First, let me tell you our primary goal – give you ideas that MAKE YOU MONEY. Hopefully, we can also inform, educate, and entertain you, but we are laser-focused on sharing profitable ideas with our subscribers.

Second, thank you for joining us as a subscriber.

This newsletter and its strategies are the culmination of my lifetime's work. My team and I are privileged to share these ideas with you!

Next, let me tell me to start by telling you a little bit about myself…

My name is Enrique Abeyta. I’ve been a professional money manager and investor on Wall Street for almost 30 years. My personal story is a very American one.

My mother fled political turmoil in her native country of Uruguay. My father's family is a mixture of New Mexican Mexicans (there since 1693!) and German/Scotch immigrants to the West. There are only a few Mexican/Uruguayans on Wall Street!

I spent my youth growing up in Denver, CO, and Phoenix, AZ, but very early on decided I wanted to come work on Wall Street.

Why?

Well, I grew up poor. Our family was homeless for a period and living paycheck to paycheck (with a couple of bankruptcies in between).

My view was that Wall Street and understanding investing were the best opportunities I had to change my life. Thirty-five years later, I still feel that way, and that knowledge is something I hope to bring to our readers.

My interest in Wall Street led me to apply to the Wharton School of Business at the University of Pennsylvania. This is the top business school in the world, especially for investing. Warren Buffett went there! Today, my classmates from my time at Wharton collectively manage over $1 trillion in assets.

After graduating, I started as a banker at Lehman Brothers but wanted to move over to the investing side as soon as possible.

My big break came just two years into my career when I had the opportunity to work with legendary investor Martin Sosnoff.  Martin ran one of the oldest hedge funds, dating back to 1960. There were just four of us managing over $3 billion of capital! This was a great opportunity, and I had my first portfolio management job by age 26.

Across the next twenty years, I launched and ran two hedge funds as Managing Partner – Stadia Capital and 360 Global Capital. Those firms went on to raise over $2 billion of assets.

After those two firms, I was a member of the founding team of another fund, Falcon Edge Capital (now Alpha Wave Global), which began with over $1 billion of assets and currently manages over $30 billion.

During that period, I honed my investing skills and learned how to make money in any market environment!

One of the strengths of my strategies is that we made money in every market downturn we faced, including the bursting of the Internet Bubble in 2000 and the Global Financial Crisis (2007-2008).

After 20 years as a successful investor, I pursued an entrepreneurial opportunity. Along with some partners, I acquired several music media businesses – like Revolver Magazine – and relaunched them with a focus on e-commerce.

Across the next six years, we successfully built this into a $20 million business. This real-life entrepreneurial experience helped me understand investing in businesses even more.

Finally, back in 2019, an old friend of mine – Whitney Tilson – told me he was joining legendary investment newsletter company Stansberry Research to create a new company called Empire Financial Research.

I knew little about the investment newsletter business, but I learned much about the media business and always loved writing.

Whitney walked me through the idea, and I thought, "This is what I was meant to do"!

The newsletter business allows me to take my thirty years of successful investing experience and share it with REAL people.

After going through so many financial difficulties myself growing up, the idea that I can help improve people’s financial futures means the world to me…

Whitney and I ran Empire successfully for five years and had a great experience. In 2024, I have decided to step out on my own and create a new newsletter company – HX Research!

This company and our newsletters are the culmination of my three decades of investing. This is my life's work…

We aren’t some huge company. There are just three of us – my best friend from college (who worked with me before) and one of my best friends from the last 15 years (who also worked with me before). However, we have decades of experience investing and delivering high-quality content to readers.

We are focused on delivering newsletters that educate, are enjoyable to read, AND can give you ideas that make you real money.

At my previous company, Empire Financial Research, we had newsletters with names that clearly described the company's strategy. "Trader," "Options," "Growth," etc.

What exactly does “Legacy” mean?

