Dear Subscriber,

Ok, sports fans...it's time to rock the second half of 2020. If you have not yet read Part 1 of our June/July "The Biggest Global Reset since WWII" Newsletter from June 30, I strongly suggest you start there (copy to Word/Docs and print it out) to get warmed up to the two core elemental strategic drivers of Transformity Research's amazing 700%-800%+ outperformance of the S&P 500 2020.

Here is that link. 

Then I really think you would highly benefit from printing this Part III out as well and reading at your leisure. 

Quick Recap of the Transformity Investing Principles + Digital Platformity Investing Principle

To set the stage for rebuilding our Ultra Growth portfolio for the post-pandemic "New Normal 2022" world, in the June newsletter I shared with you the multiple reasons why "value investing" aka atom-based investing has not worked for a decade and definitely not in the 2020+ growth investing world. In the piece, I suggest that value investing died when no one really knows what the "intrinsic value" of an atom based business when the Federal Reserve promises
1) "ZERO Percent No-Risk Interest Rates for ALL till at least 2022" 
2) "We will buy every corporate and municipal bond issued if we need to--and mortgage-backed securities, too"

when you as an investor discount your estimate of future cash flows and intrinsic value of an enterprise at ZERO!

In the race to getting back to our 2019 GDP by 2022, most of the new wealth between now and then will definitely be created from reimagining everything in the "bits & bytes" Platformity Economy while some (say 20%) will come simply from a return to normal valuations for the "atoms" economy companies.

Key Point: With the Fed's "Put" option in place for two more years (the concept that the Fed will NOT LET stock and bond prices fall until 2022 at the earliest), secular growth Platformity Economy risk asset returns will beat cyclical low growth equities like a red-headed stepchild (with the caveat that when the Platform Economy stocks get TOO FAR AHEAD of their skis, you and I MUST EXPECT some sharp corrections like last 30% flash correction for the Platformity tech stocks). 

Our basic investing thesis for June 2020 onward is the most wealth creation will come from the disruptive industry or regulatory transformity events primarily from digital platformity technology, mobile platformity enabling API's ("application programming interfaces") which become the dominant enterprise/SMB/consumer digital mobility and platform infrastructures and ways of doing business, managing mobile workflows and day-to-day business processes. 

Interestingly, in our "Tale of Two Cities" Ultra Income portfolio, our 200%+ wealth creation opportunity that started on March 24th is the direct opposite of Ultra Growth opportunity; our Ultra Income positions are betting on the return to just "normal" 2019 tangible book value in the atoms of the energy infrastructure and financial assets that were destroyed 80-90% OFF their actual tangible book value.  The narratives that bring our Ultra Income investments back to the normal true value is news that is simply "not as bad" as most thought. 

Hence the paradox of investing for ultra growth and ultra income in the post-pandemic world 2020-2022:

A) To achieve historic levels of monthly/quarterly dividend INCOME, we must wade into the graveyard valuations of TANGIBLE physical atom-based assets and securities (but not zombie bricks and mortar stocks or over-stored REITS) and analyze and imagine the overly-punished survivors who will return to normal tangible book valuations and

B) To achieve historic levels of capital appreciation in the new post-pandemic world 2022 (since successful growth investing as mentioned is really an exercise in time travel)  we have to accurately imagine and assess the durable digital platform winners of 2022 today

C) And identify the consumer and enterprise behaviors that have permanently changed as the COVID-19 pandemic slammed into the world like a massive invisible comet.    

Literally, every investor today is trying to solve a giant jigsaw puzzle of post-pandemic investing and conducts the thought experiment "what will life be like in 2022?". Fortunately for us, as I shared in the June 30 newsletter, all you really need to understand about the amazing wealth-creating power of the Transformity Research wealth creation and protection strategy in the post-pandemic world (and gain the "pull-the-trigger" faith in our growth and income investing portfolio selections) are these five basic and interrelated wealth creation concepts 202-2022:

• The Transformity Wealth Creation/Destruction Principle

• The TR Business Cycle Market Timing Index (which called the 2000, 2008 and 2020 market crashes and recessions)

• The Digital Platformity Principle (i.e, building companies with digital moats featuring self-reinforcing network effect feedback loops) 

• The Wealth Building Power of "Beat/Beat/Raise" Narratives

• The Discovery and Analytical Power of Subject Matter Experts (SME) Syndicates

Key Point: From the founding of ChangeWave Research in 2000 with 44% annual returns 2000-2010 to my latest improved investment research and stock selection approach iteration in 2014 with Transformity Research now with 66% annual returns, we have proven the wealth-building power of these five basic core wealth creation & destruction assumptions that apply to the "New Normal" 2020-2022 global economy.

