Dear Fellow Investor,
Our daughter is finally home from college today. She just finished her freshman year. But you know how it is... she thinks she has everything figured out already.
We talked about her English major... all the new friends she's made… her plans for the rest of the summer... And then my 18 year-old daughter said something that floored me.
It wasn't about the boys she met in her dormitory (thankfully).
It was an investing tip. Maybe the best anyone's ever given me, believe it or not.
I'll reveal what it was below. And what it means for the winner-take-all "holy war" that companies like Google, Apple, Amazon.com, and Netflix are gearing up for this fall.
I'll also tell you about the 3 surprisingly overlooked stocks I was able to zero in on, when I took my daughter's insight straight to two of the world's top professional investors.
They showed me why these companies are poised to explode — all 3 of them are up 63% since the beginning of 2012 — and they made a simple comparison that's really changed the way I look at the future of this once-beloved industry.
But first, I want to ask you a question that's been on my mind lately. (As I try to get over the sticker shock of this first tuition bill... and as I think about the kind of financial freedom I want my kids to have.)
What's the secret to making a fortune?
Is it education? Hard work? Connections? Or just good luck?
According to a growing body of research, all of those things help. But there's another factor that matters a whole lot more...
Making a fortune requires imagination.
Now when I say imagination, I don't mean wishful thinking. You know, "visualize what you want in your mind's eye, and then you'll get it!"
You and I both know that's pure bull.
What I mean is... imagining a different world.
A world almost like the one we live in now... but a little better. Maybe a lot better. That's what great businessmen like Thomas Edison, Henry Ford, and Steve Jobs did to make their billions. It's also what great investors like Peter Lynch and Warren Buffett have always done.
(And it's the secret behind the simple investment strategy I want to tell you about today.)
Now unfortunately, there's another side to this story. And you can probably guess what it is.
Losing a fortune requires a lack of imagination.
Just ask a newspaper publisher, or anyone who invested in that industry in recent years. Ouch!
Newspaper industry
R.I.P. 1605-2000 |
We still read newspapers. In fact, we read them more than we ever did! But we don't read them in quite the same way — and that means newspaper publishers and investors have watched helplessly as more than HALF of their money swirled right down the drain.
Without an emergency loan from an eccentric Mexican billionaire (the richest man in the world), even the grand-daddy of them all, The New York Times, would have gone bankrupt.
Were there warnings this would happen? Of course there were.
Back in 1993, a man named Gordy Thompson worked for the Times. His job title was "internet services manager," and I'm sure the big bosses at his company had no idea who he was, or what that really meant.
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What did he try (and fail) to tell them?
"When a 14 year-old kid can blow up your business in his spare time, not because he hates you but because he loves you, then you got a problem." |
See, Thompson was in the habit of hanging out on internet message boards.
And he had noticed that fans of the Miami Herald's popular humor columnist Dave Barry were re-posting Barry's columns online, so people who couldn't read the Herald could enjoy them.
In other words, the greatest competitive threat for newspapers was... the popularity of their own content! People wanted more of it, and they wanted it instantly.
Sound familiar?
It's the same thing that happened to the book industry with Amazon.com and now e-books on demand. It's the same thing that happened to the financial industry when we started trading our own stocks online instead of using traditional stockbrokers. And to the record companies that once ruled the music industry with an iron fist.
The list goes on and on.
Did people stop traveling? No… they stopped paying travel agents. Did people stop talking on the phone? No… in fact, they started carrying their phones in their pockets wherever they went! Did people stop buying stuff? No… but enough of them stopped buying it at big box department stores that the industry is now collapsing almost overnight.
And you better believe there was a Gordy Thompson every time, sounding the alarm.
Telling the corporate bosses, and the Wall Street know-it-alls, to use a little imagination.
Saying...
People want what they want, when they want it, where they want it, andhow they want it! And if we don't figure out a way to give it to them, they'll get it somewhere else.
But those guys never listen... even though we ALL agree that the Internet is still in the process of transforming our daily lives.
Even after we've seen it make forward thinking investors mega-rich, and bring once mighty industries to their knees, TIME AND TIME AGAIN.
That's why I wasn't too surprised when I heard what Robert Johnson said about the shaky state of his $2.2 trillion industry last summer at a conference in Sun Valley, Idaho.
