October 1, 2013: The Day That Made You Rich

42 | By Michael A. Robinson

“Dear Michael: I subscribe to your Strategic Tech Investor newsletter, and am a big believer in your message that investing in technology stocks is the single-best way to build up my savings and secure my future. And I want to do this – very much, in fact. But I don’t have a lot of money to get started. Can you help me?”

Hearing from you folks – and knowing that this Strategic Tech Investor project is making a difference – is an incredibly gratifying part of my work here at Money Map Press.

Each week, I get dozens of comments, suggestions and encouraging testimonials.

I also get loads of questions.

But there’s one specific question I receive that dwarfs all others in terms of its frequency, and that affects me more profoundly.

It’s the question that starts today’s column.

And today I’m going to give you the most-complete answer possible.

Indeed, I’m going to show you a strategy that will allow you to invest in the top tech companies – and invest in the key explosive growth trends – that we talk about here each week.

If you commit to this plan, and follow it diligently, years from now you’ll look back on Oct. 1, 2013 as the day that changed your life …

Another Nice Mess

When I read the news bulletins coming out of Washington – including the one late yesterday about the debt-ceiling impasse – it always brings to mind that Laurel and Hardy catch-phrase: “Well, here’s another nice mess you’ve gotten me into.”

But I’m not laughing, and I know you aren’t either.

Since I got involved in the markets during the severe recession that hit us at the start of the 1980s, I’ve never lost sight of a key lesson: You can’t lose sight of your long-term financial goals.

The global economy and Washington are going to keep throwing curveballs. And “disturbing” events occur all the time. But you can’t let this “noise” divert you from those goals, which is why you need a long-term strategy that is customized to fit your needs, and that you know will get you where you need to go.

(In fact, this realization is the basis for the second of my Five Rules for Creating Tech-Investing Wealth: “Separate the Signal From the Noise.”)

And this strategy will get you where you need to go.

For most of this year, we’ve talked about such wealth-creating trends as the Mobile Wave, Big Data, the Internet of Everything, Cloud Computing, and the emergence of Biotechnology.

And I’ve showed you some explosive-profit opportunities being created by such intriguing “special situations” as mergers and acquisitions, corporate spin-offs, rising dividend payouts and the explosion in Initial Public Offerings (IPOs).

To create this “foundational” tech-investing plan for you, I obviously wanted to identify areas that offer big profit potential. But I don’t want you to have to trade in and out of investments in pursuit of those profits, since that defeats the purpose of what we’re trying to do.

I wanted to identify areas where I’m projecting sustainable profit opportunities, meaning you can start out small – with almost any amount of money, in fact – and then just keep adding whenever you have a little extra money to do so.

The three areas that offer the wealth-igniting mix of big profits and explosive, sustainable growth are:

  • Software.
  • Biotechnology.
  • And IPOs.

Having identified those three areas, I turned my attention to finding the best possible investment vehicles in each one. I obviously wanted to find investments that were strong performers, and I really wanted to make sure they gave you access to the fastest-growing, most-innovative, and highest-potential investments each of these three realms.

  • The SPDR S&P Software & Services Fund (NYSE: XSW).
  • The First Trust NYSE Arca Biotechnology Index (NYSE: FBT).
  • And the First Trust IPOX-100 Index (NYSE: FPX).

Exchange-traded funds, or ETFs, are sometimes dismissed by veteran investors, or investors who prefer the “more-connected” feeling they get from individual stocks.

But even for those folks, ETFs offer some alluring features as a foundational element of a portfolio.

And for investors who are looking to get established, the simplicity and ease-of-investing that ETFs offer just can’t be beat.

Indeed, if you really break these down and study them – as we’re going to do right now – I think you’ll be staggered when you understand the opportunity these three funds are putting right into your hands.

Just one ETF in your portfolio can allow you to own 100 great technology shares for as little as $40. It also allows you to target proven winners in red-hot sectors like Cloud Computing, Big Data and Biotech without spreading yourself too thin.

So let’s take a look at these three funds – and get you started down that road to wealth…

High Tech ETF No. 1: SPDR S&P Software & Services (NYSE: XSW) – Recent Price: $85

When it comes to notching stratospheric profit margins, almost nothing beats the software sector. That’s because software firms don’t have to build the billion-dollar fabs that chipmakers need, or build or license the big assembly plants that PC-makers require.

These firms also often use a licensing model to generate revenue. By that I mean, software companies like Microsoft Corp. (Nasdaq: MSFT) and Oracle Inc. (NYSE: ORCL) basically “rent” seat licenses to corporate customers – and collect a fee based on how many folks actually use their product.

That’s where the XSW ETF comes in.

