A "Shark Tank" Approach to Stock Picking

Here's how ABC's hit show "Shark Tank" can make you a better investor.

Jan 10, 2014 at 6:11PM

If you haven't yet seen the show, "Shark Tank" is a reality series on ABC that lets hopeful entrepreneurs pitch their business ideas to industry tycoons in hopes of securing an investment. While the show is more entertaining than it is educational, it does render some worthwhile advice on how to identify winning business models. It's in this spirit that I've outlined two "Shark Tank"-inspired techniques for uncovering wealth-building stocks.

1. Look for companies that tell a memorable story
It may seem obvious, but stories sell. When Tod Wilson pitched his pie factory to the Sharks, it was his emotional story about overcoming homelessness and passionately chasing his dream of selling pies wholesale that got their attention. With a compelling story and a delicious sweet potato pie recipe, the Sharks agreed to invest, and Wilson's retail pie business has since tripled. The takeaway for investors is that consumers want to connect with a company and its products on an emotional level.

Apple (NASDAQ:AAPL) is one of the best examples of this in recent retail history. As AdAge magazine conveyed more than a decade ago, Apple's genius is in its ability to resonate with "consumers across generations and international boundaries." From Apple's iconic "Think Different" ad campaign to its 1997 Emmy winning commercial "To the Crazy Ones," Apple told a story that won the hearts of consumers everywhere. As we all know, Apple went on to become one of the most valuable companies in the world.

2. Strategic partnerships are key
On "Shark Tank," the tycoon investors don't just bring money to the table... they also bring an invaluable source of networking opportunities. You can apply this same logic to your stock research by checking out a company's board members. How many influential or reputable business minds does this company have at its disposal?

SolarCity (NASDAQ:SCTY), for example, has more than a few strategic ties to Tesla Motors (NASDAQ:TSLA) and its visionary CEO, Elon Musk. SolarCity, which installs solar panels and helps customers finance them, first hit the public market in December 2012. However, unlike other recent start-ups-gone-public, SolarCity's chairman is billionaire entrepreneur Elon Musk.

As the CEO of Tesla Motors, Mr. Musk brings more to the partnership than just business acumen. For example, in November, SolarCity unveiled a new smart energy storage system called DemandLogic that uses Tesla's lithium-ion batteries to help save people money on their electric bills. This strategic partnership has also worked to Tesla's advantage. In fact, SolarCity currently supplies the solar panels for Tesla's Supercharger Network. It's through this cost-effective arrangement that Tesla is able to deploy supercharger stations inexpensively. 

Ultimately, strategic partnerships such as these can fuel future growth and be an important revenue driver for the companies involved.

Foolish takeaway
So the next time you're looking for stocks to invest in, ask yourself: Does this company or brand tell a story and engage with its customers in a unique or memorable way? And, does the business have any strategic partnerships that could boost its market value down the road? Moreover, the key to profiting from business analysis like this is to learn how to turn business insights into portfolio gold by taking your first steps as an investor.

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Fool contributor Tamara Rutter owns shares of Apple and Tesla Motors. The Motley Fool recommends Apple, SolarCity, and Tesla Motors. The Motley Fool owns shares of Apple, SolarCity, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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