This isn’t a brand new ad, it’s been circulating for a couple months now, but I’ve gotten a lot of questions recently and haven’t covered it before… so I’m digging in. The pitch is from Eric Fry, who launched Fry’s Investment Report as an entry-level stock-picking newsletter fairly recently (last summer, I think), and the main ad they’ve been using to recruit subscribers is an obnoxious “I’m in America’s Most Expensive Zip Code” spiel about how the wealthy make money in ways that are far more clever than you could imagine.
The intro push is all about how drastic income inequality or the “wealth gap” has gotten, using his video crew in Atherton, CA to illustrate how much money gets concentrated in these well-heeled enclaves, while kids grow up in poverty or homelessness explodes just a few miles away.
Atherton, if you don’t know the Bay Area, is just one of the uber-wealthy towns spread between San Francisco and San Jose, right in Silicon Valley near Palo Alto and Mountain View and Cupertino… so it’s no surprise that what Fry is really talking about is disruptive technology investing — the kind of investing that made this the financial heart of first the semiconductor revolution and then the internet revolution, and the home of millionaire-makers like Apple and Alphabet who have shaken up the economy of the whole region, boosting city coffers with massive tax inflows but also making it impossible for people without stock options to live anywhere in the area.
But that’s beside the point, the basic spiel is that these rich people know that you have to invest in the next generation of disruptive technologies — and that’s probably true, though in the main they’re wealthy because of the work they do in those technologies, and not because they’re good investors. Here’s a bit from the ad:
“To get the biggest gains going forward, you must make sure you own the fastest-growing, most disruptive, and most profitable ‘outsider’ tech companies available in the markets today.
“I mentioned earlier that I’ve just published a brand-new report on the best tech investments you must make right now, if you want to capture the biggest gains of the next year and beyond….
“One of these firms, for example just reported revenue growth of 25% higher this year compared to this time last year. Another company has increased revenue 46% in the past few years… and another has added a whopping 40 million people on it’s app compared to last year.
“What’s important to realize is, these gains and this growth are all just getting started.
“I’ll show you four (4) revolutionary companies you should buy immediately… and roughly another four you should buy over the next few months.”
It all gets quite squirrely with the promises of exactly how many hot stock ideas he’s going to deliver to you, but the teaser ad itself actually talks specifically about three different stocks, different from that “four revolutionary companies” report that he’s apparently selling… so we’re going to look at the three he actually drops some hints about.
He gives the first one away for free, as promised…
“A few months ago, one of the most remarkable businesses in the world, went public on a major stock market.
“The name of the stock is Prosus. The ticker symbol is: (PROSY).
“And while you’ve probably never heard of it, Prosus is an incredible company.
“What the men and women who run Prosus do is scour the globe for technology companies that are disrupting the status quo…
“Then, they take early stage, major investments in these businesses.
“In one of their investments, for example, they made roughly 500,000% returns on a new internet platform that would soon take over in China.
“It’s one of the best investments ever, in the history of the modern world.
“The great thing is, because Prosus is now publicly traded, you can get in on these incredible deals, too, and potentially make a fortune as a result.”
He talks up the potential of Prosus as basically a venture capital investment fund, owning stakes in a dozen “next PayPal” and “next GrubHub” companies in different countries around the world, and that’s true — though despite the fact that it did recently “IPO,” it’s not at all a new company. Prosus is the global technology investment arm that was spun out of Naspers last year and listed in Amsterdam, in order to raise its profile a bit, hopefully decrease the discount to its investments at which Naspers was trading, and create a bit more liquidity in this business by getting it out of the South African exchange (where it was by far the largest company) and listing it in Europe, a continent desperate for some exciting “homegrown” technology companies.
And while Naspers has been around for eons as a South Africa media company, for most of the past 15 years it’s been thought of as just “those guys who got in early on Tencent.” Naspers invested in Tencent when it was a tiny startup, buying about a third of the company for $32 million in 2001 when it was just a little internet chat technology firm developing a Chinese version of something like AOL Messenger. That stake, now at 31%, is now worth roughly $165 billion as Tencent has grown to become a global colossus and Naspers somehow resisted taking profits… so yes, this is one of the greatest investments in the history of the world, and that valuation has driven Naspers and now Prosus ever higher, becoming such an overwhelmingly huge portion of the business that almost nothing else they does can possibly matter to shareholders.
And by the way, for those who lament that they might have bought something too late, or missed the boat, do note that although the value of that Tencent stake for Naspers (now Prosus) has increased by about 515,000% over 19 years… that’s “only” a compounded annual growth rate of about 57%. 500,000% might seem incomprehensible, but 50% gains sound more do-able — the trick is to find investments that can compound for 20 years as companies mature and evolve, to turn great returns into life-changing ones, and the super-double-difficult trick is NOT SELLING along the way. How much would you have wanted to sell your Tencent shares after five years to take your profits, with maybe 1,000% or 2,000% gains?
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Prosus (PRX in Amsterdam, PROSY or PROSF OTC in the US), is current