The $5 Stock Altucher Says Could Deliver Massive Returns

ALTUCHER’S MICROCAP MILLIONAIRE REVEALS, “AMONG THE 8,000 STOCKS AVAILABLE IN THE MARKET, THIS IS THE ONLY ONE THAT ALIGNS WITH HIS 3 KEY WEALTH TRENDS. HOWEVER, ITS AFFORDABILITY WON’T LAST FOREVER.” SO, WHAT IS THIS STOCK? AND WHAT ARE THE OTHER FOUR “MICROCAP SUPERSTOCKS” ALTUCHER RECOMMENDS?

Once again, James Altucher is making headlines with his enticing claims about striking it rich, this time in a promotional presentation featuring Doug Hill for his Microcap Millionaire service. The service costs $2,495 per year and includes a 90-day cancellation period for Paradigm credit (no cash refunds are offered). Altucher has his sights set on a specific stock he plans to invest in before the upcoming Federal Reserve announcement.

The ad kicks off with a bold declaration:

The presentation format resembles a typical “interview” style that lacks a transcript, so my interpretations may be inaccurate. Nevertheless, let’s explore the key points and hints regarding this $50,000 investment.

Altucher’s central argument hinges on the anticipation that the Federal Reserve will cut interest rates shortly, which he believes could spur a significant rise in specific stocks. While this could happen, it’s essential to recognize that such expectations may already be factored into current market valuations. Investors generally speculate about the extent of these cuts and the guidance Jerome Powell might provide regarding future rate adjustments.

Altucher contends that rate cuts are generally beneficial for the market but have a particularly positive impact on small-cap stocks compared to their large-cap counterparts. He explains that small caps rely more on debt, which may explain their tendency to outperform when rates are lowered. This has been the case, with smaller stocks sometimes experiencing considerable gains relative to larger ones.

To support his thesis, Altucher presents a chart illustrating the periods when small stocks have outperformed large caps. He highlights that the most significant outperformance, a notable 9.55% gain, occurred recently in July. This leads him to assert that we are on the cusp of a prolonged period of small-cap outperformance, akin to the surge seen in the 14 years following the 2001 outperformance period.

The prevailing expectation is quite widespread, whether it’s because large-cap stocks became too pricey and popular back in 2000, smaller companies are more sensitive to interest rates, or for other reasons. From about 2001 to 2014, small-cap stocks generally outperformed larger ones, but they have lagged behind for the last decade. Historically, these performance cycles reverse, suggesting a shift is on the horizon.

Eventually.

Small-cap stocks are typically less expensive than their large-cap counterparts and tend to outperform when the Federal Reserve lowers interest rates. It’s important to note that “tend to” is a significant qualifier, especially regarding individual small-cap stocks — these observations are based on market averages over long periods. The methodologies used for data collection can vary (for instance, should you consider the unusually high number of small banks? What defines a “small” company? Which index is being referenced? What factors lead to rate reductions?).

As for the rationale provided by Altucher for this specific stock recommendation:

Despite the widespread anticipation that the Fed will announce a rate cut tomorrow at 2 pm, Altucher warns, “Once that happens, it will be too late to jump in…

This creates a “FOMO” angle, a common tactic in high-priced newsletter promotions. They know that if you take a moment to reflect, conduct research, weigh the risks, and consider that once you subscribe, you can NEVER get a refund, you might feel free to reach for your wallet.

While they may offer a “90-day guarantee” upon signing up, they won’t refund your $2,495 under any circumstances. This guarantee allows you to exchange it for $2,495 worth of credit for other Paradigm Press newsletters, meaning the publisher has little to lose. You could opt for another one of Altucher’s writings or purchase from Jim Rickards, who primarily discusses apocalyptic scenarios and the “deep state” stealing your wealth, urging you to invest in gold. Alternatively, you could choose Ray Blanco, who provides speculative tech and biotech stock recommendations similar to Altucher’s.

This strategy forms the primary revenue model for most publishers: persuade people that your analysts are credible, cultivate a subscriber base willing to sign up for a free newsletter or pay a nominal fee for an essential monthly subscription, and then inundate them with advertisements for “upgrade” newsletters or nonrefundable lifetime package deals. The cycle continues by attracting new individuals into the top of this marketing funnel and repeating the process.