"Legacy" means that this newsletter captures the strategy with which I ran my investment funds for over two decades. This strategy is my investment legacy.

This is a long-term investing strategy that is focused on preserving and growing our investor's capital. It is also very eclectic with an ability – and desire – to take advantage of many opportunities.

As we will discuss later, those opportunities could be growth, value, M&A, or any number of ways to make money.

We often use the word "omnivorous" to describe our investing strategy, and that is the most true for this strategy – HX Legacy.

We will walk through the methodology of the strategy below. Here are some high-level aspects of the strategy…

Those who were subscribers to our products at Empire Financial Research and were readers of our Empire Elite Growth product will see many similarities with HX Legacy. You will also see some critical differences.

This strategy is more closely aligned to the exact strategy under which billions of investor capital are successfully running.

We ARE looking for high returns, but our primary goal is to PRESERVE YOUR CAPITAL.

My investing career was built on identifying great ideas, preserving investor capital during difficult times, and then being able to "counter-punch" to take advantage of the worst markets.

This newsletter is the evolution of that successful strategy.

At HX Research, we often talk about "Plan the Trade, Trade the Plan".

Like our other products, HX Legacy has a very well-defined “Plan," and we are relentless about pursuing it.

So – what is the plan?

At the highest level, HX Legacy is looking for attractive risk/reward (at least 3 to 1) opportunities where the “reward” part of the equation has AT LEAST the potential for us to double our investment.

That is a pretty concise sentence, but there is a lot in there.

We aren’t looking for the investments to “double” overnight, so our holding periods could stretch several years.

By definition, this kind of risk/reward combined with THIS much reward is relatively rare.

Believe it or not, we can find LOTS of stocks with the potential to double. The key is finding those that have this superior risk/reward.

Here are some qualities that we are looking for in our positions…

1)     EXTREMES

Our target combination of risk and reward is itself extreme. To find opportunities with this type of "extreme" risk/reward, we need to look for "extreme" potential in the underlying position.

We will discuss the different opportunities we may pursue later, but they all need to be "extreme."

If we are looking for a company to grow economic earnings, we prefer that they grow them a LOT.

If a company is trading at a steep discount to the asset value of the underlying assets (with a REAL plan to realize that value), we want it to be at an “extreme” discount.

If we own something because we think there is a strategic value to the asset (and likelihood of M&A), then we want that to be one of the rarest assets on the face of the planet.

If we are looking at a cyclical industry and looking for a recovery, we want the situation to be terrible and have a ton of upside potential.

You need to identify extreme situations for great returns with "extreme" risk/rewards. We START by looking for extremes.

2)     GROWTH

We invest across all different styles, but GROWTH is the single most potent factor we have seen to drive stock prices higher. Not all of our ideas will be centered around growth, but it is another place where we start…

Companies that grow revenue and earnings almost always see their stock prices rise! Companies that produce these metrics a lot usually see their stock prices go up a lot.

Our view is that the role of growth in the appreciation of stock prices is underestimated.

We have never had a "value" investment work because it was cheap. They only work when the company shows some stabilization and recovery in the operations or some degree of growth even if it is miniscule.

We have seen in our careers that investors (and thereby stock price appreciation) only really happen when some level of growth is involved.

We only need 20 stocks in this group of recommendations, and we do not see the need to recommend businesses that are either not growing or at least have the potential for growth in the future.

3)     OPERATIONAL MOMENTUM

The promise of extreme growth or closing a steep discount to asset value are great ideas. You can't have a position that can create excellent performance without extreme potential.

The challenge for many investors, though, is that the potential seduces them, and they need to pay more attention to the actual realization of that potential.

The most dangerous type of positions for investors are those with great potential but with poor or negative operating momentum.

If the management cannot demonstrate that they can realize that value, the investor should move on to another position.

Again, we only need 20 stocks in HX Legacy, and therefore, we can hold out for the best combination of potential, growth, and operational momentum.

