Let's look at Apple first.
One of Apple's mantras is to "Think Different" and that perspective has led to a number of industry-revolutionizing developments like iTunes, the iPhone, and the App Store, to name a few. Each of those has disrupted the prevailing business model and created opportunities for those investors that were prepared, but carnage for those that were not. The impact of the Internet provides countless other examples, and even after all the years we've witnessed its impact and the destruction it has wrought upon newspaper and other publishing business models, as well as the travel industry, we are on the cusp of seeing it now rock the retail industry to its core.
Apple is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. See how Cramer rates the stock here. Want to be alerted before Cramer buys or sells AAPL? Learn more now.
Now, let's look at Amazon, which is a holding in Growth Seeker, a portfolio I manage. The company delivered super-sized March quarter results, is benefiting from the accelerating shift to online and mobile commerce as well as the ubiquitous migration to the cloud. By comparison, companies like the Gap, Sears, Sports Authority, to name a few retailers, are shutting locations while others are filing for bankruptcy.
In a world of connected devices, higher-speed networks, social media and immediate gratification, we've seen a pronounced change in how consumers communicate, shop, transact, save,invest, and consume content. From chips and devices to networks and data centers to the Cloud, streaming and downloads, it all falls into our Connected Society investing theme. Developments to watch include the connected car, connected home and the Internet of Things and security within this new virtual universe.
In the case of Apple's innovations, in each of the cases there was a demonstrative tailwind created by a confluence of factors leading to dramatic developments which altered the course of an industry and changed the competitive landscape. Some companies adjusted their courses correctly, shifting their businesses into the slipstream of those tailwinds, while others missed or misread the signs and for them that tailwind became a headwind.
If we continue to look at the world from the standard view of industry classifications, we'd likely miss the impacts of the changing economic, demographic, psychographic, technological, regulatory and legislative landscape. This reminds us of those great words on insanity attributed to Albert Einstein, "Insanity: doing the same thing over and over again and expecting different results."
Doing things differently, like Apple used to do and like what Amazon does today is the key to growth. It's been elusive, however, over the past few quarters.
Just look at the small and mid-cap heavy Russell 2000 or its iShare Russell 2000 Index (IWN) equivalent. Despite the market rally since the February lows, the Russell 2000 is still down more than 8% over the last 12 months while the iShares Russell 2000 Growth Index ETF (IWO) is down -11%, the iShares Russell 1000 Growth Index (large cap) ETF (IWF) is down -1.8% and the iShares Russell Midcap Growth Index (IWP) is down -6.1%.
What is an investor to do?