This Tech Sector Is Like Amazon in 2002
Amazon.com Inc. (Nasdaq: AMZN) is an essential part of my life.
There’s an average of 1.3 Amazon Prime boxes a day at my doorstep.
My wife and I watch old movies on Prime streaming video.
And Alexa is always there to queue up the perfect Disney song to calm a frustrated toddler.
I remember using Amazon for the first time in 2002. This was a few years after it started selling items other than books.
I needed a bag of tennis balls for my loyal mutt. They arrived at my apartment in just a few days, saving me a trip to the nearest sporting goods store.
I thought Amazon was really on to something back then.
But when I looked at the company, it wasn’t making any money. Nor was it even expected to make any money for a few years.
It was shortly after the dot-com bubble had burst. The stock had dropped 90% from its high.
The bottom wasn’t easy to spot. The price would double or triple in a few months’ time, only to fall 50% in the next pullback.
So, I thought I would have a better chance to buy it sometime in the future when it was less volatile.
Boy, was I wrong. Amazon has increased 600-fold from its post-dot-com lows.
But I learned an invaluable lesson from this.
And there’s one specific sector I’m following that reminds me of Amazon back then.
The Hype Cycle
Every new technology follows the same “hype cycle.”
When a new innovation arrives, investors hype it up to inflated heights.
We saw this with dot-com in 2000, bitcoin in 2017 and electric vehicle stocks in 2021.
But then expectations sour, and the hype pendulum swings downward. Investors become disillusioned with this new technology.
At some point, investors start to realize that the technology isn’t going away.
Adoption rates start to increase, slowly at first.
It soon becomes an indispensable part of our daily lives.
Where the Biggest Gains Can Be Found
When I look around the market for investments, I’m always searching for the one that holds immense promise, but investors have cooled on its prospects.
That’s where the biggest gains can be found.
Right now, decentralized finance (DeFi) is in the trough of disillusionment.
This is the peer-to-peer financial services infrastructure that’s being built on top of crypto networks.
Last year, DeFi expectations were overly inflated. You couldn’t hear enough about how DeFi was about to replace the entire banking system.
The value of crypto in the DeFi space grew 100X, from under $1 billion to over $100 billion.
The prices of DeFi tokens that allowed for trading, lending and other financial activities surged.
It even graced the cover of Fortune in an issue titled “Crypto vs. Wall Street.”
Investors have since become disillusioned with DeFi’s future.
They’re concerned about the legacy banks forcing heavy-handed regulation from Congress and the SEC.
They’re fearful about a spate of recent hacks, which amounted to $1.3 billion lost in 2021.
They’re worried that DeFi will never go mainstream, reserved only for the techno literate among us.
Amazon faced similar concerns 20 years ago.
Investors worried about credit card theft, lost packages and a company that was far from making any money.
In hindsight, that was the time to buy.
Invest in the Amazons of the DeFi Space
DeFi, like e-commerce, is a transformational technology.
It will disrupt the banking systems, similarly to how Amazon impacted the brick-and-mortar retailers.
It’s an innovative technology that holds the key to a better, more efficient way of doing business.
Crypto protocols like Aave, Uniswap and Balancer remove multiple middlemen out of financial transactions and allow for instant settlement.
You can learn about crypto’s “third wave” by clicking here.
DeFi will eventually be a vital part of our lives. And I don’t think we’ll have to wait 20 years to get there.
Regards,
Editor, Strategic Fortunes
Morning Movers
From open till noon Eastern time.
Meritor Inc. (NYSE: MTOR) designs, develops, manufactures and services auto parts. The stock is up 45% after the company received a $2.58 billion buyout bid from engine manufacturer Cummins Inc.
Ocugen Inc. (Nasdaq: OCGN) focuses mostly on developing gene therapies to cure blindness diseases. It is up 20% after the FDA lifted the clinical hold it placed on the COVID-19 vaccine candidate, Covaxin, that Ocugen helped Bharath Biotech develop.
Riley Exploration Permian Inc. (NYSE: REPX) engages in the acquisition, exploration and production of oil and natural gas in Texas and New Mexico. It is up 18% after analysts at Truist Securities maintained their buy rating on the stock and raised the price target.
Houghton Mifflin Harcourt Co. (Nasdaq: HMHC) provides curriculum, supplemental, intervention solutions and professional learning services worldwide. The stock is up 15% on the news that it is being acquired by Veritas Capital for $2.8 billion.
Esperion Therapeutics Inc. (Nasdaq: ESPR) develops and commercializes medicines for the treatment of patients with elevated LDL cholesterol. The stock rose 13% after the company reported on a strong fourth quarter with both a top- and bottom-line beat.
Hecla Mining Co. (NYSE: HL) mines and produces precious and base metals. It is up 12% after the company reported fourth-quarter results and provided a higher production outlook for 2022.
Daiichi Sankyo Co. Ltd. (OTC: DSNKY) researches, develops and manufactures pharmaceutical products worldwide. The stock is up 11% on positive top-line results from a phase 3 trial of ENHERTU, a treatment candidate for patients with HER2 low metastatic breast cancer.
IronNet Inc. (NYSE: IRNT) designs and develops solutions for cyberattacks. It is up 11% on a rebound from a sell-off on Friday, but there is no significant news driving either move.
Star Bulk Carriers Corp. (Nasdaq: SBLK) is a shipping company that engages in the ocean transportation of dry bulk cargoes worldwide. The stock is up 8% after analysts at Jeffries raised the price target on the stock following the company’s strong fourth-quarter report and outlook late last week.
Krispy Kreme Inc. (Nasdaq: DNUT), the doughnut and coffee chain operator, is up 8% this morning. The move came after the company reported a revenue beat for the fourth quarter and provided a reassuring outlook for the rest of 2022.
My career on Wall Street started while I was in college. I spent a summer interning for Merrill Lynch in the middle of the ‘90s bull market. I was fascinated with trading, and as a result, after college, I joined Salomon Brothers in the famed mortgage bond trading department. Later, I spent time at Citigroup working with credit derivatives. Eventually, I needed to walk away from the excess of Wall Street. That’s when I joined Banyan Hill in 2017. Now I help readers get ahead of the market and build their retirements.
