I had the pleasure of writing a series this spring on the Top 25 Stocks for the NEXT 25 years. I researched over 300 companies to come up with the list of what I thought were the best 25 stocks to own for the next 25 years. But something was missing that I now want to address in a new series.
The very nature of picking 25 stocks which hopefully would perform magnificently for 25 years excluded many great companies that were already executing well but could not be included because of their high current market capitalization. Some examples were "game changing" companies like Apple (NASDAQ: AAPL). Back in May, Apple had a market capitalization of about $90 billion. But I couldn't include it in my top 25 unless I expected Apple's market cap to reach several trillion dollars. I love Apple, but that's probably not in the cards. By the way, Apple today is worth $130 billion.
Another example of a game-changing company is McDonald's (NYSE: MCD). This once staid, stuck-in-the-mayonnaise company has re-invigorated itself in the past couple of years and has seen its market value more than double to $66 billion. I'd also throw in that camp Caterpillar (NYSE: CAT), which since January 2004 has seen its own market capitalization double to $51 billion. Caterpillar changed and fortified its business model starting back in late 2003. By the way, Apple,Caterpillar and McDonald's are still game changers---meaning the shares are a buy.
So what is a game changer? A game changer is a company that has a newer, better mousetrap to entice its customers. It's also a company that has the products to create a new market altogether. Google (NASDAQ: GOOG) is the best example there.
A game changer defines or re-defines the sector where it competes. A game changer sets the pricing and margin model in its sector. A game changer explores new geographies for its products, and in many cases betters mankind. One might argue that a McDonald's Big Mac does not better mankind, but McDonald's has made a powerful effort to offer healthier items on its menu. A game changer, regardless of current size, grows its revenues and earnings at the highest levels within its respective sector.
Many of the top 25 stocks for the NEXT 25 years are game changers in their own right. Electro-Optical Sciences (NASDAQ: MELA) could be a mega game changer in the diagnosis and treatment of the most common cancer -- skin cancer. Opsware, now part of Hewlett-Packard (NYSE: HPQ) was a game changer in the information technology (IT) world, radically lowering the cost of servicing and implementing new programs to large organizations' server farms. Typically, the most expensive IT function was dramatically enhanced in quality yet accomplished more quickly and cheaply. Indeed a major game changer.
Can a large blue-chip company be a game changer? Absolutely. Many stodgy companies re-invent themselves with better products and services. The fun part is to catch the Caterpillars and the McDonald's early in their "revamped" cycles. Game changers can come from any industry and at almost any valuation. If they "change the game," their market valuation will invariably change as well -- for the better.
So begins this series. My next Game Changer article will feature two companies that are compelling buys ... stay tuned!
Georges Yared is the CIO of Yared Investment Research and the author of Baby Boomer Investing...Where do we go from here?
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Reader Comments (Page 1 of 1)
10-08-2007 @ 9:39AM
dewerling said...
I note in this mornings news that McDonalds is offering free WiFi in the UK. Is Mc Donalds about to be another enabler for iPhones and other post PC, post laptop devices to come?
I think Apple in its patents, in its almost "windowless" Leopard operating system, and in the development of peer to peer exchange of songs, videos and documents between Mac Tablets and iPhone extremes yet to come is by definition a game changer. It is the Microsoft of young Bill Gates to the stogey old Big Blue IBM.
A trillion dollars is nothing if one sees Apple's critical positioning in the 2008 convergence of Web2 software, of new energy efficient components and newer color bright touch screens for ultra-portables and of the proven engineering prowness of Apple to put it all together with good software to boot.
The early adopters of this technology, students and youth, are already driving up sales of Macintosh hardware, not incrementally but by leaps and bounds. It is the handwriting on the wall for another seismic shift in play for the computing world.
I think you personally may see this, but are hesitant to say it as it is still outside the consciousness of so many of your peers talking about iPods and iPhones as luxury toys. The people at Salesforce. com see it differently and the youths and consumers looking ahead to Christmas are about to make it start rolling, big time.
10-29-2007 @ 7:21PM
j casson said...
Looked for your comments on VMW as a game changer over the past week but didnt see any.
Nothing on the blog about whats going down with vmw
12-17-2007 @ 4:25AM
Stavros Georgiadis said...
In the next years as the problem of environmental pollution gets bigger more green companies are likely to be in great demand for social reasons as well.
http://www.themoneycosmos.com