They are: 

1) We must discover and analyze the most powerful tectonic transformational and disruptive technological/regulatory secular macro events in the world (i.e., 3-5-10 year unstoppable non-cyclical 20%+ annual growth) that do NOT depend on a normally cyclical business cycle or slow down in the pre-vaccine global economy.)

2) We use our 7500+ member Transformity Research Experts Alliance ("TREX") members as our eyes and ears on the front lines of new and investable seismic transformational events, sectors, micro-sectors, scientific discoveries, and regulations.

3)) In order to build wealth in growth stocks, our transformity events and micro-sectors need to turn into widely adopted secular transformative investment narratives

4) IN order to NOT get wiped out in 50%+ bear markets, we must also correctly forecast Fed-based monetary transformations and economic expansions and contractions aka the business cycle (which we have successfully done since 2000 with our Transformity Macro Market Timing Index going negative Feb 24, 2020, and currently just ABOVE the 15 reading which means a V-shaped expansion has overcome a historically short recession)

5) We must dissect those long-tail secular transformations into the enabling technology "picks and axes" micro-sectors that in the latest 21st-century digital transformation means

1. Investing in the high margin/low incremental cost digital platforms business models aka "The Platformity Investment Principle" and

2. BUYING the key IP "intellectual property") and API enablers ("application programming interface") developers and owners that provide the enabling digital horsepower technology that makes ubiquitous 24/7 vertical market digital platforms run 

3. BUY the companies that use digital business processes and workflow functionality to build digital platform-based high mobility enterprises that disrupt the existing status quo competitors. 

Key Point: Investing in the dominant and soon-to-be-dominant global Platformity Principle companies is the way you get rich in stocks in the 21st century.

Period.

Unless your last name is Kardashian. 

The Platformity Economy aka X-as-a-Service Equities RULE!

We love investing in the Platformity Economy simply because it is now the most lucrative business model in the world (only behind being a drug cartel--which is in itself meets the definition of a Platformity Economy member!). And investing in the world's best digital platformity providers is the answer to the key investment decision today: "What stocks  DO NOT NEED a strong economy to grow at 2-4-6X faster than the 2022 economy?"

In our portfolio of Platformity Economy stocks we monitor and value, X-as-a-Service (XaaS) platformity economy companies include 
1) Enterprise/SMB WorkFlow/Business Process Mobility Software-as-a-Service (SaaS)
2) Digital Mobility Infrastructure-as-a-Service (IaaS),
3) APIs-as-a-Service (APIaaS)
4) Digital Mobility Platform-as-a-Service (PaaS)
5) Consumer Digital Services-as-a-Platform (CDaaS)
6) Digital Healthcare Mobility-as-a-Service (DHaaS)
7) AI/Machine Learning as-a-Platform (AIasS)
8) Financial DTC Fintech-as-a-Service (FSaaS)
9) Digital Education Mobility-as-a-Service (DaaS)
10) Communication Mobility Platform-as-a-Service (CPaaS)
11) DTC Ecommerce Platforms 
12) B2B Ecommerce Platforms
13) Biotech/CRSPR & Genomic Digital Discovery Platforms
14) Freelance Professional Employment Platforms (FivvR, Upwork etc.)
15) Global Digital Streaming Content platforms
16) Site-license-to-SaaS corporate conversions 
17) New City/State Tax Revenues and Outsourcing Platforms (Sports Betting/Cannabis/Services) 
18) Autonomous Transportation-as-a-Service Platformity

We love businesses in the Platformity Economy because they have high recurring revenues that often experience significantly higher and more consistent revenue growth than their non-XaaS counterparts. Digital platformity companies benefit from network effect economics (i.e., the more network nodes are connected, the more valuable and sticky the network is). Platformity companies don't have to release or upgrade a product every six months to keep sales up. And with proper product structuring, there are plenty of opportunities for cross-selling and up-selling.

