4 Rules for Finding Revolutionary Stocks

Revolutionary stocks are those that are poised to shift the paradigm and bring big profits for investors who identify them early.


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I recently saw two dystopian science fiction movies about the end of the world which led me to some thoughts on finding revolutionary stocks. Dystopian cinema (or literature, for that matter) is not one of my preferred genres, but in the interest of family relations, it was a good use of my time.

And the interesting thing about these movies is that both were depicting the very challenging future that lies ahead after the earth succumbs to the forces of Global Warming.

I interpret this not as coincidence, but as a sign that many people today see Global Warming (or Climate Change, if you like) as the biggest threat facing mankind.

I’m not going to argue with that-and I definitely don’t want to get into politics here-but I will say that generally:

Recognizing the problem is half the solution.

So, the fact that the problem of Climate Change is well recognized AND that so many people are working hard to solve the problem means to me that the problem WILL be solved, and therefore that I should not worry about it.

Which is not to say that I’m not doing my part. I drive a totally electric car that gets the equivalent of 89 miles per gallon and next year I’ll be putting solar panels on my house.

Both use technologies that were in their infancy back when fallout shelters were all the rage, and I fully expect that scores of additional technological solutions will be developed to help us deal with both the causes and effects of Climate Change.

Furthermore, I fully expect that technology will continue to improve our lives in ways we can barely dream of-not least because we’re too busy watching disaster movies to envision a vastly better future.

As Evelyn Waugh put it, “The human mind is inspired enough when it comes to inventing horrors; it is when it tries to invent a heaven that it shows itself cloddish.”

So today-in part to counteract all that worry about Climate Change and in part to get you excited about the better world to come-I’m sharing rules for finding Revolutionary Stocks that are poised to not only improve the world but also bring big profits to early investors.

Finding the Best Revolutionary Stocks

Revolutionary stocks are not just fun to think about-they can be extremely profitable for early investors.

To find revolutionary stocks, start with these rules.

Rule #1 when hunting for revolutionary stocks is to ignore valuation. Wall Street likes to count things, and price/earnings ratios are one of their favorite measurements. But investors who focused on PE ratios missed the greatest growth years of Amazon, Google, Microsoft and Qualcomm.

Rule #2 is to use your imagination. This is difficult for most investors. It’s much easier to look back than look ahead. But ahead is where the big profits are. In the case of Amazon, having the imagination to see that the little company might actually put Borders out of business was key.

Rule #3 is to pay attention to management. It’s my contention that the best revolutionary stocks are those of companies led by visionaries. In fact, just off the top of my head, I made a list of the revolutionary stocks of my lifetime. Most-perhaps all-were led by exceptional managers: Apple, Blockbuster, eBay, Google, Green Mountain Coffee Roasters, Home Depot, IBM, McDonalds, Microsoft, Netflix, Oracle, Research in Motion, Starbucks, Tesla Motors, Teva Pharmaceuticals, Walmart, Whole Foods, Yahoo! and Xerox.

Rule #4 is to invest only when there’s potential for a major increase in perception. If you invested in Amazon (AMZN) when Jeff Bezos was on the cover of Time, you lost money. Similarly, if you bought Apple (AAPL) when it made headlines as being the most valuable company in the world, you lost money. To make big money, you’ve got to invest when skepticism is high!

For example, in December 2012, when Tesla Motors (TSLA) was trading at 34, JP Morgan initiated coverage on the stock and gave it a price target of 37 for December 2013. That’s a whopping 8% advance in 12 months. JP Morgan, of course, is very good at counting things. But they’re not very imaginative! And they, like many investors, were skeptical of what Tesla could achieve.

But should you buy it now?

More precisely, considering the fact that TSLA has become much more highly regarded over the past few years, is Tesla still one of the best revolutionary stocks to buy? Or should you look elsewhere?

TSLA is off its recent highs (along with most growth stocks) and facing increasing competition in the EV space but likely has room for continued growth in a still-nascent industry.

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