Like any other industry, the financial world has a language all

its own
Contango, pairs trades, cusips, TIPs, gamma, dark pools
And in the financial lingo, theres a term that makes hedge fund
managers go wild ALPHA.
Alpha is defined as the abnormal rate of return on a security
in excess of the benchmark. For a stock, this would be
outperforming an index such as the S&P 500.
Mathematically, it looks like this:

= Rp [Rf + (Rm Rf) ]

Heres a breakdown of each symbol
Rp: the realized return of your portfolio.
Rm: the market return.
Rf: the risk-free rate (think U.S. Treasuries).
(beta): the risk premium.

I know that sounds complicated, but in essence, its really quite simple
A stock with an alpha of 1.0 implies that the shares have outperformed the
benchmark by 1%.
And a portfolio with an alpha of 125.0 would outperform the market by 125%.
Pretty simple concept
But whats missing from virtually every portfolio?
Why do novice investors struggle when it comes to boosting their portfolios
alpha scores?
Whats the powerful dynamic that could turn a modest $1,000 investment into
$57,665 or a $10,000 investment into $576,650, as depicted in the model
portfolio below?

YEAR TRADITIONAL PORTFOLIO

0
1
2
3
4
5

ALPHA 125 PORTOFLIO

$10,000.00
$10,600.00
$11,236.00
$11,910.16
$12,624.77
$13,382.26

$10,000.00
$22,500.00
$50,625.00
$113,906.25
$256,289.06
$576,650.39

Its the presence of at least one big gainer per year!

Im talking about a real moonshot!
Seriously The presence of a single killer stock can boost a portfolios alpha to
125.0 making it worth 4,209% more than a traditionally allocated portfolio
after just five years!
Before I show you exactly what I mean, I need to first explain how True Alpha
stocks can fit in your portfolio

ROBERT WILLIAMS

THE BARBELL STRATEGY

In the midst of the financial crisis bank bailouts,
frozen credit markets, and plummeting stocks a
new idea in portfolio theory quietly emerged: the
Barbell Strategy.
It calls for an investment on both ends of the risk
spectrum, with nothing in between.
That means investing in low-risk investments,
like government debt, money market instruments
and CDs, and defensive income-paying stocks.
And then investing in high-risk, speculative
investments, like small caps and startups.
The portfolio entirely omits the medium-risk/
medium-reward investments that typically
dominate most portfolios. Thus, when the
portfolio is plotted along the risk spectrum, it
looks like a barbell.

IN THE MIDST OF
THE FINANCIAL
CRISIS BANK
BAILOUTS, FROZEN
CREDIT MARKETS,
AND PLUMMETING
STOCKS A NEW IDEA
IN PORTFOLIO THEORY
QUIETLY EMERGED: THE
BARBELL STRATEGY.

Also called the 80/20 strategy, one invests 80%

of the portfolio in the low-risk instruments. This
is your insurance of a comfortable retirement no
matter what markets you have to weather on the
way there.
Then you put the remaining 20% to work in fastgrowth, high-flying investments.
The idea is that youll have a sizeable chunk of
change as your nest egg. And since its invested in
securities with the lowest levels of inherent risk,
you can set it and forget it in order to focus all of
your attention on that speculative 20%.

ROBERT WILLIAMS

Its that 20% of your portfolio where True Alpha recommendations should
come into play And its also the part of your portfolio that could make you a
multimillionaire as long as you keep maximizing alpha.
Nassim Nicholas Taleb, bestselling author of Fooled By Randomness and The
Black Swan, first made noise on Wall Street for his brilliant execution of the
Barbell Strategy.
He wont say exactly how well he did, but estimates have him booking anywhere
from $20 million to $45 million in profits in a single day. Taleb is obviously an
incredibly gifted investor, but the strategy has merit regardless of ones investing
IQ.
Thats not to say that there arent going to be any losers.
Taking a hit is just the nature of the beast when youre seeking True Alpha. (And
thats why I recommend not investing more than 1% of your total portfolio in any
one True Alpha company.)
But as I mentioned, the power of alpha means that you only need at least ONE
HUGE GAINER per year to rack up serious gains. As youre about to see, that
can completely wipe out the losses!

