Last June, I wrote of three Big Ideas I'd been betting on in Motley Fool CAPS and my personal portfolio.
"If you're willing to embrace turbulence in exchange for a shot at sustained, long-term gains at or near venture capital's 20% annualized, you'll have to look up from the spreadsheets and Securities and Exchange Commission filings," I said at the time. "You'll have to think bigger. You'll have to invest like a venture capitalist."
My plan? Bet on companies creating tools for social commerce, content independence, and cleaner skies. I've been wrong so far. Here's a look at each of my calls.
- Social commerce is alive, but not yet well. Testimonials may be the most powerful form of marketing, but as businesses, the companies behind the testimonials have yet to be as profitable as we'd like. Take Angie's List, a membership site that aggregates professional services recommendations. Profits have proved elusive -- for more than 15 years. Yet there are signs that social commerce has value. By introducing the "like" button, and then designing a recommendations engine around it, Facebook has grown to produce more than $3 billion a year in revenue. And for all its Faker Breaker attributes, Zynga (Nasdaq: ZNGA ) depends on friends recommending new games to other friends. I still believe in this trend, but it's probably going to take a healthy post-IPO run by Facebook to prove me right, and that's anything but a guarantee.
- Content isn't yet independent. But freedom is on the march. Google (Nasdaq: GOOG ) last week made good on a long-rumored plan to create a Dropbox competitor called Drive, whereby, having it installed, I can now access all my Google Docs files directly from my Mac's finder. Yet the Big G is hardly perfect in this area. I still can't start a YouTube program on my Mac and continue it on my Android tablet. Apple, meanwhile, has trapped users in a surreal fruit loop in which its download-driven iCloud service makes purchased content available only on Apple-branded devices. Understandable, but this is also a tide not even the mighty Mac maker will be able to push back completely. I expect every major content producer and business software supplier to develop ways to make content and data free of hardware constraints.
- The sky is still a dirty, filthy place. Finally, while U.S. airlines haven't made much progress when it comes to employing biofuel as an alternative for intercontinental flights, both Japan's All Nippon Airways and Australia's Qantas have recently taken to the air with less oil on board. ANA, in particular, flew a new Boeing 787 from the company's Everett, Wash., delivery center to Tokyo, with a 50-50 mix of traditional jet fuel and biodegradable alternatives composed mostly of used cooking oil powering the trans-Pacific flight. That's good, but it's also just an experiment. At least tens of millions or perhaps even billions of dollars are needed to build a fuel-supply alternative, which means we could still be years away from when Solazyme sees sustainable demand from carriers for its own algae-based biofuel. The stock is down more than 7% year to date versus a better than 11% return for the benchmark S&P 500.
Not the only themes worth betting on
Even though those three themes continue to resonate with me, as an investor and member of the Motley Fool Rule Breakers and Motley Fool Supernova teams, I'm always looking for new themes that are early in their development. Here are three that my teammates and I on the Supernova Odyssey portfolio discussed recently:
- Renting is the new owning. In everything from computing infrastructure to cars to homes, consumers and businesses are becoming more flexible in their thinking about what's a "must own" and what isn't. Mainly, this thesis depends on investing in the leaders in aggregating useful renting infrastructure. Those companies include Big Idea Portfolio stocks Rackspace Hosting and salesforce.com, as well as Zipcar (NYSE: ZIP ) , which not only disrupts the idea of purchasing a vehicle outright, but also changes how we view car renting. Zipcar subverts assumptions that renting must be a formal, plan-it-all-in-advance enterprise.
- TV as you know it is dead. Similar in scope to the content-independence idea but more specific to the business of television, the interesting play here is that what was a hardware problem (i.e., I need a big-screen TV with HD, high-res, and so on) is becoming a software problem (i.e., I need my-size-fits-me programming, anywhere, and a more intuitive interface to find it). The shift is already under way, but it's so early that we have yet to see even 1% of the potential value creation. My bet is on a total makeover of the interface, distribution network, and delivery mechanism. Netflix (Nasdaq: NFLX ) is an obvious benefactor here, but so is Google. There could also be dozens more thus-far unforeseen startups playing a role in this disruption.
- Distribution as you know it is dead. As consumers, we spend more time now with on-demand media (i.e., Internet access, where we "fetch" what we want through a browser) than we do with passive media (i.e., cable TV that feeds us whatever it has at that moment). As such, our habits are changing. We now believe that on-demand TV is the right model, and we're projecting this feeling onto passive medium providers by shifting dollars away from expensive cable to less expensive alternatives. The same is true in audio, where we customize playlists, download podcasts, or stream specific stations. Control has shifted. Monoliths are out; individuals are in. Facebook is already catering to this desire, as is streaming specialist Pandora Media (NYSE: P ) .
But again, all six of these disruptions in the making are early in their development. Payoffs could take years, if they come at all. Such is the essence of Rule Breaking and Rule Breaker investing, which is why we liken it to venture capital. Picking themes is hard enough; picking winners within themes is even harder. Yet the effort is worth it -- for it's within the context of industry shifts that portfolio-making multibaggers like this one are most often found. Which Big Ideas are you betting on? Leave a comment below to tell us what you think.