With more than 160 stocks in its portfolio, this fund invests in the top software players. But it also gets you into such closely allied, high-growth areas as e-commerce, social-networking, data processing, Internet software, Cloud computing, Big Data and information-technology-consulting and services.

As such, XSW holds everything from low-priced small caps involved in computer gaming to the ultimate big-cap software-Internet firm Google Inc. (NasdaqGS: GOOG).

The strategy works: The fund consistently outruns the broader market. Over the past year, XSW has returned 31% to its shareholders. That’s 72% better than the 18% gain notched by the Standard & Poor’s 500 Index over the same stretch.

Besides Google, XSF also holds:

  • Splunk Inc. (NasdaqGS: SPLK), a play on the hot trend of Big Data and is focused on that generated by “machines.” That’s a loose term that covers the Web, servers, networks, mobile devices and the billions of sensors in use around the world. With a market cap of $6.5 billion, the company has weak profits margins but is growing quickly.
  • Cadence Design (NasdaqGS: CDNS), a leader in providing software and other services that help chipmakers design and test the quality of their products. With a market cap of $3.8 billion, Cadence has a profit margin of 32% and a return on stockholders’ equity (ROE) of 59%.
  • And Group Inc. (NasdaqGS: WWWW), a company whose name describes its mission. It provides businesses with Web design, e-commerce capabilities and online marketing. With a market cap of $1.5 billion, the stock is up 110% year to date.

High Tech ETF No. 2: First Trust NYSE Arca Biotechnology Index (NYSE: FBT) – Recent Price: $65

This ETF gives us exposure to a broad array of new medical compounds at the cutting edge of science as well as established drugs with solid cash flow (CF).

FBT holds 20 stocks in its portfolio – each about 5% of the total portfolio. By offsetting the large-cap holdings with some smaller picks, the median market valuation of this ETF’s holdings has been cranked down to about $6.3 billion – low enough to offer a very nice upside.

Over the past year, FBT has gained about 40% versus nearly 18% for the S&P 500. But it has crushed the market over the past five years with returns of 160% – nearly six times the overall market return of roughly 28%.

FBT’s holdings read like a Who’s Who of biotech leaders. They include:

  • Amgen Inc. (NasdaqGS: AMGN), which sells medicines to treat cancers, kidney disease, rheumatoid arthritis and bone disease. With a market cap of $74 billion, the firm has a profit margin of 26% and an ROE of 24%.
  • Celgene Corp. (NasdaqGS: CELG), which has products that regulate cells, genes and proteins to treat cancers of the bone marrow, breast and lungs. With a market cap of $49.6 billion, Celgene has both a profit margin and an ROE of roughly 25%.
  • And Regeneron Pharmaceuticals Inc. (NasdaqGS: REGN), a firm that’s known chiefly for EYLEA, a compound that combats age-related macular degeneration, a leading cause of blindness among older folks. With a $24.4 billion market cap, the firm has a 53% profit margin and an 87% ROE.

We also get to tap into a wide range of clinical trials for new products. In fact, Celgene and Regeneron alone are together running nearly 50 trials for drugs designed to treat breast cancer, tumors, metabolic disorders and high cholesterol levels. And these trials are queuing up the sector’s next round of growth.

High Tech ETF No.3: The First Trust IPOX-100 Index (NYSE: FPX) – Recent Price: $41

FPX targets one of the most important forces driving the market to new heights – initial public offerings (IPOs), with tech firms playing a major role in the success of new issues.

A recent survey by the global consulting firm PwC shows that IPOs soared in this year’s second quarter, the last full period for which data is available. The April-to-June period saw 62 IPOs, an 88% increase from the same stretch a year ago.

And it wasn’t just the number of IPO deals that skyrocketed – so did the amount of money they raised. Second-quarter IPO deals generated $13.1 billion in proceeds, up 111% from the same period in 2012, PwC said. Those statistics take out the huge impact of Facebook Inc. (NasdaqGS: FB), which raised $16 billion when it went public in May 2012.

Now, this ETF doesn’t focus exclusively on tech: About a third of its holdings are in tech and the closely allied field of healthcare – meaning the fund mirrors the market for new stock offerings.

Besides tech, the roughly 100 stocks that FPX holds include positions in finance, autos, retail, heavy industry, energy and a smattering of metals covering nearly 100 stocks.

Over the past year, the fund has returned more than 44% to investors. FPX is weighted toward more stable mid-caps with an average valuation of roughly $3.3 billion. Besides Facebook, it holds:

  • Tesla Motors Inc. (NasdaqGS: TSLA), maker of sleek, electric-powered cars that have redefined the auto market in a way that’s forcing the Big Boys to respond. With a market cap of $23 billion, Tesla trades at an eye-popping 102 times forward earnings, but has a negative return on assets and equity.
  • NXP Semiconductors NV (NasdaqGS: NXPI), which specializes in a technology-standard-setting type of mobile-commerce semiconductor known as a near-field communications (NFC) chip. With a market cap of $9.3 billion, this stock trades at just 9.5 times forward earnings and a 12.5% (ROE).
  • AbbVie Inc. (NYSE: ABBV), a spin-off from drug giant Abbot Laboratories (NYSE: ABT), offers treatments for arthritis and advanced prostate cancer. With a market cap of $31.4 billion, AbbVie has a 27% profit margin and a 63% return on stockholders’ equity.

