Hey guys, it's sasha gross stocks have the best potential for long-term investing returns, but gross stocks are also one of the most risky types of stocks and they are very difficult to analyze. In this video, i will share seven strategies that i use to pick gross stocks that can significantly improve your ability to pick out the winners from the losers. Now these tips won't be the typical stuff that you'll see on youtube. I will not be talking about just diversifying your portfolio and all the other stuff that you probably already know.

I kept the best grow stock tip right to the end, so make sure you stick around for that and since we're talking about gross stocks, i presume that you're already interested in a high return on long term investing because that's what they are all about. These strategies are definitely not for people who keep all their money in an index fund or somebody who targets a three percent annual return with dividend investments. Growth stocks definitely come with much bigger risk, and it is important that you are probably aware of that. As an investor, these stocks will have a lot more volatility.

Some of them may well go down to zero over time. That does happen, but they also have a potential to be the multi-bagger in your portfolio that delivers strong results that grows in value by 100 or more. You can't get every single one of these picks right and you won't, but you can definitely skew your chances in your favor by applying these investing strategies for growth stocks. Some of them may be a little more obvious, but hopefully there will be some tips in here that you really haven't thought about.

If you particularly like one of these, please go and tap the like button for the youtube algorithm, so that this video can reach more people all right. Let's start with the first tip, and that is the one that sounds very obvious, but it's actually much harder to apply in real life than it sounds one of the best ways to dramatically increase the return on your gross stock. Investments is to buy heavily on non-material or exogenous dips. Let me explain what this means.

Grey stocks are naturally volatile and their share price can suffer very heavily when the market sentiment shifts or some negative press comes out or something else like that. You've got traders and funds who sit there staring at the bloomberg terminal and bang. Some negative news story turns up about a grey stock and a big sell-off happens which pushes the price down by 20, and this happens a lot every time that happens with a stock that you are particularly interested in. It is really critical to assess whether the reason for this drop is material to your long-term outlook on the company optics.

Does this news actually affect your long-term valuation? If you determine that it doesn't or that it doesn't in any material way, then you could go and buy that stock at a 20 or 25 discount for seemingly no reason whatsoever, and if that stock, that just dropped by 20 then goes back to the same value. That it was at before before even accounting for any future growth. You are already 25 up. Here is a few recent examples where i did this over the last couple of months.

A few weeks ago, fiverr published their quarterly results and their projection for ebitda. For the rest of this year, dropped by fifty percent now fiverr is a stock that is operating at break even at the moment, because they are basically reinvesting everything that they are making back into marketing spent in order to grow the business. So there is no real ebitda anyway, and a 50 drop this year on a number that is pointless and immaterial doesn't really mean anything for where i see the company going in five years time. The stock dropped by more than 20 in value, and i ended up buying a lot of fiber shares when that happened.

Yesterday, lucid motors also dropped by 20, and that happened because the first of september was the expiry of a lockout period for lucid's pipe investors. It was the first day that those institutional investors when lucid, went public could sell their stock and people panicked, thinking that this was going to be a massive sell-off and the share price tanked, and it was the end of the world. But for me this is a short-term fluctuation and it literally has zero impact on what lucid is actually doing. All my long-term projections on what they might be able to deliver.

So again, i went and bought a load of shares the massive discount yesterday, as well with grey stocks. These sorts of events happen all the time, so there will almost always be an opportunity like this pretty much every single month. If you have enough different growth stocks that you are following, if you capitalize on these random drops, then the average price at which you're buying those shares can be substantially lower, which can then yield much higher relative returns as a result, when that share price actually goes Up in the end now the second tip might seem controversial. You might say duh obviously, but hear me out when investing in grey stocks.

You only want to target companies that have an exceptionally high upside on the share price. Most of the grey stocks that i invest in have upsides of over 100. But it's not as simple as saying that you should invest in things that could get you a high rate of return because well, of course, you do right. Well, gray stocks naturally carry a lot of risk.

Some of that risk. You can't even forecast because it is an unknown risk and some of these stocks might actually end up losing all of their value over time. Growth stocks also tend to take a long time to catch up to the valuations, because the markets tend to overprice and overvalue. The risks and impact like inflation, so if it's going to take you a few years to get that rate of return and some of your grey stock picks might not make it at all.

