For those of you keeping track at home, turning $450 into $1 million would require a lifetime return of 222,222%.
Preposterous. Impossible. Flat-out stupid.
These are the types of comments you should expect to hear by shooting for such results.
Make no mistake, this kind of success isn't easy to come by -- but it's also not impossible.
To create returns like this, you need to know where to look. Today, I'm going to share with you one secret that can supercharge your portfolio: Invest in companies that are truth-killers. These organizations slaughter the so-called "truths" in our society, exposing them for the myths they are.
A short history of truth-killers
We've all heard the story of Christopher Columbus. According to legend, he revealed that a huge "truth" -- that the world is flat -- was actually a myth. If we go back further, we see that before Copernicus, it was accepted as truth that the earth was the center of the universe.
Killing these truths and exposing them as myths used to be a difficult process. But these days, it seems to happen on a regular basis. My grandma once believed that she'd never see me again once I moved to Costa Rica, but through the power of Skype, we were talking face-to-face one week later.
In the investing world, spotting companies that are killing widely accepted truths is the key to market-clobbering returns.
Take a look at the chart below, which highlights a few recent truth-killers, and reveals the returns they've provided to investors (assuming all dividends we reinvested).
|
Company |
The myth exposed |
$450 at IPO is now worth |
CAGR |
|---|---|---|---|
| Netflix (Nasdaq: NFLX) | Movies must be rented at a store. | $15,400 | 48% |
| FedEx (NYSE: FDX) | Domestic packages can only be delivered by ground transportation | $43,700 | 14.8% |
| Amazon (Nasdaq: AMZN) | You purchase books at a bookstore. | $50,700 | 40.1% |
| Wal-Mart (NYSE: WMT) | Only big cities can fulfill all your shopping needs. | $1,008,600 | 21.4% |
*Sources: Yahoo! Finance, FedEx and Wal-Mart investor relations. Returns based on closing price on first day of trading.
All four of these companies turned conventional wisdom on its head. If you were prescient enough to get in on the ground level and patient enough to hold throughout the years, you'd be sitting on a huge pile of cash right now.
What's the next truth on the chopping block?
There are lots of ideas floating around about what the next big thing will be. Many companies will come up short, but a precious few will succeed. If you invest in just one truth-killing company in your entire life, that alone can lead to untold riches.
Below, I've singled out three companies that I believe have the potential to produce such results.
| Company | The truth being killed |
|---|---|
| K12 (NYSE: LRN) | Children must be formally educated in schools. |
| Tesla Motors (Nasdaq: TSLA) | You need gasoline to drive a car. |
| Zipcar (Nasdaq: ZIP) | You need a car in the first place. |
K12 is an online educator that provides all the schooling a student needs, from kindergarten all the way through high school. The free, publicly accredited school caters to both struggling and advanced learners, students who are mobile either by chance (e.g. parents in the military) or by choice (e.g.. an elite athlete), and homeschoolers. Last year, K12 was responsible for educating about 70,000 full-time students nationwide.
Tesla Motors, the Silicon Valley-based brainchild of PayPal co-founder Elon Musk, aims to provide a stylish car that can run on electricity alone. The company needs to make strides before it can become a serious threat. Its Tesla Roadster clocks in with a price tag of more than $100,000, and the company has yet to turn a profit.
And though Zipcar may not ring a bell with rural folk, ask any city slicker about the company and you're sure to get rave reviews. The company owns a fleet of cars covering 14 major cities and 230 college campuses across the United States. For a yearly fee of $50 -- and much smaller per-hour rates -- Zipsters (as they call themselves) can trek around downtown all they want, gas and insurance included, without the hassle of owning a car.
A Foolish takeaway
In the investing world, there are no guarantees. These three companies could all be wildly successful ... or flop. Most likely, they'll land somewhere in between. Just remember -- all you need is one truth-killing stock in your portfolio to make a fortune.
If you're interested in further ideas, I'll provide you with access to a free report: The Motley Fool's Top Stock for 2011. In it, our senior stock analyst reveals why "this stock is cheap relative to its potential, but won't be for long." Click here, and the report is yours for free.
