When we spoke on July 2, I gave you three venture capital (VC) tools you can use to screen privately held companies.
At the time, my focus was on the cannabis sector. But I indicated that these tools also can be used to screen for winning publicly traded tech stocks.
And today, I’m following up to let you know about a great way to become a VC-style investor. We’re targeting a company that is doing all the heavy lifting for us.
Here’s the thing. In the venture world, you can make 10 times your money.
But it’s almost impossible for the average retail investor to get involved.
You face two big problems.
First, most of the time you have to be a high net worth individual. And second, even if you make that cut, you have to have the right Silicon Valley contacts to get in on the action.
An Insider’s Game
I know a thing or two about the VC world. Several years ago, I served on the advisory board of Sensei Partners LLC based in the Valley city of Menlo Park.
I also have served as a strategic consultant to a dozen high tech-startups. In fact, I still do some consulting, which keeps me abreast of trends that are highly lucrative.
For roughly the last 18 months, I have been advising Aitonomi, a Swiss-German startup focused on robotic delivery vehicles.
Aitonomi’s unique hook is the advanced proprietary software that autonomously drives the vehicles loaded with high-tech gear. We’re talking such things as radar and Lidar sensors, computer vision, and optical and radar mapping combined with both 4G and 5G wireless communications.
As excited as I am about this company, it’s not something in which most folks should invest their hard-earned money.
That’s because with startups like these, the risk of losses is high. And even if you make money, you’ll be tying up your cash for at least five years.
In other words, what we’d really like to find is a public firm that has visionary leaders with deep pockets to invest in exciting technology. That way, we have the kind of liquidity that private investments don’t offer, but with a lot of upside.
A Big Payoff
And that’s just what we get with the SoftBank Group Corp. (SFTBY). Over the last few years, it has made a number of strategic VC-style investments that promise to pay off big for its shareholders.
Let me start with one quick example. SoftBank put just $20 million into China’s Alibaba Group Holding Limited (BABA) back in 2000. When the e-commerce leader when public in 2014, that investment was valued at $60 billion.
That’s equates to an IPO profit of 299,900%. In June 2016, SoftBank booked an actual gain of 39,400% on just a small portion of its holdings that it sold for $7.9 billion.
Now you know why founder Masayoshi Son has emerged as one of the world’s top tech investors. He parlayed his knack for spotting the Next Big Thing into a vast fortune – he’s estimated to be worth a cool $23 billion.
For him, it’s not just about buying low and selling high. Instead, it’s his ability to peer around the corner and spot tech’s next biggest growth areas.
His greatest trait may be his ability to see where tech is headed over the next generation. He’s even got a two-hour video on the firm’s website titled “The Next 30-year Vision.”
That’s just the first leg of SoftBank’s growth strategy for the next 300 years. Don’t scoff. A hotel in Japan has been running since the year 705. A sake brewery has been around since 1141.
What’s Under the Hood
SoftBank holds a very broad range of other tech leaders in its portfolio including:
- Yahoo Japan for e-commerce.
- Uber Technologies Inc. (UBER) for ride hailing and driverless cars.
- Arm Holdings for mobile chips.
- WeWork for on-demand office space that all of SoftBank’s portfolio firms can use.
- Nvidia Corp. (NVDA) for graphics processing, connected cars and artificial intelligence.
- Slack Technologies Inc. (WORK) for managing workflow and collaboration.
Son also came to see that some of his boldest investments would require vast sums of capital. So in May 2017, SoftBank launched the Vision Fund.
Major global investors are shelling out a minimum $100 million investment to be a part of what may become one of the largest -and most disruptive- VC funds the tech world has ever seen.
Now the stage is set for SoftBank to play a leading role in artificial intelligence (AI), driverless vehicles, the Internet of Everything (IoE), Robotic Process Automation (RPA), fintech and more.
In all, the Vision Fund has stakes in 83 companies and now manages nearly $100 billion from its backers. These include the sovereign-wealth funds of Saudi Arabia and Abu Dhabi.
SoftBank can afford to wait for its investments to ripen. The riches gleaned from the Alibaba IPO, for example, took 14 years to harvest.
Yet the firm will also cash in a lot sooner if asset prices suggest an exit. In the summer of 2017, SoftBank took a stake in FlipKart, India’s largest e-commerce firm. Roughly a year later, Son sold the stake to Walmart Inc. (WMT) for $4 billion – a quick 60% gain.
Softbank’s VC skills are so in demand, the firm recently launched Vision Fund 2. This second operation is expected to raise $108 billion from a roster of all-star clients like Apple Inc. (AAPL) and Microsoft Corp. (MSFT), as well as big banks and a sovereign wealth fund.
So, you’d think a company with this impressive of a track record would cost a small fortune.
Don’t bet on it.
The stock is actually very cheap based on two key aspects. First, it trades for less than $25. Second, a recent piece in Barron’s suggested the price is as much as 50% less than the underlying value of its assets.
With a discount that would make Warren Buffett salivate, it means we have found a rare growth-and-value investment for those willing to take the long view.
This is a stock that could double in value over roughly the next five years.
And along the way, you can be sure that SoftBank will continue to make a series of very lucrative investments in some of the best tech the world has to offer.
A Chance to Get In…
In the meantime, I want to let you know about an exciting and hugely profitable opportunity that’s surfacing in the area that often precedes even the likes of Masayoshi Son with the Vision funds.
I’m talking about angel investing – one of the greatest wealth generators the world has ever seen.
Now, these opportunities used to be set aside for just the top 1% – the captains of industry and globe-trotting aristocrats who could afford it.
Not anymore. A recent congressional act just paved the way for a brand new path for everyday folks to achieve the American Dream.
And you can potentially do so without having to part with a small fortune. As long as you have $50 and a checking account, you can start growing your wealth exponentially.
Cheers and good investing,
Michael A. Robinson
P.S.: I’ll be speaking at The Money Show – San Francisco this Aug. 16th from 10:45 a.m. to 11:30 a.m. Pacific time. If you’re in the area, I suggest you stop by. I’ll be talking about How to Own Great Tech Stocks For Free. So don’t miss it! You can register by clicking here.