Is there anything more exciting than getting in on the ground floor of an amazing opportunity? Imagine you’re Eduardo Saverin meeting up with and partnering with a Harvard classmate named … Mark Zuckerberg.

As times change and technology advances, new industries and opportunities regularly arise. Examples from the last few decades include the Internet, wireless communications, smart phones, GPS mapping and clean energy.

When a new market opens, some corporations, often small and young, quickly dive into the void in the hopes of growing right along with the new market and eventually emerging as the leader. As a result, we call them emerging growth stocks. It should go without saying that these corporations reinvest any profits to grow the business as fast as possible.

Because they often start off very small, these corporations may be able to ride the new market’s growth and double, triple or quadruple themselves in a short period of time. The value of your stock may do the same! But, it’s much more likely that one or both of the following plays out:

  1. the corporation is swamped with an array of similar competitors and just cannot gain enough market share to sustain itself
  2. the emerging market never, well, emerges. That is, the exploding demand that experts predicted never materializes. Recent history is replete with technologies that were supposed to be the next big thing but which simply fizzled. They include personal 3D printers, fitness wearables, action cameras, consumer drones and virtual reality headsets.
Suitable for Young, aggressive investors who want to take a small portion of their investable assets and try to hit a home run.
 Examples GoPro (GPRO), Fitbit (FBIT), and 3D Systems (DDD).
In the news Prepping for a rapid-fire launch, Kite Pharma gets a pass from FDA on axi-cel panel review – September 2, 2017

Garmin, Samsung Join Fitbit in Season of Wearables, Says Raymond James – September 1, 2017

GoPro’s Much Hyped $800 Karma Drone Is Getting Raked Over the Coals on Amazon by Buyers – August 6, 2017
Connections An emerging growth corporation, if it can manage to be one of the top few in a market that continues to expand, can become a growth corporation that may be able to reel off a decade or two of above average growth.
Explorations Biomedical corporations, ones on the leading edge of new approaches to treating illness, would be best categorized as emerging growth stocks. Many of these corporations, however, are working on a single drug for a single illness. If the company or the Federal Drug Administration (FDA) announces that trials have shown it to be ineffective, that will lead to epic losses for the shareholders. Imagine losing 80% of the value of that investment on the day of the bad news and you get the idea. Research three biotech corporations that have soared. What did they have in common? Research three that have plunged. What did they have in common?
A final word There’s a great expression in business that is appropriate to use when discussing why an emerging growth stock failed due to demand in the market not materializing as predicted: “There’s no there, there!”