Stocks to Watch: Those That Will Shape the Future

By Markets Fool.com

Continue Reading Below

Our stocks to watch could expose you to this futuristic reality.

On some level, it's kind of silly to write an article about stocks to watch for investing in the future. For long-term investors, shouldn't every stock you put your money behind be a bet on the future?

Allow me, then, to narrow my scope: There is a small group of companies out there that will have an outsized role in shaping how society works 20 years from now. Some of these companies have yet to be created, and it is patently impossible for me to tell you which companies those are.

There are, however, a handful of companies that I believe have a strong likelihood of being major players in shaping the future. They all share a few key traits in common.

Two characteristics of "futuristic" companies
The two variables that I'm zeroing in on are (1) cash on hand, and (2) companies that have optionality.

Continue Reading Below

Let's tackle cash first. The future will always bring opportunities. Whether that involves entering or creating new markets, or buying out a start-up company that has a bright future, it will cost money. Companies with a lot of cash on hand have the freedom to pursue such paths.

Next, let's deal with the nebulous concept of "optionality." In essence, a company that has optionality has the ability and skill on hand to pursue several different avenues for growth.

I'll tip my hand and reveal that one such company on my list is Amazon.com . This company started out as just a book seller. Later it broke out into selling electronic media and physical merchandise. Today, it is not only the largest e-tailer on the planet, but a leading provider of delivery and cloud-computing services.

CEO Jeff Bezos has said that his goal was not to build the world's largest store. Instead, it was, "to be the earth's most customer-centric company." That lends itself to millions of different options for future growth.

Compare that to a company like Ford. Ford may be a great stock to own moving forward, but I see very little evidence of optionality. The company designs and manufactures cars -- that's it. There's little evidence it's moving into other markets.

Other companies on "The List"
In total, my list of companies that will shape the future is up to five. Here's the list, with a short explanation on why they were chosen.

Company

Cash on Hand

Optionality?

Apple

$194 billion (most in world)

Is moving from mobile technology into wearables, with rumors of forays into cars and television.

Google

$68 billion

The company's Google[x] project, detailed below, focuses on disruptive moon-shot technologies.

Amazon

$14 billion

See above.

Facebook

$12 billion

Investments in WhatsApp just starting to unfold, with a lot of optionality in virtual reality, via the acquisition of Oculus Rift.

Tesla

$1.5 billion

Sure, Tesla makes cars. But it also makes batteries which could change energy generation and storage, and is building a hyperloop prototype.

Sources: ABC, Yahoo Finance.

When it comes to Google, the entrepreneurial spirit of co-founders Larry Page and Sergey Brin is key. While Page is CEO, Brin is in charge of a project called Google[x].Fast Company described this project as, "devoted to findingunusual solutionsto huge global problems."

Photo: Steve Jurvetson, via Wikimedia Commons

Many refer to these as "moonshot" projects -- like balloons that provide Internet in remote areas, or self-driving cars. While many may not come to fruition, all it will take is one or two big ideas for Google[x] to prove successful. And Google has the cash to make that happen.

With Facebook, we have the undisputed leader in social media. But I think CEO and founder Mark Zuckerberg believes in a much bigger mission that gives the company optionality -- to connect the world. His shrewd acquisitions of WhatsApp and Instagram -- and their booming popularity -- are helping ensure he does that. And the real x factor is Oculus Rift -- which many believe could be the future of virtual reality.

Many might argue that Tesla, a company with only $1.5 billion on hand, shouldn't be on the list. Those detractors have a point. But the optionality that Elon Musk -- Tesla's CEO and founder -- brings to the table is unmatched.

An artist's futuristic rendering of transportation drawn in 1912 has eerie similarities to the proposed hyperloop.

In building the Gigafactory, Musk has already shown that Tesla is much more than just a car-maker. With a future that will likely include significant forays into energy and other forms of transportation (like the hyperloop), Tesla is highly likely to play an outsized role in shaping our future society.

I won't get too much into Apple. I think the most brilliant presentation for what the company could become was given by NYU professor Scott Galloway in a talk titled:The Four Horsemen. In a nutshell, the company is increasingly become a luxury brand -- not a technology company -- that enjoys unmatched margins.

Is there any guarantee that these companies will be the shapers of the future -- let alone great investments? No, there's not. But you shouldn't ignore the significant advantages that having a huge cash pile -- and optionality -- makes in the real world.

The article Stocks to Watch: Those That Will Shape the Future originally appeared on Fool.com.

Brian Stoffel owns shares of Amazon.com, Apple, Facebook, Google (A shares), and Google (C shares). The Motley Fool recommends Amazon.com, Apple, Facebook, Ford, Google (A shares), Google (C shares), and Tesla Motors. The Motley Fool owns shares of Amazon.com, Apple, Facebook, Ford, Google (A shares), Google (C shares), and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.