At my premium newsletter Game-Changing Stocks, I have the challenging but exciting task of identifying companies that are set to change the way the world operates. I’m talking about companies that hold the promise of revolutionizing their specific sectors of the economy or companies that create and nurture promising new businesses. And, of course, these are companies that will richly reward investors.
If there’s one thing true game-changers have in common, it’s the ability to innovate. But it’s not just companies that are innovative — countries can be, too. An innovation-friendly environment on a country level should, in theory, do wonders for companies domiciled in this country. Therefore, it should end up benefitting investors, too.
So to complement my growing set of promising companies in Game-Changing Stocks, I recently featured a look at a highly innovative country that holds promise of fostering as many game-changing ideas as possible.
It’s not a coincidence that so many revolutionary technologies, processes, consumer goods, medicines and devices originated here in the United States: Our country spends a big chunk of its GDP on research & development (R&D). The National Science Foundation put the number at a record $499 billion in 2015. Of that amount, the federal government’s share fell to a record low 23% while the business sector’s share rose to a record 69%, according to the foundation.
And, naturally, almost all of the companies in the GCS portfolio (and many that we have sold for profits) are U.S.-based.
However, it turns out that the United States isn’t the most innovative country in the world — at least not according to a special index created to measure innovation on a country level.
An Index Measuring Game-Changer Potential
The Global Innovation Index (GII) — co-published by Cornell University, leading business school INSEAD, and the World Intellectual Property Organization (WIPO, an agency of the United Nations) — aims to quantify the many sides of innovation.
The GII provides a key tool and a database of detailed metrics for 128 economies it incorporates (in 2016 the countries in the index represented 92.8% of the world’s population and 97.9% of global GDP). The GII includes indicators that go beyond the traditional measures of innovation, such as the level of research and development.
In assessing a country’s ability and potential to innovate, the GII relies on two sub-indices — the Innovation Input Sub-Index and the Innovation Output Sub-Index.
Five inputs capture elements of the national economy that enable innovative activities: institutions, human capital and research, infrastructure, market sophistication, and business sophistication. Two outputs capture actual evidence of innovation: knowledge and technology, and creative measures.
The index is comprehensive (which is why I like it more than a variety of similar indices from other sources); out of its 82 components, 58 are hard data, 19 are composite indicators from international agencies, and 5 are survey questions from the World Economic Forum’s Executive Opinion Survey (EOS).
Over the nine years of its existence, the GII has become one of the leading references on innovation. And for Game-Changing Stocks it will provide a scientific basis for investing in the most innovative environment in the world.
Something of a shortcut, yes — but remember that buying an entire country (via an exchange-traded fund, of course) also gives you instantly diversified exposure to a majority of its companies.
The table below summarizes the findings of the most recent GII iteration, as of 2016.
As you can see from this table, the No. 1 most innovative country is Switzerland; Sweden is a close second, and the U.K and the United States aren’t too far behind.
And to get the most bang for our buck, I am recommending that my subscribers invest in the most innovative nation on the list, Switzerland. While it’s impossible to invest directly in a country, we have a pretty good proxy.