Clearly, these three funds give you access to some of the hottest trends and most-fascinating profit opportunities on earth.

Over time, you will be surprised at how a successful investment plan and a visible increase in your net worth will give you the confidence to “win” in other parts of your life – and just make you feel better and more secure over all.

Once you’ve established your holdings in these, you can jump off and invest in some high-quality individual stocks.

And, hey, as cliché as it sounds, with a financial foundation like that, you really may look back on today as the one that transformed your life.

If that does happen, believe me when I tell you that no one will be happier for you than me.

[Editor’s Note: As I hope today’s Strategic Tech Investor underscores, I welcome your comments – and your questions. And I read everything that you send me. My boss likes to see the comments, too. So if you like this service and feel it’s useful, take a few minutes to post a comment here and let us know. One other note: While today’s column was focused on ETFs, we haven’t given up on individual stocks. In fact, I’m working on some research right now that I hope to roll out for you folks in the next few columns. So please keep stopping by.]

42 Responses to October 1, 2013: The Day That Made You Rich

    • Michael Robinson says:

      Hi Jac,

      Thanks for reaching out to me with your comment. I wish I could be more help but I’m not a tax or estate expert and would hate to give you the wrong information.



  1. Finny Firebird says:

    Great article and advice…..the diversification of ETFs help those of us small investors who want to invest in positive megatrends without having to worry about picking the winners within the trend.

  2. Jacques Despres says:

    Hi Michael,
    Thank you for all your analyses that you are providing us with.
    1- I am 67, I wonder – is there a way we can go a bit faster, I have not much time left.
    2- With all respect there is so many experts pretending 200% and more gains, how can we tell the difference between the good and the bad. My gains are 0- aftr 8 years with a few millions invested. I am not looking to gamble but looking for some winners.

    • Michael Robinson says:

      Hi Jacques,

      Thanks for taking the time to write to me. I found your comments moving and hope to write a follow up column addressing the issues you bring up.

      Cheers and best wishes,


  3. Herbert Hoover says:

    Today, i bought 10 shares of all 3 reccommended ETF’s i have confidence in your advise
    Ray of philly

    • Michael Robinson says:

      Hi Ray/Herbert

      That’s awesome. You clearly got the message of this column and took it to heart.

      Best wishes,


  4. Peggy Hoffer says:

    Thank you. I’ve tried to beat the market, but I haven’t been able to… I didn’t have much money to start with ($27K) and then I tried to follow the risk guidelines (2-3%) per position. But I found myself jumping in and out of stocks and the fees ate up everything I think I made. In 2 years, I’m down to $24K, when I should have been up. First, I had too many stocks and ETFs (at one time close to 70). I still carry about 25, but I’m much more patient. I actually act according to my trailing stops, versus my emotions. Thanks for all the great advice/recommendations you’ve made. (I own many of them.)

    • Michael Robinson says:

      Hi Jerry,

      Good question. The fees are as follows: XSW, .35%, FBT and FPX, both at .6%. Hope that helps. Cheers,


    • Antonio Rossi says:

      Sir I liked what your saying in your article and I would be inerested in being updated.
      Thank You.
      Antonio Rossi

  5. Romy says:

    I have been following your advise and am impressed with your research.

    Thank you. Keep up your good work. I read all your writings.

    Saludos from Mexico.

  6. jack bruso says:

    This has been the most beneficial column in years. Focused, clear examples of portfolio holdings and why’s, smallish investment size, simple to start and add to, low cost, opportunistic way to buy major trends. Might add emerging markets etf to the mix of growth going forward.

  7. mirko peresa says:

    I like your information and advise and I feel I will buy some.
    I am sure that lots of people are already benefiting in taking you recos.
    I am looking also for your next read..
    Thank you sir

  8. Octavio says:

    Hello Michael,

    Love reading all your insights to secure wealth. I’m a small investor and Is ARMH (Arm Holdings) still in your radar to buy? And would buying options be good for this stock? Thank You for your response.

    • Michael Robinson says:

      Hi Octavio,

      Thanks for contacting me. As regards options, that’s really out of the scope of this e-letter. But I still have ARMH on my radar screen. I like the company and keep abreast of its developments. Hope that helps.

