[Business] Finding the Perfect Investment for 2025
Part 1: Goals, intuition, & how I initially screen for investment opportunities; (part 2 preview) assessing the macro-environment
Hi Readers!
Today I’m starting a series where I walk you through how I’m going about finding the perfect investment opportunity for 2025 (and beyond).
I’m coupling a personal desire to take a deep-dive into one specific industry to find one specific investment opportunity and take a meaningful stake in that opportunity with writing it all down to stick to my guns and lay my investment theses and convictions on the line (for better or for worse… gulp).
To start, it’s worth noting that I’ve spend around 3 hours so far thinking critically on what my goals are with this investment opportunity, assessing my intuition about the markets, actually screening for investment opportunities, and lastly, assessing the actual macro-environment (not intuition).
High level overview:
Investment Goals
Assessing my Intuition
Screening for Investment Opportunities
(Part 2 Preview) Assessing the Macro-Environment
Let’s get started...
1. Investment Goals
I want to keep this short and simple, and I can do that by stating one thing: I have a high appetite for risk, but I’m not stupid.
I’m young, I have excess cash to use for this investment thesis, and I want outsized returns. That said, I also don’t want a high-flying company that is traded in an abnormally speculative way (this is highly up to my good judgement), so that sets me in a middle ground where only a few industries make sense — look, we are already narrowing down the choices — but more on that later.
With the conservative approach that the S&P will rise 10% this year, I want my the stock (yes, it’s going to be an equity) to rise by 2-3x in percentage-terms relative to the market. That’s 20-30% for those of you who have a hard time math-ing 😀 .
Next, I would love to be able to use leverage on this trade (AKA, trade it as an option), so volatility, volume, and liquidity will be important as well. Alongside volatility, I would prefer this investment to be a well-branded name that has the ability to make large jumps from day to day; in my opinion, if nobody has heard of it, nobody is going to trade it.
So, my investment goals are:
Choose a stock that isn’t subject to mindlessly speculative trading
Earn outsized returns (20-30% / Annum) on my invested cash
Have the ability to utilize leverage in a safe and effective way
2. Assessing my Intuition
This section is naturally highly subjective, but this is my article after all — so here are my thoughts.
Currently, I think there is quite a bit of uncertainty with the market, but there is great strength in lots of the things that matter.
The uncertainty is coming from the volatility in our political space, debt, and geopolitically. The latest administration is still new and lots of bills are being passed, policies being set, national debt is still at an all time high, and there are two major conflicts yet ongoing.
The strength in our economy is coming from corporate investment, corporate stability, national fervor, and momentum. Big money is still being invested by our corporate leaders, this has been happening now for 1-2 years and has seen real results in terms of earnings, we have national leaders right now in the business space that are visionaries and share a U.S. nationalist mindset (cough, Trumps inauguration, cough), and the market has been in a general upswing since the end of 2022 (we have enough drops in the bucket to overlook momentary bad news… momentum).
Other notable intuitions for me are: magnitude of market reactions are larger than ever before and largely subject to inflation, interest rates, and employment; we are approaching an asymptote for AI/Tech investments and there will need to be another breakthrough on a new front soon to justify the dollars being spent, and slower-growth sectors will be more dominant in the second part of this year as they catch up to provide infrastructure for the numerous changes in tech.
I’d love to hear some commentary on these thoughts from you as my readers. What am I missing? Are my intuitions correct (will assess them quantitively below)?
3. Screening for Investment Opportunities
If you missed my recent article on the perfect tech stack, spend some time and make sure to check it out — I used two of the resources I discussed in that post to screen for opportunities.
My initial screening process really happened all in two steps:
Filter for companies meeting the following criteria on Finchat: (a) industries I like and believe are poised for growth (e.g. Electrical Equipment & Machinery in this case…) (b) aren’t outrageously valued in one way or another (e.g. P/E -100 to 250) (c) have room to run (e.g. Normalized EPS CAGR showing increasing momentum; i.e. 3-year CAGR < 1-year CAGR)
Search for the companies that meet these descriptions on Danelfin to get a quick-glance at AI’s take on the pick
After reading through descriptions of each company that came up after filtering to get a sense for their business model, I added the screened stocks to my Robinhood ‘Watch lists’ to monitor as I continue researching.
And that’s it! More screening to come, but after an hour of running through this process by slicing and dicing my filtering criteria, I’ve added ~10 stocks that fit my criteria!
Summary
At this point, I’ve run up against the max email length for Substack, so I’m opting to split what originally was my part 1 into 2 parts! Lots of ground setting to do up front 😃. So, more to come on this ‘initial’ stage of finding the perfect investment opportunity.
In this post we’ve covered my (1) investment goals, (2) my intuitions on the market (3) my initial screening criteria and methodology. As a sneak peek… we’ll get into the macro-factors in the next part of this series.
I hope you learned something in reading this post. Please provide commentary and feedback as you see fit — contributing to a community is a great way to apply what you’ve learned or already know!
In learning,
