To watch the full episode, head on over to our sister channel at Hypergrowth Investing on YouTube.
Unlike QuantumScape (NYSE:QS), many hypergrowth companies with robust fundamentals have been steadfastly growing revenues — but their stocks have been crushed. If revenues and earnings are directly correlated to a stock’s price, shouldn’t the opposite be happening?
This phenomenon is called a divergence. Every once in a while, stock price diverges from the revenue trend line. Revenues and earnings continue to move higher, yet the stock price sinks lower.
This opens a window of divergence that continues to widen. But eventually, those stocks must snap back to their equilibrium and move in tandem with earnings — convergence. And when that happens, we’ll see some enormous returns.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.