Disruptive growth investing is a simple endeavor. You’re looking for companies that use technology to disrupt existing business models or create entirely new markets (called blue oceans). The size of the opportunity is referred to as the total addressable market (TAM). If you’re planning to hold a company for a decade, the TAM needs to be sufficiently large so they can grow for long periods of time. Ideally there are some recurring revenues (i.e. software-as-a-service) or, in the case of hardware companies, consumables.
Revenue growth is a proxy for market share captured so that’s our main focus. Healthy gross margins ensure that profitability can be achieved at an appropriate time (when raising capital is no longer economically viable). One company that ticks the revenue growth boxes and then some is TransMedics (TMDX). The green bars in the below chart show the strong growth TransMedics has realized since our last piece on the topic – TransMedics Stock Comes Alive with Organ Transplant Tech.
An Evolving Business Model
The TransMedics core product offering is the Organ Care System (OCS),- an organ preservation platform that keeps organs alive longer than flopping them onto a bag of ice.