(If you recognize the name, he's one of the CEOs who helped build its current business model in the 1970s and 1980s.)
"In the next two or three years, something's got to give.
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Remember, this isn't an isolated commenter with an ax to grind.
It's one of the most powerful men in the business, warning his fellow fatcats that their bloated, inefficient industry may collapse by 2014...
So today is an interesting day for you. Because today you get something quite rare: a second chance.
Actually, the way I figure it, it's your 8th chance.
And quite possibly your last chance to capture this kind of sky-high profit multiple.
Plus, taking advantage of this opportunity couldn't be any easier.
You don't need to know any Manhattan trader jargon. And you don't have to predict when some gee-whiz laboratory prototype will be ready for prime time.
You just need to connect the dots. And use a little imagination...
Because the truth is, what I'm about to say should be completely obvious — so obvious that it took a teenager to explain it to me.
The "powers that be" may refuse to believe it, but it's already happening right in front of our eyes.
See, the real revolutions are the ones that happen so quietly, and so completely, that you never even notice them until they're already over...
And then you have trouble remembering that they happened at all...because the new way of doing things just seems better, and more natural.
(Meanwhile, someone who knew the score all along is counting up all the MONEY.)
But I need to warn you. This could get a little emotional.
Because I'm about to take away something you love — something 99% of us enjoy every day — something that, in our heart of hearts, many of us have a deeper relationship with than we do with anything else in our lives.
And I'm going to pull the plug.
I promise I'll give it back to you! Better than new! In fact, I'll show you how you can get all of what you love about it, and none of what you hate about it.
And, more importantly, you'll discover:
How to invest in the next great transformation of the Internet Age. And why it will be the BIGGEST of all.
Amazon.com
Up 1,867% |
Priceline.com
Up 3,593% |
Tom and David Gardner led readers of Motley Fool Stock Advisor to returns that have more than tripled the S&P 500 for over a decade. And they think this new investment strategy — up 75% since the beginning of 2012 — is their next big "home run."
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But since I'm asking for your trust, allow me a proper introduction.
My name is Tom Conner. And I work for a company called The Motley Fool.
It's a small company with a hugely ambitious goal:
To help everyday investors like you and me systematically build our wealth, simply by leading us to great companies that we can buy and hold over the long-term.
Sounds like common sense, right? But when David and Tom Gardner founded The Motley Fool in 1993, it was a message the Wall Street establishment didn't want to hear.
And in the years that followed, David and Tom did point their readers to great companies. Especially ones that used the power of imagination (and the power of the Internet) to overtake the seven dinosaur industries we just discussed.
Like Amazon.com, which has turned every $5,000 invested by Motley Fool Stock Advisormembers into more than $98,000 by changing the way we read and shop.
Or Priceline.com, which has turned every $5,000 invested by Stock Advisor members into more than $184,000 by changing the way we book vacations.
Meanwhile, Wall Street insiders stuck to the same dirty game. Losing trillions of our money on "derivative swaps" and "flash crashes." Almost causing a second Great Depression. And scaring ordinary investors away from the stock market...by making them lose faith in the proven power of capitalism to create life-changing wealth.
Maybe that's why former U.S. Securities & Exchange Commission chairman Arthur Levitt says The Motley Fool is, "as close to being an effective investor advocate as any organization in America"...
Why Time magazine says "even billionaires get ideas from The Motley Fool"...
And why even one of The Motley Fool's competitors admits that the Gardner brothers "are among the most widely followed stock market advisors in the world."
But like I said, it wasn't Tom or David Gardner who clued me into this new idea, which may prove to be even bigger than Amazon, Priceline, or their other winners...though they were the ones who showed me exactly how to take action and invest.
And it wasn't any of the eggheads I work with here in the software development department at The Motley Fool, either.
It was my daughter. When she said...
But Dad, why would I need cable to watch TV?
As you've probably figured out by now, when I hinted about the 8th "dinosaur" that's about to be massively disrupted by the Internet, I was talking about the $2.2 trillion entertainment industry.
And more specifically, about the cable and satellite providers that many of us fork over more than two thousand dollars of our hard-earned money to, year after year.
Even though we're seeing more ads and less real programming than ever...
Even though their customer service is so bad that according to the American Consumer Satisfaction Index, three of the top five "Most Hated Companies in America" are cable providers....
