Catching a certain kind of moonshot; Five examples of moonshots

I gave a presentation last week to my team at Stansberry Research that I wanted to share with my readers here...

It focused on how to identify the kind of stock we all dream about: moonshots – ones that go up 5 times, 10 times, or even 100 times.

These stocks come in all shapes and sizes, as you can see by looking at the 10 best-performing stocks over the past one, three, five, 10, and 25 years (helpfully listed on this website).

Over the course of my career, to find such stocks I've usually focused on "boring" long-term compounders – stocks like Berkshire Hathaway (BRK-B), McDonald's (MCD), Home Depot (HD), Ross Stores (ROST), AutoZone (AZO), and Yum Brands (YUM).

But in my presentation last week, I focused on a particular kind of moonshot: market-leading companies in sexy, exciting sectors that appeal to the media and retail investors.

Tech is, of course, what's sexy and exciting... but I'm only talking about a narrow subset of tech companies. I'm not talking about Nvidia (NVDA, semiconductor chips), Microsoft (MSFT, software), Google parent Alphabet (GOOGL, search engine), Meta Platforms (META, social media), or Amazon (AMZN, online retailing).

These are all great, dominant companies, but they don't fit into the category of breakthrough technologies that capture retail investors' imaginations – which can result in parabolic stock moves.

Rather, I'm talking about electric cars, smartphones, video streaming, robots, and space tourism...

1) Let's start with one of the all-time biggest, fastest moonshots, Tesla (TSLA), whose electric cars have enthralled investors.

Since it went public on June 29, 2010 at $17 per share and closed at $23.89 ($1.59 after adjusting for stock splits totaling 15:1), its stock is up 138 times through yesterday's closing price of $219.91:

2) Three years to the day earlier (June 29, 2007), Apple (AAPL) launched the iPhone – the ultimate world-changing sexy, exciting device – when its stock was at $4.36 per share (split adjusted). (Note that I'm not going back to Apple's launch of the iMac or iPod, though some might do so.) Since then, it's up 42 times:

3) I was short Netflix (NFLX) in 2009 and 2010 as the stock went up 150%. In frustration, on December 16, 2010 (arrow No. 1 in the chart below), I published my short thesis, Why We're Short Netflix. That led the company's founder and CEO, Reed Hastings, to publish a response, Whitney Tilson: Cover Your Netflix Short Position. Now.

Hastings invited me to meet him. I did so six weeks later, and immediately covered my short position because I could see that he was a brilliant, visionary CEO and Netflix was the leading company in a new industry that could be massive, streaming video.

The stock went up another 50% – and then crashed 82% (arrow No. 2).

Even though I patiently waited to buy the stock until late 2011 after it had fallen by 75%, I had to endure another year of pain, as the stock gyrated between $10 per share and $18 per share until it finally bottomed at $7.78 per share on October 1, 2012.

Fortunately, I hadn't lost faith...

I always try to keep in mind Warren Buffett's maxim, "Mr. Market is your servant, not your guide." So on that very day, I pitched it as my favorite stock idea to the 500 attendees of my Value Investing Congress and, immediately afterward, on national television on CNBC, saying it was this decade's Amazon, which had risen 20-fold in the previous decade. (You can see the slides I presented here.)

It turns out I was too conservative, as Netflix rose 90-fold in the next eight years (arrow No. 3)!

4) I was short iRobot (IRBT) in January 2014 (arrow No. 1 in the chart below) when I ran into my friend and famed short seller Andrew Left at the Consumer Electronics Show in Las Vegas. We were shooting the breeze, talking about our favorite ideas, when I told him I was short iRobot's stock.

I recall his reply:

I know exactly why you're short it – and you're not wrong – but it's a bad short because it's the only public company in an exciting sector, robots, that retail investors might get very excited about.

I covered my short that day and, sure enough, two years later the stock tripled (arrow No. 2):

Today, iRobot is back to where it was a decade ago. But anyone short the stock got massacred... so thank you, Andrew!

5) Lastly, what could be sexier than space travel/tourism?

That's what led me to go along with my friend and former colleague Enrique Abeyta's idea of Virgin Galactic (SPCE), despite my misgivings about a company that was years away from generating revenues and was racking up big losses.

Here we are visiting Virgin Galactic's Spaceport in Las Cruces, New Mexico:

We recommended the stock in our Empire Investment Report newsletter at $10.20 per share on December 18, 2019 (arrow No. 1 in the chart below). Sure enough, we caught a moonshot as Virgin Galactic doubled in less than two months, so we told our subscribers to sell half at $20.40 per share (arrow No. 2).

It kept soaring... So only nine days later, we recommended selling another half at $37.64 per share (arrow No. 3).

Within weeks, SPCE shares crashed back to $10, making us wish we hadn't kept the last quarter of our original position. But we hung in there... and, sure enough, caught another moonshot during the meme stock bubble in January 2021 and sold the last shares at $50 (arrow No. 4):

SPCE shares are now under $2, but our subscribers made out like bandits – someone even made $10 million! – because we correctly identified the right setup for a moonshot stock, even though it eventually collapsed.

So do I see any similar setups today?

I do, in fact... So tune in tomorrow for more details.

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.