Look, I get it. Trying to pick winning stocks feels like playing darts blindfolded while riding a unicycle. But what if I told you there’s a stupidly simple two-question test that could help you spot the next Amazon before it becomes, well, Amazon?
This comes from investment guru Eric Fry, who basically figured out that successful companies have one thing in common: they’re efficiency ninjas. While everyone else is still using a flip phone, these companies are already on iPhone 47.
The Magic Questions
Here’s the test that could save your portfolio from becoming a cautionary tale:
1. Is this company making something way more efficient than what already exists?
2. Is this company using new tech to make their own operations run like a well-oiled machine?
If you get a “yes” to either question, you might have a winner. If you get “yes” to both? Start doing your happy dance.
Why This Actually Works
Remember Blockbuster? They were the kings of movie rentals until Netflix showed up with DVDs by mail. Suddenly, driving to a store to rent “Titanic” for the 47th time seemed as outdated as using a payphone.
This is what economist Joseph Schumpeter called “creative destruction” – basically, new companies come along and make old ones look like they’re still using dial-up internet. It’s brutal but inevitable.
Take Ford back in the day. In 1908, a Model T cost $850 (that’s like $30,000 today – yikes). But Henry Ford figured out this crazy thing called an assembly line, and by 1925, the same car cost just $260. Sales went through the roof because, surprise, people like paying less for stuff.
Modern Winners
Fry points to companies like Corning (GLW), which makes the fiber-optic cables that basically power the internet. Every time you binge-watch Netflix or doom-scroll social media, you’re using their tech. They’re not sexy, but they’re essential – like the friend who always has jumper cables.
The key is finding companies that either create efficiency or use it better than everyone else. These are the businesses that make you think, “Why didn’t I think of that?” followed immediately by, “I should probably buy their stock.”
The Reality Check
Here’s the thing about efficiency gains – they don’t always show up in quarterly reports right away. Sometimes it takes a while for the market to realize that Company X just figured out how to do something 10 times better than Company Y.
But when it does show up? That’s when you see expanding profit margins, growing market share, and stock prices that make you wish you’d bought more.
So next time you’re evaluating a stock, ask yourself those two questions. Is this company making life easier, faster, or cheaper? Are they using AI, automation, or some other fancy tech to run circles around their competition?
If the answer is yes, you might just have found your next big winner. And if not? Well, at least you didn’t invest in the next Blockbuster.