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The Innovation Bubble Burst — Buy Now for Massive Returns

The Innovation Bubble Burst — Buy Now for Massive Returns

I wasn’t trading the markets back in the early 2000s.

Being a young kid, the only exposure I had was Sunday trips to the coffee shop with my dad.

He would often walk me through the stock prices in the newspaper.

At the time, shares of Apple only cost about $0.25…

Nvidia traded for less than $1…

And at one point, you could buy Amazon stock for under $10 a share.

As it turns out, those were great entry prices for some of the best U.S. companies.

The same once-in-a-generation buying opportunities are playing out again.

Major companies like Zoom, PayPal and Zillow have seen their share prices fall over 75%.

Drawdowns of this nature are painful. And some companies will never see their share prices recover…

But those that do will go on to see massive returns.

It Was Like the Peak of the Dot-Com Bubble

Between 1995 and 2000, the number of internet users rose over 20X, reaching 361 million.

The growth was clear as day. And investors couldn’t buy into internet stocks quick enough.

Their excitement pushed valuations to extremes, even for companies that were losing money.

If a business put “dot-com” in its name, its stock was sure to rocket upward.

Investors’ giddiness in recent years created a similar scenario. Except this time investors flooded into innovation stocks.

Like the internet at the peak of the dot-com bubble, the momentum in today’s biggest tech trends is clear as day.

  • Intellia eliminated a disease-causing gene inside the human body for the first time.
  • Waymo and Cruise successfully launched self-driving taxi fleets in select markets.
  • New-build solar and wind became cheaper than fossil fuel plants in more than two-thirds of the world.

These technologies will disrupt trillion-dollar markets like health care, transportation and energy.

But like the dot-com bubble, investors’ excitement pushed valuations to extreme levels.

This created a new bubble: the innovation bubble.

Now, with the prices of many Nasdaq stocks well off their highs, it’s clear that the innovation bubble has burst.

(Source: Bloomberg.)

When a bubble bursts, HUGE buying opportunities arise.

As I said before, not every stock will rebound.

But if you sift through the rubble, you’ll find great opportunities to buy into the companies of the future.

Ian King and I have been doing just that in Strategic Fortunes.

We’re using the weakness in innovation stocks to buy into tomorrow’s leading companies.

Regards,

a black and white drawing of a hand with a long pointy point

Steve Fernandez

Research Analyst, Strategic Fortunes

Morning Movers


 

From open till noon Eastern time.

Praxis Precision Medicines Inc. (Nasdaq: PRAX) develops therapies for central nervous system disorders characterized by neuronal imbalance. The stock is up 26%, continuing its rise from last week after reporting positive data from a Phase 2 study of its drug for patients with essential tremors.

 

Griffon Corp. (NYSE: GFF) provides consumer and professional home and building products internationally. The stock climbed 23% this morning on the announcement that management is considering strategic alternatives for the business, including a potential sale.

 

Oric Pharmaceuticals, Inc. (Nasdaq: ORIC) discovers and develops therapies for the treatment of various cancers. The stock jumped 20% on a disclosure that the company’s CEO, Jacob Chacko, bought up more than 76,000 additional shares of the stock.

 

IQiyi Inc. (Nasdaq: IQ) provides online entertainment and streaming services in China. It is up 16% after analysts at JPMorgan upgraded the stock from an underweight to an overweight rating and raised its price target.

 

Clear Secure Inc. (NYSE: YOU) provides a member-centric secure identity platform that expedites identity verification at key points such as airports. The stock is up 16% after the company announced a $100 million share buyback program.

 

Faraday Future Intelligent Electric Inc. (Nasdaq: FFIE) designs, develops and sells electric vehicles and related products. It is up 16% after reporting results for the fourth quarter and full-year 2021 showing that it achieved several key milestones.

 

Rattler Midstream LP (Nasdaq: RTLR) owns, operates, develops and acquires midstream and oil and gas-related infrastructure assets. The stock jumped 16% on the news that Diamondback Energy is acquiring the company for $2.2 billion.

 

ManTech International Corp. (Nasdaq: MANT) provides technology solutions and services for U.S. defense, intelligence community and federal civilian agencies worldwide. It is up 15% on the news that it is being acquired by investment firm Carlyle Group in a deal valued at $4.2 billion.

 

Benson Hill Inc. (NYSE: BHIL) is a food technology company that develops healthier and more sustainable food and ingredients. The stock is up 11% after the company reported strong first-quarter results that were driven by rapid growth in its ingredients segment.

 

Spirit Airlines Inc. (NYSE: SAVE), the low-cost airline service company, is up 11% today. The move came after JetBlue Airways launched a hostile takeover after Spirit rejected its previous offer in favor of a deal with Frontier Group.

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