The Next Rocket Stock Is Right in Front of You

Disruptive technologies don't come around every day. But when they do, they can not only change users' lives, but also create handsome profits for investors. All you need to shake the foundations of the tech world is a culture of innovation, a few good ideas, and a little bit of luck.

Yesterday's disruptions
Microsoft
(Nasdaq: MSFT  ) , Apple (Nasdaq: AAPL  ) and Google (Nasdaq: GOOG  ) each took a different path to domination of their businesses, but each started with a core technology that changed the world. And even after their earth-shaking innovations had turned things topsy-turvy, their shares kept heading upward.

Company

Disruptive Innovation

Stock Performance

Microsoft Windows Operating System IPO – End of year 1999
59,956%
Apple iPod, iPhone, iPad 1998-Present
9,062%
Google Search Engine combined with keyword advertising IPO – Present
596%

Microsoft started controlling the PC operating system market in the mid-80s, and that domination only got stronger throughout 2000. If you remember the days before Microsoft was Apple and Google's nemesis, the company actually had some pretty incredible programs (even if you argue Apple's were better).

Apple has disrupted the world a few times, but I've focused here on the last 12 years, when the company became more than the Mac. Its technology has become so ubiquitous that I might be lost (literally) without it. A friend asked me recently whether I'd be more worried if I lost my wallet, keys or cell phone. Who would have thought that my cell phone would even be part of that list 12 years ago?

Google may be more interwoven in our lives than we care to admit. Its search engine is not only on our computers, but also on our phones, and now (in a few cases) on our TVs. Google also provides the ads we see on the Internet all day long, and if Big G has its way, its integration into our lives will only expand.

Tomorrow's disruptions
To see future innovators, you need to seek more than the best balance sheet or return on equity. You must find companies with a culture of innovation where new ideas can flourish; financial returns will follow. A decade ago, Apple was a niche computer company with an eccentric CEO and a booming culture of innovation. Today, it's a central part of millions of people's lives.

So who will deliver the next disruptive technology? You could point to Motley Fool favorites such as Netflix (Nasdaq: NFLX  ) and Sirius XM Radio (Nasdaq: SIRI  ) for content-delivery models that are turning the media world on its head. As smartphones proliferate, there are a wealth of new possibilities for gaming, television, medicine, and more, opening doors for numerous new companies. Here are a few innovative companies I think are worth watching.

Company

What They Do

Why They're Disruptive

Tesla Motors (Nasdaq: TSLA  ) Electric vehicles and drivetrains The auto business is transitioning to more electric vehicles, and Tesla is out front.
Universal Display (Nasdaq: PANL  ) OLED screens Inexpensive flexible displays open a world of possibilities.
Facebook Social network Can anyone under 30 live without Facebook anymore?

Tesla Motors could change the auto industry as much as any development since Henry Ford's assembly line. It has a head start on electric vehicles, owns the distribution network, and has begun to supply industry titans like Toyota.

Universal Display has only begun to scratch the surface of its potential in OLED screens. If the promise of these screens holds true, you could see multimedia screens wrapped around curved surfaces, new lighting solutions, and cell phone screens that are nearly impossible to break.

Facebook, although not public yet, couldn't be following in Microsoft's footsteps any more closely. A Harvard student creates a tech product that becomes integral to our lives, drops out, moves to the West Coast and becomes the richest person on earth -- although for Mark Zuckerberg, that last development is still pending. But seriously, I'm concerned that Facebook will soon rule my life.

Those are three companies I think have the ability to build technologies that will continue to change our lives. Now it's time for you to weigh in. Tell us who you think is creating a disruptive technology, and which company will become the next decade's rocket stock.

Google and Microsoft are Motley Fool Inside Value picks. Google and Universal Display are Motley Fool Rule Breakers recommendations. Apple and Netflix are Motley Fool Stock Advisor choices. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On November 19, 2010, at 9:47 AM, Brent2223 wrote:

    SIRI is a MF favourite? Congratulations, but a few years too late. Sell low buy high! Sorry, couldn't help myself......

  • Report this Comment On November 19, 2010, at 10:10 AM, TMFFlushDraw wrote:

    I was referring to MF readers as fans of SIRI.

    Travis Hoium (TMFFlushDraw)

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