In this piece, we will take a look at the top stocks that are poised to disrupt their industries by 2030 with technology according to investment bank UBS.
When it comes to investing and making massive gains on the stock market, disruption is the name of the game. The biggest firms on the market right now are all disruptors of their industries. These firms have ushered in new products and used technology to allow consumers to improve their daily lives.
Since the word disruption is well used in stock market discourse, a brief history lesson is in order. The term disruptive innovation was popularized by the late Harvard Business School professor Clayton Christensen. Despite being widely used, disruption innovation is far from being a widespread effect. In essence, while all disruptive innovation is innovation, not all innovation is disruptive innovation. To understand how, consider an HBR article co authored by Professor Christensen. In it, the authors share that “too many people who speak of “disruption” have not read a serious book or article on the subject.”
Truly disruptive firms end up anticipating the needs of customers that larger incumbents ignore, believe Christensen and his compatriots. This enables the entrants to establish a foothold in the market, after which they upscale their products to also target the customers that incumbents are focused on. However, a firm doesn’t have to be an entrant in its industry to be a disruptor, as the authors point to the iPhone’s success in leveraging existing business processes that truly reshaped the course of the world.
Consequently, in order to analyze the stock market returns offered by disruptive innovation, a good place to start would be to see the share price of firms that Professor Christensen believes are disruptors. The article provides two examples; one is of the firm responsible for the iPhone and the other is of the company that is dominating the global streaming market.
Starting from the former, its shares are up by a whopping 209,000%+ since they started trading on the NASDAQ exchange. The latter is a relatively newer entrant to the stock market. The stock started to trade in 2002, and since then, it has gained 61,000%+. Mind you, both of these are calculated after stock splits. Safe to say, disruption is rewarding, but to understand its impact on the share price of the former company, we’ll have to dig in slightly deeper.
Using post split stock prices, before the launch of the iPhone, the shares had gained roughly 3,800%. Since the launch of the iPhone, the stock is up by almost 4,600%, despite the higher base effect of the higher share price and the global stock market disruption during the 2008 Great Recession and the COVID 19 recession. In today’s AI driven market, the firm is one of the most valuable companies in the world courtesy of its $3.51 trillion market capitalization.
Since disruption often occurs on market fringes, it’s hard to predict which firm will be the next one to shake things up. Using Christensen’s criteria, the world’s preeminent AI GPU manufacturer whose shares are up 727% since OpenAI publicly released ChatGPT isn’t a disruptor. This is because it offers its products and services to customers that it serves already, while true disruptors are those that might end up gaining market popularity by catering to customers that are ignored by large incumbents due to profitability or other factors.
Another great example of disruption, or what Christensen terms as ‘big bang disruption’ is in the gaming console market. For years, two gaming consoles, namely the Xbox and the PlayStation have dominated the market. Within these, the PlayStation is the original disruptor and a device that dealt a deadly blow to the arcade industry. In American culture, Pinball holds a pivotal place, especially for those who were growing up in the pre internet era.
Data from Harvard shows that Pinball sales in the US peaked at roughly 1.3 million units in 1993, despite the fact that arcade video games had already become available since 1978. However, from the 1.3 million units in 1993, the sales dropped to less than 5 million in just a couple of years in 1997. This was because the PlayStation was launched in 1994, and by 1997, its sales had surged to 20 million. A key differentiating factor for the console that enabled its meteoric rise was its popularity. The PlayStation at the time was available for $299 while Pinball machines could cost as much as $7,500. The console also offered more video game variety, and it allowed children and adolescents to enjoy gaming from the comfort of their homes. In short, the video game console served the needs of players ignored by Pinball (those who wanted to play at home), and its ‘big bang’ occurred when the console caught on with the broader Pinball market.
Therein lie the secrets to disruption. With these details in mind, let’s look at UBS’ latest list of firms that can use technology to disrupt their industries. The bank believes that “these are leading disruptors in sectors undergoing technological transformation, which should lead to consequential and enduring impact” to allow them to deliver “superior earnings growth.”
An investor in a trading room with an illuminated monitor showing stock/market trends.
Our Methodology
To make our list of stocks that will use technology to disrupt their industries, we divided the 29 stocks in UBS latest report into two categories. The first lists OTC stocks by their year to date share price gains, while the second ranks US listed stocks by the number of hedge fund shareholders during Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
29. Samsung Electronics Co., Ltd. (OTC:SSNLF)
YTD Share Price Gain: -28.89%
Samsung Electronics Co., Ltd. (OTC:SSNLF) is a global diversified technology company with a presence in the consumer electronics, semiconductor fabrication, consumer electronics, and chip fabrication industries. It is one of the biggest smartphone manufacturers in the world, and also a key player in the semiconductor manufacturing industry. Consequently, Samsung Electronics Co., Ltd. (OTC:SSNLF) depends on cyclical up trends to drive revenue. Additionally, the firm’s memory division has suffered lately as weak demand and its sizeable market share have driven volumes lower. However, Samsung Electronics Co., Ltd. (OTC:SSNLF) also benefits from advanced research and development which allows it to develop advanced chip manufacturing processes such as gate all around (GAA) 2 nanometer. UBS believes that Samsung Electronics Co., Ltd. (OTC:SSNLF) can use technology to drive innovation in the green technology industry.
28. Société Générale Société anonyme (OTC:SCGLY)
YTD Share Price Gain: -4.41%
Société Générale Société anonyme (OTC:SCGLY) is one of the oldest and largest banks in France. This allows it to be a sizable entity in the banking industry, with €1.6 trillion in total assets as of June 2024. Looking at Société Générale Société anonyme (OTC:SCGLY)’s income statement, during the first half of 2024, 68% of the firm’s €42 billion came through interest. Consumer deposits, central bank deposits, and hedging derivatives accounted for most of the interest income. Consequently, with a lower rate environment expected in the future, Société Générale Société anonyme (OTC:SCGLY) could struggle to maintain its income in consumer and central bank divisions. Yet, it is also one of the biggest digital banks in France, which provides the firm a key leg up over rivals in the highly growing space. Additionally, out of the bank’s €13.5 billion in noninterest income in H1, €13.1 billion came through its asset management business. Through this, Société Générale Société anonyme (OTC:SCGLY) provides equipment leasing and fleet management services. The bank is due to sell a portion of this business next year to generate capital and streamline operations. This is at the heart of a turnaround by the bank which is struggling to bring its valuation level with peer firms.
