I’ve just had the most exciting education experience in many years — three half-hour sessions with Jon Markman and the amazing wealth-building power of what he does. Here’s the transcript, edited for clarity and brevity. — Martin
Technology Investing Bootcamp:
How to Profit in the Best and Worst of Times
Part I. Why Tech Stocks? And Why Now?
Martin Weiss: Not long ago, a very unusual email landed in my inbox. It was from tech specialist Jon Markman, and it came with an even more unusual attachment: A spreadsheet showing the results of his proprietary trading strategy designed specifically for the tech sector.
The word “surprised” — even “shocked” — can’t begin to describe how I felt when I looked at the numbers in that spreadsheet.
It documented, trade by trade, a very simple strategy to buy and sell just a few times per year.
It showed that if you followed this strategy, you could have turned a small $10,000 grubstake into more than $2.3 million — $2,316,345 to be exact, before commissions and taxes.
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And, it showed you could have done it all by using strictly ordinary investments that any investor can buy, applying a simple, reasonable, prudent strategy that any investor can follow.
That’s why I felt it was so important to offer you this Technology Boot Camp with Jon Markman. I wanted you to have the opportunity to see exactly how you can use Jon’s system to go for those kinds of returns.
In this three-part series of Boot Camp webinars, Jon will cover all the bases.
First, he will show you why the tech sector currently offers so many large profit opportunities for investors.
Next, he will tell you about four technology megatrends paving the way for select tech stocks to continue booming for years to come.
He will show you how he spots tomorrow’s technology titans today. He will name companies on his radar screen right now with the potential of becoming tomorrow’s Amazons, Googles, or Apples.
And he will show you his incredibly prudent and innovative strategy with the power to transform a small $10,000 investment into $2.3 million.
Jon’s credentials as a technology stock specialist are unsurpassed. Jon is the man who developed one of the first objective and comprehensive stock screening systems in the world: Microsoft’s StockScouter system.
Jon is the man who helped launch Microsoft’s MSN Money website. And more recently, Jon is the co-creator, with his partners, of the tech-sector trading strategy I just told you about. So, Jon, thank you very much for joining us.
Jon Markman: Thanks for inviting me.
Martin: Let’s start with the main topic for this first session. Why tech and why now?
Jon:Technology is not new. Technology is the way that humans use tools to augment their ability to interact with the world. Technology absolutely drives history.
You think about the Middle Ages when kings built castles. That was technology. When they built moats around their buildings. That was using architecture and technology at the same time. When they created catapults to fire boiling vats of oil over their enemies. That was a type of technology.
And then you can zoom all the way to the middle of the 19th century with the steam engine — again, massive change in technology that augmented humans’ ability to work and to grow.
In this country, the most important technology of the eighteenth century was the cotton gin, which helped the South build a tremendous financial powerhouse — responsible for most of the United States’ money during the eighteenth and early nineteenth centuries.
The point is that technology helps advance the cause of man through ambitions to grow and to connect. We want to connect with other people. We want to get to places faster. We want to be entertained in a more distinctive way. And all of these require technology. But when it comes to technology stocks in the U.S., I want to talk about …
Four Megatrends Revolutionizing How
We Live Now, and Will Live in the Future
My #1 one new megatrend is one that I have been talking about for the last 10 years. It is not new but it is not played out either: I call it “Mobile everything, mobile everywhere, mobile first.”
All computing will soon be on the go, 24/7, 360 degrees. Worldwide, three billion people are accessing the Internet through mobile devices. And by the end of this year, smartphones and tablets will be the primary means of accessing content around the world.
Martin: I know. I was in China recently and then Japan as well. They skipped over the home computer phase and went straight to mobile access of the Internet.
Jon: Yes, and the pace of change is accelerating — especially in the United States: Six months ago, it seemed kind of cool to take your Apple device and click it at a device at the retailer. But now, even that seems almost passé.
Why take it out of your pocket? Square has a deal with Snapchat that will allow you to pay vendors or pay your friends through a Snapchat button. And most retailers will soon have buttons that’ll allow you to pay for whatever it is that you want to buy — whether it’s diapers or a diamond ring — through text messaging or through their Twitter and Facebook feeds.
So the technology of payment is just rocketing forward. And that’s a great example of mobile everything.
If you’re buying tech stocks, this changes everything. It means the world needs new types of faster chips that require less power than you would normally have in a desktop.
