Being first is not as important as being right in your investment choices
A disruptive technology is defined as an innovation that significantly, and in some cases fundamentally, changes the way consumers, businesses, and/or entire industries operate. Indeed, to be considered a disruptive technology, it must have demonstrably superior attributes in that it renders prior technology obsolete.
If you’re an older investor, you know stocks like Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) single digit trading. Both companies are examples of disruptive technology. Investors who bought shares in these companies early and held them through the growing pains were able to build up impressive wealth.
In this article, we’ll identify other examples of disruptive technology and give investors some key takeaways that can help them decide if a disruptive technology is sustainable.
Examples of disruptive technologies
Technology is accelerating the advancement of disruptive technologies. But imagine what life was like in the 19and and early 20and century. Then imagine how indoor plumbing, electricity, automobiles, radio, and then television changed the world. All of these were considered disruptive technologies in their time.
Cell phones are another prime example of disruptive technology. Just 15 years ago, many consumers still had fixed lines. Now, if everyone in a household can have a mobile phone, why would you ever have a landline? In fact, I’m sure many building codes today don’t even consider the need for one.
More recently we have seen the growth and evolution of the internet and how this has advanced both digital media and mobile devices. We’ve also seen the growth of carpooling, artificial intelligence, and peer-to-peer (P2P) commerce.
Invest in the best mousetrap
Sometimes there are forms of disruptive technology that can be like the tip of a spear. These technologies indicate what is to come, but they are not the technologies that will ultimately lead to mass adoption.
An example that comes to mind is the LaserDisc of the late 1980s. It was supposed to be the next generation of VHS and Betamax video tapes. But, at least in North America, for many reasons (size, cost, etc.), it was never widely adopted. And this despite the fact that it has unquestionably delivered on its promise of superior audio and video quality.
It turned out that the LaserDisc was the bridge to the DVD player. And of course, the DVD player was the precursor to today’s streaming technology, which was a massive example of disruptive technology.
The bottom line is that you want to invest in companies that have a better mousetrap, not just a new mousetrap. If the intended audience does not see (or accept) the benefit offered, this technology could go the way of LaserDisc.
Patience is not just a virtue, it’s a must
If you’re old enough to remember the “era” of dot-coms, then you’ve experienced the risk of disruptive technology. The Internet itself was not a bust. But in the early years of the Internet, it was the Wild West. And many companies have started a business and even gone public with a website and not much else.
But as many investors have discovered, many of these companies used disruptive technology, but weren’t actually disruptive, just different. On the other hand, it was also a time when Amazon came into existence and some naysayers didn’t understand how an online bookstore could be a good investment.
The second takeaway is to know what you have, but be prepared to wait. If you believe in the business and it has strong growth prospects, you will likely be rewarded. Conversely, you need to know when to cut your losses. For every Amazon, there are many Pets.com.
Don’t just look at startups
But as noted above, one of the mistakes investors made in the dot-com era was chasing after the shiny new thing. There are times when investors can find innovation in certain established companies. Apple is a good example of a company that continues to deliver disruptive technology. Microsoft (NASDAQ:MSFT) is also a source of innovation.
What about blockchain?
Blockchain technology, which is the underlying technology of cryptocurrency, is an example of a disruptive technology that meets all the criteria in this article. This gives investors a better mousetrap and it is still in its infancy. As of this writing, it’s too early to tell what the future of cryptocurrencies will be, but blockchain technology is here to stay.
And as many investors are looking for ways to invest in blockchain technology, they can also look to established names such as Nvidia (NASDAQ: NVDA) and Block (NYSE: SQ) for opportunities to invest in the underlying technology with companies that have revenues and profits.
Some Final Thoughts on Disruptive Technology
Disruptive technologies are often sought after by early adopters. This may be a socio-economic distinction. The point is that more affluent consumers and businesses have the resources to purchase these items when they are in their infancy. But the real key to disruptive technology is if the products and/or services have the ability to evolve.
Investors should be on the lookout for companies that make these products, because that’s where the growth will be, no matter what happens in the economy.
7 agricultural tech stocks to buy as commodity prices remain volatile
Agricultural stocks have their place in every investor’s portfolio. The fact is that the by-product of agriculture literally feeds the world. But for various reasons, supply and/or demand can be disrupted. For example, the weather is often a concern. Farmers are always subject to periods of drought or flooding.
But the past few years have shown how this sector is not immune to geopolitical concerns. The Covid-19 pandemic has affected supply chains in addition to seeing demand destruction in key markets. And this year, the world sees how interconnected we have become. Russia’s war on Ukraine is shutting down much of the world’s wheat supply.
However, with commodity prices soaring across multiple categories, investors have an opportunity in agtech stocks. These companies run the gamut from companies that supply equipment to those that supply fertilizers, pesticides and other products and services.
To help investors determine if this opportunity is right for them, we have created this special presentation. We assess the long-term opportunity of seven agricultural technology stocks.
See “7 Ag Tech Stocks to Buy as Commodity Prices Remain Volatile”.