      Cheers and best wishes,


  9. Thomas J. Harrison says:

    Hey there, Michael. I happen to have been born and raised in an impoverished societal circumstances respectively. My former employer decidedly canceled out the 401k retirement plan I had been paying into for about a year or so when Obamaconomy took over because I was not getting enough work time in from my employer to continue paying into it on a regular basis. Now I have only some funds in a stagnant esgrow holder fund that is not making a whole lot of interest on, if you call about 1% annual interest any kind of interest at all. I am currently in between jobs again, Due to the economy in my local region where I live, jobs are always too few and so too far in between, so I am unable to continue contributing on a regular basis to my 401k funds that I had originally started. At this rate it looks like it is going to take me at least 1000 or so more years to be able to utilize these funds for any retirement possibilities any time soon, so I was figuring possibly just cashing them in for something a little more substantial like these ETF’s you speak of in this article here depending on my ability to be able to turn them into a much better retirement fund if you want to call it that. . Have a good day and may you become prosperous financially with all due respect.

  10. Henry says:

    I’ve been incredibly lucky so far with individual choices. At age 85 time is running out for me. So you have convinced me of the value of taking up these suggestions. Many thanks for them.

  11. Carl Rosner says:

    This write-up is very informative and well written.
    You give specific and meaningful suggestions without holding back until
    the reader is required to subscribe which is the typical gimmick by most
    so called financial letter writers.
    i am inclined to try your letter, after re re reading this one.
    Thank you

  12. karon says:

    Hi, I’m very new to learning about the stock market and how it works. I very much enjoyed reading this news letter. Not pushy with the get rich fast mindset. Which I appreciate. How do I get started,investing in these stocks you mention? I don’t have a broker.

    • Michael Robinson says:

      Hi Karon,

      Thanks for taking the time to write to me. Much appreciated. The easiest way to get started as an investor is to pick an online broker. There are many too chose from and you can get the facts at your finger tips with a simple Web search.

      After that, you will fill out the required forms online and then make arrangement to fund the account. Once all that is done, you can start trading. Since you are relatively new to this, I would also suggest you get on the phone with the broker in advance to make sure you get good phone support for the first few trades.

      Sometimes they will charge an extra fee to place the transaction for you. But usually they will walk you through the entire process and you just have to hit the “confirm” button the stock purchase. Hope that helps and good luck.



  13. gerard dufresne says:

    Michael. At age 90, I’ve been up & down the financial road a few times…..and have subscribed to over 60 financial newsletters.& services… . With all honesty, I must say yours is one of the two financial .writers/services I value above all others .
    Thank you for your inspirations.

    • Michael Robinson says:

      Hi Gerard,

      Thank you so much for writing to me and for that great comment. Very much appreciated. Glad to hear you have great success investing.

      Cheers and best wishes,


  14. Donna Snell says:

    Hi Michael
    This was excellent. I so enjoy finding out about leading edge technology, with a glimpse of possibility. It seems very timely as well, given that technology is coming to the forefront in a market that is pretty close to overvalued, with Interest rates threatening to explode etc. My concern is this: as with Mutual Funds in the past, managers often threw a ‘dog’ into the collection, watering down a stellar fund to ‘acceptable’ customer standards with sub standard performers thrown in, so they could receive a payoff (that sports car they always wanted). Is there not the very same danger with ETF funds like these? With such a wide range of performance possibilities, it is so easy (and tempting for fund managers I am sure) to have a collection that serves THEIR interests more than their clients.
    Interested in your comments

    • Michael Robinson says:

      Hi Donna,

      Thanks for taking the time to reach out to me. I appreciate your support. One of the things I really like about ETFs is their incredibly low fees. That and the fact that the three I mentioned in the column are all beating the market consistently. Hope that helps.



  15. Franco says:

    Dear Michael:
    My name is Franco, I’m from Argentina.
    One of the first thing I do in the morning is read your web page, it’s a very good! Good work!

    • Michael Robinson says:

      Hi Franco,

      It’s great to know we have an international readership!! Thanks for the vote of support.



  16. Brian says:

    Thanks very much for your excellent picks AND your ability to boil down scads of data into easily readable reports. Excellent work, Dude!

  17. Ryan says:

    Dear Michael
    Your columns are very informative and right on target and they are greatly appreciated by the small guy! I just wanted to say thank you for your hardwork and dedication to your readers! Your articles have helped my young family recover from 2008 crisis where will lost our home due to its value plummeting and thought we would never recovery! But since reading all your materials I have put together another nest egg that you personally help me grow again! I will continue to follow all your recs! Like Cray yesterday boom!! 40 percent! Up 65 percent! That just one of so many great reads ! Thanks to you, Bill, kent, Keith, Shah. Thanks a lot from me and my wife and two young kids !!! Paid up sub to 4 services ! Ryan

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