You need all kinds of new security. You need all kinds of new speed. And you need mostly new infrastructure. So it presents all kinds of great opportunities for investors.
You have companies making chips that will specialize in mobile communications. Their semiconductors are the brains of the operation — that tell the rest of the device like your iPhone what to do.
You have specialty software which governs customer interactions and provides security for these payments and for their communications.
Then there’s the network and storage integration. You have to connect these devices. You have to store all the data. This is what is commonly known as “the cloud.”
And finally, you have the integrated devices themselves — your iPhone, your Nexus 6, the ones that consumers use to connect to each other. Each of those has a group of companies behind them whose shares I think are going to grow exponentially over the next 10, 15 years.
Martin: So far we’ve just talked about one megatrend.
Jon: Another one is the Internet of Things. Have you heard of it?
Martin: I have. Right now it’s mostly people who are connected to the Internet. For example, I’m connected to Skype right now, which is connected to the Internet and then feeds into your computer. But in the Internet of Things, it’s products on shelves, it’s parts being delivered to factory floors. All of these things would have a little chip that sends information about where it is and what it is doing, correct?
Jon: Exactly. The Internet of Things is the idea that everything is connected to everything else. I have been talking about this for about 10 years and it’s kind of funny to me that the Internet of Things has become “a thing.”
Let’s say you go to Wal-Mart and you pull a can of soup off of a shelf. The shelf deducts that can of soup from inventory and that triggers a request to the manufacturer to send more soup.
If you have “Google Now” on your phone and you park somewhere downtown, later your phone is going to remind you where you parked. You didn’t tell the phone to remember this. You didn’t tell the parking lot to tell you. They just knew that you might want to know and talked to each other.
Martin: But what are some of the beneficiaries of the Internet of Things?
Jon: Again, you have chip makers — semiconductors that are even smaller than the ones in your phone. Because they have got to be mass produced at extremely low cost.
Martin: Megatrend #3?
Jon: Drone technology, probably the most innovative and most important of all.
In this country, you can go on to Amazon and buy yourself a $50, $150, $350 drone, which is essentially a remote controlled helicopter or plane with a camera attached. But drone technology is going to be much more associated with vehicle transportation than with anything in the sky.
Martin: Driverless cars or driverless delivery devices?
Jon: All of the above. I think that, ultimately, people will realize that about 90% of the human race are terrible drivers. We go too fast. We’re too distracted. We’ve got kids in the back and turning on the radio. You’ve got road rage.
Martin: Texting and driving. Ask any mom who is a member of MADD, Mothers Against Drunk Driving, and you’ll get a very strong argument for finding a better way to get people from place to place.
Jon: People get so upset about guns, drinking, heart disease and obesity as a cause of death, as they should. But the number one killer in the United States is car accidents.
People will still be able to drive 25 years from now for sport. But driving yourself is going to really start to disappear — at first slowly and then very quickly. Drones will be like people movers at airports: You get into something and it takes you someplace. Simple.
Another thing that is sort of drone-like is Uber — a new methodology similar to taxis. You can have an Uber vehicle pick you up basically anywhere, whether it is downtown or in the middle of a suburb or even at your house — places where you might not normally want to take a taxi or even think about getting a taxi.
Let’s say you’re at your office and you know you want to leave in about five minutes. You press a button on your iPhone. Uber knows where you are because your phone has GPS. Then, all you do is you walk off the curb, get into the back of a car, and the driver takes you where you’re going.
When you get to your destination, instead of handing the driver money — or even waving an Apple Pay device at him — Uber already has your payment information and draws money either from your PayPal or bank account. And you walk away.
You have called it electronically. It knows where you want to go electronically. And when it drops you off, your payment is made electronically. So in a lot of ways I think these Uber experiences are going to pave the way towards the way people think about drones.
Martin: Instead of a driver, you could be picked up by a driverless drone using the same or similar software.
Jon: Yes! And that gets into the whole issue of who the winners are. Drone manufacturers include makers of wheeled and winged vehicles and the components.
Software makers are going to provide instruction sets for the drones, plus, of course, the interface with human beings. And part of this software’s going to be the database makers.
There’s a vast amount of data that’s necessary for drone vehicles to be successful and it has all got to be amassed, sorted, understood and accessible quickly.
For drones to be effective on the road, they’ve got to be able to understand every road condition, every lighting condition, every kind of rain or snow condition. They’ve got to know every street. They’ve got to know where every curve is. All this may sound complex, but really it’s just data and it all can be organized and stored — much like Google Maps has done with the maps that we’ve all become accustomed to.