We discuss it in our trading strategies, but we are looking for "winning" companies that combine potential and execution.

4)     PERFORMANCE VERSUS ANALYST EXPECTATIONS

This is another area where we are looking at the company's operating momentum and how well management is executing.

We talk a lot about human psychology in our investment newsletters. It is a significant driver of how stock prices react to news and the performance of the stock price.

This is true in both trading AND investing.

Growth in revenues and earnings is great (and BIG growth is even better), but "winning" stocks usually also "beat" investors' expectations.

The same is true for the realization of asset value. Potential is great, but we need to see some progress and management doing as well as – or preferably better – than the investor's expectations.

We may look at performance relative to analyst expectations.

Our first focus is going to be on the reported financial metrics.

A community of professional "sell side" analysts is out there that research the company and publish their expectations about how it will perform.

On Bloomberg, we use a function called "Earnings Estimates Graph" or, as we refer to it, "EEG".

This tracks these analysts' estimates for any number of financial metrics (pretty much every metric, not just earnings) and how those estimates are trending.

Successful executing companies have charts that move "up to the right" and higher.

We can also look at how companies perform when they report their quarterly results.

We use another Bloomberg function called "Earnings History" or, as we refer to it, "ERN." Like EEG above, it is not just about earnings but basically every financial metric the company reports.

Companies that beat investor expectations have better-performing stock prices. This is one of the most powerful rules of the stock market, and we strongly prefer positions with better-performing stock prices!

We often use sports analogies. Performance against analysts' expectations shows how the team is "clicking" and working together. Like sports, excellent company management teams will tend to outperform consistently, while poor teams will underperform.

This is another way we look for “winning” companies and stocks.

5)     DYNAMIC POSITIONING

One of the differences between HX Legacy and our “investing” products at our previous firm is that we will look to give more active guidance on trading around these positions.

We aim to have proper "buy-and-hold" positions where we ideally do little or no trading.

This will likely be true with many of our positions.

Furthermore, our "name" turnover will be relatively low over time. We will not necessarily go in and out of many different positions.

We are looking for stocks that can go up a lot, and to realize that potential, you need to be involved generally for a long time.

One of the key indicators we use around our dynamic positioning recommendations is the Relative Strength Index or “RSI."

Look up "Relative Strength Index" on the internet, and you will find the following definition….

"The relative strength index (RSI) is a momentum indicator that measures recent price changes as it moves between 0 to 100."

We aren't going to dig deeper into the technical definition. Still, it is basically a number between 1 and 100 that looks at the recent average price gains in the stock and compares them to the current average price losses. This is usually done across 14 days.

Let’s focus on that 1 to 100 scale.

A stock is considered "overbought" when the RSI is above 70. It is considered "oversold" when the RSI is below 30.

What do “overbought” and “oversold” mean?

In our trading strategies, we use these RSI levels to identify opportunities. We will only get involved if a stock has triggered our target RSI signal.

With our investing strategies, we look at them as guideposts to trading around a position.

A high RSI does not necessarily mean that a stock is going down next. Most high-quality opportunities that reach very overbought levels will become even more overbought.

Very often, though, it does mean the stock may take a breather. Extreme overbought levels often mean the stock is due for a pullback.

We will actively take advantage if we see these kinds of situations and book some profits.

Away from high RSI, we will also look to take profits if we have a position quickly double in a short period.

One of our favorite pieces of advice for investors is that if a stock doubles in a day, a week, or a month – you should sell some, probably at least half.

If it doubles in a year or two, you should be adding to the position.

In the famous "buy low, sell high" advice, the "sell high" is the hardest for investors. However, it is also the key to " buying low."

Our dynamic positioning around our long-term positions allows us to take advantage of the dislocations in the market around these positions.

6)     ASSESS THE SETUP

In HX Legacy, we are looking for a specific risk/reward with a target high return profile and many other factors we look for in a position. We outlined them above.

