Buy Disruptive Innovation!

I recently read a LinkedIn post written by Ray Dalio, the chief investment officer of Bridgewater Associates.

Bridgewater Associates is the largest hedge fund in the world. Ray Dalio is a hedge fund legend.

The title of the post was “Paradigm Shifts”. Ray went into great detail about the different paradigm shifts that have occurred over the last 100 years.

It was an excellent read, and I highly recommend it.

There was one piece of information that was very intriguing to me. I did not know that the two worst decades of stock performance were from 1930 to 1940 and from 2000 to 2010.

Since I was alive for the latter period, I decided to do some digging. I wanted to see how companies focused on disruptive innovation performed during that decade.

If, as I do, you like to invest in disruptive innovation, what I found was very interesting and exciting!

Here are the numbers:

Performance of Each Index, 2000-2010

Dow -9%
S&P 500 -14%
NASDAQ -34%

I chose 10 stocks that represented disruptive innovation, and here’s how they did over that 10-year period…

Amazon (NASDAQ: AMZN) +136%
eBay (NASDAQ: EBAY) +177%
Apple (NASDAQ: AAPL) +1250%
Illumina (NASDAQ: ILMN) +784%
Priceline.com (now Booking Holdings, NASDAQ: BKNG) +40%
Nvidia (NASDAQ: NVDA) +262%
Intuitive Surgical (NASDAQ: ISRG) +1500%
Whole Foods (now a subsidiary of Amazon) +431%
Netflix (NASDAQ: NFLX) +3100%
Monster Beverage (NASDAQ: MNST) +9000%

This small sampling shows the advantages of investing in disruptive innovation. During the second-worst decade in the history of the stock market, these stocks crushed it!

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

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Could this stock be the investment of your lifetime?…

Good morning!

When you make an investment, no matter how big or small, there is always that chance that the investment could be one of the great investments of your lifetime.

Whether it is likely or not is irrelevant. Because none of us knows for sure.

Today we have access to so much commentary, through social media, legacy media, newsletters, and financial blogs like Wealthy Joe. Everyone has an opinion on the market and on stocks in general. Some may be right. Most will be wrong.

What’s important to remember is that your next – or first! – investment could very well be a life changer for the better.

Here’s a great example of what I’m talking about…

One of the greatest investors in the world is a firm called Baillie Gifford. Baillie Gifford primarily invests in founder-led, disruptive companies that come to market as well as those that have been around for years.

In the early 2000s, right after the dot-com bomb, Baillie Gifford invested in eBay (NASDAQ: EBAY) and Amazon (NASDAQ: AMZN).

At the time of their investment, they believed that eBay was the better investment.

Over the next 20 years, of course, Amazon would turn out to be the far superior investment: up over 17,000% since 2002, while eBay is up a little over 400%.

In 2002, I was a market maker working on a trading desk. I don’t recall one person that felt Amazon would be the better investment than eBay over time. Not one.

As investors, we become owners. I know you may not look at it that way, but we are owners when we buy shares in a company. Our goal is to find the best investment opportunities we can.

We try to find first movers in an industry that is evolving and take a partial ownership stake.

When we buy, our timeframe is long: 10, 20, 30 years or even longer.

If you can do this, truly great companies will reward you handsomely over time. The bad ones won’t.

Here is a list of great companies that went on to become the greatest investment of a lifetime:

1. Home Depot (NYSE: HD): Disrupted hardware stores, with everything under one roof and low prices.

2. Walmart (NYSE: WMT): Disrupted brick and mortar retail by offering the lowest prices.

3. Southwest Airlines (NYSE: LUV): Disrupted air travel by offering the lowest prices and great customer service.

4. Costco (NASDAQ: COST): Created a new business model, in which you pay for the privilege of shopping in their store.

5. Monster Beverage (NASDAQ: MNST): Became the leader in the energy drink space.

These companies I listed are not companies that anybody thought would turn out to be investments of a lifetime!

Just find a business you like – and get invested today. For help getting started, check out my beginner’s guide, The Stock Market is For Everyone.

Have a great day!

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)