I've been asking myself, "What are the elements that industry defining companies like Apple, Tesla, Nike, and Disney all have in common?"
There is a lot of money to make if this magical formula could be discovered and applied to smaller companies. I've come up with three elements that I'm going to be on the hunt for when it comes to future investments. Not saying this is the magic bullet we are looking for, but it's a good start.
If you're just looking for a stock pick, feel free to scroll down to the bottom. This email was originally sent out in November but the thesis is still the same.
Behold, the all powerful trifecta :
1. Cult following
2. Hardware and software combination
3. Growing Market
Let me explain using Tesla as an example...
Hardware and Software Combo
Companies that have both a software and hardware combination are able to create truly deep relationships with their customers and have strong money making potential. This type of product is often what creates cult followings.
A Tesla wouldn't be so magnificent without the software that powers it. Not only does it create a quality customer experience, but it also allows Tesla to offer subscription services and the ability to upsell new car features.
This goes far beyond loyal customers, and is where we can find an investing edge against the Wall Street suits. Investors for large funds are typically generalists and undervalue qualitative observations like the a brand's cult following.
Tesla has obsessive customers who can't wait to tell someone about their car or connect with other Tesla owners. They clearly go beyond regular fandom and act more like a little marketing army for the brand to which they've pledged their allegance. These cult-like communities are not just valuable marketing tools, but they are valuable customers who will buy anything the company throws their way.
As an investor, I want a company that's in a market bound to grow larger. Obviously with Tesla, the electric vehicle market still has a ton of room to grow.
Hardware and Software Combo + Cult + Growing Market
This trifecta methodology is a big reason I bought more Peloton earlier this week. Let's apply each pillar to them...
📈 Stock Pick
This is also leading me to the conclusion that I should be adding Lululemon to the Four Minute Fund. As a member of the Weekly Geek Out email group, I'm letting you know this earlier than everyone else. I'm going to be buying Lululemon on Monday pending any crazy news that pops up this weekend.
Why I like Lulu:
- The workout/work from home apparel market is growing
- They have a cult of customers that hold LuluLemon as the pinnacle of stretchy pants
- Their acquisition of Mirror makes them a player in the fitness/content/tech space with Peloton
- Bound to see a huge increase this holiday season
- They've already reported a huge boost of their online sales channel
What companies come to your mind that possess these elements? No seriously, I want to know. Email me back or shoot me a text at 510.712.0803.
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