We often talk about being an "omnivorous" investor. Omnivorous animals will eat anything nutritious. We take advantage of any opportunity that meets our numerous criteria discussed previously.

While there are many different "types" of opportunities that we might recommend, for the most part, they break down into a few specific types; here they are…

Growth Potential

These situations are easy to understand, and we talk about them a lot - we are looking for BIG growth!

We start by looking at the growth potential of the underlying opportunity.

They discuss the "total addressable market" or "TAM" in finance. A company with a large TAM might have a tremendous economic opportunity.

We also take a look at the competitive positioning of the company along with their track record. Can they realize the economic potential of their sizeable underlying market?

Ultimately, we are pushing towards one fundamental goal – can we find companies growing earnings from $1 to $10 per share?

We use that as a particular example, but it makes the point. "Earnings" could be defined as EPS, EBITDA, free cash flow, or any number of metrics.

We prefer earnings metrics, but it also might be referencing revenues. Companies that grow revenue by 10x fold are almost always good to great stocks.

If you can find companies with THIS kind of growth, you always find great stocks.

Strategic Assets

One of the most successful strategies in our long investing career has been to identify unique assets. These assets will often have significant growth attached to them, but the key here is that the asset has value to other strategic buyers.

Our portfolios have experienced over 100 takeovers (over 100…) over 30 years. We have shown an ability to identify assets that will be attractive to other companies.

With many of these companies, we see a different level of growth than we look for in our growth investments, but the scarcity and value of the asset create the opportunity.

Cyclical Opportunities

After growth and strategic assets, our next most prosperous area of investing through time has been in cyclical industries.

"Cyclical" refers to the economic sensitivity of the underlying business. Capital-intensive businesses like auto manufacturers, energy, construction, mining equipment, etc., can see huge swings in profitability across an economic cycle.

One of the attractive aspects of buying these businesses is that even though they exhibit a lot of earnings volatility, the underlying companies aren't going away.

Automobiles may be very economically sensitive, but they aren't going away soon. The world will still need companies to make them even after a recession.

Our favorite saying in Cyclicals is – "If they don't go bankrupt, then they are going to go up threefold at least."

Also, even when they go bankrupt, it presents some of the most attractive opportunities.

Asset Value Realization

Another version of an asset-based opportunity is where we can buy assets at a steep discount.

We buy "undervalued" assets with our strategic asset positions, but they are undervalued because a strategic buyer is eventually willing to give them greater value than the market.

Occasionally, we find situations where we can buy $1 worth of assets (as valued by the market) but buy them at a steep discount to that value.

This fits the classic definition of "value" investing. Still, in the modern investing climate, finding these opportunities worth taking advantage of is rare.

Usually, something trades at this kind of discount for very valid reasons. As an investor, you need to have a clear view of why, how, and when this discount will be realized to make it worth including in a small group of recommendations.

Capital Arbitrage

This group has relatively rare opportunities, but we have been very successful.

Occasionally, some situations in mergers or other capital-related actions present exceptional risk/rewards. 

These might be the exception to our target of at least a +100% return, but the risk/reward is so exceptional that we still might recommend these opportunities.

One of the hallmarks of my career as a professional money manager was my ability to preserve capital and make money in down markets.

I joined my first hedge fund just a year before the Long-Term Capital Management (LTCM) crisis and made money during that period of high volatility.

The first fund I launched was launched in the heart of the Internet Bubble collapse six months before September 11, 2001. We made our investors money throughout that period.

My next fund was launched just a few months before the Lehman Brothers collapse during the stock market volatility of the Global Financial Crisis. Again, we made our investors money.

Finally – and we discussed this above – our trading strategy performed exceptionally well during the most recent volatility in 2022.

Considering we are launching our new firm, HX Research, we always warn folks to be careful if I start something new in the investment world – volatility could be just around the corner!

