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What is Kamikaze-Plus (K-P) Investing

January 29, 2024

Tesla has a version of its Model 3 which Elon Musk calls Ludicrous because the acceleration is so fast. It can go from 0 to 60mph in 2.5 seconds. My electric BMW i3 takes a stately 7.3 seconds and still makes backseat passengers feel sick. There is even a Ludicrous Plus version that takes 2.3 seconds.

Kamikaze Plus is an investment version of the Tesla Ludicrous Plus. It takes an exciting investment programme, buying only shares in high-growth high-performance companies and ramps up the excitement until your gums start to bleed.

Investing as a Game of Chess

An advantage of this programme is that it is so turbo-charged that you can achieve life-changing results even when starting with a relatively modest amount of money. The way to do it, as I have noted in the past, is not to think about money and risk but to think of it as a game of chess or military manoeuvres where you are trying to achieve victory by making all the right moves.

Move No. 1 is to open a spread betting account. It needs to be a spread betting account because there is no tax to pay when you sell, however much profit you are making. On the flip side, losses can not be set against gains elsewhere.

The simplest way to think of a spread betting account is that a one-point bet (1.0) is the equivalent of buying 100 shares. Think about a share I like, Broadcom (AVGO). A hundred shares are worth the latest price, $1204 plus two noughts or over $120,000, so a 1.0-point bet means you will quickly find yourself playing with the big boys.

Spread betting platform IG are aware of this so they allow minimum bets below 1.0 per point. The smallest US$ bet on AVGO is 0.06 points equivalent to buying six shares for an investment of $7,224.

We are doing this with maximum leverage which, for beginner investors, is 5:1 so our equity to fund this transaction is $1,448. IG is funding the transaction so we pay interest which accumulates daily.

Why might we be buying shares in Broadcom in this way? It has been alerted on Quentinvest and it is classic 3G (great growth, great story, great chart). It is an amazing business which has grown on the back of 39 acquisitions, Broadcom is a serial acquirer, and it has a fabulous long-term chart.

This is the kind of chart I love which spends almost the entire time going up. Who would want to invest in any other kind of chart? Lots of people, surprisingly. They think a plunging chart means a cheap share. Not me!

So now we have made our leveraged spread bet on Broadcom. What happens next? We find more shares like Broadcom and make similar five times leveraged spread bets on them. If you are a QV subscriber, which you will be if you are reading this, my job is to supply you with candidates.

So let us say you have built your portfolio to 10 shares. Now comes the regular Kamikaze bit (not Kamikaze Plus yet). You don’t have to do this by the way but my goodness it gets exciting if you do.

When the value of your portfolio falls and triggers a margin call you feed it with cash to stop the daily margin calls from coming. At some point, shares will start climbing again. You will make profits which will appear as spare equity. Put another way your equity will exceed your margin requirement.

You can invest this spare equity either by adding to existing holdings or by acquiring new holdings (which, at a minimum must be 3G but ideally also have magic, innovation and ‘something new’ going on).

You keep on doing this, topping up on margin calls, investing spare equity when it comes and your portfolio should soon be growing in value like Jack’s Beanstalk.

By the way, don’t be freaked out by the spread betting terminology. It doesn’t have to be as much of a gamble as you might imagine. If you place your bets on one-time leverage you are no more gambling than any other share investor. What you have though is the ability to use leverage if you want to and the ability to buy and sell shares without worrying about creating tax liabilities.

So what on This Planet is Kamikaze Plus

This is the absolute WOW bit. I like to hold shares which are going up and get rid of those which are going down. I want my portfolio to be PERFECT all the time! So I make sure it is, being as ruthless as is necessary. If I have doubts about a share, I simply sell it and reinvest in another which still looks perfect to me.

I call this strategy surfing. Instead of surfing the waves I endlessly surf the hottest stocks. I began doing this in 2021 and started making money at an insane rate. This happened even though I frequently found myself buying back shares which I had earlier sold. They loved me on IG as my portfolio exploded in size and my commission payments went through the roof.

It is just the wildest, most exciting way of investing: foot-to-the-floor crazy but it works!

You don’t have to be too trigger-happy. Shares go up and down; that’s what they do. You need to get a feel for what is OK behaviour and what is alarming and even then you will make tons of mistakes. Most important, is that every share you consider for playing this game must be classic 3G. There is no room for passengers.

Actually, there is no room for passengers in any style of investing.

The way I handle the risk is by starting small. If you lose you shouldn’t lose much. If you win then you will soon find you are playing the investment game with profits which is just what I like to do. As a beginner, you can never lose more than the money you put in.

It is a Bit Like Dating

In many cultures, a boy meets a girl and that’s it, marriage, babies, school and grandparents. Others are a bit more adventurous to the point where I once went to a party with my stepbrother who claimed that he had slept with every woman in the room. I was with my very pretty stepmother at the time and it was a relief that she took issue with this statement.

