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Here’s what you can learn from A2 Milk Company Ltd (ASX:A2M)

Source: Company presentation

A2 Milk Company Ltd (ASX: A2M) has been a monster performer on the ASX and despite its share price being down 25% from its peak in March, the company has returned over 1,600% for investors who bought it at 56 cents in April 2015.

That is a phenomenal return that even top companies such as CSL Limited (ASX: CSL) (up 110% over the same period), Xero Limited (ASX: XRO) (up 107% over the same period) and SEEK Limited (ASX: SEK) (up 33% over the same period) have not been able to come close to.

So what can you learn from this? Here are a few lessons that I take away:

The trend is your friend

People have been talking about the rise of China for a long time and sometimes it’s easy to think that this trend is overplayed. These trends, however, take a long time to fully play out and investing in companies that are backed but such tailwinds can be lucrative.

Pick and Shovel plays work just as well

You don’t have to invest in the trend directly (in this case Chinese stocks) to benefit from it. For example, semiconductor manufacturers have benefited significantly from the growth of Apple iPhone sales.

Understanding a business model and strategy is important. 

It’s an obvious point to make but who would have thought a milk company can grow that fast?

Just because it has gone up, doesn’t mean it can’t go higher.

Despite its share price going up 260% in 2017, A2 Milk Company shares are up over 20% so far in 2018. It might not sound impressive but that is still higher than index returns and it’s nothing to sneeze at.

Want to find the next A2 Milk Company? It’s never too late to get started. There are always exciting new opportunities. A good place to start might be to read about these three revolutionary companies.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Atlassian.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

Kevin Gandiya owns shares of Apple.

You can find Kevin on Twitter @KevinGandiya.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Apple. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool Australia owns shares of A2 Milk and Xero. The Motley Fool Australia has recommended Apple and SEEK Limited. 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. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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