But most of all, if what you are selling is based on electrons/bits/bytes/code and data, the reproduction cost of your product is zero. That means high gross margins and zero incremental selling costs (i.e., when you upgrade from paying Apple for downloaded music to Apple Music, Apple's cost of that new service sale is only the credit card transaction fee and your minuscule share on their annual licensing fees.) 

Key point: The more services the customer signs on for from a platformity company, the more difficult it becomes for the competition to make inroads. These upsell digital services create 120%+ customer renewal rates at 92% gross margins. But most importantly, like a vine that grows into a tree, multiple critical service touchpoints creates an incredibly powerful economic moat.

The best example of the network effects and 90% incremental margin embedded in the Platformity Principle is Apple (which we will add to Buy List on next pull back with $500 target--really!)

They did not become the most valuable enterprise on the planet for nothing. First, most today do not "buy the phone"--they pay a lease payment and upgrade every 12-18 months. Then every Apple device and service you add further locks you into the iOS digital platform. Every app you download does too. Every song or movie or unlimited plan you add to your personal digitalia (I own that term too!) locks you deeper into the iOS ecosystem and, for Apple, the gross margin to get a $1 of digital service revenue from you (one this cost of the content is paid) is infinity!

The Law of Transformity

The primal law in the Transformity Research jungle is the simple "Law of Transformity" which states that " the greater the impact and velocity of secular (i.e., non-cyclical) "S-Curve" change, the greater the magnitude of new wealth is created and old wealth destroyed." 

The economic engine that drives the amazing Law of Transformity wealth-building rates of change is that rapid accelerating revenue growth in ANY company (with capable management) will create the growth investors dream scenario- the "top-line beat, bottom-line beat, and forward guidance raise" quarterly reports that, if we are right, will last for YEARS. 

Beating revenue/profit guidance and raising EPS revenue guidance every quarter is the mother's milk of attracting the price-insensitive "marginal buyer" of stocks we now call "momentum" or "black box algorithm" buyers who are programmed to buy stocks going up (until they don't.)  Stocks in the Transformity Zone create self-reinforcing positive feedback loops of higher stock price which, in turn, attracts algorithmic trading bots that are programmed to buy stocks in uptrends--and the greater the magnitude of stock price escalation, the more they buy. 

The mother's milk of quarterly "beat and raise" public companies is when they have emerged from the early adopter phase of their business development and are now in the S-curve revenue/EPS growth phase. S-curve means the type of curve that shows the growth of a variable (in our case unit sales) in terms of one other variable expressed as units of time.

For example, the non-linear S curve of the growth of new killer enterprise software-as-a-service product with HIGH gross profit marting unit economics would show a
1) slow growing early adopter phase, then
2) boom the inflection point aka the explosive upslope of an exponential increase in sales phase as the product goes mainstream and then global followed by
3) a tapering or leveling off when the rate of change of the rate of adoption by new customers slows.

In reality, here is what a real business S-curve inflection point looks like and sounds like:


All the algo stock buying computer sees is the inflection point and the increasing rate of the rate of price change (aka the "second derivative"). When the R squared rate of change of the rate of change tapers (look it up), the ride of over.

And those of us investors who are ON THAT EXPONENTIAL RIDE make a small (or in the case of Nikola Motors) pretty big new fortunes. 

Key point: At this leveling off point of quarter-over-quarter secular growth our platformity stock has hit maximum valuation (in most cases--Apple being the one exception with so many NEW S-curve products and services), we have SOLD that stock because and is now saturated the total addressed market ("TAM") and is sustained by existing customers who continue to buy the product. Read more: http://www.businessdictionary.com/definition/S-curve.html

REALLY Key Point: The final part of the Law of Digital Platformity is TAKING PROFITS. WHEN the upsloping S-curve begins to flatten out, ignorant investors will continue to hold the stock extrapolating the upslope to infinity. Those are the investors we SELL our Platformity stocks to OK? Life is not fair--and investing "fair" is a weather report. 

