Find a theme. If the last 18+ months have taught me anything, it is find a theme.
Find a theme that resonates with you as an investor and learn it both forward and backward. Don't invest blindly or fall in love but find the theme or themes you think are going to carry technology forward or society forward or even society backward (hello online gambling).
There's a ton of things to choose from out there. I've fixed myself on psychedelics and cannabis (alternative life sciences), iGaming, eSports, cryptocurrencies and NFTs, green tech, biotech, and private offerings. At least for the most part.
This isn't an all-inclusive list as I still play plenty in the tech space, especially on the trading side, but when it comes to trying to find the next big thing or names with asymmetrical reward versus risk these are some of the areas I'm looking to. Really, I could throw small-caps and microcaps onto the list that sits as an asset class more than a theme.
Although it hasn't been my forte in the past, I am adding miners to the list, including gold, silver, copper, lithium, and oil sands. Again, I want small names, nothing on the radar of Wall Street yet. There's simply too much competition out there to get an edge on big names any longer outside of some scalp traders. Sure, buy and hold works fine, and I favor that, but it won't offer asymmetrical risk-reward scenarios.
What do I mean by asymmetrical risk versus reward? I'll give you an example. I'm playing around in the eSports plus NFT space. This is a new space, new company, so immediately I know any risk is 100%. Sure, we say that about everything but in few worlds will your risk with something like Disney (DIS) or Apple (AAPL) be 100% unless you bury your head in the sand and never look at them for a few decades or the world completely collapses. So, while 100% is technically accurate with companies like that, it's not very realistic. Instead, you get a two up, one down type of risk-reward, oversimplified of course.
But if we switch gears back to the NFT eSports idea, we'll call it "NFTPlay Corp," we can realistically say our capital is 100% at risk. There's a very real chance something like this could go to zero and do it quickly. Weeks. Days. Maybe hours. But if my upside is 10x or 20x my initial risk, and success, even moderate success, would offer that upside, then I have an asymmetrical bet.
These I want.
If I can create a portfolio of 10 names that fit this category, I only need to be correct on one to be profitable. If I hit on more than one, then I'm crushing it. And if I hit on three, then we're going to Sizzler... every day.
That's the whole idea behind the Billion Dollar Bets idea. I hope to have a couple of additional ones soon as I've been digging into some smaller names. I've definitely had some misses in the group so far.
Genprex (GNPX) has been a little slower, but with data coming around the end of the year, there are still catalysts here.
Draganfly (DFLYF) should have uplist news coming soon. My guess is July. That should be a great catalyst.
Juva Life (JUVAF) has been the biggest disappointment, but they should have data coming this year, so I'm not ready to give up yet.
CurrencyWorks (CWRK) erased what was nearly a triple-digit gain.
GT Biopharma (GTBP) capped out around 300%. I did take some off, but nowhere near the 300% level.
Cybin (CLXPF) is approaching 100%.
Alkaline Water Company (WTER) has almost added 50% to its gains and has Shaq on board now.
Moving forward, I should probably adopt the approach to take off something like one-third of a position once it doubles although that tweaks my successful need to two names from one. I'm confident enough that at least two of the names will go 5x and the other 8 won't be complete losers, especially once I get three more names here.
Keep your eyes peeled because I hope to have number eight sooner rather than later, but not only does the story have to be right, the risk-reward needs to be asymmetrical for us.
(Alkaline Water and Juva Life are holdings in TheStreet's Stocks Under $10 portfolio. Click here to learn more about this portfolio, trading ideas and market commentary product.)