Do you know the difference between a live disruptor and a dead one?
A live disruptor stock will march higher year after year… snowballing your profits to 1,000% or more.
Dead disruptors flame out after one big idea and limp along to average gains, at best.
How do you know which is which?
Let’s look at the four ways. Then, I’ll tell you about the live disruptor stock we just recommended in the Disruptor 20.
- Live disruptors keep the founder spirit alive.
They still have a Day 1 mindset… even when the founder isn’t around anymore.
Take Nvidia (NVDA), for example. Fifteen years ago, it was a gaming graphics card company.
Five years ago, it cashed in on the boom in cryptocurrency mining, which required powerful chips.
Today, it’s the undisputed king of artificial intelligence (AI) chips.
That leap didn’t happen by accident. CEO Jensen Huang made it happen. He was willing to bet billions on a future most competitors considered science fiction.
Today, Nvidia controls a stunning 80% of the AI chip market.
NVDA stock has surged 10X since ChatGPT came out in late 2022. We added it to our Disruption Investor portfolio in 2020, and we still hold it today after taking some profits twice.
Or consider Tesla (TSLA). Elon Musk has repeatedly wagered the entire company on bold projects.
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He poured billions into a fully automated production line for the Model 3 ramp-up. He constructed the world’s largest battery factory, the size of 100 football fields. And he built the world’s largest, fast-charging ecosystem with over 70,000 chargers.
At the time, many analysts criticized him. In hindsight, Tesla created entirely new markets that it now dominates.
Tesla is one of the most successful stocks in recent history. It’s soared 27,000% since it went public in 2010.
Meta Platforms (META), led by Mark Zuckerberg, is a live disruptor too.
Zuck poured $10+ billion a year into the metaverse, a trend that did not pan out.
But live disruptors adapt.
When AI momentum exploded, Meta pivoted hard again. It rolled out cutting-edge open-source AI models and retooled its products around them.
Now, Zuck is going after the iPhone with its Meta AI glasses.
And he’s poaching AI researchers with some of the biggest pay packages in history. Some of his new employees will make hundreds of millions in just a couple years, more than Lebron James’ NBA salary.
Meta stock has been on a tear recently, surging 700% since November 2022.
- Many of today’s top stocks are dead disruptors in disguise…
They used to be bold upstarts. But they’ve morphed into cautious incumbents.
During the Steve Jobs era, Apple (AAPL) released the iPod, iPhone, and iPad in quick succession. Those years minted fortunes for investors.
But since Jobs’ death, Apple has turned into a textbook case of a dead disruptor. It’s just sucking money out of its existing business model. Apple hasn’t released a category-defining product for over a decade.
Worse, most of Apple’s new attempts have failed. The Apple Car never saw the light of day. Apple TV+ is a money pit. Its AI-powered virtual assistant, Siri, is miles behind competitors. And do you know anyone who bought a Vision Pro? I don’t.
Most investors are unaware that Apple’s profits have plateaued. The only thing keeping the stock alive is buybacks.
Amazon (AMZN) under Andy Jassy is another dead disruptor. It’s still a phenomenally efficient empire. But the bets are smaller. The moves more cautious. It’s not swinging into entirely new industries with Bezos-era aggression.
Since Bezos stepped down as CEO in 2021, AMZN has climbed a mere 28%. The S&P 500 gained 48% in comparison.
Or consider Google (GOOG) post Larry Page and Sergey Brin.
Google remains an advertising powerhouse… and a cash-generating machine. But it’s not redefining the internet like it did moving from search into online videos with its acquisition of YouTube, maps, and mobile OS dominance through Android. The bold, industry-shaping bets have slowed.
Google stock has kept pace with the S&P 500 these last couple years, but that’s it.
- My Disruption Investor co-editor Chris Wood and I created a 4-step checklist for separating a live disruptor from a dead one…
We use it to evaluate potential stock recommendations before adding them to our Disruption Investor portfolio.
Before you buy a disruptor stock, run it through this list first:
- Follow the capital. Is the company investing money into the future, or returning most of it to shareholders?
- Look for non-obvious moves. Are they opening new markets, or just milking old ones?
- Check hiring patterns. Live disruptors poach elite talent from other top companies.
- Read the CEO’s words. Are they talking about reshaping entire industries, or optimizing the existing machine?
In simple terms, are they focused on the past or on the future?
You can read about our newest recommendation—one of my favorite live disruptors—in the latest issue of Disruption Investor.
Fourteen years ago, its app toppled a once-unshakable monopoly. Now, it’s using that same app to break into the autonomous vehicle market. Paid-up members can read about it here.
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Stephen McBride
Chief Analyst, RiskHedge