Before I get to my disruptive stocks, I wanted to first talk about disruptive innovation—and what that means exactly.
According to Wikipedia, “Disruptive innovation is an innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading firms, products, and alliances.” The term was first coined by American scholar Clayton M. Christensen and his collaborators beginning in 1995.
Examples from history include automobiles replacing the horse and carriage; airplanes that changed migration and demographic trends for the world; the internet killing encyclopedias and phone books; computers disrupting just about every industry—from math calculations to the creation of whole new industries, including smartphones, and personal computers; digital photography that decimated the film industry; and ultrasounds that moved medical diagnostics years ahead.
In more recent years, Apple (AAPL) brought sleek computer graphics to our desktops and laptops, and created a luxury smartphone business. Tesla (TSLA) certainly disrupted the automotive industry, with its luxurious styling and cutting-edge technology. Amazon (AMZN) has uprooted the book-selling and e-tailing industries and is making its next moves on the grocery sector.
Investors are always seeking “the next big thing,” and disruptive stocks often fit that bill. If a company has the smarts and drive to permanently change an industry and create and steal market share, it usually has the ability to garner immense wealth for its investors—and in case of market hiccups, will often be one of the few companies that manages to more easily weather the ups and downs that investors abhor.
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It often takes a while for disrupters to create long-term profits, so investors sometimes ignore them—until most of the gains have been achieved. It’s difficult to jump on board a stock that looks uncertain, but sometimes you have to take a leap and just be patient. With other companies, they’ve begun to make some money, but as the saying goes, “You ain’t seen nuthin’ yet.”
The latter are the companies that I want to talk with you about today. Such companies are often featured in Wall Street’s Best Investments.
Many industries today offer a pathway for disruptive technology and companies, including:
Healthcare—Global demographics and cost control are spurring innovation.
Marijuana—An entire new and legal industry is making millions for entrepreneurs and investors.
Telecom—The advent of 5G technology will create fabulous investor wealth, as new products and companies pop up to serve the requirements of this mega-fast technology.
Internet of Things—Data-driven storage and processing needs are rapidly expanding, fueling amazing growth.
Security—Cyber threats are global, and we’ve made few inroads so far in defeating—or even slowing—the threats.
Biotech—Cures for old and costly diseases are coming and will reward those investors who jump on the right companies.
Blockchain—Problems abound, but if they can be worked out, globally, the sky is the limit.
Here are a few companies that you may not know too much about, but have the opportunity to revolutionize their industries. I call them disruptive stocks:
Disruptive Stock #1: Cognex Corporation (CGNX)
Cognex makes machine-vision technologies that automate tasks to manufacture cell phones, aspirin bottles, automotive wheels in a manufacturing environment. The company’s products monitor production lines, guide assembly robots, detect manufacturing defects and track parts, are used in 3-D applications and ID systems.
Robotic vision systems are incredibly advanced, compared to humans, seeing thousands of frames per second compared to the 30 that we humans can visualize and process. Today Cognex says 80% of its revenues come from factory automation, which is growing by 20% annually.
In a recent issue of my investment newsletter, Wall Street’s Best Investments, Cognex was recommended by Tony Daltorio, editor of Growth Stock Advisor.
Here is what Tony had to say:
“Cognex has a 30% share of the vision systems market. Its business is quite profitable, with Cognex enjoying nearly 80% gross profit margins. And with much of the growth in robotics overseas, it is not surprising that 45% of its 2016 revenues came from Europe. Another 30% came from the Americas and 25% from Asia.
“Cognex is expanding rapidly into the fastest-growing segments of industries that are becoming more automated. For example, the logistics sector (warehouses, etc.) accounts for only 10% of Cognex’s revenues, but is currently growing at a 50% annual rate. Another example is 3D vision, which is a necessity for cobots (collaborative robots). Its 3D products grew well in excess of 100% in 2016 and that growth should only accelerate going forward. Industry tailwinds and Cognex’s industry-leading position will keep the stock moving higher.”
Disruptive Stock #2: Teledoc (TDOC)
Teledoc partners with insurance companies so patients see a “virtual” doctor. Using their computers or smartphones, they can actually talk with a medical professional (without waiting two weeks for an appointment), which radically reduces costs. And if you are in need of a second opinion, last year, the company acquired Best Doctors, a virtual second opinions company.
This stock was recently recommended in my newsletter by Richard Close and Brian Hoffman, analysts at Canaccord Genuity Research.
Here’s their take on the company: “The adoption of telemedicine is in its early stages, and as the only publicly-traded vehicle, TDOC is well-positioned to evolve to the most preferred model over time. We were encouraged by management’s commentary regarding signing customers that switched from competitors.”
In addition, this stock was featured in Cabot Stock of the Week.
Disruptive Stock #3: Palo Alto Networks (PANW)
Palo Alto is in the cybersecurity business, working to prevent and defend against attacks three ways—in the cloud, the network and devices. It is gaining market share, and that is showing up in the company’s stock price.
Palo Alto Networks Inc. was also a recent feature in my newsletter, recommended by Glenn Rogers of Internet Wealth Builder. Glenn notes, “PANW is one of the best bets in the cyber security group and looks poised for a rebound. Palo Alto is rapidly moving to a cloud-based system, which should lower costs and increase revenue. The stock isn’t cheap, but the growth potential appears to be there.”
Each of these companies is poised to “disrupt” their industries, and while their stocks have moved higher, the opportunities for further gains in these disruptive stocks is even greater.
To get access to additional disruptive stocks, consider joining Wall Street’s Best Investments here.
Nancy Zambell, Editor of Wall Street’s Best Investments, has spent 30 years helping investors navigate the minefields of the financial industry. Nancy scours more than 200 advisories and research reports to select the top recommendations, which she collects for you in this easy-to-read digest.Learn More