Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Three Key Principles for Successful Disruption Investors

Companies / Investing 2020 Sep 15, 2020 - 05:33 PM GMT

By: Stephen_McBride

Companies

In this essay, I’ll share my top three “disruption investing” principles for building lasting wealth.

Principle #1: Great Disruption Investors Know Timing Trumps All

Disruptors invent the future. For example, Amazon created the online marketplace. Netflix pioneered video streaming. And Apple is the main reason 85% of Americans have a smartphone. Disruptors figure out how to accomplish things that have never been done before. This often leads to big stock market profits. But it can also lead to irrational excitement. And irrational excitement can lead to dangerous situations in the stock market.


You see, investors are emotional creatures. They naturally get excited about big new breakthroughs. Sometimes they get carried away with dreams of riches. Their imaginations run wild and they can bid disruptive stocks up to the moon. This makes disruptor stocks prone to hype and wild exaggeration.

Consider Webvan. In the mid-‘90s, startup online grocer Webvan promised to drop your groceries on your front porch within 30 minutes of ordering. Investors drooled over the idea it would claim a big share of America’s colossal $1.5-trillion grocery market. Overeager buyers caused Webvan’s stock price to leap 65% on the day of its IPO%. But it turned out to be a complete disaster. Grocer margins are already razor thin. Add in delivery costs—trucks, drivers, fuel—and Webvan lost money on every transaction. Webvan shut its doors for good in 2001 and donated all its remaining food to a food bank. And shareholders lost all their money.

As disruption investors, we must always remember timing is key for making money from disruptive megatrends. Groceries are ripe for disruption today. But back in the early ‘90s, it was simply too early. Many companies were still a good 10–15 years away from figuring out how to profitably do business on the internet.

As a rule of thumb, when you see folks getting overly excited about a company or trend, be skeptical. And be patient. There’s a good chance it will crash and you’ll get the chance to buy for pennies after the overeager masses get burned.

Principle #2: Great Disruption Investors See Domino Effects

The famous astronomer Carl Sagan said, “It was easy to predict mass car ownership but hard to predict Walmart.” What Sagan meant was it was obvious in the ‘30s and ‘40s that cars were the future. You could see all the signs. The technology was constantly improving. Cars were getting safer and safer. The cost to buy one was plunging. And so it wasn’t all that hard to foresee that car ownership would eventually explode, as it did in the 1950s.

But it was much harder to predict the domino effects of mass car ownership. One of which was the incredible success of Walmart (WMT). You see, before every family owned a car, grocery stores usually occupied the center of town. They had to be located where people could access them easily. Mass car ownership changed all that. Walmart’s strategy was to open “big box” stores on the outskirts of towns where land and rent were cheaper.

Its sales exploded 27X from 1965 to 1975 as more and more people drove to its stores. Walmart’s stock trounced the S&P 500 by more than 50X during the 1970s.

A more recent example is how the rollout of 4G around 2011 help boost Netflix from a struggling business into a world-beater. As you likely know, Netflix began as an online DVD rental service. It mailed movies to customers in little paper sleeves. The problem? Postage costs were crippling. By 2010, Netflix’s shipping fees hit an absurd $600 million.

Because it was coughing up huge sums of money to the US Postal Service, Netflix was losing money on every movie it rented out. Netflix had toyed with the idea of offering movies online. But in the mid-2000s, internet speeds were too slow. 4G changed the game for good. For the first time ever, Netflix could reliably deliver content to customers over the internet anywhere through cell coverage.

From 1998–2010, Netflix added 20 million subscribers. That’s not bad. But it’s nothing compared to the 120 million it would add over the next eight years. And more important, its stock leapt 2,800% in the years after it launched its online streaming service.

Principle #3: Great Disruption Investors Know the “Golden Watch” Era Is Dead

It would be nice to invest like your father or grandfather did. You buy stock in a well-run, financially stable busines, hold it for 30 years and reinvest the dividends every quarter, and watch your money compound. For most of the 1900s, investors built lasting wealth this way.

I call this bygone time the “Golden Watch” era. Back then, many folks worked at the same company their whole lives. If you worked hard and showed loyalty, you could reasonably expect good pay, a pension, and a gold watch when you retired.

Like it or not, the world doesn’t work this way anymore. Things are changing too fast both in the business world and the stock market. Since 2000, half of all Fortune 500 companies have either gone bankrupt, been acquired, or ceased to exist. And over the past six decades, the average lifespan of an S&P 500 company has plunged from 58 years to 18 years. Even some of America’s most rock-solid, longest-lasting companies are struggling to stay afloat today.

Take Phillip Morris. The 172-year-old tobacco giant is now being disrupted by e-cigarette startups like Juul. Its stock has fallen 30% since 2017. At the same time, disruptive innovations are reaching “critical mass” at a faster rate than ever.

For example, it took the landline phone roughly 40 years to hit 40% penetration in America. TV hit the same milestone in 25 years. PCs took around 15 years to reach a similar proportion. The internet did it in under seven years. And smartphones less than four years!

The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money"
Get my latest report where I reveal my three favorite stocks that will hand you 100% gains as they disrupt whole industries. Get your free copy here.

By Stephen McBride

http://www.riskhedge.com

© 2020 Copyright Stephen McBride - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in