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75% of S&P 500 Stocks Are Time Bombs

Why am I doing this? Surely, you’ve asked yourself that question at least a few times in high school or college. Indeed, you may be asking yourself that question right about now. I had a similar moment of clarity recently, where I asked myself: Why am I investing in hypergrowth stocks to buy?

Source: Shutterstock

After all, these hypergrowth stocks – which have been huge winners for the past decade – have been on a wild see-saw ride over the past month.

One day, these stocks are up 10%. Then next, they’re down 10%.

And it’s all because of equally wild gyrations in the normally calm bond market, where Treasury yields – which normally don’t move more than a few basis points a day – are regularly rising and falling 10 basis points per day, as investors grapple with a one-of-a-kind economic reopening, an unprecedented volume of fiscal stimulus, and the inflation implications of all this…

I have some maybe unwelcome news for you: I don’t expect this volatility to subside until summer.

Everyone knows we are going to see some huge year-over-year inflation numbers in March, April, and May, mostly because of “base effects” – a year ago, the global economy completely shut down, so of course, when comparing to that shutdown, inflation and growth numbers are going to be huge

But the big debate here is whether that inflation will have staying power. In other words, will it be transitory, and will inflation rates fall back below 2%? Or will it be permanent, and will inflation rates stay above 2% for the next few years?

I’m 100% confident it’s the former. This, for all the reasons I’ve already detailed, and technology (or, more specifically, the internet) is the most powerful deflationary force ever invented. It won’t be upended by a half-open economy with above-normal unemployment.

Still, we won’t get a firm answer on that until the summer, when base effects phase out, and we start to get some normalized inflation numbers.

So… we come full circle… knowing that there is a ton of volatility on the horizon… why are we doing this? Why are we continuing to invest in disruptive innovation?

Because we want to be on the right side of history.

Stocks to Buy: Getting on the Right Side of History

We came across a very interesting Twitter post recently from Bloomberg anchor Jon Erlichman.

The tweet listed businesses that advertised during NFL quarterback Tom Brady’s first Super Bowl. That list included long-gone and hardly relevant companies, like Blockbuster, Radio Shack, Circuit City, CompUSA, AOL, and Sears.

The purpose of the tweet, of course, was to showcase how fast the world is changing… so fast that most of the companies that advertised during the world’s largest sporting event less than 20 years ago, are no longer relevant or even around today.

They have been disrupted by innovation. Blockbuster has been replaced by Netflix (NASDAQ:NFLX). Sears replaced by Amazon (NASDAQ:AMZN). AOL replaced by Facebook (NASDAQ:FB). These are multi-billion-dollar companies entirely uprooted by disruptive innovation.

Sound like a pattern?

It is – indeed, after some digging, we unearthed some interesting data which broadly illustrates that Blockbuster, Radio Shack, Sears, and AOL aren’t anomalies. They’re the norm.

Don’t Get Caught With the Next Blockbuster

According to research from Credit Suisse, the average lifespan of a company in the S&P 500 in 1958 was 61 years. Today, the average lifespan has shrunk to 18 years.

Bar graph showing average lifespan of a S&P500 company in 1958, 1980, and 2012

Now, this is happening because disruptive technology is progressing at an exponential pace… and its influence, impact, and reach are only getting bigger and bigger.

As all that happens, more and more incumbent giants that enjoyed long lifespans are being uprooted by technological innovation.

Just think about all the brick-and-mortar retailers that have filed for bankruptcy over the past few years as a new class of e-retailers like Amazon, Etsy (NASDAQ:ETSY), and Shopify (NYSE:SHOP) have taken over the shopping world.

Or think about all the movie theater chains that have been made irrelevant by streaming services like Netflix and Hulu.

Or think about the publishing companies that have been run over by Facebook and Google (NASDAQ:GOOGL, NASDAQ:GOOG).

The acceleration of disruptive innovation is significantly shortening the lifespan of S&P 500 companies.

Importantly, this acceleration isn’t going to slow down anytime soon.

***Hydrogen, wind, and solar technology are going to upend the oil and gas industries.

***Electric vehicles are going to take over the auto market.

***Cloud computing is going to make onsite computing irrelevant.

***Automation is going to displace huge swaths of the labor market.

That’s why, by 2027, Wall Street research firm McKinsey believes that 75% of current S&P 500 companies will completely disappear…

In other words, three out of every four companies in the S&P 500 currently face the same fate as Blockbuster and Radio Shack.

So… why do invest in disruptive innovation?

Because we don’t want to be caught on the wrong side of history – we don’t want to be stuck holding the next Blockbuster.

Instead, we want to be early investors in the next Netflix.

That’s why we invest in disruptive innovation.

Bottom Line on Hypergrowth Stocks to Buy

The world is changing. Faster than ever before. Don’t get caught up in interim interest rate volatility and noise. Zoom out. Look at the big picture. And get on the right side of history.

One of my favorite tech stocks to buy on the right side of history isn’t mentioned here.

But it reminds me of a young Amazon. Indeed, I think buying this stock today could be like buying AMZN stock back in 1997 — before it soared thousands of percent.

Which stock am I talking about?

Click here to watch my first-ever Exponential Growth Summit to find out the name, ticker symbol, and key business details of this potential 10X stock pick.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s how his Daily 10X Report has averaged up to a ridiculous 100% return across all recommendations since launching last May. Click here to see how he does it.


Article printed from InvestorPlace Media, https://investorplace.com/hypergrowthinvesting/2021/03/75-of-sp-500-stocks-are-time-bombs/.

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