A new variation on the 'black swan' is emerging...

Black swans are unforeseen events that have a huge impact on the markets. The term was popularized by statistician and former options trader Nassim Nicholas Taleb.  

The COVID-19 pandemic is a prime recent example of a black swan event. Nobody could've predicted the pandemic in advance and been totally prepared.

But in late 2021, think tank Atlantic Council released its own term to define these events. It calls them "snow leopards."

According to the council, snow leopards are known but overlooked or forgotten events that could potentially change the world. Technological developments or new innovations could be good examples.

These developments are often known to the public... but remain underappreciated while the work is still in progress. In the end, they result in life-changing innovations.

As we'll cover today, many of these events go hand-in-hand with our favorite investment themes. So let's take a look at how they intersect – and what that means for your portfolio.

Snow leopards are distinct from black swans in one key way...

The Atlantic Council describes a black swan as "an extreme event with no historical precedent."

Unlike black swans, it says, a snow leopard "does not have to be a single discrete event at all." And there's plenty of information to suggest the occurrence of a snow leopard event before it happens. 

The Atlantic Council came up with six snow leopards to watch for in 2023...

  • Tightening algorithm regulation
  • Corporate decoupling from China
  • The battery revolution democratizing electric vehicles
  • A platform worker-driven labor movement
  • The potential of geoengineering
  • Rapprochement between Japan and South Korea

Each of these snow leopards has a lot in common with our favorite investment themes.

For example, both corporate decoupling from China and Japanese-South Korean collaboration point to countries diversifying their supply chains away from China.

This isn't news to us... We've been "pounding the table" on the supply-chain supercycle for months. It's our term for the wave of investment in U.S. infrastructure as we bring manufacturing back to our shores.

The pandemic brought to light the downside of outsourcing and offshoring. Factory shutdowns led to massive shipping delays, leading to all kinds of product shortages worldwide.

It also brought the political differences between the U.S. and China front and center. Corporate America is concerned that these disagreements might make long-term business dealings difficult.

As corporations rebuild their supply chains away from China, expect stronger ties between the U.S. and its allies around trade.

In a similar vein, the tech sector is changing... and fast.

The Atlantic Council believes tightening algorithm regulations and the rise of the tech-enabled, platform-based labor force will mean big changes for the industry.

As it connects to regulation, we agree. Tighter tech regulations may be just around the corner. It's a sector we're approaching with caution right now.

We talked about the battery revolution last Tuesday. The world is moving toward greener energy... And that's going to require a big leap in energy-storage capabilities.

The U.S. leads the way in innovation, research and development, investments, and technological breakthroughs. It will be one of the biggest winners of this trend.

It's easy to ignore change when it's not right in front of our faces...

But snow leopards will likely have a big impact on your portfolio in 2023. It's important to keep them in mind as an investor.

These big changes often lead to the biggest moneymaking opportunities. Consider how snow leopards might alter the global economy... and how you can best prepare your portfolio.

That could mean considering which companies could be hurt by greater algorithm regulation or finding a list of companies investing in a platform-based labor force.

Knowing what changes are coming ahead of time will let you get in or out of trends... before it's too late.

Regards,

Rob Spivey
February 9, 2023

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