You likely know what “cutting edge” is when it comes to investing, but do you dare go just a bit deeper into the flesh, so deep that you sink the blade into the “bleeding edge?” Briefly defined, the term bleeding edge, when applied to investing, involves taking a position in a product, service or technology so new, and sometimes still very experimental, that they’ve yet to be proven in the marketplace.
Because of their newness, bleeding edge companies usually are absent of any real revenue, as they are usually a case of future potential profits rather than present-quarter profits. Yet, despite their nascent status, investing in the bleeding edge with a small percentage of your overall investment dollars can lead to some big alpha — provided one possesses the admittedly difficult virtue of patience.
You see, the recipe for success when investing in bleeding edge companies is part patience, part futurist, part financial analyst and part psychologist. What I mean by that is to make money investing in the bleeding edge, you have to have a good sense of where the world might be going, you have to embrace change, you have to know how to read the financial tea leaves of a sector and/or company and you have to be able to accurately assess the people in charge of that company. Oh, yeah, you also have to have a lot of patience.
Now, last week, I wrote about the supposed “artificial intelligence (AI) bubble” in response to the question that many are asking right now regarding whether AI investing is destined to soon morph into another dot-come bubble. My response to this question is, in essence, an emphatic “no.” That emphatic no stems from the fact that unlike the early 2000’s dot-com bubble, the current surge in AI stock prices, i.e. the current AI bubble, is not based on valuation. Rather, it’s an issue of continued capital expenditures into the AI buildout.
The reality here is that there’s so much money being spent, and so much more is promised to be spent, on AI infrastructure that it has become the biggest driver of the multi-year bull market. That driver isn’t going to stop anytime soon, and the only thing that will stop it is if companies fueling the buildout decide to pull out and exit the AI race.
This AI issue and questions of a bubble got me to consider what other sectors and companies are currently in the bleeding edge state, as nearly every innovative technology spends at least some time in various states of the bleeding edge. Contemplating the question of bleeding edge companies/industries got me thinking that this would be a perfect subject matter to present to you, The Deep Woods reader, as it will allow us to explore some new technological ground that may indeed be successfully investable, either right now or sometime in the future.
This week, I am going to begin an intermittent series on bleeding edge investing, which will run periodically in this publication over the several months and likely beyond. Up first is a stock that you may already know about, as it’s taken flight (pun intended) and nearly doubled investors’ money (+93.6%) year to date.
That company is bleeding edge air taxi firm Joby Aviation, Inc. (JOBY).
Joby has developed an all-electric, vertical take-off and landing air taxi. Yes, air taxi. The California-based firm is designing and testing a piloted all-electric, vertical take-off and landing (eVTOL) aircraft that can transport a pilot and up to four passengers, or an expected payload of up to 1,000 pounds, at speeds of up to 200 mph.
According to the company, the Joby eVTOL aircraft is optimized for urban routes, with a target range of up to 100 miles on a single charge. The company plans to manufacture, own and operate its aircraft, thereby building a vertically integrated transportation company that delivers services to individual end-users through an app-based aerial ridesharing service. Think of it as the “Uber of local flight.”
Now, when it comes to the bleeding edge, Joby is a bit more of a developed company than others, as it actually does have revenue. Last quarter, it brought in $22.57 million, but that metric is far from translating into positive earnings per share. The company does, however, have a strong balance sheet, ending its most recent quarter with nearly a billion dollars ($978.1 million) in cash, cash equivalents and securities.
One big positive for Joby was announced last week, as perhaps the very best company in the world, the mighty Nvidia (NVDA), has entered into an agreement to have Joby serve as the aviation launch platform for Nvidia’s IGX Thor Platform, which is an industrial-grade platform for the next generation of physical AI applications.
Joby will use the collaboration to advance development of its autonomous flight technology, called Superpilot, across military and civil platforms. According to Joby flight research lead Gregor Veble Mikic:
“The autonomous systems under development at Joby are poised to complement human intelligence by providing speed, precision and stamina beyond what a person alone is capable of… Combining Nvidia’s compute power with our world-class aircraft design, certification and rigorous flight-testing capabilities, we’re enabling a new era of safety-first autonomy in aviation.”
You see, I told you this was bleeding edge, as this is a case of AI meets flight taxi. More importantly, the Nvidia-Joby collab shows how bleeding edge can serve as a magnet that attracts some of the most-profitable companies, companies that know their capital can help fuel a brave new world of bleeding edge technologies — and bleeding edge alpha.
Finally, I want to be clear that I am not recommending you go out and buy big blocks of JOBY shares. That is not the focus of this series on bleeding edge stocks. What I am saying, however, is that investing in bleeding edge winners before they become household names is one way to get some serious alpha if you are correct.
I mean, consider that at one point, Microsoft (MSFT), Apple (AAPL), Nvidia (NVDA), Amazon.com (AMZN), Alphabet (GOOGL), Meta Platforms (META) and Tesla (TSLA) all were bleeding edge companies, too. And hey, they managed to make a few bucks for investors, too.
In the weeks and months ahead, I’ll continue this periodic series on bleeding edge stocks/sectors, because if there is one thing I learned from all of those hours of listening to The Rolling Stones, it’s that “we all need someone we can bleed on.”
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The Passions I Have
“My fault, my failure, is not in the passions I have, but in my lack of control of them.”
–Jack Kerouac
I was once told that it’s ok if a man’s hobby begins to conflict with his work. But when one hobby begins to conflict with another hobby, well then, that’s when you have a real problem. All jest aside, I think it’s important to remember that when you are someone with a passion, or many passions, for many things in life, sometimes that can lead to faults and failures.
I know I’m guilty of this, but I also know that one of my virtues is control, and that is what has saved my bacon more times than I can count. So, it’s ok to harbor passions, just employ a bit of control, and don’t let them become either fault or failure.
Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.
In the name of the best within us,
Jim Woods