This doesn’t imply that some high-cost newsletters lack value for confident investors. Still, it often leads to disappointment when one signs up during a moment of FOMO, driven by the desire to uncover a “secret.” While I can’t definitively say whether our rating system accurately reflects the various Paradigm Press newsletters, my previous discussions about teaser ads from Rickards, Blanco, and Altucher have shown that feedback from readers tends to be more harmful than positive.

So, regarding your “FOMO” moment, Altucher believes this opportunity is akin to “going back to buy stocks like NVIDIA two years ago, when prices were still affordable.”

(Of course, it’s worth noting that NVIDIA wasn’t cheap two years ago by standard measures; it was considered cheap relative to the immense growth ahead. However, this wasn’t apparent back in August 2022. At that time, the groundbreaking ChatGPT AI service had yet to be launched publicly. AI was more of an exciting concept that investors weren’t seriously considering, primarily focused on self-driving technology rather than its potential to replace knowledge workers or assist with writing tasks for students. Analysts were still under the impression that NVIDIA’s earnings in 2023 would remain flat or potentially decline slightly.)

So, what insights do we gain about the specific stock Altucher plans to purchase?

He notes it was also the “top stock in 2020, the last time we experienced a significant wealth shift.”

This indicates it thrived during COVID, coinciding with interest rates slashed to zero to stimulate the economy during pandemic-related shutdowns.

Specifically, he claims the stock achieved a staggering 5,341% gain in 2020, suggesting it was a wildly speculative stock.

This aligns with Altucher’s assertion that it serves as a cryptocurrency investment and an AI opportunity.

What other details can we glean?

He mentions that they mine Bitcoin and stake Ethereum, having also exchanged a significant amount of Bitcoin for Ethereum, a move Altucher supports due to its potential for higher returns. This next-generation crypto mining company has made some exceptionally strategic portfolio decisions in anticipation of the next crypto bull market while branching out beyond crypto. The firm has discovered a unique way to capitalize on the soaring demand for AI large language models, valued at around $500 million. Altucher believes it could rise 10 to 20 times in the next 1 to 2 years.

According to him, the company holds $100 million worth of Ethereum alone, although this is just a tiny fraction compared to larger miners like Marathon Digital (MARA).

He also addresses the “halving problem” that impacted Bitcoin miners earlier this year. He refers to the recent halving event, which reduced the reward for mining Bitcoin by half. Altucher states that miners anticipated this situation and began diversifying their revenue streams.

This is where the “AI” aspect comes into play; they operate extensive mining facilities equipped with supercomputers. If mining becomes unprofitable, they can lease this infrastructure to AI companies developing large language models. In the previous quarter, Altucher mentions they generated $8 million from leasing their computing power to AI firms, compared to zero the quarter prior. He indicates that demand remains strong and that as the stock price fell before the halving, 27 different hedge funds increased their stakes, suggesting that “smart money” is backing this stock.

So, what is “Bitcoin’s #1 Superstock” that James Altucher will be purchasing as “the leading crypto for substantial gains?” That would be Bit Digital (BTBT), a stock he has previously hinted at in earlier Microcap Millionaire recommendations.

This presents an intriguing opportunity, especially considering that the company is now profitable, holds a significant amount of cryptocurrency and cash, and has no debt. Their profitability in any given quarter largely depends on the fluctuations in the value of their crypto portfolio. However, if you look beyond that, their operational business is profitable. Thus, if cryptocurrencies experience another surge—perhaps due to election-related uncertainties or shifts in interest rates—it’s probable that Bit Digital will also benefit. Here’s how they characterize themselves:

Their latest report stated that they possess over 27,331 Ethereum and 682 Bitcoin in their treasury. Approximately $2,350 (ETH) and $60,800 (BTC) totaling around $105 million. Additionally, they have 2,000 GPUs available for lease for AI projects and claim that their “256 servers” generate $4.3 million in monthly revenue from AI activities. Their total liquidity, including cash and digital assets (ETH, BTC, and USDC), stood at $217 million as of August. They are earning a reasonable return from their cash and staking Ethereum, yielding about 3%. This allows us to view the company, valued at $400 million, roughly half supported by liquid assets. The value of their data center access and various servers, GPUs, and mining rigs remains uncertain, but it certainly holds potential.

While this investment is speculative, the solid growth they’ve seen recently and the prospect of rising crypto prices—particularly Ethereum potentially outpacing Bitcoin—might make it a worthy speculation. They aim for $100 million in annualized AI revenue and believe they can achieve this goal by the end of the year, as this business is far more profitable than crypto mining. You can review their investor presentation if you’d like to examine their sales pitch.

