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Importance of mega trends in multibagger hunting
When looking for the next #tech #Multibagger #stock, tailwinds matter. There is no greater tailwind for technology stocks than a mega trend.
“If you're looking for a home run -- a great investment for five years or 10 years or more -- then the only way to beat this enormous fog that covers the future is to identify a long-term trend that will give a particular business some sort of edge.”
- legendary investment manager Ralph Wanger
A mega trend causes significant transformational change to the economy, business, or society. Mega trends create significant value over an extended period, like electricity, automobiles, and the Internet all did.
So how can tech investors capitalize from mega trends successfully? Before pouncing on the latest technology fad, be skeptical and make sure all the elements of an investment ready mega trend are in place before pushing that buy button.
Where is the technology is in its adoption lifecycle. Is it just hype or has the technology fully arrived? Are there significant bottlenecks remaining that are blocking mainstream adoption of the technology? Has the business model been figured out?
Keep these considerations in mind when assessing if the Mega trend in question has truly arrived:
- Sometimes it takes a while for all the necessary elements of the technology to arrive. Typically, they aren’t all there on the same day. For example, mobile computing has been an important catalyst for embedding the Internet into all facets of the economy and society. The promise of the Internet was “information at your fingertips”. Well, this was hard to realize when people spent most of the day away from their desktop computers. The arrival of smartphones kicked off the next wave of adoption of the Internet.
- All bottlenecks need to be removed for mainstream adoption to occur. With the arrival of the Internet came the promise of the Internet as a platform for TV. Companies such as [Broadcast.com](Broadcast.com) and RealAudio Player promised we would be watching TV thru the web imminently. While that kind of hyperbole worked for investors, Yahoo paid $5.7 billion for [Broadcast.com](Broadcast.com) which now does not exist, the required technology was just not there for an acceptable end user experience. Because of Moore’s Law, exponential advances in optical communications and storage, the necessary technology infrastructure was in place for streaming. Now, providers such as YouTube and Netflix have all been able to reward their investors significantly because of broadband and ubiquitous devices all stacked with high resolution displays, significant storage, optimized graphics processing and advanced connectivity, available at affordable prices.
- Megatrend investing success is not just about technology innovation. Business model innovation is an important catalyst to value creation and stock returns. Streaming and peer-to-peer file sharing technology innovation brought us Napster, the popular music sharing platform, but it took significant business model innovation from the technology and music industry to find a formula for sustainable monetization.
Check out full article here: https://www.thewealthyowl.com/post/in-search-of-multibaggers-the-ultimate-guide-to-technology-stock-investing
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