Adapt Or Die: 7 Disruptive Companies You Should Own

by: Bryan Waters

The following companies are all unique in at least one way. They have caused major disruption to at least one industry and in some cases several. These companies are leaders in their respective fields and have not only turned industries upside down, they have created new industries and forced companies to either restructure the way they do business or go out of business.


Amazon started by challenging the retail book chains and forcing them to evolve by putting its entire retail sales channel online. Broader selection of inventory for lower cost. Since Amazon first went live in 1995, it has continued to apply pressure to the book industry by working tirelessly to keep costs down, adding other product lines and offering an after-market sales outlet for its items. All of the above has made Amazon the largest online retailer.

Further upsetting the status quo, Amazon launched the Kindle, which had the disruptive effect of threatening the print-publishing industry as a whole.

Not stopping there, Amazon followed this act by launching the first viable commercial cloud-services in 2006 under the name Amazon Web Services. This move caught a number of tech-players off guard including Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT). Both companies have tried to catch up with mediocre levels of success.

Amazon then jumped in after Apple (NASDAQ:AAPL) and grabbed its part of the online music market. It followed up with a major entry into online streaming movies causing Netflix to have to work to hold the lead.

Amazon is currently priced to include its stellar performance but still has a lot of upside. Find a good entry point and put this stock in your long-term portfolio.

Coinstar/Redbox (NASDAQ:CSTR)

Coinstar first started by creating an industry out of loose change in the 90s. While this wasn't disruptive by itself, it set the tone for the launch of Redbox (a subsidiary of Coinstar) in 2002. Redbox was a direct cost-reducing game changer going head to head with Blockbuster and other retail movie rental companies. In 2012, Redbox purchased Blockbuster Express, which was part of a last-gasp attempt to survive before it finally goes the way of Borders Bookstores.

Redbox is also partnering with Verizon (NYSE:VZ) to offer Redbox Instant to offer streaming movies. While this is in its infancy, it has promise.

Entering Coinstar prior to the growth and maturity of Redbox Instant could result is large returns. As an alternative trade, you might invest in Verizon as well. While the market doesn't attribute Redbox's success with Verizon, a major success in this area might have a positive impact on the stock and as a dividend stock, it's not a bad play all by itself.

Facebook (NASDAQ:FB)

This is an easy one. Facebook has changed the way people use the Internet. It has become a verb on its own as in "facebook me" in much the same way people no longer search for information, they "google" it.

The really interesting part of Facebook as an investment is that Zuckerberg has taken the reigns from Bill Gates as the leader of the evil empire. Almost no one I know likes Facebook and it seems its announcements are met with almost universal derision. This means that a lot of the upside has not been priced into the stock but that will change in the near future.

If you understand the role Facebook will play over the next five years, then you will enter Facebook and enjoy the profits that result. If not, you can stand on the sidelines and watch.


Google started by redefining online search in a way that made the existing competitors obsolete. Remember AltaVista? Then it redefined online advertising and became both through innovation and through acquisition the number one online ad-network with its AdWords platform.

While Apple got their first, Google followed and put a serious dent in Apple's iPhone smartphone market quickly becoming the leader in Smartphone OS market share. The launch of the Google Play store continues to be an interesting no-holds barred battle between Apple and Google.

Google is now going head-to-head with Amazon in the battle for cloud dominance. While it is trying to catch-up on this front, don't underestimate Google. It has the talent and the persistence to offer serious competition.

If you want serious long-term growth, you need to have Google in your portfolio.

LinkedIn (NYSE:LNKD)

LinkedIn is a simpler story but no less compelling. It turned job search upside down and instead of going from the top-down introducing job-seekers to employers, it socialized job-hunting, which is a little ironic because the best job-seekers already relied very heavily on their network connections (offline in this case).

LinkedIn continues to evolve adding peer-endorsements and recommendations, a full offering of supporting features including groups, skills, job-listings and wholeheartedly embracing the mobile smartphone industry.

LinkedIn just went public in 2011 and is having a bit of a love-affair with investors but at the right entry point, you should jump in so you don't miss your piece of the pie (i know...I'm notorious with my mixed-metaphors).


Netflix is one of those companies I can't help but love. I don't like some of the decisions it has made such as the choice to build its infrastructure on Amazon Web Services but I recognize that it made a choice to build a service rather than a platform. It has done an amazing job of leveraging cloud technology to get its service to market sooner and instead of putting the investment into content rather than technology.

While I'm not sure that these decisions make it a viable acquisition target except for content and market share, it does mean that it has a solid service and is currently the leader in online streaming movies.

It does have heavy competition from Amazon, Redbox and Redbox Instant and another weak but interesting attempt at resuscitation from Blockbuster Now, but Netflix is scrappy and is making all the right moves to keep the lead intact even learning from mistakes in branding it made in 2011.

While recent interest in Netflix by Carl Icahn has raised the price back to levels that make it a tough entry, I'm watching it both as a subscriber and an investor.

Nuance Communications (NASDAQ:NUAN)

The singularity is near (fans of Raymond Kurzweil will get this reference...the rest can "google" it). This is one of those companies that most people probably haven't heard of but is making waves in a number of markets. Nuance has a long, complicated history with the most recent incarnation of the company resulting from a merger between Raymond Kurzweil's company Scansoft (originally Kurzweil Computer Products) and Nuance Communications resulting in a company that offered the most commercially viable speaker-independent speech recognition technology.

Just as a refresher, the significance is that most speech recognition technologies require training to recognize an individual's speech. This means that you can recognize limited-domain speech on a broad and commercially viable scale enabling applications such as robust interactive voice response systems and medical transcription systems.

While it continues to push the limits of speech technology, Nuance acquired Swype in 2011 branding it as an innovator in alternative input technologies.

I like Nuance and I especially like the fact that it was under the radar. That is, until Carl Icahn did the same thing he did to Netflix and took a nearly 10% stake in the company.

Watch this stock to find a comfortable entry point.


There is one notable omission from this list. Apple computer. While Apple was certainly a disruptor with Steve Jobs at the helm, my belief is that Apple has turned the corner and is now leaving adolescence to become a boring fully grown company and its actions and stock price will find the appropriate levels to match the new Apple.

Disclosure: I am long FB, VZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.