The Story of Our Investment Philosophy

To help you understand how we came up with the Super Stocks strategy, let’s take a trip back to the start. 

Back in the day, we were inspired by Benjamin Graham’s simple method of deep value investing.

Basically, an investor finds a company worth $10 and buys it for $5 at a huge discount. It sounds great and many investors have profited greatly from this. But there were a few problems tied to this:

  1. Most of these value companies going at massive discounts had huge inherent problems. They were experiencing deteriorating financial conditions, with some even facing bankruptcy. In other words, they were cheap for a reason.

  2. Once the value stock appreciates from $5 to $10, you are tasked to find a new stock as this is the maximum value you can extract from the company. We found this to be tiresome as it meant that we had to continuously find new ideas.

We went back to the drawing board and asked ourselves if there was a way we could solve these 2 problems.

That was when we chanced upon a special group of companies with specific traits. We call them "Super Stocks".


What Are Super Stocks?

Super Stocks are companies that:

Can Grow Their Revenues By More Than 20% Annually
Have Strong Financial Health and Low Debt
Exist in Industries With Strong Secular Tailwinds

Value Stocks vs. Super Stocks

As Super Stocks exist in industries that are growing rapidly, their potential to grow is much bigger. This means that if you buy a Super Stock at $10 when it is worth $10, it is still possible to create wealth. 

Sounds strange, isn’t it? How can you make money on something that is worth $10 when you bought it at $10?

Here’s the huge difference between traditional value stocks and Super Stocks.

Because Super Stocks are companies with large and expanding total addressable markets, they have long runways to continue increasing their revenues yearly. 

These are companies like Alphabet, Microsoft, and Celsius.

When they generate more revenue, they are worth more as a company. There is no limit to how much Super Stocks can be worth as long as they continue to increase their earnings. 

In this case, a Super Stock worth $10 in Year 1 can be worth $13 in Year 2. This is how Super Stocks investors create their wealth sustainably in the long run.

Can Super Stocks Survive Tough Economic Times?

When interest rates rise and inflation is high, Super Stocks tend to see a greater decline in stock prices. So why should investors still look at Super Stocks during tough macroeconomic times?

We believe that Super Stocks should be viewed differently from the mainstream generalized idea of growth stocks.

Some growth stocks are companies that have high debt and are living from quarter to quarter. Even worse, some of them have no revenues but are valued at billions of dollars.

In contrast, Super Stocks are growth companies with low debt and consistent growing revenues, making them less vulnerable to interest rate hikes and inflation. These traits enable them to tide through a recession when macroeconomic conditions are bad. 

Unfortunately (or fortunately for us!), the markets do not differentiate between Super Stocks and lousy growth stocks. 

During bad macroeconomic conditions, Super Stocks can get sold off irrationally and dip as much as 50%, despite them growing or maintaining their revenues. This market inefficiency creates opportunities for astute investors to scoop up Super Stocks at huge discounts.  

When macroeconomic conditions eventually improve, Super Stocks that have proven themselves to survive the downturn can rebound very quickly and give long-term investors a huge upside - just like a compressed spring.

How Super Stocks Can Accelerate Your Financial Journey

If you’ve read this far, chances are you're wondering what kind of stocks you should invest in.

Super Stocks? Dividend Stocks? Deep Value Stocks? What type of stocks will suit you the best? 

Everyone has different investment objectives. An individual who needs only $2000/month to retire will need very different investment vehicles compared to someone who needs $10,000/month.

To give you better clarity, let's run through this simple exercise. We'll use the example of a young adult who just graduated from University. Let’s call this person Peter.

Peter desires to attain $4,000/month in passive income in order to be financially free. 

This means that he needs to make $48,000 in passive income per year to achieve his goal of financial freedom.

If he gets a 5% yield from dividend stocks, he will require a capital of $960,000 to generate $4,000 per month.

Now, we call $960,000 the magic number. The more passive income you need, the higher your magic number.

Now, let’s assume that Peter has no initial capital as a fresh graduate. He invests $1,000 per month ($12,000 a year) in the S&P 500 index and generates 8% annual returns.

How long will it take Peter to compound his money to hit his magic number of $960,000?

Based on the calculation above, it will take Peter close to 27 years with an annual investment return of 8%. 

Now, if Peter invests the same amount into Super Stocks that can generate 20% annual returns, let us see how long it will take for him to reach his magic number.

Instead of 27 years, it will only take Peter 16 years to achieve his magic number of $960,000. That's 40% faster, almost halving the time taken to reach financial freedom!

So would you like to wait 27 years to hit your financial target, or potentially achieve it in half the time?

The answer is obvious. But this means you cannot settle for investment returns less than 20%, unless you're happy to wait out a longer compounding journey. 

However, it is not easy for most people to believe that compounding your money at 20% or more is possible.

But let us take a look at this Super Stock as an example. 

Over a period of 12 years from 31 Dec 2010 to 10 Jun 2022, this Super Stock has given investors an annualized return of 24.9%.

In the same period, its revenues grew at an annualized rate of 17.1%.

The growth in its revenues actually supported the 24.9% growth in its stock price in the long run!

This Super Stock is none other than Adobe, the computer software company that most of us are familiar with.   

There is a strong correlation between a company's revenues and its stock price. 

If you want to grow your money at 20% to hit your magic number faster, then you need to invest in Super Stocks that are growing their revenues by more than 20%.

At the end of the day, your investment vehicle must be able to suit your investment objectives. 

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