In the end, it will make everyone safer. In fact, we may discover that drone technology saves a lot more lives than all the biotech and pharmaceuticals in the world.
Martin: That’s quite a statement. I hope you’re right.
Jon: The fourth megatrend is Solar energy, which most experts say will far eclipse fossil fuel in terms of providing low-cost energy. And we can already see solar plunging in price.
In the past, the threshold for “cheap solar” was 30 cents per kilowatt hour. But now, Saudi Arabia — ironically one of the most advanced countries in this area — has announced a deal to get 5½ cents per kilowatt hour of solar energy, which is astonishing. If other countries and companies are able match that, you’re going to see a huge adoption of solar power — a major phase change.
I think it’s going to be very fast. Apple, for example, just made a deal with First Solar to supply all the energy for one of its large new factories and complexes in Arizona, plus much of the energy for its new California facility.
They’re not doing this just because it’s environmentally friendly! They’re doing it because of the cost!
Fossil fuels have only truly been important in the world for the last 115 years or so — ever since they were discovered as an energy source.
Soon, I think we’ll look back and say, “Yes, that was a pretty cool way of advancing the world for about 115 years. But now it’s a relic of the past.”
Solar energy is much more efficient. It’s very plentiful. There are new ways to store it for use in times when the sun is not out. And there are new ways to transport it from places with sunshine to places without.
I feel very strongly that solar will dominate in homes and industry over the next 20 years.
Martin: Who are the big players that can feed this huge shift to solar?
Jon: Semiconductors. Specialized plant construction companies. And software companies — Big Data is required to coordinate sun exposure with demand and to move it around the country. And companies that install solar at homes — even in areas that don’t get a lot of sunlight, such as where I live here in Seattle.
How to Spot the Next
Apples, Googles or Amazons
Martin: Jon, today I want you to name names. I want to understand more about the actual companies that are behind these big megatrends, and that are helping to drive the success of your investment strategy.
Jon: The most important thing to recognize is the next Amazons, Googles, and Microsofts are going to start small.
Martin: Do you want to buy them exactly on the day of the IPO?
Jon: Absolutely not! You want to wait at least six months to a year to let the new company get used to being a public company. But let me give you my complete checklist.
1. Real revenue of greater than $100 million a year. Once a company gets up to that level, it shows that they’ve got something on the ball.
2. Real earnings of at least around $15 million a year.
Martin: So we’re not talking about companies like the dot-bombs in the late 1990s that had all this activity, but were losing money hand over fist.
Jon: Correct. And unfortunately this criteria is going to knock out a lot of the biotechs at an early stage — because most of the biotechs that come public are what we call “clinical-stage” biotechs, that are not yet earning any money. Don’t get sucked into them until they have real earnings to report.
The next thing I recommend is:
3. A return on equity (ROE) greater than 15%.
I think that’s a good metric of effective management.
Plus, you want to look at the biographies of the managers. You want to see that they’ve been successful with previous public companies. You can get a pretty good sense of whether you want to invest in somebody by watching their investment conference shows, which are almost always on the company’s website.
Martin: So just to watch the video, see what the guy has to say, and either you like him or you don’t.
Jon: Yes. Almost every investor has some pretty good radar about who’s an effective communicator and who’s just BS-ing.
#4. A large market with few competitors.
For instance, a lot of the biotechs that come public are focused on curing a very niche problem that only affects maybe 2,000 – 3,000 people worldwide. Obviously you’re not going to get a big business out of that. So make sure that your company is addressing a large market with few competitors.
#5. A company that communicates well with the public.
If a company can’t do this, it’s going to have a very hard time marketing effectively and I think this is really something that most investors miss.
#6. Products and services that are part of a megatrend.
Amazon was in the forefront of electronic retailing. Google was in the forefront searching and discovering the world through the Web. Microsoft was the first company to make money on personal computers because they managed to license MS-DOS to IBM in the mid-1980s. Likewise, all the companies that are going to be really huge in the future must be part of a great megatrend.
#7. Better than their rivals, cheaper than their rivals, or faster than their rivals.
A company has to do something that gives it an edge. Don’t just look at its chart. Don’t just look at financials. Ask yourself: “What does this company do better than any other company?”
#8. Inexpensive vs. the market and their competitors.
A great example was Apple in 2001 — extremely undervalued, trading for just a bit above its cash level.
