Have No Fear

"The French followed procedure, while the Americans hurtled ahead, improvising as they went."

That's John Gartner's explanation in The Hypomanic Edge of why Alexander Hamilton's charge at the Battle of Yorktown helped secure the surrender of Cornwallis, while the accompanying French charge suffered heavy casualties. And with due respect to the French, it's also the simple reason that America's economy is the most dynamic and successful in the world.

In short, we're better than average at brashly charging ahead and working around our inevitable mistakes as we make them.

The need for speed
Why is the observation relevant to investing? It's because businesses that successfully hurtle ahead can lead to every entrepreneur and investor's ideal: Dominant positioning within a growing market niche. The farther and faster a business goes, the less time competitors have to catch up. Or as Gartner wrote explaining Hamilton's charge, "Paradoxically, breaking the rules and recklessly surging forward at top speed was the safest course."

Not coincidentally, Rule Breakers is the name of our business-focused investing service where Fool co-founder David Gardner and his team of analysts scour the market for companies poised to subvert the status quo and earn investors incredible returns in the process.

An ugly growth
Of course, the downside to breaking the rules is that it doesn't always reap immediate rewards. Rules, after all, exist for a reason. Companies hurtling forward in new industries often have ugly financial statements. Consider eBay's (NASDAQ:EBAY) formative years:

Or Amazon.com's (NASDAQ:AMZN):

Then there's Netflix (NASDAQ:NFLX):

And even Rule Breakers-recommended Intuitive Surgical (NASDAQ:ISRG):

Each of these financial snapshots shows incredible revenue growth that wasn't quite making its way to the bottom line. That could be a result of operational missteps, working-capital issues, or necessary expenditures just to get the company to scale.

Like Hamilton, these companies were charging forward with their revolutionary businesses without regard for convention. And while that hurt the financials in the short term and made the companies difficult to analyze from a traditional perspective, this was the safest course for each company and its investors in the long run. Netflix, for example, got so far ahead of its competitors that even ultra-competitive Wal-Mart (NYSE:WMT) decided not to challenge its dominance in the online movie-rental market.

Likewise, eBay is the unquestioned leader in the Internet auction space -- despite frenzied efforts by both Yahoo! (NASDAQ:YHOO) and Overstock.com (NASDAQ:OSTK). Both were simply too late to stop the momentum of eBay's network effects.

Barnburner businesses
There's the rub of business-focused investing: Public financial statements won't tell you very much about the company's prospects for success. Indeed, Amazon was bleeding money in the late 1990s and stuffed to the gills with debt. Those are immediate red flags. Today, however, the company is profitable and continuing to grow.

That's why, as Paul Commins wrote a few years back, high-growth, business-focused investors should only glance at traditional value metrics such as the price-to-earnings ratio. Instead, because stock price appreciation in this area occurs in unpredictable spurts, "Rule Breaking investors should 'let the power of successful business models do the work for them.'"

And do the work they will. Early investors in the Amazon.com business plan (and that's all there was to go on back then) have been rewarded to the tune of more than 1,500%. eBay investors are up more than 1,200% since 1998, Netflix investors have tripled their money since 2002, and Intuitive Surgical investors are up nearly 500% since 2000.

The Foolish bottom line
Alexander Hamilton's experience at the Battle of Yorktown and the experiences of eBay, Amazon.com, Netflix, and Intuitive Surgical show the rewards in charging ahead with no fear. Provided you can see through the financial statements and find a company poised to reinvent its industry, business-focused investing is an extremely powerful investment strategy. If you'd like a list and detailed buy report of businesses that fit exactly that bill, click here to join our Rule Breakers service free for 30 days. There's no obligation to subscribe.

Tim Hanson does not own shares of any company mentioned. Netflix, Amazon.com, and eBay are Stock Advisor picks. Wal-Mart is an Inside Value pick. No Fool is too cool for disclosure.