Masters Series: How Speculating Is Different Than Investing
Editor's note: Most people don't realize it, but there are huge differences between average investors and professional speculators.
Today's edition of our weekend Masters Series originally appeared in the May 26 edition of our free Growth Stock Wire e-letter. In it, Paul Mampilly – editor of our brand-new Professional Speculator newsletter – explains the differences... and shows how you can use them to make 100%-plus gains in the stock market...
How Speculating Is Different Than Investing
By Paul Mampilly, editor, Professional Speculator
Hundreds-of-percent returns in a year... It's impossible for most investors. But for skilled speculators, it can be a reality...
The "speculator" often gets a bad rap in the media. When politicians do something stupid to wreck the financial markets, they often blame speculators for the problem. Or, when the management of a company does something stupid to wreck its balance sheet, it often blames speculators as the ship sinks.
What can you say? Some people don't like to accept responsibility for their actions. They have to blame somebody.
Also, many people think "risk" when they hear speculation. But when you approach the market as a professional speculator would, you actually take on less risk than the average investor... and you'll earn much larger returns...
The first thing to understand about speculating is how it differs from investing.
The goal of investing is to put money to work over a long time frame.
You can invest in a private business like a restaurant or laundromat. You can invest in a rental property. You can invest in blue-chip businesses like Coca-Cola or Johnson & Johnson.
I'm a fan of long-term investing. I own long-term investments. And for most people, it's the only thing they should do.
But for those of us looking for returns of hundreds of percent a year... we trade. We buy stocks with the goal of selling them to other people at higher prices. And we're not looking to hold our stocks for 20 years like you would hold shares of Coca-Cola. We're looking to cash out of our positions in a few years or less.
And when done the right way, speculating can lead to massive returns.
For example, let's take a look at one of my greatest trades...
In late 2000, I was working for an asset manager with more than $1 billion under management. As a securities analyst, my job was to research companies for a portfolio manager, who made the final decision to buy or sell stocks. That year, one of my recommendations was a tiny company called Intuitive Surgical. At the time, Intuitive was selling a robot that could perform surgery on a human. Many potential investors dismissed it as a "toy." But I was intrigued...
I attended a demonstration of Intuitive's robots at a New York City hospital. Watching the surgeon operate the robot was like watching science fiction. This "toy" was much, much less invasive than conventional surgery. I spoke with surgeons who told me miraculous stories... of patients able to walk out hours after a heart-bypass operation – patients who used to require a week of recuperation. With Intuitive's machine, surgeons no longer had to crack a patient's ribs open to get to the heart. Instead, the robot made a tiny incision. It healed much faster than broken ribs... caused minimal blood loss... and left minimal scarring.
I could see that this revolutionary technology was going to eventually replace most manual surgery.
I'm a student of innovation. As great as innovation is, humans are conservative when it comes to technology. They hold on to old technologies that are terrible, even when new, better ones are available.
So you're not going to be surprised to hear that in the year 2000, Wall Street and the medical establishment met Intuitive's robots with deep skepticism. You won't be surprised to hear that the portfolio manager I worked for thought I was crazy when I told her she should buy Intuitive Surgical stock.
Fifteen years later, with a market cap of $18 billion, Intuitive Surgical is one of the largest medical-device companies in the world. Its robotic surgeons are considered medical miracles... and they are used all over the world. It is one of the greatest growth-stock winners of the past 20 years.
If you had put $1,000 into tiny Intuitive Surgical at $10, the approximate price I remember recommending the stock, you'd have nearly $50,000. Intuitive is now worth 58 times what it was back in 2000. In other words, an investor who bought and held Intuitive stock has made 5,688%.
I'm not telling you this story to gloat or criticize the naysayers. I'm telling you this story to show you the power of speculating.
In 2000, Intuitive wasn't the sort of company you wanted to pour a lot of money into. But it was a great speculation.
And by following a few strategies, you could limit your risk while setting yourself up to make massive profits.
Regards,
Paul Mampilly
Editor's note: We're thrilled to have Paul join the Stansberry Research team. He brings along an incredible track record and more than 20 years of investment experience. Plus, right now, he has found one of the best speculations he has ever come across. This company has developed what could be the biggest medical breakthrough of the next decade. You can gain immediate access to this recommendation – as well as his other triple-digit-upside opportunities – with a risk-free trial subscription to the Professional Speculator. Click here to learn more.