It’s easy to be wise in hindsight, but how can investors spot the next Apple or Amazon? The companies have generated massive returns for shareholders who bought ten years ago or longer.
How can investors spot the next Amazon and Apple?
Apple and Amazon shares
Shares in Amazon are up thirty-fold in the last ten years and 2,000-fold since its 1997 IPO.
Apple is up around fifteen-fold over the last ten-years, over one hundred fold this century and 1,000-fold since the 1980 IPO.
If you had invested $1,000 spread evenly over the two companies just after the dot-com crash, in say 2001, then today your assets would be worth over $350,000 and that is without Apple’s massive share buybacks.
As it happens, I don’t think that shares in either of these companies have peaked. I have also changed my mind about Tesla, and think this company’s shares can rise a lot higher. I will explain why in a few days. But there is a limit to the growth in all of these firms. Shares are not going to increase a thousand fold, one hundred fold and probably not ten-fold; that would take valuations to absurd levels. Global GDP is around $140 trillion (pre-covid); the world simply isn’t big enough for these techs to carry on growing at the trajectory seen over the last twenty years for the next decade.
So where must investors look for the next generation of companies to see meteoric growth?
The next opportunity
I am not sure that there is a company currently listed on the stock market that has the potential to join the trillion dollar club, but is currently worth less than one per cent of that, let alone 0.1 per cent.
But I do think the trillion dollar club will be joined by obscure firms today and maybe firms that don’t currently exist.
What we can do, however, is consider the sectors and regions which may well create such companies.
I would say that the region most likely to create such firms is more likely to be the so called APAC region, that’s Asia/Pacific. In particular, China, South East Asia and India.
The sectors likely to throw up such companies will be healthtech, companies in healthcare applying DNA editing technologies such as CRISPR/cas 9, genome sequencing, aromatherapy or nano technologies.
AI will create some big winners: but AI applied in specific industries.
Autonomous cars/car sharing, flying cars, meat substitute technologies such as cultured meat, and personal device manufacturers/wearable devices will also create massive firms.
Elon Musk’s Neuralink is a fascinating company. The idea is a device that be fitted into the brain. It’s way out there on the extreme end of technology and many question whether his vision is even possible. Musk may not always deliver on time, but he certainty has a track record for delivering. The Neuralink product and other so called neural lace type projects could in the medium term introduce cures for neurological diseases such as Alzheimer’s and Parkinson’s disease. With ageing populations, such therapies would be enormously valuable. Longer term, such products could provide interfaces from the brain to computers and AI. But I would say that these technologies are at least ten years away from being viable.
Many companies that can exploit these opportunities will be existing companies such as Amazon, Apple etcetera... and Tesla.
Chinese techs such as Alibaba and Tencent may join the elite club.
But for smaller companies that might become massive, look at funds specialising in the above areas.
Above all, I would say study the above very carefully. Companies will emerge that will make their investors very rich.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees