You probably can preserve capital and make a good return by investing in businesses which have a proven history of generating the same kinds of services and/or products over several years. But, if you have a desire to witness a healthy boost in your portfolio’s value, you ought to park some funds in businesses which develop disruptive technology.
What’s Disruptive Technology?
Harvard Business School professor Clay Christensen, defines disruptive products as products which addresses a market which previously has not been served. At one time, the smartphone was a disruptive product. Note that as you see how Apple's stock price has risen over the last couple of years, since they introduced the iPhone.
That is obviously what you want for your own portfolio -- to invest within an organization which is generating the following smartphone. You can fortunately, do this by discovering businesses which are generating disruptive technology.
Below are some examples of technologies that are disruptive:
- The PC (personal computer) displaced the typewriter then forever changed the way in which we communicate and work.
- Windows OS's mixture of user-friendly interface and affordability was key in the fast creation of the PC sector in the 90s. Personal computing ended up disrupting the TV industry, and a good amount of other tasks.
- Email changed the way we in which we communicate, mainly displacing letter-writing as well as disrupting the greeting card and postal sectors.
- Cell phones wound up making it possible for individuals to call us anywhere then disrupted the telecom sector.
- Mobile computing and laptop computer made possible a mobile workforce as well as made it possible for individuals to connect with corporate networks then collaborate from anywhere. Within most companies, the laptop replaced the desktop.
- Smartphones mostly replaced PDAs and cell phones and, due to the apps available, additionally disrupted: MP3 players, pocket cameras, GPS devices and calculators, amongst other possibilities. For a few mobile users, smartphones oftentimes replace laptops. Additional people prefer tablets.
- In the business world, cloud computing has hugely been a disruptive technology, and displaced several resources which conventionally would’ve been situated in-house or offered as a traditionally hosted service.
- Lastly, social networking had a big impact in the manner in which we communicate and -- particularly for personal usage -- disrupted email, telephone, event planning and instant messaging.
Three-dimensional printing still is a fairly new technology. But, it additionally has the possibility of being massively disruptive.
Whereas before individuals were forced to order specific products on the Internet, they now can print these items at home because of 3D printing technology. The industry, in short, provides consumers the chance to create instead of procure.
If you are looking for a pure play within the 3D printing arena, take into consideration The ExOne Company, a 3D printing machine manufacturer. Its stock is down over 70% over the past year, yet the flip side of the coin is that it is a value play for investors dedicated to 3D technology. This company does not have a profit at this time; therefore, it also is speculative. As with speculative, small businesses, investors ought to be very cautious.
Internet of Things
"The Internet of Things" includes a buzzphrase describing the interconnected arena in which we reside. The idea is a number of household electronic devices, like televisions and thermostats, are going to be connected to the Internet, as well as accessible to anybody online.
An excellent pure play offering within this arena is Skyworks Solutions, a business which has its hands in military, mobile, medical, industrial, and automotive technologies. It currently has a not-too-rich price-to-earnings ratio of around 23.45, which means the price is just right for investors with confidence that the Internet of Things idea is headed nowhere but up. Its stock has risen almost 68 percent over the last year; therefore, you certainly would not be the only investor who loves it if you pick up a few shares.
If you are searching to discover something that is extremely disruptive, conduct your research about up-and-coming advancements within medical technology. Nearly all industries are searching for a better method of building the proverbial mousetrap, and healthcare isn’t any exception.
NuVasive includes a medical device company which manufactures "minimally disruptive" items. This means that, unlike the highly disruptive iPhone, they produce products which have competition, yet they offer them as cheaper, simpler, or a more convenient alternative to additional items.
At this point, NuVasive is a bit rich. Its price-to-earnings ratio is just north of 56. Their stock has grown almost 47 percent over the last year, yet that is a modest increase for a rich valuation. It may be better to place this one on the radar then wait for a pullback.