Heads up → If you’re reading this, know that this is part one of a two-part series where we’ll introduce the first investment of this theme and provide a quick update on it after its ~226% run-up, while part two will be on a net new, second trade of this theme that we’re bullish on.

When you think about thematic investing, what comes to mind?

Usually, it deals with traditional themes like manufacturing reshoring, IoT, and deregulation, or with the hottest topics like AI, data centers, and quantum computing.

From there, you typically spend your time researching a basket of stocks to invest in that you believe will benefit from said theme, and voilà, you’re investing thematically!

But what if you weren’t investing in a topic but rather on the premise of one word: FEAR.

Fear can be one of, if not THE best, motivating factors for a human being. Fear can make people do things that they never would have thought possible (courage, strength, etc) or spend on things we don’t even know will actually help us when the time comes.

The bigger the fear, the more willing you are to pay for said services. Think about it. Fear affects us in many ways, which makes us respond in kind.

The list can go on and on, but you get the point. When you’re afraid of something, you typically go out and purchase something (if you can) to either mitigate, slow down, or remove the risk of that ”event” from happening. The problem with investing based on “fear” is that a really successful investment needs to reach a large number of people, have a high enough likelihood of occurring, have that fear recur frequently, and the “cost” of not paying to protect yourself is equally, if not higher than if you did → leading to a higher premium to do so.

Take, for example, the likelihood of your house burning down is low (less than 1%), but that doesn’t stop you from getting home insurance. However, because the likelihood is low, you typically don’t pay a lot to protect yourself from that (all else being equal, before people bring up what’s happening in Florida/California to us).

On the flip side, if you’re a person who gets sick a lot, your health insurance might charge you a lot for coverage because the likelihood of you getting sick often is higher, and you don’t have an endless supply of cash to pay the doctor.

So now that you have a quick introduction on how “fear” can be a theme for investing, ask yourself one more time. What in your life do you pay for that makes you feel better, or even “less stressed,” because you have something that can fully or partially protect you?

Now think about what you pay for that peace of mind.

If you stopped to actually think about it, it’s probably what most of us have. The various types of insurance (auto, home, health, etc.), the taxes we pay for local services (police, fire, ambulances, etc.), and, from a macro perspective, a sense of security against potential aggressors (firearms, military defense, etc.).

Most of us don’t think twice about it. It automatically comes out of our paycheck and goes to these services - either before or after getting paid (pre/post-paycheck). But what if there was something where the ramifications were so high that you would do or spend any amount of money to protect yourself or your loved ones from said event from occurring?

If you could find something like that, a truly devastating outcome, where people would pay for your product, then you might just have a really good business model.

In October of 2024, that’s exactly what we found. And as of December 8th, the stock is up more than 225% since we shared it with you all.

That stock is Owlet (OWLT). We pitched it when it was $4.47, with the core thesis revolving around fear. Specifically, the fear of losing your baby.

If you’re a parent and are reading this, then you probably agree with us when we say that most parents would do anything possible to prepare to enter their child into the world or to keep their child healthy once they’ve arrived.

When we first wrote our report in 2024, we opened by sharing an alarming statistic. Sudden Unexpected Infant Deaths (SUID) were on the rise again after a multi-decade-long drop.

And for most parents, we’re sure you can relate to how important it was to keep an eye on your baby and to jump into action with every cough, cry, or worse, absence of sound.

Obviously, you can’t be next to your baby 24/7, so the thought of not being present or conscious when your baby suddenly stops breathing is a risk that parents don’t want to take, and the ramifications are irreversible. However, if there were a device to reduce that fear, then they’d happily pay for it.

Enter Owlet. A remote baby-care monitoring device company whose main job is to alert you if there’s something abnormal going on with your baby and let you tap in remotely if needed. That’s basically the crux of the thesis.

Parents want peace of mind → create/charge for a product that gives them that.

Owlet capitalized on this fear with its FDA-approved product, the Baby Sat, and went on to begin capitalizing on the same fear, but in a different way.

A different way that we highlighted in our March 11th post, and why we were so bullish on it, back when the price was $4.39. We think that consumers have responded well to this new initiative, which is clearly reflected in the stock price, and hints a a future where OWLT is no longer just a medical devices company.

Below, we’ll provide a quick update on the company and its prospects, and what the future addressable market could look like once it reaches maturity.

For those who are looking for our next investment into this theme (fear), stay tuned for part two and sign up below so you don’t miss it.

If you need a refresher on our past work, click here to access our table of contents. With that, let’s get started.