Jim Cramer: Apple Leads the Way With Revolutionary Innovation

Oh yeah, then there's innovation. Yeah, that difficult-to-quantity pesky innovation that gets your attention and changes your mind, that makes a difference.   For most of the 40 years I have been investing every day's pretty mundane when it comes to news events. A better quarter. A beat and raise. Some wild tweet. A Fed that doesn't get it, one that does. Good employment numbers like the one that's been propelling us since last Friday.   But every now and then we get something, something that matters, that impacts decisions, alters behavior.   For me it's the innovations Apple (AAPL) announced Wednesday, innovations that are not evolutionary, but revolutionary, something that happens when you least expect it.   Some of us, candidly, have become a but inured to the launches, not because we don't like the phones, they are always better than the ones we have, but because they don't' really move the needle when it comes to the stock. I have been far more focused of late on the service revenue because I love a model where I pay a company every month without thinking of it because I need its service.   For the longest time there was Costco (COST) , Sirius XM (SIRI) , Spotify (SPOT) , Netflix (NFLX) , Amazon (AMZN) Prime  and a couple of sports services in addition to, of course, my phone and broadband provider.   Then a person in my family lost his phone and then someone who will remain nameless failed to take my phone out of my pocket before putting my pants in the washing machine. That's about all it takes to have an iCloud backup moment.   I love subscription businesses. They are annuities. They also eliminate the one and done notion of buying a phone. You buy the razor, now you have to buy the blades.   The growth of that revenue stream had me so enthralled that I didn't pay much attention to the new phone or the new watch, especially because I just bought new ones this very summer. But when I look at the features of the phone, the amazing camera - so much for my money - the dual phone lines, an absolute must if you travel, and I do, and the incredible screens, well, they are surprisingly welcome.   More important though, the real breakthrough I think, is the watch that I have always wanted, one that is the real health kit, one that has a low heart rate function, the electrocardiogram that the FDA has approved, the atrial fibrillation warning, or afib, as it's called, and the emergency warning system if you fall, these are what I had always hoped for.   Look, I love all the features of my current watch. But as we get older these become necessities. And for the elderly or your elderly parents and grandparents, you are now foolish if you don't have one of these. I think that we should get an insurance break if we buy them. I think your cardiologist will insist on it. How can an older person risk not having the emergency assistance capabilities, especially one that kicks in if you're unresponsive. When my late father got older we got one of those gizmos that is supposed to allow him to let people know something's wrong.   It was almost useless given that if your parent falls, it's unlikely to be next to the device.   I will go as far as to say, that as exciting as the new features are for the phone, you may be downright negligent if you don't get the watch.   And here's the big kicker. You're going to get the phone if you get the watch. That's the way it works. Consider it the gateway drug to the entire Apple ecosystem.   Revolutionary not evolutionary. Just what the doctor ordered.   Now let's go back to the concept of innovation because it is instructive and worth teaching about.   When I was a hedge fund manager the best idea I ever had, the best move I ever caught, was when Intel (INTC) introduced not the 286 but the 386, the 486 and ultimately the Pentium. I mention each iteration because they were pretty revolutionary and I bought each one so I stayed long the stock. It was clearcut innovation. I felt the same way about Microsoft (MSFT) Windows. It just kept getting better and better so I held the stock.   They just kept innovating and I kept owning and buying.   Alphabet's (GOOGL) a total innovator. I have no doubt that its Waymo autonomous vehicle will continue the tradition of search and YouTube. Amazon's a constant innovator. Remember when it was just a bookstore? Netflix went from being a diskette company that had no idea what I liked to being an internet company that pushes me everything I want and a lot that I didn't' know I wanted.   What do all of these companies have in common? They are tremendous stocks with the possible exception of Intel which has stopped innovating and ceded the lead in gaming, data center and, despite the mobile-eye acquisition, autonomous driving, all to Nvidia (NVDA) and now, in some cases particularly GPUs, AMD, hence the remarkable run in that stock. Our rescue mutt, part pitbull, part who knows what is named Nvidia. I renamed our Puggle (AMD) and he now answers to AMD , but only when I starve him and then offer him a tweet.   He's learning.   Revolutionary innovation can trump business cycles, presidential tweets, employment reports, you name it. You revolutionize something you change peoples' behavior and you create demand where it didn't exist.   When you look at the S&P 500 you struggle to find more than a handful of companies even capable of adding "new and improved" on the products they offer without you laughing at it and knowing it's a phony. Almost everything is just same old same old with new wrappings.   Much of what passes for innovation is simply an iteration, an incrementally better flavor, taste, scent, look, feel. There are companies that make things easier with software, that matters. There are devices that can make life a little easier. But in the end the car drives you from a to b maybe with electricity instead of gasoline, the house has more creature comforts, the plane takes as long as it always has, the PC can have a touch screen. For the most part even the drug companies have stopped making real breakthroughs and seem to concentrate on just slight improvements, often just designed to continue patent exclusivity.   But tech? The changes can move the needle. They can alter behavior. They can be new and improved to the point that what you have is now outmoded and just not good enough.   Yesterday Apple revealed a device that outmoded my watch. Am I upset that I bought this one in June? Nah, it's been fine. But this thing's a record player. The new watch leapfrogs the cassette, the 8 track and the CD and gets you to what you need now. I wish I were younger, I bet I would know more about how the phone is so revolutionary other than the basics that I can follow, enough to want to buy simply because I need the second line and I want the better camera because I love social media.   Those people who want to buy the S&P 500, that's fine. I tell people all the time to buy index funds. But if you want to know what really propels a stock, not the market, but a stock, it's revolutionary innovation like that kind that Apple just gave you, like the kind that tells you that its trillion dollar valuation not only makes sense, but is exactly as it should be, if not more.      
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