According to an article on Investorplace, 10 big US technology companies could disappear in less than 10 years. That’s not a heading you read every day!

The Land of Opportunity

I won’t deny it, I like to invest in technology shares. In my mind, the best software companies offer great upside potential with fewer downside risks than many other types of companies. I’ll take that bet any day of the week.

But not all software or tech companies are created equal and some of them are not very well understood. As I’ve said before if an investor doesn’t understand why she is making an investment it’s unlikely to end well. This is what we call our circle of competence.

You might remember this image from our free ebook:

The benefit of sticking to our circle of competence may not be obvious at first blush. Take Buffett in the late 90’s.

This was the time when internet tech stocks were trading at nosebleed valuations and some ‘investors’ were getting ludicrously rich for nothing more than an idea (with ‘.com’ in the name). Buffett fell behind his peer group because he wasn’t comfortable investing in profitless start-ups.

In 1999 Buffett’s Berkshire Hathaway underperformed the S&P 500 index by 20.5%. At the time, Buffett wrote, “Our lack of tech insights, we should add, does not distress us.”

Fast forward three years. In 2002, Berkshire returned 32.1% more than the market. Buffett stuck to his knitting and was rewarded for his patience. But like all good investors, Buffett improved the way he invests and slowly widened his circle of competence.

Indeed, Buffett cannot be accused of being a technophobe today. Recently, it was revealed he was buying bucket loads of shares in the same big tech company I offered as the first investment idea to Rask Invest members.

But I digress, here is Investorplace’s list of companies that “will” go bust in less than 10 years:

  • Twitter Inc
  • Roku
  • GoPro
  • Fitbit
  • BlackBerry
  • Snap Inc
  • Seagate
  • IBM
  • Pandora
  • Tesla

That’s a long list of well-known companies. Do you agree? Find me on Twitter: @owenrask.

I’m not entirely sure I agree with all of them. However, just the idea that $US261 billion ($352 billion) of shareholder money might go up in smoke in 10 years should give investors pause for thought. For context, the entire ASX 200 is worth around $2 trillion.

One thing many of the companies on the list have in common is that they are ‘one-trick ponies’. Some of them have failed to withstand intense competition. Most of them have no moat or competitive advantage. So it sounds plausible that these companies may disappear in the next decade. However, predicting the timing of these events is next to impossible. That’s why I don’t ‘short sell’ stocks.

What doesn’t change?

If we look back over decades, not only since the beginning of the internet era, change is a constant in all industries. It doesn’t matter if you’re investing in tech, supermarkets, pine trees or property.

There’s no rhyme or reason to it and most of us don’t see it coming.

Just look at General Electric. GE is one of the oldest conglomerates, with its hands in many different pies (healthcare, aviation… you name it).

It was an original member in the Dow Jones wayyy back in 1896. The only company to be included in the Dow and pay dividends for more than 100 years.

But even the mighty GE couldn’t escape change. Last fortnight, GE was booted from the Dow because its share price slumped from over $30 to just $13 in about two years. S&P (the company that manages the Dow) said it was no longer “representative” of the US economy and stock market — both of which are increasingly dominated by tech.

Don’t just do something, stand there!

I’ve made more money sitting on my hands than by being constantly on the lookout for buying and selling opportunities.

As someone wise once said to me, “it’s time in the market that counts — not timing the market.”

Technology might seem like it’s reserved for enterprising investors only, but there are many opportunities hidden under the surface.

For example, I search the ASX and global markets to find companies that have long-term contracts with many reliable customers and deliver ‘mission critical’ services. Services that lock in revenue and produce high margin ‘maintenance’ style sales. I believe that type of business affords them substantial staying power.

These companies are not easy to find trading at a good price. But when they come along it’s more often than not a bet I’m willing to take.

Cheers to our financial futures!

 

Owen
Founder, Lead Adviser of Rask Invest

P.S. Did you know: Google (Alphabet Inc) employees often receive holidays instead of cash bonuses. Why? Money provides more happiness when it is spent on experiences and not material items.

 

P.P.S. Want to join our free Investor Club?

Get your hands on my latest free insights and analysis by joining our Investor Club newsletter. It’s free! When you join I’ll forward you my latest investing ebook, “What Warren Buffett’s Investment Checklist Can Teach Aussie Investors” — free of charge. No credit card or payment required.

 

This article contains general financial advice and information only. That means the information does not take into account your objectives, financial situation or needs. Because of that, you should consider if the information is appropriate to you and your needs, before acting on it. Please read our financial services guide (FSG). At the time of publishing, Owen Raszkiewicz does not have a financial interest in any securities mentioned.

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