5 Criteria for Revolutionary Tech Investing
On the 13th November, 1789, Benjamin Franklin wrote a letter to Jean-Baptise Leroy.
He wrote it in fluent French. The letter contained one of the most recognized quotes in history. In the letter Franklin wrote:
‘Notre constitution nouvelle est actuellement établie, tout paraît nous promettre qu’elle sera durable; mais, dansce monde, il n’y a rien d’assure que la mort et les impôts.’
The last part of that paragraph translates as, ‘nothing is certain except death and taxes.’
This is a renowned quote, but I believe that had Franklin lived 200 years later, he might have added a third certainty. Because in a world of revolutionary technology, nothing is certain except death, taxes and technological advancement.
Technological advancement is the key to everything.
…nothing is certain except death, taxes and technological advancement.
I call this the ‘Vision of the Third Certainty’.
It’s a blueprint of the future. It’s a detailed outline of the technologies and trends that will drive the world forward. It explains how society works, lives, engages and moves. It’s a tightly held construct of the next five, 10, 20 and even the next 100 years.
Examples of the Third Certainty are trends such as Immersive Tech, the Molecular Revolution, 3D Printing and the new Industrial Revolution, and the War to Protect the Internet. That’s just to name a few.
These trends illustrate that a vision of the future isn’t some bizarre sci-fi movie with aliens and flying cars. It’s a logical theory of where the world is heading based on insight into new technology trends.
In general, the market misses what really drives revolutionary companies.
Because for many analysts, it’s all about the numbers. So the first (and sometimes only) thing they look at is a company’s balance sheet and income statement.
However, when it comes to revolutionary tech companies, ‘traditional’ analysts have got it wrong. The last thing you want to look at are the financials. That’s because most revolutionary technology companies don’t have any financials!
This is an unconventional approach to revolutionary profits, of course, and it flies in the face of conventional research. But if you haven’t figured it out by now, we’re not all that conventional…you can’t afford to be when you’re looking for revolutionary stocks.
And because we take an unconventional approach to investing, we can uncover stocks that the rest of the market ignores.
Many people ask me exactly how to find these revolutionary stocks.
They’re amazed at how we can find these tiny, unheard of companies. The quick answer is to say, ‘That’s my job.’ But I can tell you that finding these stocks isn’t easy. I spend up to 14 hours some days researching, reading about, and unearthing my stock picks.
Once I’ve got a shortlist of stocks, I then subject them to a five-step screening process.
What I call the five keys of revolutionary technology…
CRITERIA 1: The anti-Newton principle
This is the most important of the five keys and involves the most analysis because it’s the most subjective. But why the name?
The Apple Newton was a PDA released by Apple in 1993. At the time it seemed like pioneering technology. But within five short years the Newton platform and hardware was discontinued. It was blink-and-you’ll-miss it technology. It was tech that appeared too soon and in the wrong design.
Technology that really made an impact in terms of bringing together all your ‘personal assistant needs’ was the laptop, tablet and smartphone.
Although the Newton itself was outstanding, it lacked longevity. And that’s one of the biggest risks of technology. Much of it is fly-by-night; it rarely lasts more than a few years.
That’s not the kind of technology we’re looking for. For something to be revolutionary technology it should have a long lifespan ahead of it.
One example of the anti-Newton principle is the LaserDisc. The technology itself was revolutionary and pioneering. It was the step forward from VHS and Betamax, but was ultimately doomed by technology that dragged the world into the Digital age: CDs & DVDs.
LaserDisc was merely new technology that promised a lot, delivered little and never lasted.
We look for the opposite, the anti-Newton. The key for a company to be a real revolutionary stock tip is to have the technology that’s pioneering, timed perfectly, and has the potential to go above and beyond even its own capabilities.
It needs to be the kind of technology that inspires others. The kind that creates new, unique markets. And then spawns new markets off that. It’s the kind of technology that we identify with 3D printing, composite materials, immersive tech and molecular biotech.
This leads us to the second most important criteria.
CRITERIA 2: The big picture potential
The Big Picture potential is all about whether the company and the technology has scope beyond its current activities.
A good example of this is new tech that’s allowing payment devices for mobile payments.
But the bigger picture is an entire mobile payments ecosystem. Complete with mobile payments, contactless payments and frictionless payments, there is enormous potential.
CRITERIA 3: Fit the trend requirement
In every case the stock must fit within the specific trends I’ve identified.
Not only must it be relevant to the trend, but we must also be able to pinpoint what role the company will play in the trend.
It may be that they create the ecosystem or infrastructure needed for the future of immersive tech. They might be the benchmark standard for new forms of medical treatment like RNAi or 3D bioprinting.
By this stage, after assessing the first three criteria we’ll know if the company genuinely has revolutionary technology.
CRITERIA 4: The visionary leader
It’s all well and good to have a company that’s successful, makes good products and is well established. But that doesn’t always make for a revolutionary technology company.
You need leadership with a greater vision.
They need to carry a bigger picture view of what the company is capable of. Without that visionary mentality, even the biggest of big companies can fail.
Kodak, Blackberry and Netscape are all examples where leadership was incapable of seeing past the end of their noses.
If we can find a revolutionary company without a visionary leader that ticks all the other boxes, great. But if we can find one with a visionary leader, that’s even better.
CRITERIA 5: The financial opportunity
There’s no point in a company that’s only going to return 5% or 10% in a year. We look for a company with untapped financial opportunity. A company the market has underpriced. Or best of all, a company that’s priced on their current market value and not the full potential of their revolutionary technology.
The most glaring example where a company was priced on its numbers and not its true potential is Organovo (NYSE:ONVO). The company was priced at a level that reflected its lack of revenue. No one really appreciated the potential of their 3D bioprinting technology.
But we could see that the market for 3D bioprinted tissue was a short term opportunity. The bigger picture of fully transplantable 3D bioprinted organs was even bigger.
The financial potential of Organovo was far greater than the market had yet realized.
One final point I’ll make is that not every stock will meet every criteria.
For example, there may be a company that’s worth investing in if it doesn’t have a visionary leader. Sometimes a technology is so good and the trend so strong that almost anyone could run the company.
That’s all for now. Thanks for reading.
Ed. Note: Whether it’s the 3D Printing revolution, Age of Cyber war, or swarms of nanotechnologies that do our bidding, we’ll continue to cover technologies that create revolutions. To explore which companies stand to profit from sprouting tech revolutions, sign up for the FREE Tomorrow in Review email edition, right here, and start reaping the benefits of this tech every day.