THE POWER OF ALPHA

To give you an idea of what just ONE big gainer a year can do for your portfolio,
lets take a look at some examples.
Say we have a portfolio with a total initial value of $10,000 and we invest those
funds evenly among 10 companies (remember, you receive at least 10 reports a
year as a True Alpha member)

ROBERT WILLIAMS

SCENARIO ONE: NINE SMALL LOSSES AND ONE HUGE WIN. This is the
simplest example Say nine of our stocks trade down slightly while we own them
(an average of a 5% loss on each), but the tenth is a thousand-bagger that nets us
1,300%
Even with those nine positions sucking away at our profits, after five years, we
end up with a 5,795.8% gain and a portfolio with an alpha score of 126.0. All with
just ONE big gainer.

SCENARIO TWO: FIVE LOSSES, FOUR GAINS, AND ONE MOONSHOT.

Now lets assume that we suffer five losses, but with four medium-sized gains, and
one stock that really skyrocketed
With five losses averaging 25% each two gains of 50%... one gain of 60%... one
gain of 80%... and just one homerun that bags us a 750% return...
If that occurs each year for five years, wed see a gain of 5,927.4% on a portfolio
measuring 127.0 on the alpha scale.
All with just ONE stock reaching a triple-digit gain.

SCENARIO THREE: ONE DEVASTATING LOSS, EIGHT AVERAGE GAINS,

AND ONE GRAND SLAM. Lets say we suffer a shattering 75% loss on one
of our 10 stocks then we see average returns (around 75% - which is pretty
reasonable for these innovative companies) on eight picks and just one stock
that catapulted higher at 750% a year.
At the end of five years, even with that one crushing loss, weve still got a portfolio
that checks in with an alpha score of 127.5 and enviable gains of 5,994.1%.

Now that youve seen how the power of alpha and how just ONE HUGE
GAINER can build your wealth to tremendous levels, lets break down a few
criteria I use to select the perfect alpha-worthy stocks

ROBERT WILLIAMS

Alpha Criterion #1: Be a

Visionary. Its one thing to create superior
products that compete in existing markets. But
I track down companies that develop products
capable of capturing new markets altogether.

Alpha Criterion #2: Say No to

the Status Quo. Alpha-worthy companies

arent a bit concerned with conventional wisdom.

Or the standard ways of conducting business. Or
even what their competitors are doing. In fact,
they reject the status quo almost defiantly in
every instance, choosing instead to passionately
forge new ideas, innovation, and business
parameters in which to flourish.

THE ULTIMATE
WINNERS IN
MOST CASES
ARE THE SHAREHOLDERS.

Alpha Criterion #3: Reposition

the Bulls-Eye. These companies all have
an innate ability to recognize their market as
a moving target. By positioning themselves
where the market is headed, rather than where
it presently is, such companies enjoy almost
every conceivable advantage over competitors.
The ultimate winners in most cases are the
shareholders.

Alpha Criterion #4: Magnets for

Fresh Capital. Almost every company gets

its start in the private market. It stands to reason

that the companies attracting the most private
funds (venture capital, private placements, and
private equity) hold the most promise. By tracking
these pre-IPO money flows, we can ensure that

ROBERT WILLIAMS

were among the first to know about the next wave of visionary companies.

Alpha Criterion #5: Must Have a Compelling Catalyst.

A coming event can send a tiny stock through the roof. Imagine owning a tiny
pharmaceutical ahead of FDA drug approval... Or a little software company
before a major takeover. Such events can make investors ridiculously wealthy.

So, now that youve got an idea of how we do business here at True Alpha (and
how well go about attaining alphas of 125.0 or better), make sure you take
full advantage of all of the other resources on our website like the exclusive
Alphacasts and web portals.
Thanks for joining us in our quest for market-beating returns.
I look forward to helping you attain True Alpha status.
Onward and Upward,
Robert Williams
Founder, True Alpha

ROBERT WILLIAMS

ROBERT WILLIAMS

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