Invest In The Game Changers

| February 28, 2014

There are many different strategies when it comes to investing.  Some people like growth, others like value.  Some like income stocks, others like small caps.  Some like technology, others like energy.  And the list goes on.

However, there’s one strategy you can always count on paying off in a big way.  That strategy is investing in game changers.

By game changers I mean, companies that have disruptive products or services.  These are the businesses that rewrite the rules for an industry or sector.  Think of what Apple (AAPL) did to the smartphone and tablet markets, for example.

You see, game changers often become leaders in their industries.  And, they tend to have a stranglehold on that leadership spot for years to come.

Here’s the thing…

Two game-changing companies have been making headlines in the last week.  Both Facebook (FB) and Tesla Motors (TSLA) are attracting attention – and tons of investors – due to recent events.

In the case of FB, it’s the company’s surprise purchase of texting service WhatsApp which is making headlines.  After all, the company’s paying $19 billion for this relative unknown in the US.

Nevertheless, WhatsApp boasts over 450 million users with 330 million of them active daily.  The service is wildly popular in Europe and India, and is particularly useful for international and group texting.

More importantly, the service allows users to bypass texting fees from traditional telecom companies.  And now, WhatsApp has announced it will be adding a voice service to its product. 

In other words, users may be able to bypass voice and texting fees from phone carriers.  Now that’s a game changer!  And it’s no wonder FB spent so much on the purchase.

In the meantime, TSLA could be on the verge of becoming a major player in the automotive and energy industries.

Basically, Tesla is planning on building a huge lithium-ion battery factory.  Its purpose is to lower the cost of building electric cars.  However, cheap batteries of this nature could also significantly improve energy storage across the entire electric grid. 

So with this one stroke, TSLA is setting itself up to be a major player in two industries.

The thing is, it’s hard to judge game changers based on valuation.  Much of their value is tied up in future revenues and profits.  As such, waiting for a pullback may not be the best way to buy into these types of companies… unless you sell puts.

By selling puts at the price you wish to enter a game changer, it allows you to collect premiums on the stock until it reaches your entry level.  It’s a good strategy to use when you’re having trouble waiting on the share price to fall to your level.  In the meantime, you are still generating cash in your portfolio.

Yours in Profit,

Gordon Lewis

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Category: Options Trading

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also one of the key analysts behind the highly successful Options Trading Wire and Advanced Options Adviser. As a market maker on the floor of the CBOE, Gordon analyzed and traded stocks and options across a broad range of market caps and industries including retail, internet, oil, insurance, and telecom. He often traded thousands of options contracts per month… and it’s fair to say, Gordon’s analyzed and invested in some of the most complex and successful options strategies in the world.

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