I’m sufficiently intrigued to consider a small investment here, but I plan to approach it cautiously. This way, I can leverage my position if I’m correct while limiting my losses if I’m mistaken, effectively setting a pre-committed stop-loss.

This is a minor speculation, as I don’t have significant cryptocurrency exposure. I appreciate the company’s clean balance sheet and the early success of its GPU leasing for AI projects, so I’m eager to see how it unfolds.

By the way, this was also one of the stocks teased by James Altucher during his Superstock Summit in late July. He has since re-teased the other four stocks he highlighted then, including them in the various “special reports” associated with this subscription offer. To provide some context, here’s a summary of the hints given back in July, which aligns with the same companies referenced now:

The 5 stocks are categorized into three in-depth reports. The initial one, teased, is titled “Second Wave: Three Market Leaders Driving the AI 2.0 Revolution.”

The fundamental concept is that upcoming phase of successful AI companies will focus on software. The leading companies in this space, valued at approximately $500 million, are leveraging AI across multiple sectors.

Hints regarding the initial one:

That’s Innodata, which recently disclosed a contract with a “Magnificent 7” company projected to yield 44 million dollars in yearly revenue… they achieved become slightly profit last year, reporting around 86 million dollars in revenue. Currently valued at approximately $500 million at $18 per share, this translates to about 6 times sales and 150 times expected earnings (note that there are only 2 analysts, so approach this estimate cautiously). Their latest Investor Deck is available for those interested in their overview—showing strong growth, expanding margins, and some optimism regarding AI, which is about all I can share.

Next?

That is NanoXImaging (NNOX), a company that many might remember mainly because its stock received a notable Surge in February as NVIDIA filed its initial 13F filing, highlighting everyone that they possess held a small amount of NNOX stock for quite a while due to a prior partnership. It’s a very small business that isn’t growing significantly regarding revenue at present, but its connection to NVIDIA elevates it arguably. The latest business update can be found here.

Mitek (MITK).

Mitek began its journey by managing imaging technology for processing digital check deposits, it has and has expanded into digital ID verification solutions for banks, related industries organizations. They faced challenges in meeting their filing requirements, leading to a year-long inability to submit genuine financial reports, which put them in a difficult position. However, they have finally reconciled their accounting, are experiencing at least some growth again. Currently trading at 13 times forward earnings, they could be considered value-priced, the previous filing issues have made many investors cautious. Let’s hope they’ve resolved these concerns.

From March 2020 to February 2021, the stock experienced significant volatility. During this time, the company issued a large number of stock to support its next phase of growth. Afterward, the stock saw a sell-off, making it one of the most attractive bargains I’ve encountered.

Most likely Nano Dimension, a company that currently has about $793 million in cash due due to capital funding rounds in 2020-2021 They are attempting to utilize a portion of those funds to acquire another former high-flyer, Desktop Metal, for approximately $180 million, which would decrease their cash reserves but significantly increase their revenue if successful.

Now back to September…

Currently, BTBT is his favorite stock and the one he is personally investing in. However, Mitek (MITK) is his second favorite, as suggested by his recent presentation. Six weeks ago, Nano Dimension (NNDM) was considered the “deal of a lifetime” as we approached the Fed’s rate cuts this year. We should approach our interpretation of what constitutes his “favorite” stock at any given moment with skepticism.

By the way, here’s the chart illustrating the performance of all five of these stocks since Altucher mentioned them during his “Super Stuck Summit” on July. The orange line at the top represents the S&P 500, showing that these “super stocks” have not had their moment in the spotlight recently.

Could all of this change with the Fed’s rate cut announcement ?

Well, investors in all those stocks have anticipated a rate cut for months and have been betting for at least the past month that it would be a more significant reduction that seemed more likely earlier next year. However, the near certainty of a rate cut hasn’t led to any exciting movements for those stocks over the past month.

This isn’t surprising. Data suggests that smaller companies don’t typically experience a surge on the day of a rate cut; rather, they generally, on average, outperform larger stocks in the years that follow a rate cut.

Will any of these five stocks be among the outperformers in the coming years? Do you have a favorite among these five? Are they all excellent or poor microcap investments? Don’t hesitate to share your thoughts in the section below… thanks for reading!