If It's a Household Name, It's Too Late to Buy

A few weeks ago, I was at a birthday party for an old high school buddy of mine when a mutual friend of ours walked up to me, grinning ear to ear. 

We hugged it out, like aging bros do after not seeing each other for years, and started to catch up. 

After a few minutes, we reached the part about work, and the inevitable happened. 

“So what do you think about Apple, man? I just got into it. Everyone’s saying it’s just starting to heat up.”

I’m not going to write what I said verbatim, but the gist was this: You’re not living in the early 2000s anymore. 

What was going through my friend’s brain was a mental anomaly called “optimism bias”; it’s what allows him to believe that good things that have been happening will continue to happen, and, more importantly, that they will happen to him. 

It’s the same psychological malfunction that convinces people that they are “on a roll” throwing dice or flipping coins, when the laws of the universe clearly state that each outcome carries the same probability, regardless of previous results. 

In a more organic sense, it’s like believing that your favorite basketball star is going to continue to get better… or that the prettiest girl you had a crush on in the 11th grade has only grown hotter with time. 

The sad truth is she probably hasn’t (so don’t even bother to Facebook stalk her and find out), just like investments in companies like Apple (NASDAQ: AAPL) will not return in the next five years what they have in the last five. 

Take a Deep Breath and Think This Through

Apple is the world’s largest technology company, and as such, it has exhausted most of its current growth potential.

There are literally not enough prospective customers for Apple’s existing product line in the world today to keep Apple growing along the same trajectory that it’s followed for the last decade or so. 

And even if the company does the unthinkable and releases a completely new product in a completely new niche (maybe the Apple car everyone’s been dreaming about?), you’re just not going to see the leaps and bounds covered in the same manner as the peak days of Steve Jobs. 

The same thing can be said of a bunch of other big-name tech companies — the ones that ironically, despite this staleness of size, get more press attention than anything else. 

Maybe I shouldn’t have been too shocked, though… Intensive media overexposure​ is what sells amateur investors on amateurish ideas. 

Apple is a huge company and is therefore important, but it’s not the biggest story. 

Those usually belong to companies that the big names don’t bother wasting their time talking about. 

5 Years From Now, Companies You’ve Never Heard of Will Be Household Brands

Like a company, for example, that’s just developed software capable of analyzing blood samples for early signs of cancer months before any existing method can detect it. 

It can get those results back within hours, not days, and the degree of reliability is far higher than what’s practiced by today’s blood labs. 

It’s small and young, but once testing is done and the product goes to work alongside existing blood labs, the market for this software will be in the billions. 

And that doesn’t even count the money from the second revenue source: testing new drugs for efficacy. 

Or how about a company that’s already in the process of commercializing a metal detector that can distinguish between guns, knives, and explosives and normal, everyday metal objects like watches, jewelry, and coins. 

It’s been endorsed by a former Secretary of Homeland Security and is already installing its product in potential high-value terrorist targets in the United States. 

And yet the company is valued at barely $25 million. 

Or a company that built a competitor to Tesla’s (NASDAQ: TSLA) Powerwall that was so much better that it managed to push Tesla out of a longtime relationship with one of Germany’s top three automakers.

It makes large batteries for a multitude of applications, including domestic energy storage — and it makes them better, smaller, cheaper, and yes, even smarter than the world-famous Powerwall. 

And yet, this company’s current valuation is less than $40 million. 

Tesla sold more than 20 times that sum in Powerwalls in just the first week after the product was announced. 

Disruption: The Most Feared World in 21st Century Tech

The three companies I just mentioned all have one very important thing in common: they are utterly disruptive to the status quo of their respective sectors. 

Each one represents a significant improvement, or total redefinition, of the existing benchmark… and each is still in its infancy. 

There are only three ways out of this for these promising young firms: failure, which is unlikely barring an act of god; buyout by a major brand, because it’s easier to swallow the competition than compete; or eventual market domination. 

You’ve seen it happen before many times, with Apple itself providing at least two examples in this century with its introduction of the iPod and iPhone. 

The trick as an investor is to see it and act on it before it happens. 

Like I said before, the biggest stories are the ones you don’t hear about until it’s too late — that’s what makes them big, in fact. 

Because if you tell that story, finishing it off with, “And I owned that company when it was trading at $0.20,” you’re no longer just some amateur bumbling around, trying to date a prom queen from the Clinton era. 

You’re now the smart money. 

To see the source of all these ideas and get some more info on those I just mentioned, click here.

Fortune favors the bold,

Alex Koyfman

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His flagship service, Microcap Insider, provides market-beating insights into some of the fastest moving, highest profit-potential companies available for public trading on the U.S. and Canadian exchanges. With more than 5 years of track record to back it up, Microcap Insider is the choice for the growth-minded investor. Alex contributes his thoughts and insights regularly to Energy and Capital. To learn more about Alex, click here.