Can’t Keep My Mouth Shut Any Longer

Dear Reader,

I’m not going to assume you know who I am.

After all, it’s been years since I’ve made an effort to write in these pages. 

Email lists churn and people hop from one media outlet to another, so unless you’ve been with us for years, you probably won’t remember… But there was once a time when readers would still write in and ask where I went. Not so much anymore.

The decision to leave this passion behind wasn’t an easy one. My name had become a valuable brand, at least relative to anything else we had going on at the time. I was running the largest premium newsletter in the history of our company… a record that still stands, as far as I’m aware.

At the peak of my career, I had over 60,000 subscribers on one monthly investment newsletter alone. At an annual subscription of $99 a year, you can work out what that recurring income stream looked like. Walking away from something like that isn’t easy. Some would say it was pretty damn stupid.

Looking back, though, I don’t know what exactly to attribute my success to. I started covering tech stocks in 2013. I rode that bull market for about seven years and bailed when I saw the house of cards about to crumble.

If you review the model portfolio I managed in that time frame, you might think I was some sort of investing genius. It’s true, I outperformed the broader indexes every single year I was at it, but perhaps I was simply operating in a sector where it was impossible to lose. Perhaps it was just luck…

There were a lot of sirens going off in the world and we seemed to be entering a period of great uncertainty. At the end of the day, I didn’t want a dunce cap permanently glued to my head.

At the time, things were getting way out of hand in the investment newsletter industry. Our competitors were getting slammed with federal lawsuits for some questionable business practices. Investors were in a manic frenzy, buying literally any speculative asset they could get their hands on. Graphics of pixelated primates were selling for as much as $3.5 million a pop.

This all culminated in a brief era of irrational speculation and exuberance. Much of the industry was hawking absolute bullshit… Lottery tickets for bozos and pipe dreams for the desperate and naive.

Despite my personal track record being very strong, I couldn’t shake the growing feeling of imposter syndrome with all of this going on in the background. I judged myself guilty by association and one day decided to pack it all in. Right at the very peak…

Fast-forward a few years and the investment newsletter landscape is an entirely different animal. There’s probably no one else in the business who is going to tell you this, but we’re getting absolutely gutted.

Despite “all-time highs” in the stock market people just haven’t had an appetite for investment newsletters lately. And now decision-makers in our niche industry are scrambling to find an explanation… 

Is it changes to email delivery? 

Is it the rise of social media “influencers”? 

No one really seems to know.

Or perhaps they do know and no one wants to admit the truth…

And this, my dear friends, is what I believe to be the truth.

The majority of “gurus” and “experts” failed you by overpromising and overselling you at a market top… two years ago.

To be clear, I’m not talking about the weighted indexes you see every day on the news. People in our industry will sometimes talk about the S&P 500 like it’s gospel, but the truth is it’s almost completely irrelevant to us.

If you really think the S&P 500 matters to you as an individual investor, you don’t actually need us. You can watch the clowns on CNN and CNBC tell you about Apple and Google any given day. You can buy an index-tracking ETF and tell us (independent financial media) to screw off. 

It’s a generally safe strategy, mind you. But also one that gives you virtually zero chance of alpha… and most people who read these pages are looking for some kind of alpha.

As far as I’m concerned, the ONLY stocks that matter are the ones that are generally too small for institutions like BlackRock to care about… stocks that give individual investors like you and me an actual edge.

Indexes that track these stocks include the Russell 2000, Russell 1000, Russell Microcap, etc. They are vastly more important to the Main Street investor than the S&P 500, I assure you.

So here’s why I bring this all up; it’s a matter of timing.

Each of these indexes last peaked in early November back in 2021, more than two years ago… 

And it’s been a rough ride up ever since (at least, until about a month ago).

For perspective…

The Russell 2000 (small caps) is still down 16% from its peak and was trading down as much as 30% off its peak as recently as November 2023.

The Russell Microcap still trades down 28% from its peak and was trading down as much as 40%.

Meanwhile, the S&P 500 just hit a record high last week…

So while the talking heads keep regurgitating this idea that the economy and stock market are and have been doing perfectly fine… the reality is it’s mostly nonsense. These weighted indexes are not representative of the broader stock market, nor are they meaningful gauge for how the average person is doing financially.

So here’s my theory: Most of the world is still following the mainstream and obsessing over the S&P 500 for no good reason. In short, many investors — and maybe this includes you — are waiting for a crash that has already happened.

Ironically enough, peak subscriber growth for the investment newsletter industry was right around the time when small-cap/microcap stocks peaked in late 2021. Almost to the day.

In other words, boatloads of inexperienced investors were joining our ranks at literally the worst time possible. Then the market turned sour and anyone heavily invested in small-cap or microcap stocks lost their shirts.

It’s no wonder people’s interest and trust in investment newsletters has plummeted… We invited you onto the gravy train moments before it derailed. Now many of you are terrified to invest (I should stress, though, how important it is that you start fighting this instinct ASAP).

Not only did this waive of exuberance bring on loads of new, soon-to-be-pissed-off subscribers, but it also brought a wave of imposter gurus and traders. It also made some of the veterans in our industry completely check out. 

But here’s the good news…

The proceeding crash shook out a lot of the garbage. The “trading” craze has been mostly wiped out, as have many of the “experts” and “gurus” who weren’t doing their due diligence. At the end of the day, this means less garbage for you to sift through in order to find legitimately compelling stock stories. 

Now, that’s not to say there aren’t still incompetent/bad actors out there. There are. But as far as this outfit is concerned, I can say there are several folks writing in these pages who I’d blindly trust my portfolio with.

More importantly for you, though, the market dynamic for individual investors is looking better than it has for YEARS. Small-cap and Microcap stocks are trading at massive discounts and are finally starting to show some signs of a recovery.

Here’s my core thesis for 2024…

We’re going to see outsized returns from small-cap and microcap stocks relative to the S&P 500, and we’re going to see a lot of selling pressure on the mega-caps, which will keep broader sentiment down. 

The media will fight this reality with a “soft landing” narrative for as long as they can, particularly because it’s an election year (we all know who they’re in bed with)… But with smart money already starting to move to bonds, it’s pretty obvious what’s about to go down.

In other words, we could be looking at a pretty bad year for 401(k)s but a great positioning year for individual brokerage accounts. 

My advice, for whatever it’s worth? 

Get cash on hand and start building your watch list. 

Find four or five stocks you absolutely love and pile in a little more at any available downturn. 

Get all the intel you can from people like us who do this for a living, but always be picky and trust your gut.

Head on a swivel,

— Stuts

P.S. If you want to hear more from me, reply to this email and let me know, even it’s just a simple yes or no. If there’s enough interest, I’ll reveal a couple of my top stock picks for 2024… no tease, no paywall or anything like that.

P.P.S. One of our other experts, Jason Simpkins, helped me net over $8k this year with one of his top stock picks… And I didn’t even start building a position until July. This is easily one of my favorite companies on the market right now, and I don’t have any plans to close the position any time soon because there is a huge catalyst coming. He’s got the whole pitch here if you’re interested.