Editor’s note: We’ve been flooded with questions since the announcement of Disruption_X, our brand-new service focused on dark-horse disruptors with 10-bagger potential.
So today, RiskHedge Executive Editor Chris Reilly asks Disruption_X co-editor Chris Wood to answer a few questions. It’s an important discussion you don’t want to miss...
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Chris Reilly: Chris, the #1 question we’ve gotten is how our new Disruption_X advisory fits alongside our long-established and successful Disruption Investor service.
Or, to put it bluntly, as some of our subscribers have: Why do they need a different service when your recommendations inside Disruption Investor have beat the markets two years running?
Chris Wood: Stephen McBride and I created Disruption_X to capitalize on the explosion of earlier-stage investment opportunities we’re seeing across artificial intelligence (AI), robotics, cybersecurity, space tech, next-generation energy, and much more.
Chris Reilly: Go on...
Chris Wood: Disruption Investor stocks are larger, more established, and carry less risk. As you know, we’ve had great success recommending companies like Palantir Technologies (PLTR), Nvidia (NVDA), and ASML Holding (ASML) in Disruption Investor.
These are big companies—all with a market cap north of $100 billion.
Disruption_X picks are much earlier in their growth trajectory. They’re also a lot smaller ($200 million to $20 billion market cap) and carry more risk, which gives them more upside.
Chris Reilly: Give us a specific example.
Chris Wood: As a Disruption Investor subscriber, you’ll know to buy a stock like Nvidia in 2020, when we first recommended it.
As a Disruption_X subscriber, you’ll get recommendations for stocks like Nvidia 10 years ago, when it was a much smaller company trading for just $0.48, split adjusted. It’s up over 25,000% since then.
Incidentally, I actually did recommend Nvidia in an old advisory in 2013. Yes, I’ve been doing this a long time.
Chris Reilly: What about the risk-management strategies in each service? How do they differ?
Chris Wood: In Disruption_X, we set much wider stops—sometimes as high as 70%—to ensure we aren’t forced out of a great company too early due to volatility.
In Disruption Investor, a narrower stop of 20%–30% is usually appropriate. Having an exit strategy is always part of good investing.
Chris Reilly: Let’s talk about profitability. One of the requirements in Disruption Investor is that all of your recommended companies must be profitable. No exceptions. But that’s not the case in Disruption_X. Why?
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Chris Wood: Disruption_X stocks must be either profitable or “intentionally unprofitable” due to aggressive investment in growth.
Legendary investor Peter Lynch insisted on buying profitable stocks. In his time, that was a viable way to find 10-baggers. Today, the “grow now, profit later” approach of many of the fastest growers requires us to take a different approach.
Tesla (TSLA), Amazon (AMZN), Shopify (SHOP), and many others gained thousands of percent before they were consistently profitable. That doesn’t mean profitability isn’t important. No company can succeed if it doesn’t eventually turn a profit.
The key question to ask when evaluating an unprofitable growth stock is, “Why is it unprofitable?”
If it could be profitable now but is choosing to invest aggressively in growth instead, that’s a great sign. You want companies sacrificing short-term profits to earn much bigger profits later.
Chris Reilly: Give an example, please.
Chris Wood: Back in October 2016, I recommended Enphase Energy (ENPH) at $1.14 per share. At the time, it was investing heavily in R&D to improve its solar microinverter technology and cut manufacturing costs. R&D was consuming about 16% of annual revenue, and it lost nearly $70 million that year.
I told subscribers: “This will take some time. But the effort will make Enphase more profitable in the long run.”
Three years later, revenue had doubled while R&D expenses shrank to below 6.5% of revenue. The company became profitable for the first time, generating over $161 million in net income. The stock had become a 20-bagger.
Another example is eXp World Holdings (EXPI), which I recommended in June 2019. It developed a virtual world platform that disrupted the real estate market by eliminating physical offices.
This allowed eXp to compensate agents better than traditional brokerages, which attracted more agents, which generated more revenue. Its quarterly revenue jumped 111% in just over a year, and it went from unprofitable to profitable in that short window.
We sold in October 2020 for a 375% gain in just 16 months.
Chris Reilly: So to wrap up, what would you say to Disruption Investor subscribers who are considering adding Disruption_X to their investment strategy?
Chris Wood: It comes down to your risk tolerance and investment goals. Disruption_X helps you get into explosive earlier-stage growth opportunities. It’s a more sophisticated service targeting bigger gains in shorter time periods.
As a Disruption Investor subscriber, you’ll get recommendations in cutting-edge technologies and newly created industries like AI, space, and robotics.
Chris Reilly: Thanks, Chris. Reader, here’s the best part:
If you’re trying to decide between Disruption_X and Disruption Investor to see which is best for you, you don’t need to pick. You can get the benefits of both, right now, in our special Disruption_X launch deal.
That’s right. By joining Disruption_X today, you’ll receive Disruption Investor for free (a $500 value). Not just for one year, but for as long as you remain a member. Go here to see the full details.
Chris Reilly
Executive Editor, RiskHedge
