Do you want to know the secret to predicting which stock will make you money before it even begins its rise to the top?

In a word: trends.

Trends are our clues to investing, our road map to the financial world. “History repeats itself” is a cliche for a reason, and so I search for trends when picking stocks for my premium newsletter Stock of the Month. Let me be clear, though. I don’t just go looking for any trend. Any investor can follow the flavor of the month. And while you may have some success doing this, I can guarantee it won’t last for long.
 

#-ad_banner-#​Instead, I spend my time looking for a specific type of trend: companies that are about to disrupt their industry, setting the table for a shift in the balance of power that can reward early investors with sizable gains. 

Many companies attempt to be disrupters — but few succeed. Disrupters revolutionize their industries using one common strategy. They find elements of their industry models that customers hate — and make them disappear.

For example, broker commissions used to be regulated and set at a flat fee, roughly 1% of the amount of the total value of a trade. In May 1975, the Securities and Exchange Commission (SEC) deregulated brokerage fees.

Most brokerage houses didn’t think it was a big deal. They just assumed the industry would maintain uniformly high fees to maximize profits. But Charles Schwab had another idea. On the very first day of deregulation, he lowered the commissions charged by his company. His peers were outraged.

The bigger brokerage firms maintained high commissions for a long time. But the revolution had begun. Charles Schwab steadily grew market share and a loyal — and grateful — customer base.

Charles Schwab’s clients weren’t the only ones to benefit from this industry disrupter. Its investors have made an enviable fortune.

Charles Schwab (NYSE: SCHW) started trading publicly on June 30, 1989. If you invested $10,000 in the S&P 500 Index on that day, your investment would be worth $55,679 today. If you invested $10,000 in SCHW, it would be worth $1,221,579 today.

On Nov. 6, the once successful video rental chain Blockbuster announced that it was closing its 300 remaining U.S. stores. At its peak, Blockbuster had more than 9,000 stores. But even in its heyday, customers hated its business model. They especially hated the huge late fees the industry charged. After only two years in the industry, Netflix (Nasdaq: NFLX) introduced a monthly subscription video service — with no late fees.

Netflix stock has risen more than 4,200% since its debut on May 29, 2002. Activist investor Carl Icahn still considers Blockbuster the worst investment he ever made.

Finding industry disrupters can be one of the simplest ways to make substantial gains in the stock market. 

And I think I’ve found the next one. 

This company recently announced a major change — a change that eliminated the one thing customers hated about its industry’s model. Customer response has been overwhelmingly positive, and it could be the start of something big…

You see, for years mobile communications companies like Verizon (NYSE: VZ) and AT&T (NYSE: T) have subsidized the cost of a new cellphone when you sign up for one of their wireless plans. The catch is, you have to lock into a very expensive two-year contract.

Customers have long hated these overpriced, inflexible contracts. So last March, one company decided to make a bold move. It created an “un-carrier” plan where customers pay full price for their phones but get wireless service at a low flat fee — with no contract. 

Consumers did the math. Even if they bought the most expensive phone, the money they saved on wireless service would offset the cost of the phone in 18 months or less. Every month they stayed with this company after that, the more they would save when compared to the standard industry contract model. 

If customers already had a phone that would work on this company’s system, that was no problem. They could just sign up and get cheap wireless service — without a contract.

Since this major disruption, it’s no surprise that this company is growing by leaps and bounds. In fact, it gained more than a million new customers in the third quarter of 2013. And if that weren’t enough, news recently broke that a major competitor is looking into acquiring the company, which gave a small boost to the share price. 

The trend is clear. Charles Schwab and Netflix saw huge gains after a major disruption. I think this company will be next.

Now, out of fairness to my Stock of the Month subscribers, I can’t share the name and ticker symbol of this stock with you today. But disrupters like the ones I mentioned above usually prove to be big-time winners — and they’re the kinds of opportunities you should be looking for in your own portfolio. 

P.S. Looking for industry disrupters is just one of the methods I use to find stocks every month in my premium newsletter, Stock of the Month which has seen picks return of 40% or more in a matter of months. Though getting a track record like that wasn’t easy, I use an incredibly simple strategy. To learn more about it and how to get the name and ticker symbol of the latest industry disrupter I mentioned in today’s essay, click here.