Technology helps the world advance. As humans it’s in our nature to investigate, innovate and solve problems.
This curiosity means we make things, create things and develop new technologies.
You can look back thousands of years for basic examples of technology pushing civilisation forward.
Stone Age: it might sound simple, but the development of stone and bone blades and tools was vital to the development of mankind. The earliest example of innovation and technology is a shovel that was fashioned from the shoulder blade of an Ox.
Iron Age: in the Iron Age, iron smelting was all the rage. It helped make better, more efficient tools. This helped construction, agriculture and civilisation continue to advance.
Industrial Revolution: the industrial revolution sparked a wave of new technology. Manufacturing went from being hand produced to machinery made. New efficiencies and tools helped to bring an era of unprecedented wealth.
Of course I’ve skipped a few different ages. Importantly though you can find examples in the Bronze Age, the Atomic Age and the Information Age too.
Over the journey, well at least the last hundred or so years, there have been companies that have been built on these advances in technology. All of them using some form of technology that was ground-breaking at the time.
Some of these companies started on the smell of an oily rag. Today they have transformed into multibillion dollar companies. And there are numerous examples of rags to riches stories across the tech world.
Of course many of these companies went from being just an idea, to a private company, and then to a listed company. For some they just toiled away for many years, the world blind to their potential.
But fundamentally these companies had breakthrough technology ready to be unleashed. And when they took off they made returns in excess of 1,000%. Some of them have returned over 10,000% over the years.
The investment world of technology is thankfully large. Technology is quite a broad term and it spans across many industries. That means opportunities are ample.
It’s easy to think of technology as just computers, phones, tablets and gadgets. But in all reality technology and technology stocks cover a range of industries. These include medicine, resources, telecommunications, automotive and aerospace.
Look at Ford Motor Co. They make cars…so what? But remember, the first cars were revolutionary technology. The car literally changed the world. And Ford started with just $28,000 and one car in 1903. 110 years later they’re a $60bn company that sells over 2.25million cars a year.
Then there’s the Computing-Tabulating-Recording Company started in 1911 with 1,300 employees. They made weird (and large) machines that could calculate mathematics.
Later in 1924 they renamed to International Business Machines (IBM). They helped shape the world we live in today and were pioneers in computing. IBM’s now a $223bn business with over 434,000 employees.
These are two examples of companies started over 100 years ago that exist today because of continued innovation and cutting edge technology.
One final example is a company that started out as a simple radio repair shop in Tokyo in 1945. They went on to make Japan’s first transistor radio. They’re now a $20bn company that has dominated consumer technology for over 30 years. That’s the simplified story of Sony.
Over the years as these companies have grown into billion dollar businesses they’ve made a lot of investors very wealthy. But they started from humble beginnings with technology that not everyone really understood the full potential of.
But how are you to know which technology is world changing and which one is all hype? What is it that separates those that make money from investing in tech stocks from those that don’t make any money investing in tech stocks?
Well there’s one big mistake technology investors make when investing in tech stocks. It’s important to know to make sure you don’t make it. I’ll get to it in a second…
One of the key things you need to know first is there’s a lot happening, a lot of new technology and a lot of companies promising the world.
The other is there are fundamentals that you need to know as an investor in tech stocks. In fact in any stocks these fundamentals apply. Good leadership, a good product or service, competitive advantage, a strong plan and the ability to remain solvent are all pretty important.
But what tech stocks eventually boil down to is will this technology change the world? And will enough people pay for whatever the company is selling?
If you get an answer to both of those questions, then you’re well on the way to finding a diamond in the rough.
But the one big mistake that too many technology investors make is ignoring technology breakthroughs by not understanding the technology.
Let me explain in a bit more detail.
When Google first listed in 2004 they were a search engine that sold advertising. Simply, they helped to find information on the internet. Now no one could have seriously predicted that less than 10 years later they’d be making wearable technology and have the dominant mobile operating system. But that’s irrelevant.
But those in the know realised Google’s technology wasn’t just a search engine. According to the company, they had the ability ‘to organize the world’s information and make it universally accessible and useful’.
And this was far more powerful than most people realised. The mechanics of it involved complex algorithms that sorted information on the internet. It made online life easy for billions of people.
By sorting that information Google could rank websites based on their content. Smart investors understood that e-commerce was taking off and having a ‘visible’ website was vital for business.
It made sense that businesses would pay Google to enhance their listing, and to advertise their websites.
More than just a search engine, Google was and still is an advertising behemoth. And that’s what their core business is and always will be. It’s resulted in 705% gains in just 9 years.
Then there’s a company like Illumina, involved in DNA sciences. To most people their understanding of DNA is the double helix image and that it somehow makes us the way we are.
But the work Illumina do is at the cutting edge of the Personalised Medicine trend. As the Human Genome project was underway, Illumina was gearing up their business to cash in on this.
Then in 2003 the entire human genome project was completed. And the potential for a DNA sciences companies was unleashed. Subsequently those that understood the technology Illumina had at their disposal were in for gains of 3,199%.
What this all means is that there are companies out there involved in cutting edge research and technology breakthroughs. And in the early stages many investors see tech breakthroughs as just a fad, or say, ‘It won’t take off.’
One thing is for certain, what might sound like ‘crazy talk’ now will be the future you live in tomorrow. No one thought man could achieve powered flight, walk on the moon, dive km’s under the sea, have a bionic eye or make calls on the go from a computer the size of your palm.
What’s clear is that technology advances civilisation, and those that ignore the inevitable do so to their own detriment. Those that seek to understand the potential are the ones that benefit financially.
The biggest mistake you can make is ignoring the technology breakthroughs happening every day.
Now I’m not saying you need a Doctorate in every new technology, but you need to be able to decipher and filter the real deal from the hype. And for that, you need expert information.
The best thing you can do is use this information to realise the potential revolutionary technology has.
Armed with the info you won’t be the person that looks back and says, ‘I had the chance to invest in Apple back in the 80′s.’
You’ll be the person that says, ‘I invested in Apple back in the 80′s, look at me now.’
Sam Volkering
Technology Analyst
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From the Archives…
Don’t Make Investing a Chore… Invest in an Innovative Business
14-06-2013 – Kris Sayce
The Technology Revolution Begins in Four Days…
13-06-2013 – Kris Sayce
Zero G for the Australian Dollar is a Shot in the Arm for Miners
12-06-2013 – Dr Alex Cowie
There’s More to Technology Than Facebook and Spying
11-06-2013 – Sam Volkering
Four Great Australian Technological Achievements
10-06-2013 – Sam Volkering