"Long-term buy and hold."
You've heard that phrase a million times, and we like it a lot here at the Fool. But have you ever really thought about the implications of "long-term"?
Ideally, what you buy today should still be in your portfolio 10, 20, or 50 years from now. What will the world look like then? Which companies will stand the test of time?
Even better: Which companies will help build that brave new world?
Hits and misses
When we invest for the long term, we have to try to predict what new technologies will become standard, which new products will become consumer staples, and which companies will lead the pack.
But prognosticating the future isn't all that easy. I recently came across a very special Omni magazine from 1985. "Japan 2000" was the tagline -- looking 15 years into the future of the Eastern Empire.
Some of the technologies Omni foretold in that old issue more or less worked out:
- "Want to write to a friend? Just dictate your message to the computer, and your friend would get the note in seconds." Yep, an Apple (Nasdaq: AAPL) iPhone can do that today. The mobile-communications industry has exploded in the past 10 years.
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Sony (NYSE: SNE) showed off a "130-foot-wide television set" -- and now you can see them at any major sporting event. Sony itself got out of that business in 2001, but entire companies today exist only to fill that need.
- Waseda University had a vision of "an army of hazard robots" that could go into situations a human shouldn't handle and take care of the problem. iRobot (Nasdaq: IRBT) is doing exactly that for the Army right now -- when it's not busy selling you a robotic vacuum cleaner.
Granted, the Year 2000 deadline passed for a few of these advancements, but we made it eventually. But some other bright-eyed predictions are still off in the future.
- Summon your car and just tell it where to go? Garmin (Nasdaq: GRMN) can help you find the way, but its GPS devices won't actually take the wheel quite yet.
- Dermal papilla cells revolutionizing hair transplants forever? Twenty-three years later, it's still just a promising medical technology. Even the rich and famous still get hair plugs the old-fashioned way -- by moving follicles from the back of their necks to the problem spots.
In other words, this prognostication business is pretty tough -- and that's just the products and technologies. Was it obvious in 1985 that Apple would get into the mobile-phone business, or that Eastman Kodak's (NYSE: EK) cash-cow photo film business would die at the hands of digital pictures?
I don't think so. That Omni issue featured full-page ads for portable typewriters, for crying out loud. And one day, our iPods will seem just as quaintly old-fashioned -- but what will have replaced them?
Where's my crystal ball?
We're surrounded by technologies and breakthroughs that seem just about ready to change the world. Some of the revolutions are quite audacious -- Universal Display (Nasdaq: PANL), for example, wants to replace all of our TV screens and every light bulb in the world with organic light-emitting diodes. But which of these potential revolutions will, in hindsight, have been the right ones to bet on?
Will fuel cell cars be the next Big Thing, or will the need to build a new infrastructure to support them kill that technology in its cradle? Will we cure cancer once and for all? Will that cure come before the Baby Boomers need it in a big way? Will green tech take off? What will cloud computing make possible? Over what things will we kick ourselves, for not having believed in?
And even more important: Which company within these potential revolutions will have emerged as the leader you should have invested in?
Signs point to yes
Our Motley Fool Rule Breakers analysts, who are searching for just these revolutionary companies, found a pharmaceutical company nearly four years and 170% ago, long before Mr. Market had heard of its hepatitis C medication. Motley Fool co-founder David Gardner pounced on Intuitive Surgical (Nasdaq: ISRG) a couple of months later, and he's ridden the robotic-surgery pioneer to a hefty quadruple.
Why these two companies? First, they meet some important Rule Breaking criteria:
- Top dog and the first mover in an important, emerging industry.
- Sustainable competitive advantage.
- Good management and smart backing.
- Strong consumer appeal.
But just as important, these companies meet a pressing and widespread societal need -- they're disruptive. And disruption is the difference between a revolution and a fad.
Finding revolutionaries
The Omni writers and editors couldn't predict everything right in the '80s, and you'd probably rack up a similar batting average today. But that doesn't mean there's no way to buy in to the companies and technologies that will revolutionize the future. Find a well-run, solid company that changes the way we live in the world, and you've found a potential multibagger.
That's what we aim to do at Rule Breakers, and our roster is packed with visionary businesses that are working hard to change the way we live and work -- and making profits along the way. If you'd like to see what we're recommending now, click here to take a free, 30-day trial. There's no obligation to subscribe, and you'll see everything we're recommending -- including our best bets for new money now.
Fool contributor Anders Bylund owns shares in Intuitive Surgical and Universal Display, but he holds no other position in any of the companies discussed here. He gets a kick out of 1985 ads for decrepit computers and solar watches that look like wall clocks. Garmin is a Motley Fool Global Gains selection. Universal Display, Intuitive Surgical, and iRobot are Rule Breakers selections. Garmin and Apple are Stock Advisor recommendations. The Motley Fool is investors writing for investors.
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