Another is Qualcomm in late 1999, trading for just a bit above cash — right before it rose 1,000%!
I have a unique measurement of intrinsic value — what a smart, professional investor would pay for the company to take it over? I apply that measure to any company I invest in.
$10,000 into $2.3 Million
Martin: Jon, I’m going to briefly tell our readers the story about how I got into this project with you. But feel free to jump in at any time, okay?
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Jon: Sure. Will do.
Martin: When I first got the data on your investment strategy, what I first saw was that your signals since 2000 could have turned every $10,000 invested into $78,200.
That’s nearly 15 times better than the results achieved by the average S&P stock in that same timeframe. And it’s 34 times better than the gains in the Nasdaq 100.
But I knew that, during that same period, the Nasdaq had fallen from a peak of over 5,100 in the year 2000 to a bottom of nearly 1,100 two and a half years later. And I also knew that the recovery in the Nasdaq since then has been a long and hard path.
So how could an investment strategy based on that index possibly have been so profitable? How could it have made you over seven times your money?
I figured I must have misread something. Or perhaps there was an error hidden in one of the formulas. So I called for help.
I asked my research team to crunch the numbers for themselves. And I told them to follow the strategy all the way back to the year 2000 — to analyze and confirm the results of every trade, to double-check every gain, every loss down to the last penny.
Their conclusion was this: If anything, they said Jon’s spreadsheet did not do justice to his signals.
First, they found that, if you had followed Jon’s buy and sell signals since 2000, you could indeed have made over seven times your money.
But more importantly, they found that this was only true if you had taken all your profits off the table at the end of each year.
In other words, Jon’s spreadsheet assumed that you restarted each New Year with the same original $10,000 investment. Jon assumed you never reinvested your gains.
I think that’s an overly conservative assumption. Even with the drag of taxes, you could have easily reinvested some portion — maybe even a big chunk — of those profits.
Plus here’s one more key point: Jon’s strategy qualifies for use in a retirement account that allows your money to compound, tax-deferred, year after year.
Jon, why didn’t you take that into consideration?
Jon: Well, if I had shown it with compound results, I was afraid you wouldn’t believe me.
Martin: Well, actually I didn’t believe you at first. So let me explain to our viewers what happened next. Our researchers found that if you had followed Jon’s buy and sell signals in a tax-deferred account and you had reinvested your gains just once yearly at the beginning of each New Year, your $10,000 would now be worth more than $2.3 million.
Plus, the astonishing accuracy of Jon’s model does something I would never have thought possible: It transforms technology stocks into all-weather money-makers. In fact, the data shows that investors following Jon’s signals since 2000 would never have suffered a single losing year!
Losing trades? Absolutely. Losing months? Yes, sometimes, of course. But based on the historical data from 2000 to 2015, there were no losing years. Not a single one.
Of course, that’s the past and, needless to say, the past is no guarantee that this model will work as well in the future. But what impresses me the most about Jon’s strategy is that he does all this without ever shorting the market. Without ever using put options. Even without using inverse ETFs, which are designed to make money in the falling market.
Jon: That’s correct.
Martin: So let’s go through some critical facts here that our research team has given us in analyzing your spreadsheet.
In your best year, 2009, our studies show that your model produced a 91% gain. And in that year, it was nearly 3.5 times better than the gain posted by the S&P 500.
Jon: And I want to point out: People were doubting the rebound of the market throughout 2009 all the way through into the end of the year.
In fact, they continue to doubt it. But the model gives you a confidence to go ahead and buy even when so many talking heads and supposed "experts" are telling you to stay away.
Martin: Since 2000 — we’re looking at the entire period now — your average yearly gain has been 47%. That’s eight times more than the yearly gain of the Nasdaq 100 during the same period.
And here’s a very interesting fact: For the past six years, while the S&P 500 has posted an average gain of 17.6% each year, your average annual gain has been 53.3%.
Does that sum up the basic facts there, Jon?
Jon: Yes, that’s absolutely accurate and it’s completely verified. The system isn’t the result of some cheapo, trend-following techniques or some purely price-based studies that anyone can scare up in a back-testing program.
The system is based on deep economic psychological and social research and was created in tandem with some veteran mathematicians and scientists who developed cutting edge techniques for high-end institutional clients.
So these techniques, which owe more to physics than the economics, have never been deployed before in a program presented to the public. This is a first I’m really excited to introduce to you.
Martin: Thanks, Jon, for making this possible.
Jon: Thank you, Martin.