If you want to get a good average annual return rate on your investments, you better make sure that those that do make it at that point a few years in the future have a substantially big enough upside as a counterbalance now, there is no point in picking An early stage growth stock that has a 20 upside if it's gon na take you say three years to get there because you're already losing to the market average if you look at it as a per year, growth rate. So how do you pick grow stocks that really do have a big potential for growth? Well, i'll cover a few ways that i use to pick them. The first is looking out for companies where you can see concrete data that is showing a substantial growth in revenue and profit that is coming down the line in the future that hasn't yet materialized into the p l, and this is a really important factor, because most Growth stocks will not have this, and many companies will be building out the proposition, hoping that the customers and revenue will turn up in the future. But they don't know that it will, but some growth stocks, especially those in slightly later stages, literally show you what their future growth will look like in some of the data that they publish take palantir.

As an example, analysts are forecasting limited revenue, growth, there's a lot of negative press about them. The average forecast on yahoo finance gives them a 30 rate of growth in 2022 over 2021, but their revenue is currently growing at 49 per year, while their future deal value is growing at 146 off the rate at which they are currently banking that revenue, so they Are literally showing you numbers that say that they are currently growing at 50 and that rate of growth is accelerating very sharply, and that is exactly what i am talking about. You can already see the data that will then become revenue and profit in future years, and you can see it today, but for whatever reason, the market discards that data and seems to completely ignore it when making their projections and this data is not supposition. It isn't theory or hopium.

It is literal contracts that that company is selling that will then materialize into dollars. Remember very few companies will show you this glimpse of what will be happening over the next three to four years, so when they do and when that data shows a continuous acceleration of growth. That is an incredibly powerful signal now for early stage growth companies valuation will be even harder. How do you value a company that hasn't ever sold a single product or a company that is loss making because they only recently started on their journey? Well, these companies will have a much higher level of risk.

They also sometimes have a much higher potential for long-term returns. The key here is to put a lot of time in on the qualitative research aspect. Look for signs that the company actually is laying down real groundwork for delivering their product or service, and that there is a decent chance of that product or service. Succeeding, ignore all the pr and all of the marketing a lot of companies.

That turn out to be really bad investments, go really hard on the marketing and building up the hype and have actually very little else, sometimes that marketing will grossly exaggerate things or even outright lie. Nikola motors is a prime example here they made a fake truck and filmed it after. They literally pushed it down a hill, pretending that they have a working prototype. They also lied about the number of pre-orders they had.

This is another very common thing. By the way, with these early stage, companies that are valued in the billions of dollars they make up a lot of you know pre-sale numbers and interest, but if you actually looked beyond the marketing it was pretty clear with nicola that there was no substance to it. There was no functioning factory, no experience and massive gaping holes in the business plan. At the same time, if a company is doing a lot of marketing in pr, that is not necessarily a sign that they are a bad investment, because some people say you shouldn't invest in hype, stocks out of principle.

Remember apple went into marketing overdrive with all of their products over the last couple decades and they controlled every element of how their products were advertised and sold, and it didn't do very badly out of that. So i just try to ignore the marketing element altogether. The best that i can one example in my portfolio here is lucid motors. When i compare lucid to many other early stage, ev companies, the qualitative analysis - throws some really strong positives and a lot of people will say that i don't understand what i'm talking about.

This is a really bad investment. I get these comments all this all the time, but this is my view. They have a serious team of professionals from across the industry, led by an ex-tesla chief engineer. They have a huge existing factory that already has large parts of the production line operating.

There is plenty of footage and other evidence out there they've made close to 200 prototypes of the car, and there are endless videos out there where you can see these driving around. In the real world videos made not by the company but by real people who just happen to see it, and there is a huge gap between making a prototype and actual scale production. I am aware of that. Ela must repeat this point all the time on twitter, but even getting a sizable number of real functional prototypes is already a step further than many of these other companies will ever get to and on the financials, lucid, scored huge early funding rounds from the saudi arabian Public investment fund and this summer collected even more money from their spac merger.

It is incredibly rare for a company that is this early to have such a strong balance sheet on top of having a sizable production facility. Then you get to the technicals, and you see how good their battery production technology is, how good their electric motors are and how both are leading within the industry. And that makes for an incredibly compelling case. And this brings me to my next point, which i think a lot of people really don't think about, but i keep repeating it because it is really important when i pick grow stocks.

