How do you identify the companies that can go up in price by leaps and bounds?
How do you find promising companies and multiply your investments?
Not all growth stocks are the same. Many of them have grown hundreds times since their founding, but only a few have grown thousands times. For example, Amazon turned an initial $1,000 into $2.35 million in 24 years.
Hyper-winners often have similar characteristics: a strong management team, an innovative field or pioneering idea, and a huge benefit of the product offered to society. Without an innovative team with a fanatical founder at the head (Bezos, Jobs, Zuckerberg, Musk) there will be no growth.
It is also necessary to find the courage to invest in such a company at an early stage of its formation, when its future is not predetermined. It is also desirable that the company’s business be easily scalable and not dependent on capital-intensive production.
For example, the business of Google, Adobe or Microsoft has no physical boundaries at all except the number of servers in data centers. In practice, this means that it is equally easy for software and IT companies to sell 10 subscriptions to their services or 10 million in one day.
Unfortunately, it is impossible to pinpoint future mega-caps at their starting point of growth, or everyone would be as rich as Buffett. But there is a win-win way – broad diversification. Following the principles outlined above, it is enough to form a portfolio of the 50 most innovative companies, and every 3-5 years eliminate “losers” and add “winners”.