Many investors around the world try to find the next business that is going to change everything. Apple's iPhone has completely transformed how we consume media and where our eyeballs spend a lot of time looking. You might be reading this on an iPhone right now.
Google, Netflix, Amazon, Microsoft, Cochlear Limited (ASX: COH) plus many others have all brought something unique into the world and have created enormous value for shareholders.
Nintendo seemed to have created a similar thing with Pokemon Go. The augmented reality game resulted in hordes of kids (and adults) searching for pokemon. They were going into people's gardens, cafes, parks and everywhere else trying to catch them all.
The Nintendo share price almost doubled in the two weeks from before Pokemon Go's release to after its launch. A couple of weeks later it was down almost 25%.
Pokemon Go was not a key part to Nintendo's business, but investors got excited. The market can get excited about a business despite not knowing (or caring) how much of a financial impact it will actually have on the business.
Warren Buffet tries to find the businesses that have competitive advantages that aren't going to change much in ten or twenty years like chocolate or chewing gum.
In 20 years we will still be dying, meaning InvoCare Limited's (ASX: IVC) business model won't change. In 20 years international passengers will still be arriving into Sydney Airport Holdings Ltd (ASX: SYD). In 20 years we will still need healthcare products from CSL Limited (ASX: CSL) to remain healthy as a whole population.
Foolish takeaway
A lot of money can go up in smoke if you invest in a fad business with no long-term future. The best way to achieve strong returns is to find those businesses that can compound profit for a long time.