In every one of the past 3-4 decades, we have had one or two noteworthy companies that revolutionized the landscape through innovative products and consequently has seen its stock outperform its peer group and the entire industry. In the 80s, it was Microsoft. Cisco was the darling in 90s and Apple was prohibitive favorite in 2000-10 decade. In this report, we investigate if these companies still offer a compelling reason for investors to own their stock anymore or has the baton been passed on to others in this decade.

Microsoft, which basically created the software industry from scratch in the late 70s enjoyed meteoric growth during the PC era in the 80s as it crushed every competitor that threatened its dominance. But, lack of vision at the top has resulted in the company being unable to launch products in time to dominate the browser and the mobile software markets as it did with PC operating system business. And now, after years of stalled growth pursuing variations on the same Windows products, the company appears to be targeting cloud computing and social media markets but others are already dominating those markets and its prospects as a software powerhouse does not look bright anymore.

Cisco, was the go-to company during the broadband and communications era in the 1990s. Supplying every single piece of equipment from switches and routers to connect homes and businesses and deliver high quality internet access, Cisco, was instrumental in driving the increase in broadband usage across the globe. But, when broadband installs started to reach critical mass, the company had no answer. Cisco is still dominant in its core switching and routing markets, but those businesses aren’t growing quickly or consistently. Its forays into set top box, security business and other areas etc. offers little appeal to investors.

Apple coming out of near bankruptcy in early 2000s captured one market after another with new and exciting products. For his sheer brilliance and ability to create new markets with innovative products, Steve Jobs is revered as the Thomas Alva Edison of our generation. But Apple, after Jobs, has not had one innovative product that has had mass appeal like the iPod or iPhone or iPad. Speculation is that Apple will launch its iPhone 8 and three new iPads in 2017. Does anyone care anymore? Apple TV has largely been lost in the noise. iWatch has not kept up with the times. And Siri has been dumped in favor of Alexa. In many ways, Apple has fallen off the proverbial tree.

This bring us to this decade and one could argue that this decade quite possibly belongs to Amazon. A list that is noteworthy of Amazon’s dominance is the “Death by Amazon” list and the number of companies in that list appears to be growing by the day. The who’s who of companies that have joined or will join that list in the near future is a reflection of Amazon’s innovative prowess. While most of Amazon’s success appears to be in destroying the traditional brick and mortar stores, its recent success with the Echo and Echo Dot, a product that has stumped Apple, Google and others, offers insight into Amazon’s vision and execution in rolling out new and innovative products and services.

Future Wealth’s View

The theory of cognitive dissonance states that when people’s actions differ from the facts or morals, they begin to rationalize to protect themselves from a painful contradiction and build up protection against accusations. The bigger the dissonance, the larger the rationalization, and the longer it lasts, the less wrong or immoral it seems. While Apple, Microsoft and Cisco are stars of the past and offer little growth going forward, investors, who own these stocks, want to believe they will once again regain their old glory.  At Future Wealth, we have been fans of Amazon for awhile now and have insignificant exposure to the other stocks mentioned above. If only we could identify the company next in line to assume the mantle from Amazon in the next decade, would’nt you like to buy them apples?