No Santa Claus Rally. Will buy and hold on stocks of company that invest in itself.
Which stock do you plan to hold and trade?
With the recent tech stock price plummet, some may ask: Is this Dotcom crash 2.0?
The performance of tech stocks over the last few years draws obvious parallels with the Dotcom bubble and bust 22 years ago.
In the five years to March 2000, the Nasdaq Composite index rose 489%, and then it fell 75% over an 18 month period.
In the five years to November 2021 the same index appreciated by 205%, and it’s since fallen as much as 35% .
If a 'bubble' burst were really coming (or were already here), the impact is different.
With the recent tech stock price plummet, some may ask: Is this Dotcom crash 2.0?
The performance of tech stocks over the last few years draws obvious parallels with the Dotcom bubble and bust 22 years ago.
In the five years to March 2000, the Nasdaq Composite index rose 489%, and then it fell 75% over an 18 month period.
In the five years to November 2021 the same index appreciated by 205%, and it’s since fallen as much as 35% .
If a 'bubble' burst were really coming (or were already here), the impact is different.
First the ‘hyper growth’ stocks of smaller companies may be facing a 'bubble' and their valuations are being brought back down to earth as reality is setting in and the euphoria subsides. See $Zoom (6694.JP)$
Second the larger companies are just facing an earnings recession (may not be 'bubble' burst), and valuations are being compressed as rates rise and earnings forecasts are re-rated lower. See $Amazon (AMZN.US)$ and $Alphabet-C (GOOG.US)$
Bottom line
The so called current 'bubble' was caused by prolonged low interest rates. If it is burst, we should focus on the fundamentals of the company and be realistic about share price - remember no stock is worth an infinite price, no matter how good it is.
Be careful about extrapolating trends and particularly growth trends into the future. During a 'bubble' burst, such trending based on past data is not realistic anymore. Be conservative and look at the macroeconomics.
What a company does during a downturn can provide clues as to how it might perform in the future. The stock that I plan to hold are companies that keep investing (in itself) as they are the one that will emerge stronger after the 'bubble' burst. See $Meta Platforms (META.US)$, $Tesla (TSLA.US)$ and $Apple (AAPL.US)$
Second the larger companies are just facing an earnings recession (may not be 'bubble' burst), and valuations are being compressed as rates rise and earnings forecasts are re-rated lower. See $Amazon (AMZN.US)$ and $Alphabet-C (GOOG.US)$
Bottom line
The so called current 'bubble' was caused by prolonged low interest rates. If it is burst, we should focus on the fundamentals of the company and be realistic about share price - remember no stock is worth an infinite price, no matter how good it is.
Be careful about extrapolating trends and particularly growth trends into the future. During a 'bubble' burst, such trending based on past data is not realistic anymore. Be conservative and look at the macroeconomics.
What a company does during a downturn can provide clues as to how it might perform in the future. The stock that I plan to hold are companies that keep investing (in itself) as they are the one that will emerge stronger after the 'bubble' burst. See $Meta Platforms (META.US)$, $Tesla (TSLA.US)$ and $Apple (AAPL.US)$
The above comment is based on this article which provides detail data and chart:
https://simplywall.st/article/are-we-in-another-dotcom-bust
https://simplywall.st/article/are-we-in-another-dotcom-bust
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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I reflected trading experiences by writing journals. My comments are for educational purposes not financial advice.
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