HOW TO FIND FUTURE DOMINANT TECH COMPANIES AT EARLY STAGES?
If we look at the 10 biggest USA companies in early 2000 and nowadays you'll notice that the chart is dominated by completely different companies.
Now it's obvious that Microsoft or Apple have a dominant position in the market, but what if we wanna understand before everyone else future market leaders? Are there any signs or specific metrics to look at?
If you look at many of these dominant companies at an early stages they often burned a lot of cash , they profit were negative and sometimes they also risked bankruptcy.
Amazon risked too fail different times because a lack of funds and the same happened to Apple.
So if I can't trust financial metrics how do I find them?
I think there is an interesting and insolite way to look at tech companies with messed up balance sheet and metrics but with great future possibilities.
You have to look to their innovations and if these innovations are so good that big leaders companies in the respective sectors try so hard to hemulate them you're probably facing a future dominant company.
Let's play this game with me and think for a second about all the big and small tech innovations a company makes that are suddenly copied by every big dog in the sector:
- The IPhone revolutionized the entire market and after that every smartphone company followed what Apple did.
- $V (-0,2 %) was founded in 1958 by Bank of America and when other banks understood the potential they all coalized to create $MA (-0,05 %) in 1966.
- Auto manufacturers tried so hard to create a car model to compete with $TSLA (-6,45 %) innovative concept of cars.
- $ALGN (+3,34 %) orthodontic innovation was immediatly copied by many health competitors.
All these companies have 2 things in common:
- At the beggining their products or services were used and understood by a small public (sometimes even mocked at)
- They have all returned way more than 10x returns since big competitors tried to copy them.
If we apply this theory to today's stocks market I can find similar stories at relative early stages with a stock price that it's still not multiplied.
One new company brings innovation and the "old dogs" in the room try to implement their ideas in their products:
- $HOOD (+1,2 %) shacked the trading market so hard that big old name like $SCHW (+3,05 %) decided to buy Ameritrade for 26 bln dollar in order to compete with this new app, but with bad results. $MS (-0,14 %) also bought a "smaller" competitor to keep up with Robin Hood innovation.
- $ABNB (+1,6 %) has has been literally copied through the years by Vrbo (owned by $EXPE (+0,76 %) ). $BKNG (+0,01 %) himself has also started to gradually increase is short term leases offers on his app entering in Airbnb market segment.
- Microsoft is trying hard to hemulate what $PLTR (+0,41 %) software is able to do.
Do you know any other companies that could fit into these criterias?
I' d love to listen to your observations or constructive criticism ☺️
Please bear in mind that these are just my considerations and they can be absolutely wrong.