With the addition of the Digital Platformity Principle, we improved our 44% ChangeWave results to now 66%-per-year annual returns 2014-2020. And while it is "pinch yourself amazing" to acknowledge that our portfolio gains in 2020 now exceed 750%, I think there are a LOT of 200%-400% winners left in this Monster Millenial Stocks environment. 

Need Proof of the SERIOUS 2020 Market Outperformance of the Platformity Economy Stocks?

My friends at StockTwits publish a weekly Top 25 "Momentum Meter" list of S&P 500, Nasdaq 100, and Russell 2000 stocks. This momentum meter calculates the average weekly performance of the top-performing 25 stocks in each index week-to-week RELATIVE to the broader indexes. 

The result? The Platformity Economy stocks are CRUSHING the broad indexes. From Consumer Healthcare platformity stocks to B2B leaders, its no context--the Platformity Economy is leading the overall market at nearly a 7-to-1 basis--ergo a 700% better overall return than the overall YTD market. Here ya go--see how many Platformity Economy stocks you recognize!

PS: our long time holding Nvidia (2016-2020) IS now the killer AI platformity stock--she goes back on buy list too! 

More than 75% of ALL S&P 500 and Nasdaq 100 stocks are Platform Economy stocks--the Russell 2000 is much heavier in bioscience stocks but about 70% of them are Platformity technology firms, too! 

Post-Pandemic Investing Rule #2: What OTHER Threats To Mankind Have We Been Ignoring
and MUST NOW Address?

Another Post-Pandemic investment thesis we now hold is that when investors and global citizens woke up from the brain damage of dealing with the Covid-19 pandemic reality and most asked themselves:

"OK we ignored the risks of another 1918--1920 Spanish Flu world pandemic and it sure bit us in the ass.

So now--what OTHER GLOBAL PENDING GLOBAL DISASTERS have we been avoiding and/or ignoring. How do we NOT have another PREVENTABLE Global disaster again--as in EVER?"

If you ask sophisticated people outside the hydrocarbon extraction industry, most answer "Global Climate Change." Certainly EVERY MIllennial in the world (the biggest age cohort in the world BTW) believes that without tens of $trillions of capital invested in the de-carbonization of the world, their lives will be massively and negatively impacted by carbon-based global warming.

And certainly, regulators in the Euro Zone of nearly 600 million citizens and California (the #3 and #5 economies in the world) with their existentially strict 2024-2028 diesel emission regulations now on the books, we are now assured to see MUCH more rapid transition to decarbonized freight delivery both short and long haul (hence the Millennial's stock trading frenzy in our 7X-9X grand slam stock of the year Nikola Corporation.) California has led America and the world in decarbonisation for decades--it is only recently that the 20X bigger Euro Zone took up that baton and are now racing (relatively) to the ZERO carbon freight and auto world. 

Key Point: We are building three new portfolios for the Race to Decarbonized Transportation: The Hydrogen Economy (which includes our CNHI stock Buy Under $7), The Decarbonized Transportation Economy (TSLA SHLL NKLA and others) and the ESG Clean Energy Economy (Solar/Wind/Battery Storage) and the Millennial Values Rising Portfolio (which includes our FMCI Buy Under $16 and FMCIW warrants Buy Under $4 as a sustainable plant-based food play) 

Post-Pandemic Investing Rule #3: What Consumer, Governmental and Industry Behaviors Have Been Changed Forever?

Here is what our initial surveys of our TREX members conclude so far: basically 3-5 years of business and personal behavior and transformation has been accelerated into a 6-12 month window.

1) The 100% Digital Mobility Enterprise.  The CEO of Microsoft Satya Nadella famously shared this New Normal view a few weeks ago "The entire enterprise digital transformation underway has been pulled forward 3-5 years.

Furthermore, the very survival of virtually every enterprise we serve is now dependent on how fast they complete their analog-to-digital workflow and business process transformation. Investments planned for 3-5 year rollout periods have been accelerated to 2-4-6 month implementations. The pandemic made everyone realize without 100% digital transformation, many companies simply won't be able to compete in the post-pandemic world against fully digitized competitors.