However, our strategies are BUILT to manage and thrive during these periods…

Again, we discussed above how the strategy employed at HX Trader performed during the problematic market period in 2022.

Trading strategies, by definition, have a better opportunity to take advantage of the dislocations that occur in the large market sell-offs. Volatility is scary for investors but can present great opportunities for traders.

The focus of our strategy also helps with risk management. By only looking at liquid stocks and winning companies, we can better manage risk.

Keeping our strategy relatively simple is often the best risk management tool for investors during periods of volatility.

The final key to our risk management is our “stop loss” strategy.

A stop loss is a determined price at which you will exit a position.

Stop losses can take many forms: hard stops (a specific price level) and trailing stops (which change as the stock moves higher) are the most popular.

No matter which one you use, stop losses, instill discipline, take the emotion out of investing, and help minimize your losses.

Establishing your stop loss levels, though, can require some real thought.

Make your levels too close to the current share price (or "tight"), and you risk losing out on a winning position as a result of market volatility.

Make them too far away ("loose"), and you risk losing too much money.

Our stop losses at HX Legacy are set according to three rules.

First, we don't look at the loss on an absolute basis.

Instead, we look at it relative to the stock market indices.

Each stock has a market index with which it is most closely aligned. Some are aligned with the S&P 500, some with the technology-heavy NASDAQ, and others with the small and mid-cap Russell 2000.

For our strategy, most positions correlate to the more significant capitalization indices – the S&P 500 and NASDAQ.

We then calculate how much the stock is down versus the index.

For instance, if the stock is -10 % over a week but the index it is aligned to is down 5%, it would be -5 % on an "alpha" basis.

“Alpha” is how investors refer to how much a stock outperforms or underperforms the overall stock market.

The second way we look at it is by understanding the stock's underlying volatility in the past. This is how big the moves are in the stock.

Different types of stocks have different levels of volatility that are "normal."

A mega-cap company like Microsoft (NASDAQ: MSFT) will likely have smaller moves than a small-cap stock.

We then set the stop loss using the volatility of the stock and measured it against the stock market index.

If the stock moves more than usual (greater than its volatility) versus the stock market index, then we will look to close the position.

The goal of adding these first two additional measures to the stop loss is to ensure we don't get "shaken out" of the trade.

The third rule, though, is the one we most strictly adhere to.

IF we believe that a company has lost operational momentum and jeopardized its ability to realize its value potential, we will quickly exit the position.

We are looking for opportunities with very high potential. The WORST kind of situation an investor can find themselves in is successfully identifying the economic potential but being stuck in a position where that value will not be realized.

This is the most dangerous type of position for investors…

At HX Research, we often use gambling and probability analogies. There is never a trade that is a "sure thing ."In every one of our recommendations, there is a possibility of loss. We make sure they are ideas where there isn't a probability of loss.

We expect to win far more often than we lose. Stop losses help us avoid catastrophic losses and make a profit over the long-term.

Remember our motto – “Plan the Trade, Trade the Plan”.

Risk management and stop losses are essential parts of that plan!

Thank you again for subscribing to HX Legacy!

It may sound grandiose to say that this strategy is the culmination of our life’s work, but it is…

When I was 16 – or 35 years ago – I made the decision that I wanted to work in the financial markets.

Across these last 35 years, I have spent most of my working hours in the markets and learning how to make money, emphasizing doing so in ANY market environment.

We are incredibly proud of the products we have built at HX Research, and HX Trader is one of our best.

On a personal note, I would also add that it is a great privilege and responsibility to bring these recommendations to you – our reader.

Across my twenty years of managing money as a hedge fund manager, we worked for some of the largest institutions and governments in the world. It was a great responsibility to manage the assets of these funds with responsibility for funding pensions and services.

However, it is a much greater responsibility to share our recommendations with REAL people.

We hope you can take advantage of our experience and insight and MAKE MONEY that can change your financial future…

One last time – THANK YOU!