The Anti-Buffett Investment Strategy
There’s a saying in the investing world that you should only invest in businesses you understand. Most people bring up Warren Buffett’s name when mentioning that saying.
Here’s my take on that: it’s garbage advice.
It’s not true that you have to understand a business or industry before investing in it.
What’s most important is to understand consumer demands and broader trends. Once you get that, it allows you to think about which industries could benefit and grow most from those trends.
…as good an investor as Buffett may be, his investing style doesn’t suit innovative tech investing.
Now, I’m not saying that Warren Buffett’s approach doesn’t work. Of course it works. That’s why he has been one of the world’s richest men for the past 20 years.
My point is that in the tech world, the market is always changing. You can’t waste valuable time by trying to understand each aspect of every business. If you try to do that I guarantee you’ll miss out on every tech investing opportunity there is.
Take how my tech analyst Sam Volkering and I approached the 3D printing industry last year. I can’t claim we got in at the ground floor, because we didn’t. But if we had tried to get inside every aspect of 3D printing and become technical experts on the subject I know for sure we would have missed out on recommending this fast-growth sector to investors.
You only have to look at the footage my colleagues and I shot at the London 3-D Print Show earlier last year to see the mind-boggling extent of the industry. Every time I look at the latest 3D printing developments I end up asking more questions about how it’s all possible.
That’s what makes the sector so exciting. That’s what makes it so revolutionary and innovative.
The truth is that no one on Earth fully understands the potential for 3D printing. No one knows the theoretical or actual limitations for this game-changing technology either.
And yet, that shouldn’t stop you from envisioning what things could be like if the 3D printing industry goes in the direction we expect.
This is why, as good an investor as Buffett may be, his investing style doesn’t suit innovative tech investing.
Buffett’s investing style relies on finding companies that are already brand leaders. He then buys them when the market has priced them at a discount to their true value.
The idea then is to hold on to those stocks for decades in order to get the full benefit of that company’s growing market dominance.
Revolutionary investing is different. We’re looking for investing opportunities before the company becomes a brand leader.
That may mean the company doesn’t have the strong revenue and profit growth that Buffett looks for. And it most likely means the company doesn’t have the established brand name on which it can build.
This is where it’s important to understand the big picture implications for a particular company and industry.
That’s exactly what Sam and I did with the 3D printing industry. We don’t just see this as an opportunity for people to make plastic toys. We see this as the beginning of a once-in-a-lifetime shift in the manufacturing, distribution and retailing industries.
Simply put, if 3D printing takes off as we expect, it could challenge the way many firms do business. It even has the potential to destroy China’s position as a global manufacturing powerhouse.
How? By giving local firms the ability to compete with China by printing-to-order parts and components. No longer would you have to wait days or weeks for a part to be delivered; a local 3D printing store could print the item for you straight away.
But not only that, 3D printing poses a threat to the ‘big box’ retailers too, such as Walmart and Bunnings. Rather than Bunnings out-muscling smaller competitors by offering millions of items at a discounted price, a local hardware retailer could offer many more millions of items, which the store could 3D print at a moment’s notice.
Who needs acres of floor space and rows upon rows of nuts, bolts, and widgets, when a local 3D print center could print the exact item you need. Think of the benefits. No need to wander aimlessly up and down aisles, wasting your Saturday or Sunday afternoon.
This is where it’s important to have a vision for the future. Only if you have that vision could you have picked or invested in a company and industry still in its infancy.
But 3D printing technology is just one game-changing industry. There’s also biotechnology, 3D bioprinting (that means 3D printing human tissue!), cyber security and cyber terrorism, and regenerative and personalized medicine.
These are all revolutionary technologies. None of them would fit the bill as an investment for any Buffett-style value investor.
Stocks like these are for speculators who want to get in on the ground floor of the next big investing trend. You can only do that if you’re prepared to speculate on what the future could look like.
Bottom line: this is the time to be a tech investor.
Ed. Note: As Kris correctly notes, you have to have vision to invest in a company or industry that’s still in its infancy. And as readers of the FREE Tomorrow in Review newsletter discovered in today’s issue, this kind of vision could have shown savvy investors 200% gains with a single 3D printing stock. Readers were given a chance to discover the name of that stock in a unique video for a special entry-tech level research package. And this is just one of the many benefits of being a free subscriber to the Tomorrow in Review email edition. Don’t miss out on any of the other great opportunities readers are currently exposed to. Sign up for FREE, right here.