Motley Fool CAPS (a free service at the Fool) is a wonderful investment tool that measures all my stock picks against the market. It's a way for investors to track their performance and see how they are doing. I put all my real-money stock picks in CAPS to track how I'm doing. And I also track an additional 150 or so names that are on one of my watchlists. So these are 199 stocks that I'm bullish on. I love to swim in the high-risk market pool, so a lot of these names are getting killed in 2022.
CAPS says that my accuracy is pretty awful. 54% of my stock picks are currently beating the market, and 46% of my stocks are underperforming the market. This doesn't concern me at all. Why is that? Because CAPS also informs me that I am in the top 2% of investors at the Motley Fool. So this gives me confidence that my strategies will work over time. I don't have to be right on every high-risk pick. (Especially in the short-term).
The cool thing about the stock market is that if you own a few huge winners over a couple of decades, you will see massive outperformance against the rest of the market. Buying Apple (AAPL 0.68%) in 2007 can make up for a whole mess of stinkers.
What I'm trying to do now is find the next Apple, the next monster stock that will be a huge winner in 2032. I am swinging for the fences like Babe Ruth. I'm going to strike out a lot. But when I hit one, I'm going to smack it a mile. And that's how I have outperformance. It's not the only way to make money in the market. (It's not Buffett's way, for instance). But it works for me, and it might work for you, too. There are some huge benefits in aiming for the fences.
Most people aren't doing it
Newbies are terrified of losing money and don't want to risk it. Fund managers and other professional money managers are afraid of newbie clients looking over their shoulder and complaining about recent underperformance. So they don't want to do it, either.
This is why, in my opinion, the high-risk sector is chronically undervalued. Many people don't understand these kinds of investments, and want to wait until they see profits, or until it's safer. But the single best time to buy a stock, in my opinion, is before the success of the company is apparent to everyone.
For instance, back in 2000, I quit the practice of law and I was writing a novel. My parents did not like this idea. I love my parents, but I do my thing. I took a year off. (This book did not make it to the public.) In order to do this, I had to sell every stock I had. Amazon (AMZN 0.64%) was the last to go.
My father had bought Amazon on my recommendation. And when I sold, he got cold feet. And he sold, too. So I left a million dollars on the bus, my father left a million dollars on the bus, we all learned a lesson.
When I'm right about the future (sometimes), I might be super-right. That means some of my stock picks might go up 1,000% or 10,000% or even higher than that, believe it or not. But I don't know which ones are going to pull it off until 20 years later. And if that sounds a little sketchy, annoying, and hard to duplicate, well, yeah. But that's how it works.
It pays off big to try to be a long-range financial planner
The farther you push out your investment time horizon, the more likely you are going to be wrong. The critical feedback that I hear about these kinds of investments is that they are "speculative." I hate this word, but I can't really knock it. We are speculating on what the future is going to be like 10 or 20 years from now.
Many people would say this is a waste of time, and we should focus on 2022 and (maybe) 2023. The vast majority of investors are impatient and they want to get rich quick. And they have a short-term investment time horizon. And the market smacks them around.
The stock market is a wealth-creation machine. But to really enjoy those rewards, you have to take risks, and you have to be patient. Those two skill sets don't naturally go together. I don't mind taking risks, but I constantly have to remind myself to be patient. Let the thesis play out.
For instance, internet commerce is an on-going massive worldwide trend. I expect it to still be a major trend in 2030. So I am bullish on internet commerce stocks from around the world, including MercadoLibre (MELI 1.95%), Sea (SE 3.48%), and Jumia (JMIA 9.44%).
Other ways to invest in e-commerce is to look at different sectors of the economy that have yet to be utterly transformed by the internet. So that makes me bullish on healthcare plays like Doximity (DOCS 4.73%), the high-fashion platform Farfetch (FTCH 9.40%), the used car dealer Carvana (CVNA 12.39%), and so forth.
I'm relatively certain of the macro phenomenon, and I see my job as finding the best investments to ride that trend.
My strategy is to invest for 2032, not 2022. I'm going to be wrong a lot. Maybe even 46% of the time. But all you need are a few massive winners to enjoy serious out-performance over time.