Obviously, John, my super-active brother, liked all the girls but would have liked some more than others. If he had needed to cull the herd, in the immortal words of Hugh Hefner, I am sure he would have been able to make his choices and was always on the lookout for new recruits. That is how we need to be as investors if we are playing the Kamikaze Plus game.

Apologies to my lady subscribers for the outrageous analogy but I love being old school on this stuff and I guess the ladies who are kind enough to read what I write will not mind. They are used to guys like me and know the teasing comes from a good place.

Strategy – Be as Wild as You Like (and Remember it’s Only a Game)

Kamikaze Plus is not the only game in town. It all begins with 3G. There is no point in owning any share which is not 3G. Investment is like everything else; it makes sense to buy the best. Why compromise?

Some guys are bottom feeders and maybe that works for them but it doesn’t for me. Why choose an ugly girl when you can have a pretty one? If you prefer as less outrageously sexist why choose a boring girl when you can have an entertaining one? So what’s the ideal choice, a girl who is super hot AND very entertaining? And that is exactly how I think about shares. I want to fall in love and often do.

The strategy you follow with these 3G girls/ shares is up to you. You can pile into one on maximum leverage, close your eyes and pray. But, as my clever student friend says five times leverage is unsustainable. It is a matter of time before you hit the rocks.

One answer to this is not to be greedy. Operate with less leverage. I have some personality issue that makes it hard for me to do this.

I am brooding on the idea of starting with five times leverage, building a decent holding, and then stopping investing your additional equity. If all goes according to plan your leverage should, over time, fall to a more sustainable two times. I estimate that the underlying share(s) need to double to achieve this result.

Sell When You Start Thinking You Are Doing Very Well

I have noticed in the past that whenever I think I am doing very well it is time to sell. Hard to do I am afraid but that could be a solution. What constitutes doing super-well – up 10 times on your initial capital, making a fortune. More practical maybe is that when your profits are anywhere near that impressive you watch for warning signs/ sell signals – Coppock turning down, trend line breaks, dead crosses on shorter term single month candlestick moving averages.

Another excellent strategy is to combine Kamikaze Plus with other strategies. You could build an unleveraged portfolio of 3G shares. You could buy leveraged ETFs in a share account. You could buy straight ETFs. You could mix and match various strategies.

There is a time and place for being aggressive. I think now is a time for aggression. If the market starts to head dramatically higher then we need to become more cautious. It’s common sense but hard to apply because of the feedback loop that develops in a strongly rising market. We become attached to shares which have made us a lot of money and don’t want to part with them.

Emotion is a curse when investing which is why I like charts so much. They take the emotion out of investment decisions. However much I love a company I won’t hold it if there is a dead cross on the moving averages.

Loads of Great Charts

The biggest argument for being an aggressive investor right now is that there are loads of great charts.

Meta Platforms is an excellent example. The chart above is very long term so anything could happen in the short run and the company is due to report imminently. But look at the power of the breakout and the strength of the uptrend.

Analysts have a short-term focus like many investors and there is a bias to cynicism/ scepticism. My analytical stance is to veer in the direction of naivety and believe The Kool-Aid the boss is peddling. The advantage of doing this is that it helps you spot the big winners and that is exactly what I want to do.

Like everybody in town Meta is focused on AI.

In terms of investment priorities, AI will be our biggest investment area in 2024 –both in engineering and compute resources. But I want to avoid allocating a lot of new headcount, so we’re going to continue deprioritizing a number of non-AI projects across the company to shift people towards working on AI instead. On the recruiting front, one dynamic that I want to flag is that we have a sizable hiring backlog right now since part of our layoffs earlier this year included teams swapping out certain skillsets for being able to hire others, and we’re still going to be hiring for those roles going into 2024. That means that even though we’re planning to grow headcount at a much slower rate going forward, the actual rate next year may temporarily be faster as we work through this hiring backlog.

Mark Zuckerberg, CEO, Meta Platforms, Q3 2023, 25 October 2023

Zuckerberg concluded his Q3 report by saying:

This was a good quarter. I’m pleased with our progress on efficiency this year. We’re a leaner organisation, shipping faster and advancing the state-of-the-art in all of our long-term initiatives. And while investing heavily for the future, we also just recorded our highest operating margin in two years. I’m looking forward to carrying this product momentum and operating discipline forward.

Mark Zuckerberg, CEO, Meta Platforms, Q3 2023, 25 October 2023

Share Recommendations

Broadcom AVG. Buy @ $1212

Meta Platforms. META. Buy @ $400

Just a note on Bitcoin. There are now a number of Bitcoin ETFs. The biggest is Blackrock’s iShares Bitcoin Trust (IBIT). The Bitcoin chart looks good and could become spectacular so I advocate buying some IBIT shares in early dealings. This cannot be done on IG but it is available along with 10 other bitcoin ETFs on a platform called Trading 212 (sadly I have discovered that currently it is only available for US-domiciled investors).

iShares Bitcoin Trust. IBIT. Buy @ $24.50

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