Investment Opportunity: Digital transformation now or die. See "Platformity Principle" above. 

2) Flex Work/School/Commuting/Travel/Healthcare/Delivery Schedules. Its a cliche today but there is NO going back to 5-day, 8-5 office schedules for tens of millions of American professionals (and for many technology professionals living in SF/LA/NYC in a 900 square foot apartment with two kids at $3500-$4500 a month rent or mortgage)

As someone who went into the office only one day a week since 2000, I can tell you the upside to professional work mobility is huge--and once you get the hang of it, you will NEVER want to go back to daily rush-hour commutes and "standing staff meetings." Also jumping on a plane to fly across country or continents see a new customer or corporate meeting? No way. Of course, some business-to-business meetings must be in person--and corporate cultures require actual not digital facetime with your boss and people you need to impress and build relationships with. 

PS--the same with digital healthcare and e-commerce alternatives to the status quo. I just discovered Wayfair--my wife is cancelling my credit cards! 

3) The NEW Golden Age of Biotech/Genomics/CRSPR is Here. According to our FDA/Genomics/Biotech insiders, Operation Warp Speed (FDA's super-fast approval protocols for COVID-19 vaccines/therapeutics/tests) has a) completely shaken up the long drawn out FDA approval process and b) forced new significant inter-and-intra company collaborations in biotech and discovery platform companies that will accelerate from here. 

We have our FDA, biotech, and genomic industry professionals bringing in new intel every day on new drugs, companies coming out of FAST approvals and warp speed collaborations. We are bulking up our subject matter experts in ALL the molecular biology/genomics/genetics/genetic testing/stem cell and biotechnology platforms

Hint: Based on new intel we just received from our inside the FDA members, we should have a VERY big upside COVID-19 testing stock out very soon--look for our BUY ALERT out in the next coming days. 

4) Human Consumption Behaviors. Our need for human connection, social interaction, and self-actualization are DNA encoded behaviors from our Paleolithic ancestors--they have not changed an iota.

BUT--watching all that TV on your crappy TV and sound system is over--upgrades have happened or are happening soon in-home entertainment digitalia (think Sonos, Apple, Amazon). That crappy chair or appliance you put off fixing or replacing? Now it's a pain you can't stand--if you are working and have the disposable discretionary income, you are SO getting you indoor (and outdoor too) ecosystem up to 21st speed (think Wayfair, Best Buy, Amazon, Home Depot, Lowes). 

Your finances? CASH RESERVES and saving for a rainy day? With the average household at $400 of cash liquidity, you can bet there will be hoarding of cash reserves in many households who can (unfortunately about 60% of America's 124 million households live in poverty--22%--or live in working poverty 38%.) In America, working poverty is when then earn less than $62k per year but more than $32K level of poverty. America's working poor can only pay 8-of-10 monthly bills for a lower middle-class lifestyle and can't write a $400 check for an emergency.

My firm participated with United Way on this research on America's "ALICE Households--Asset Light/Income Constrained/Employed" and trust me--Congress and the White House know that IF unemployment support of the under $45k a year household is NOT EXTENDED to 2021, there are going to be tens of millions of America's ALICE households on the street. 

It's an election year. Those headlines won't happen in an election year. Same with Medicaid expansion paid for by the Federal Government. With a Fall second round of COVID-19 cases, there will be people dying in the streets. 

5) 20th Century Zombie Company Retail Store Apocolypse Is Roaring

Our TREX members in retail and real estate all say "America going into 2020 already had 25% too many stores, restaurants, hotels and of course malls and strip malls fueled by cheap expansion money and real estate development loans."

The end of the 10-year expansion will do what recessions are supposed to do--exterminate the weak operators and make room for new blood and new ideas in the retail world. 

OK--look for 2-4 NEW recommendations in your email box over the next few trading days in Ultra Growth and Ultra Income.

WE DONT CHASE STOCKS, OK?

All-Access Members--look for some very timely option plays as the set-ups are starting to come fast and furious!