Insights

3 Disruptors I Love Right Now

Disruptive companies with disruptive offerings can end up being the star performers in your portfolio. Not every such company becomes a long-term winner, but plenty do. Think of how Amazon got people buying books (and then many other items) online, how Apple introduced such a successful tablet in the iPad, and how Zoom Video Communications made conference calling easy for anyone.

Here are three more innovators to get to know better — and to consider for berths in your portfolio.

1. Intuitive Surgical

Intuitive Surgical (NASDAQ: ISRG) is a giant in the field of robotic surgery. Founded in 1995, it launched the da Vinci robotic surgery system in 2000. And now, some 22 years later, there are more than 6,700 da Vinci systems installed worldwide (many, if not most, costing more than $1 million). More than 10 million procedures have been performed with the system.

In 2019, Intuitive introduced another robotic surgery platform, the Ion endoluminal system, a robotic-assisted bronchoscopy platform to improve early lung cancer detection. These technologies have disrupted the way that many surgeries are performed, and have rewarded long-term shareholders well. Over the past decade, for example, shares of Intuitive Surgical have grown by an annual average of 13.4%. Over the past 20 years, that average is 31.1%.

One very appealing aspect of Intuitive is its business model: Customers buy a robotic surgery system, and then they make many more recurring purchases — for servicing, supplies, and accessories for the machines. It’s the old razor-and-blades model.

The company has plenty of room for further growth as it rolls out new systems, sells more systems, and gains approval for its machines to perform more procedures. In the company’s first quarter, the number of procedures performed jumped 19% over year-ago levels. Despite that, shares were recently 47% below their 52-week highs. All things considered, there’s a lot to like about Intuitive Surgical.

2. Airbnb

Airbnb (NASDAQ: ABNB) is a growth stock that has clearly disrupted the hotel industry’s status quo with its peer-to-peer rental platform. It traces its roots back to 2007, when its founders rented out air mattresses in their San Francisco apartment.

There are now roughly 4 million hosts renting out spaces on Airbnb, and together they’ve welcomed more than 1 billion guests, while earning more than $150 billion. The company puts the average earnings per host at $13,800, an impressive figure, especially when you remember that it’s just an average. Certainly, plenty of hosts are earning much more.

Airbnb has become such a disruptive force that some are claiming that it’s disrupting not only the hotel industry, but also real estate markets, with many homes or apartments that would normally be sold to people who plan to live in them now going to those who want to rent them out on a short-term basis. That might be bad for buyers, but so far, it’s been good for Airbnb.

Shares were recently down 53% from their 52-week high, as we have entered a bear market. It doesn’t mean the company is performing poorly, though. In its last earnings report, for its first quarter, Airbnb posted revenue of $1.5 billion, up 70% from the year-earlier quarter, and free cash flow roughly doubled to $1.2 billion. Airbnb is continuing to innovate, too, regularly releasing new features, such as split stays and travel protection, and improving how customers can search for properties.

3. Roku

Roku (NASDAQ: ROKU) has helped disrupt how people view video entertainment, via its Roku devices that stream content from many services. While some investors are focused on which company or companies will win the streaming wars with their movies and TV series, Roku has become a dominant route through which people watch streamed content — not only via inexpensive streaming devices, but also via Roku-branded TVs (which are valuable data-collecting machines for the company).

The company makes much of its revenue not from devices, though, but from the streaming services it hosts, offering them data and analytics, and the ability to advertise. Spending on  streaming advertising is expected to grow robustly in the years ahead. Meanwhile, Roku itself is also entering the content arena, offering some original fare on its own channel.

Founded in 2002, Roku is now a $10 billion company, as of this writing — and that’s after shares have fallen a whopping 85% from their 52-week highs. That has certainly been painful for existing shareholders, but it’s an attractive opportunity for would-be investors.

These are just some of many companies these days selling at prices that are reasonable, if not downright compelling. Market downturns do that, and investors with some money to spare should consider investing at least some of it. Before deploying your hard-earned dollars, though, be sure to thoroughly research any companies of interest.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions in Amazon, Apple, Intuitive Surgical, and Roku. The Motley Fool has positions in and recommends Airbnb, Inc., Amazon, Apple, Intuitive Surgical, Roku, and Zoom Video Communications. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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