in this space.
My BIG point? To consistently make 25%+ annual profits, Public Venture Capital (PVC) investing is a DYNAMIC investment strategy and NOT a passive one. You need at least 10-12 DIFFERENT portfolio investments whose fundamental/operational results tell you who to keep (and double down on) and which stocks to trim to improve your overall portfolio returns.
I'll get into the whole strategy in the new book…but I'll get more detail on the NBT 30/12/70 Public Venture Capital strategy over the next weeks—I have worked a number of years on proving and improving the strategy and most important—it WORKS!
Cheers!
And now for our top stories of the week…
Pulse Beverage (PLSB) Adds 12 Million Thirsty North Westerners to Its Dist. Network |
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Adding Oregon, Northern Idaho, and Eastern/Western Washington State plugs one of the final holes in Pulse's distribution network and another 12 million thirsty people to their distribution footprint. |
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Pulse Beverage Coverage Initiated by Goldman Research...eh Rob Goldman |
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Our colleague Rob Goldman of Goldman Research published a nice report on Pulse Beverage today. As usual…people tweeted and posted that research was started by Goldman Sachs on Pulse…just wanted to clear this mild confusion up. Rob makes a good comparison that PLSB is “Clearly Canadian II”—with Bob Yates and Bruce Horton from Clearly Canadian fame running the show. |
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BOLDFACE Group (BLBK) Adds 2100 CVS Stores for the Kardashian Cosmetics Launch |
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Our celebrity beauty licensing company Boldface Group announced this week that CVS/pharmacy® has expanded the Beauty Brand's presence to 2100 key beauty doors after a successful initial launch of the Company's limited edition Holiday line. |
NBT Video of the Week...
Newtek Business Services (NEWT) |
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Tobin Smith of NBT Equity Group Inc. interviews Barry Sloane, CEO of Newtek. |
NBT Stock of the Week...
Pulse Beverage Corp. (PLSB) |
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Denver-based Pulse Beverage Corp. ($PLSB) develops and markets non-alcoholic, non-carbonated water-based nutritional drinks to niche segments of the beverage industry. Their current product line was originally developed by the Baxter Healthcare Corp. to be scientifically effective and contain REAL nutritional ingredients. Pulse now owns the rights to its products and does not owe royalties to Baxter. Pulse's goal is to create a “new product category that is focused on providing true and meaningful health and wellness benefits in a convenient, enjoyable and good tasting format.” The company created its mission and product strategies based on clear trends in the beverage marketplace and designed its non-carbonated beverages to appeal to the health conscious 30+ demographic. |
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NBT Investor Presentation of the Week...
BOLDFACE Group Inc Investor Presentation |
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Here is the business plan BLBK has used to raise $5 million in equity. We can hardly wait for a financial forecast updated for the new accounts. |
Quick Survey of the Week
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Is Apple a buy or sell under a $500 share price? |
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Founder and Editor-in-Chief for NBTEquitiesResearch.com. Contributor and Anchor for the Fox News Channel and Fox Business Network 2000-2013. Chairman & CEO of NBT Group, Inc., a boutique private capital investment bank and investor relations organization.
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