By Kris Sayce, editor, Casey Daily Dispatch
Small bets. Big gains.
It’s such a simple idea.
Yet, most investors get it wrong.
They make big bets… hoping for small gains.
It doesn’t make sense.
Because if you invest that way, you’ll miss the market’s biggest opportunities.
Including what investment expert, entrepreneur, and venture capitalist Dave Forest says is the biggest of them all.
If this is your first time reading the Dispatch, welcome. If you’ve been here before, welcome back.
At the Dispatch we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our cast of in-house investing experts. Among them is Dave Forest, and the founder of our business, Doug Casey.
It’s from Doug Casey that we get the idea of making small bets for big gains.
It involves using a simple three-step method called the Casey “10 x 10” Approach to investing.
Here’s how it works…
We’re Looking for 1,000% Gains
First, you take your investable capital and split it into 10 lots. Let’s say you have $50,000 either in investments or standing by ready to invest.
That means allocating $5,000 to each lot.
Next, you look for 10 separate investment ideas that have relatively little in common. Now, that isn’t always as easy as it first seems – it takes some thinking.
Finally, look for investments that have the potential to earn you 1,000% returns over a business cycle.
(For ease of understanding, think of a business cycle as the period between one stock market bottom and the next. Although it’s a little more nuanced than that.)
The reason for picking 1,000% gainers, or 10-to-1 shots (or 10-baggers), is that you only need one or two of your 10 investment ideas to pay off in a big way.
The rest may produce no more than average returns. Some may fail to take off entirely – potentially leading to losses. But even if only one of your 10-to-1 shots pays off, it will more than make up for any losses on your other investments.
As an example of one of these groups of ideas, take Dave Forest’s favorite asset for the “10 x 10” Approach – warrants.
Back in February 2019, a little-known company attracted the attention of Dave’s team.
If you remember, at that time the market was super volatile. The Federal Reserve had increased interest rates, and stocks were only just starting to rebound after a 20% fall.
It was the type of market that scares most investors. But that didn’t happen here. There was one play that looked like a perfect opportunity to profit from the rebound.
Big Wins From Warrants
There was a stock trading around $5.75 at the time. Less than two years later, the stock was trading around $30. That’s when Dave told his readers to sell.
That’s a gain of 421%. Pretty good. Especially when you also consider we had the COVID-19 crash occur bang in the middle of it.
But Dave and his team didn’t recommend the stock.
There was a much better opportunity…
That’s where the warrants come in.
Rather than paying the full stock price of $5.75, investors who followed Dave’s advice were able to buy in at just 19 cents.
That’s because they didn’t buy the stock… they bought the warrant.
And when the stock went from $5.75 to more than $30, at the same time, the warrant went from 19 cents to $9.57.
That’s a gain of 4,942%.
You can see the comparative returns in the chart below:
So how does that work? Look, we won’t get into all the details here. But the quick story is that companies issue warrants as a kind of incentive.
It’s a way to attract investors. By offering warrants, the company is rewarding an investor for having faith in what the company is trying to achieve.
And the best thing about warrants, as we’ve shown you, is that you can get a leveraged exposure to the performance of an underlying stock. What’s more, you can invest less than you would if you invested in the stock.
In this case, you could have bagged a 4,942% gain. That turns $500 into $25,210… $1,000 into $50,420… and $2,000 into $100,840.
What to Do Now
That’s what makes warrants such a perfect choice for the Casey “10 x 10” Approach.
But that 4,942% gain was in the past. How do you find plays now that could become the 4,942% gainers of the future?
That’s where Dave Forest can help. Right now, he’s helping thousands of regular Americans tap into this niche area of the market that’s normally reserved for billionaires.
And now, you have the opportunity to take part in that, too…
Check out his briefing on this incredible asset class right here.
Editor, Casey Daily Dispatch