As of 12/03/2018 our Disruptive Technology portfolio has has a 21% return so far this year. Stocks that provided the strongest contribution to that performance were Twilio +66.5%, Amazon +34%, and Proofpoint +33%*. By way of comparison the ASX is down 1.68% in the same period. These market-beating gains were primarily driven by much better than expected 4Q 2107 earnings and positive guidance for the year ahead.
Investing in Disruptive Technology
A disruptive company disrupts established players in the industry where they operate. They are growth companies which will continue to attract investors. For example, in 4Q 2017 Twilio revenues grew a stellar 66%, Amazon’s sales were up 38% with gross profit up 49% (remarkable given the size of the company) and Proofpoint’s top line increased 36% Y/Y. To put those numbers in perspective, in Q4 2017, S&P 500 sales grew 8.4% and earnings increased 14.8% year over year.
Who are they disrupting and how are they doing it?
Cloud based Twilio (TWLO) enables developers to build, scale, and operate real-time communications, e.g., SMS, voice, video, and authentication, within software applications (APIs). Twilio’s line up of high-profile users include Uber, WhatsApp, and Airbnb. Twilio is leading the shift to communicating within APIs and the shift to cloud. Twilio is the only public pure-play CpaaS (Communications-Platform-as-a-Service) on the public market. Twilio’s growth will continue to be fuelled by the proliferation of cloud and mobile application development.
Who is getting disrupted by Twilio?
Any company that has traditionally operated in network communications-the telecom networks, mobile operators, as well as call centre communications providers and network specialists such as Cisco and Avaya.
Online retail giant Amazon is one of the original disrupters. As an early adopter of leading edge technology, the company turned the book industry upside-down then made its way into every aspect of retail-consumer electronics, apparel, toys and so forth. With the recent acquisition of Whole Foods, it is now moving aggressively to expand its grocery business and is rumoured to be looking at the drug and pharmacy industry. The company has built Amazon Web Services(AWS) into a cloud powerhouse, dwarfing its two main competitors Microsoft and Google. Amazon’s secret? Amazon’s strategy is to offer customers the lowest prices possible through low every day product pricing, free shipping offers, and super-fast delivery (sometimes the same day). Its “prime” subscription ecosystem, mastery of logistics, embrace of artificial intelligence (AI), use of robotics, and the fact it is consistently innovating, literally guarantees that Amazon will remain the largest disruptive influence in the U.S. and international retailing for the foreseeable future.
Who is getting disrupted by Amazon?
Basically any retailer that sells products through traditional “brick and mortar’ methods, cloud services, grocery retail, and potentially the drug and pharmaceutical industry.
Proofpoint has become a major cybersecurity player by perfecting vulnerabilities in its larger competitor’s offerings. The large legacy security software players Checkpoint Systems, Cisco Systems, and Symantec failed to adequately address vulnerabilities of the email gateway, an area that has allowed innumerable hackers passage into the enterprise. These targeted attacks that involved hackers injecting malicious attachments or URLs on e-mails to take control over enterprise IT systems or to target them with ransomware. These links were cleverly disguised by making them appear as official documents, thereby luring employees to click on such URLs or to download infected attachments. Proofpoint offers a ‘one-stop shop' for email gateway with its advanced e-mail security solutions such as Secure Email Gateways (SEG), Advanced Threat Protection (ATP) and Targeted Attack Protection (TAP) to identify and quarantine e-mails that contained malicious links and attachments. In other words- a “better mousetrap”
Who is getting disrupted by Proofpoint?
Large legacy security software players such as Checkpoint Systems, Cisco Systems, and Symantec.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
*Returns are expressed in AUD. Past Performance is not a reliable indicator of previous performance. See how our performance is calculated.