Even though they're getting sued left and right for deceptive hidden fees, customer privacy violations, and monopoly practices...
I mean, do you know anyone who actually likes their cable company? I sure don't.
But like any bad habit, they've been a hard one to break.
Until now...Because for everyone who LOVES television but HATES being forced into a raw deal, there's been a lot of good news lately...
- New Choices. In the past month, more than 200 billion videos were viewed online. And these videos include real, full-length TV shows like the ones my daughter likes. In fact, 83% of viewers aged 18-29 say they watch "some, most, or all of their shows online." And it's not just a youth phenomenon...more Americans are now watching videos online than on TV. 58% now say they no longer need their TV at all.
- New Gadgets. The Sony Playstation, Microsoft Xbox, and Samsung Smart TV can all pull your favorite TV shows directly from the Internet to your TV screen. So can the Boxee and the Roku, which cost around $100 at Wal-Mart. A new web-based service called Aereo even does it with no "box" at all.
- New Laws. On the morning of June 12, 2009 all television broadcast signals became digital instead of analog. That means TV shows are now downloadable "data" that we can watch conveniently on a computer, smartphone, or iPad. And, as The Wall Street Journal points out, it also means that the cable and satellite companies are keeping another "dirty secret"...they're hoping you won't realize that crystal-clear, high-definition viewing of "most key sporting events and every network TV show" takes nothing more than a new pair of digital rabbit ears!
- New Independence. According to Forrester Research, 45% of households will soon own a device that allows them to "time shift" their viewing (like a DVR). By skipping commercials and breaking out of the network programming schedule, viewers can make TV a personal experience instead of a mindless "broadcast." And 94% of us are also enriching that experience by multi-tasking with emails, text messages, cell phones, and social networks while we watch.
All these trends are starting to add up in a big way.
Because the percentage of households with a cable or satellite subscription is now declining for the first time in the history of television.
More than 3 million Americans have already cut the cord.
And according to Credit Suisse analyst Stefan Anninger, those "cord-cutters" are joined by a new group (like my daughter): the "cord-nevers." A full 83.1% of new households are choosing to live without pay-TV.
No wonder Business Insider reports that the cable/satellite industry is "starting to collapse"...
The #1 objection most skeptics raise (and why they're wrong)
Believe me, I was one of those skeptics too.
I figured that even though some shows were free to watch online, there was no way that the ones I like to watch were available.
So I looked it up.
These are the 20 most popular shows on TV. The green ones are all available to watch online, the red ones aren't:
| Can I watch it online? | |||||
| 1. Sunday Night Football | NBC | yes! | 11. Criminal Minds | CBS | yes! |
| 2. American Idol | FOX | no | 12. 60 Minutes | CBS | yes! |
| 3. NCIS | CBS | yes! | 13. Modern Family | ABC | yes! |
| 4. Dancing with the Stars | ABC | no | 14. Survivor | CBS | yes! |
| 5. NCIS: Los Angeles | CBS | yes! | 15. X-Factor | FOX | no |
| 6. The Big Bang Theory | CBS | yes! | 16. CSI | CBS | yes! |
| 7. The Voice | NBC | yes! | 17. Castle | ABC | yes! |
| 8. Two and a Half Men | CBS | yes! | 18. Blue Bloods | CBS | yes! |
| 9. The Mentalist | CBS | yes! | 19. Unforgettable | CBS | yes! |
| 10. Person of Interest | CBS | yes! | 20. Hawaii Five-O | CBS | yes! |
The first item on that list is the most important one.
Because for years now, live sports programming has been the one insurmountable obstacle standing in the way of mass cord-cutting.
But as my daughter explained to me, Sunday Night Football is just the beginning.
She showed me that every Major League Baseball game, every NHL hockey game, every NBA basketball game, and every "March Madness" tournament game is available online for free or for a low subscription price. So is a lot of ESPN's content.
Even the NFL is inching toward direct distribution. In addition to the Sunday night games, you can watch every other game online with a "tape delay"...And even if complete live football coverage online takes another year or two, I can still watch my local teams on a free high-definition local broadcast signal. (Go Redskins!)
Yes, I thought I was having a conversation with my daughter about why she didn't need cable. But it turned out we were really talking about why I didn't need it either.
