DISRUPTIVE Trend is now the talk of the town. The faster innovation and technology grow, the more intense the need for business to increase its competitiveness.
This brings about an interesting phenomenon: overtaking or intervening conventional businesses by more competitive companies.
The companies that cannot compete would keep losing market shares to the point of closing down. On the other hand, those companies, commonly known as disruptor, which buy or intervene in the dying business, would normally see some exponential growth in the way that would also send their stock price soaring. It is because of newer business model, improved products and services that are competitive both in price and quality.
Most important of all, these companies can significantly change the consumers' behaviour and their own industry, and create ripples felt in other industries.
A clear example of a disruptor would be Amazon, a giant among businesses benefiting from digital economy, which recently stunned everybody by announcing a profit of US$1.6 billion for the first quarter of 2018, doubling what they have made in the same period a year earlier. Such has sent Amazon's stock price to a new height, at $1,625. At the same time, Netflix, a disruptor in lifestyle business, showed some observation-worthy trend with their 9 per cent increase in stock price last month after the announcement of their 1.96 million subscribers compared to 1.42 million in the first quarter of last year.
Three business areas that are distinctive and present some good disruptive trend investment outlook in the long run include 1) Digital economy businesses, which can expect some good amount of disruption due to a global increase in internet users who are also buyers of products through a type of digital platform. The increase seems to be trending from 2016 – 2022. Together with this are cashless payment business and cloud service, which would soon exceed the use of cash (Source: BCG Analysis, Euro monitor Passport, 2015). Amazon and Alibaba could serve well as examples of this type of disruptors.
2) Lifestyle Disruption, which includes a lot of interesting disruptors covering many aspects of a person's daily life. The cover ranges from entertainment business including ones on a digital platform, virtual reality development, health-related businesses such as health application developers, Biosimilar drug development, education on digital platform, or development of different types of smart devices.
3) Future Transportation and Energy, where it was estimated that in the long run, the market share of both hybrid and electric cars would increase, driving up the need for batteries. This could put both electric car producers and energy storage business in a disruptive status.
Some are worried that the disruptive trend would be short-lived. Then the explanation would be that as long as business is still competitive and technological advancement is still moving forward, companies would have to come up with newer business models that should overtake older models of business. Actually, disruptors have been around for a long time. Cars are the disruptor of horses and horse-drawn carriages.
Electric cars may very well be the disruptor of petroleum based cars. Or while in the past we needed to leave home to buy things at a department store, today, we only need a mobile phone. All these show that disruptors have always been around, as winners in the business world.
So Disruptive Trend can be counted as another interesting investment theme, both with disruptor companies themselves or those in the supply chain of the disruptive trend. This presents some opportunities for risk appetite investors to enhance high expected return in the long run from foreign stocks of the disruptors, the real winner in the disruptive trend.
Contributed by Asset Plus Fund Management Investment entails risk. The investors should thoroughly study prospectuses, product features, return conditions and risk before investing.