Remember when Starbucks (Nasdaq: SBUX ) was young, and what lots of people -- maybe even you yourself -- said about it? Gourmet coffee? That's a fad! A couple of dollars for a cup of coffee? Yeah, right! They'll just go to McDonald's (NYSE: MCD ) ! Why is there a Starbucks on every corner -- each store is going to cannibalize another!
As it turned out: These assumptions were wrong, wrong, wrong, as people developed a pressing, urgent, desperate need for their morning Starbucks fix. The company continued to deliver torrid sales and profits and the stock price continued to march up, and up, and up. However, you had to be one cool customer to take advantage of the investing potential in Starbucks.
Starbucks was a Rule Breaker, and Starbucks investors were Rule Breakers, too, for that matter. Do you have what it takes to be a Rule Breaker? Let's find out.
When rules get broken
I've always considered myself to be a bit of a rule breaker. Once I had moved on from my turbulent teens into my post-college 20s, this tendency developed into a penchant for working for Internet start-ups. (My mom couldn't understand why on earth I would want to work for a company that was operating out of someone's garage. That was one of my favorite jobs ever, and probably the one where I learned the most.)
I even made early investments in some of the stocks people still talk about today -- TiVo (Nasdaq: TIVO ) , XM Satellite Radio (NYSE: XMSR ) , and Amazon.com (Nasdaq: AMZN ) (none of which I hold now, but all of which I can still see the investing story for). And, of course, there were also a few flaming disasters, like the now defunct Razorfish (anybody remember it?) and a bunch of shares in NBC Internet that I had received through my then-employer, also now defunct.
Live and learn, live and learn. Just as I can say that there are a few employers behind me that no longer exist, there are a few stocks behind me that crashed bitterly. However, in true rule breaker style, I feel that every experience was part of my personal growth, part of a lesson learned, part of my assessment of risk and reward. You've got to have guts to get what you want.
Trust me, it's not always easy to detect the paradigm shifts that make for great investments in groundbreaking companies with bulletproof brands. That's why we've put together the team of Rule Breakers, headed by our lead rule-breaking rebel himself, David Gardner.
A little honest rule breaking can be a benefit -- particularly in investing, going against the grain of conventional wisdom, which skews toward mediocrity and small-time, unimaginative thinking.
I can offer a personal example of my own small-minded thinking in my recent commentary I Hate eBay. In that piece, I described how, when I first heard about eBay (Nasdaq: EBAY ) , I thought it was the most ridiculous idea. Ever. Just look how that turned out -- eBay has become one of the most visible, killer brands in the world, and it has been delivering years worth of astronomical sales and earnings gains. That was a lesson learned, too.
Brand behemoths = investor bounties
What kind of aspects are you looking for when you're searching out rule-breaking stocks? It's a good question, with a few answers.
How about presence of a killer brand, and one that exemplifies a first mover in a strong industry space, or a new solution to an old problem? Starbucks revolutionized one of the oldest commodities we know: coffee. eBay gave us all the power to be a boutique.
Rule-breaking stocks permeate the culture. Sometime, really pay attention to where you see Starbucks cups, how many people you see carrying them on the street, or how many Starbucks cups you see clasped in the hands of people featured on TV or in a movie. I guarantee, once you tune into the subtle signs of the domination of culture, you'll be surprised.
Contemplate eBay's pop-culture cred -- not only its quirky TV commercials, or the fact that eBay is often part of everyday conversation. There's also the fact that everybody always wants to know the latest weird thing that's being auctioned off on eBay -- think holy grilled cheese, Elvis' water cup, Grandpa's ghost... it all ends up in the news. That's some buzz that has worked to differentiate it, give it a whole new angle on being a piece of old-fashioned Americana -- and that buzz is free.
These are the kinds of killer brands Rule Breakers are looking for. We're looking for the next wave.
Negativity and nosebleeds, oh my!
This is all a no-brainer, you might say. What's the big deal? What makes rule breaking investing so hard?
First, as I mentioned earlier, when you find these stocks, it will be when they're breaking the rules. That's when you get the nervous feeling in your gut -- because lots of experts are probably saying don't do it.
Maybe they're saying that there's not a deep enough moat around the company's products to guard it against competition. (Think Rule Breakers pick Blue Nile (Nasdaq: NILE ) , which faces everybody from Tiffany to Costco to Amazon.com.) Maybe they're saying that rapid expansion is eating into the company's own sales.
And another likely culprit: high P/E ratios, sometimes even in what could be described as the nosebleed range. Ouch. Rule Breakers can certainly make you queasy. This is why companies like Starbucks and eBay have never exactly looked "cheap" and require nerves of steel for the buy-and-hold investor -- not only to buy the stocks, but oftentimes, to hold them, too. And that's one of the key moments when you begin to realize that the stocks you're targeting are, indeed, the stocks that break The Rules.
This manner of investing is not for the faint of heart. It's not for you if you're too easily upset by conventional wisdom, with people braying negatively about how a superstar stock is "too expensive," "too overexposed," or "too threatened." If this makes you nervous, steer clear. It takes a brave soul to fly in the face of that logic, and to take the chance at stocks that are smack-dab in the middle of the radar screen. Such brave souls are we, looking for the Next Big Thing.
However, with Rule Breakers, get ready for the roller coaster of excitement, the adrenaline rush that comes with picking stocks that require you to look perhaps years ahead for success. It takes nerves of steel, it takes patience, it takes standing strong when your friends and acquaintances shoot you down.
And, yes, sometimes you will feel the agony of defeat on a stock that may not deliver on its promise and potential, when it turns out it wasn't the rule breaker you thought it was, after all. But rest assured, our team has the tools to help you pick the winners out of the masses.
One of the only ways to really make a bundle is to break all the rules. Don't miss out on the chance of a lifetime -- to take stock in the future.
David Gardner, the man behind the message, has himself described the new Rule Breakers service as more than just a newsletter, but also as a community network, peopled with bright, curious, forward-thinking investors. If you want in on the excitement of high-growth stocks, then Rule Breakers is for you. Don't miss out on a free 30-day no-obligation trial that helps point you in the right direction with Rule Breakers investing.