I absolutely want them to be in a high growth squared company, and that means that not only do i want the company to grow and establish themselves and do really well, but i also want the industry within which that company operates to be on the way up. I want that industry to be exploding over the next decade, because if a company does well within an industry that is also exploding, then that explosion tends to pull the company up along with it. So i'm not really interested in grey stocks in industries that are not going through that process or dying out. I don't want an innovative printer company or an innovative tobacco business, but when i see new industries or major disruptions that will fundamentally change the world for the better, i definitely want in on that electric vehicles and self-driving technology are some of those industries.

For me, we are definitely going there one way or another, and it's going to make the world a better place, and so, if i can pick companies that i think will do well within that space. The compound effect of the industry exploding with the company doing well can result in really powerful long-term growth. So now, let's talk about the valuation part, because this is one that a lot of people completely don't understand, and it quite often frustrates me because i see a lot of people talking about it in ways that will probably not be particularly useful for people watching grow Stocks cannot be valued in the same way as established mature companies, so whenever somebody tries to point out that a gross stock has a p e ratio or 300 or whatever, you can safely discard the rest of what they have to say, because the p e ratio Is a completely irrelevant metric for a company that is not turning a profit or has only just recently turned profitable. It's like assessing a sapling that you've just planted based on its height or the size of its leaves, it's just the wrong metric.

It makes no sense when you compare it to a big tree in the same vein. A lot of investors. Don't understand that p l and balance sheet items do not grow linearly for growth companies. This is such a common mistake, especially among the twitter sphere and all the social media and youtube videos where people just roll out all these stats.

So if a company has just broken even and made a 10 million dollar profit on a 1 billion total of revenues, they do not need to make a hundred billion revenue to reach 1 billion in profit. It is not a linear scaler, a car manufacturer that earns 1 billion in profit from selling 200 000 cars. A quarter does not need to sell 10 million cars to make 50 billion dollars in profit, so the only way to properly assess these types of companies is to do some sort of a bottom-up present value model where you actually model out the different elements of the Company's business so that you can properly understand what those non-linear relationships between the different metrics different parts of the company, different costs and different revenue streams are, it is not easy, it will take a lot of time. It is far more complex than taking the last year's profit number and multiplying by 15, which is what a lot of people tend to do as their due diligence.

And that means a lot of people who don't understand. Grace talks will just simply discard them and they'll tell you that it is completely worthless investing in them, but you can use that to your advantage. If you do put the time and effort in - and you can then show yourself that you think that the current share price for that growth stock is grossly undervalued. Based on your reasonable best case assumptions, then the stock could offer incredible long-term returns because of this valuation factor and i've saved the best one till last, as i promised this is one that a lot of investors get completely wrong because a lot of people just don't Get it and this one's juicy, i love investing in growth stocks that have a natural, non-linear growth business model.

Now a nonlinear growth business model doesn't just mean that i think the revenues will grow more and more every year, it's a bit more complex than that. It means that the way the business is operating and the fundamental way their products work automatically imply that not linear growth in the future. So when you see that company executing the early stages of that non-linear business model, you can then see that the rest is coming before it comes, and when it comes, those numbers can look insane. A non-linear business model can come in different guises.

One is where the customers that a business acquires are not transactional and have a very long revenue tail. That means that the customers that you bring in aren't just gon na make one purchase if they like your product or service they'll, keep paying you for months and years to come now, don't confuse that with monthly subscription models. Those can also do well, but those models are just splitting out the total expected revenue into monthly payments. This isn't the same thing.

A good example of a non-linear business model is amazon. The company did everything to provide the best possible service to their customers buying on the platform. The buying process is super easy. It was industry leading for a long way.

It still is your purchase, arrives the next day and guess what next time you need to go and buy something else, you're going to go to go right back to amazon month after month, year after year. This is what happens, and this is what's led to the growth that amazon has been experiencing. Fiverr is an example of an early stage, growth company, where the numbers are showing the same type of pattern. Customers who buy services on the platform are actually extremely sticky.

They continue using the service for many years after they sign up and actually, as the platform has been improving, those older customers are actually spending more over time per original customer, which is an insane statistic. If you just look at five spnl, you won't see these numbers coming through yet, but they share the data that shows that they are at the start of that non-linear growth trajectory, and that is the sort of thing that gets me incredibly excited about the potential for Share price growth when those numbers will begin coming through in future years now. I hope you found this video useful if you did, please go ahead and smash the like button for the youtube algorithm. Thank you so much for watching.

I really really appreciate it and, as always i'll see you guys later, you.