If you do not understand what is causing this behavior, please contact us here. If you wish to be unblocked, you must agree that you will take immediate steps to rectify this issue. Please fill out the CAPTCHA below and then click the button to indicate that you agree to these terms. Continued abuse of our services will cause your IP address to be blocked indefinitely.A quick glance at history confirms this. It took humans thousands of years to understand fire, stone tools and the wheel. But, in the late 1990s, it took only about 30 years for humans to turn the computer and internet from science fiction into reality. Then, in the 2000s, we’ve gone from a world where only a handful of people had smartphones and DVD players in 2005, to a world where everyone has an iPhone and Netflix in 2020. This phenomena of accelerating returns has huge implications. Companies aligned with technological change have advanced forward at breakneck speeds. Their revenues, profits and stock prices have soared. Similarly, individuals aligned with this trend have also benefited. Their net worth, reach and influence has grown. More importantly, the pace of technological change is still accelerating. That means the implications are only getting bigger and not always in a positive way. Research conducted by Gustavo Grullon, Jesse H. Jones Professor of Finance at Rice University, has shown that the ability for many firms to generate sales commensurate their assets has not kept pace with technological acceleration: “What we’re finding is that the market valuation factor has been increasing exponentially over the past few decades,” said Professor Grullon. “But for some reason the asset utilization (the ability of firms to generate sales given their assets) has been declining systematically over the last 40 years … That has huge implications for the market because are not keeping track of the fundamentals. So the market valuations are going up relative to sales, but for some reason, the ability of firms to generate sales has been going down.”įor this reason, investors have to know the difference between overvalued stocks and true industry disruption to understand which companies are right for long-term gains.Įric Fry (the sharp investing mind who famously bested the prowess of Bill Ackman, David Tepper, Joel Greenblatt, Dan Loeb and David Einhorn) believes the law of accelerating returns is the driving force behind the wealth gap. This means that while it is a massive wealth-creation tool, it only functions favorably for those at the forefront of technological advancement. “The issue is that most of the value created in the markets is mainly driven by technology,” says Grullon. “So you see the market valuation of many high-tech firms has exploded over the past decade, and the problem is that most of those firms are controlled by few individuals … so the market value is highly concentrated and only a small fraction of the population is benefiting from these increases in stock valuation.” To learn how to apply Fry’s method to your portfolio, read more here. Technology Disruption: E-commerce & cloud Stocks to Buy for the Law of Accelerating Returns: Amazon (TICKER: AMZN) With that in mind, let’s take a look at 20 stocks to buy to align your portfolio on the right side of the law of accelerating returns: Stocks to Buy for the Law of Accelerating Returns: Amazon (AMZN) TURTIX HINT TO GETTING PAST LEVEL 10 HOW TO
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