Market Gobblers; The Disrupted vs. Disruptors


“gob·ble” / verb / definition: to eat (something) hurriedly and noisily

/// Listen to 12+ New Audio Interviews with Top Investors (2019) ///

There’s the disrupted and then there’s the disruptors.

RIM (BlackBerry) 💥 —-> Apple
Blockbuster 💥 —-> Netflix
Yahoo! 💥 —-> Google (Alphabet)

History proves that the disruptors (e.g. Apple) gobble up their direct competitors (e.g. BlackBerry) and then leap-frog them not just technologically, but also in market share & capitalization. These are large-scale, multi-year transfers of wealth. For example, while Amazon hasn’t completely gobbled up Walmart (time will tell..), it’s already surpassed it in size; $944B (AMZN) vs. $288B (WMT). Amazon is over 3x bigger than Walmart, and still growing on the strong tailwind that is eCommerce…

Some investors find it hard to fathom that a household name can go away. But that’s the reality. To illustrate, between January 1, 1963 and December 31, 2014, 1,186 S&P 500 index companies were replaced by other (new) companies.

So here’s a question; what’s in your portfolio? Is it mostly disruptors or companies that are ripe for disruption?

We’re living in interesting times:
– Pace of disruption has accelerated (shorter business cycles);
– Increasingly, it’s winner takes all (bigger companies; little competition); and
– Advancement, and leverage of technology means seemingly limitless scale

I think this year is significant. In 2019, a group of five big disruptive companies will IPO (some already have) on the stock market. This is probably a good opportunity to add new disruptors to ones portfolio; companies that are gobbling up their respective competition, and entire industries:

– Uber
– Lyft
– Beyond Meat
– Airbnb
– WeWork

These five companies are disrupting transportation, food, lodging, and workplaces, respectively.

There’s some other companies that will IPO (or already have) in 2019, but I don’t think that they are nearly as significant, or will grow as big in the long run:

– Pinterest
– Casper
– Instacart
– Slack
– Robinhood
– Postmates
– Palantir Technologies
– Zoom Video Communications

As humans, it’s tough to accept change. I’ve had to teach myself along the way to adapt more, and be open to new opportunities. For example, Warren Buffett was my first teacher. He’s invaluable to me as a role model. However, it would be unwise, especially as a growth investor, to blindly follow Buffett’s current stock holdings. Buffett has admitted that since the early 2000s (advent of the “internet age”), he’s missed some big opportunities, namely Amazon and Google – relatively new companies that are changing the world. It was just recently this year that Buffett’s company, Berkshire Hathaway, announced a position in Amazon, after many doubles in the price of its stock since IPO (1997).

The key takeaway from this newsletter issue is that DIY investors should own the companies that are gobbling up market share from direct competitors, plus entire industries (the disruptors), and divest the companies that are getting gobbled up (the disrupted). Also, that today it’s increasingly possible for big companies to grow much bigger (with little competition), and scale with advances in technology.

Naturally, because of sheer addressable market, wide sphere of influence, and advancement in technology, it will continue to be the big American, and increasingly Chinese companies that dominate markets and grow much bigger. Because most of my readers are in Canada, I’ll point out that there’s also a few Canadian companies that can possibly get there (but nowhere near the size of an American or Chinese company).

Just ten years ago it was tough to fathom that companies could reach $1 trillion in market cap, but in the future there will be an increasing number of companies in the trillion dollar club. Actually, my big bet is that among the new IPOs this year, Uber will make it to the trillion dollar club (I know.. crazy).

In addition to the five new IPOs that I’ve highlighted above (Uber, Lyft, Beyond Meat, Airbnb, and WeWork), I believe that most of these 40 big companies (see below) will continue to disrupt, gobble up market share, and grow bigger in the years to come (but don’t hold me to these names fortoo long, because as history has shown, companies come and go!):

– Adobe Systems (ADBE)
– Alibaba (BABA)
– Align Technology (ALGN)
– Alphabet (GOOG)
– Amazon (AMZN)
– Apple (AAPL)
– Baidu (BIDU)
– Booking Holdings (BKNG)
– Canopy Growth Corp (WEED)
– Constellation Brands (STZ)
– Constellation Software (CSU)
– CTrip (CTRP)
– DocuSign (DOCU)
– Facebook (FB)
– Intuitive Surgical (ISRG)
– IQiyi (IQ)
– JD (JD)
– Lightspeed POS (LSPD)
– Mastercard (MA)
– Match Group (MTCH)
– Meituan Dianping (3690)
– Microsoft (MSFT)
– Momo (MOMO)
– Netflix (NFLX)
– PayPal (PYPL)
– Salesforce (CRM)
– Service Now (NOW)
– Shopify (SHOP)
– Spotify (SPOT)
– Square (SQ)
– Tencent (TCEHY)
– Tencent Music (TME)
– Tesla (TSLA)
– Twitter (TWTR)
– Upwork (UPWK)
– Visa (V)
– Walt Disney Company (DIS)
– Wayfair (W)
– Xiaomi (1810)
– Bonus: Bitcoin/ Blockchain

/// I recently interviewed 12+ Top Investors in 2019. Listen nowJason Donville – Francois Rochon – Aubrey Hearn – Gerry Wimmer – John Ewing – Martin Braun – James Telfser – Iain Butler – Roger Dent – Barry Schwartz – Jason Mann – Matt Kacur – Jason Del Vicario – Alex Sasso. ///


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