Don’t look now, but tech stocks are in a bear market. And believe it or not, history clearly shows that investors who buy tech stocks today will make some huge profits.
Yesterday, the broader averages fell off a cliff, led by a whopping 4% drop in the tech-heavy Nasdaq. Thanks to that sharp plunge, the Nasdaq is now more than 20% off its November 2021 highs. By Wall Street’s definition, that means tech stocks are now staunchly in a bear market.
That sounds scary. I know. But did you know that the best time to buy tech stocks is when they plunge into a bear market?
Historically, buying tech stocks when they enter a bear market has been a great money-making strategy on Wall Street. The Nasdaq has entered a bear market a handful of times over the past several decades. Every time, it bounced back quickly and with vigor.
Average one-year gains in the Nasdaq after entering a bear market? 22%. Average three-year returns? 52%. Average 10-year yields? Almost 330%.
So, in our research advisory Innovation Investor, we listened to that data and bought the dip in tech stocks yesterday. Specifically, we issued a brand-new Buy Alert on one stock. We think could double (or more) in the next year alone.
And the name of that stock? Well, let’s find out.
The Divergence Phenomenon
History shows it’s time to get aggressive on tech stocks. But past performance is not an indicator of future success. Indeed, if historical data were the only thing telling us to buy tech stocks today, we wouldn’t be buying them.
And in fact, it isn’t the only thing telling us to buy tech stocks today.
Rather, the far more important factor at play here is a rare stock market phenomenon that we’re calling the “divergence.”
In short, since mid-2021, we’ve conducted months of research and dug into quantitatively measuring and understanding what drives stock prices. Through all that research, we’ve concluded that fundamental growth trends (i.e. revenues and earnings) drive long-term stock price performance. If revenues and earnings go up, stock prices do, too. There’s a positive correlation between the two of ~90%.
In normal markets, a company’s revenue/earnings growth trends move in tandem with its stock price. But when investors and worry about the future, the correlation breaks. Stock prices start to diverge from fundamental growth trends on fears that they’ll fall. But for high-quality companies, they persist. And eventually, those stock prices converge back to those fundamental growth trendlines in emphatic fashion.
This happened in the late 1980s around the Savings and Loan Crisis. It happened in the early 2000s after the dot-com crash. And it happened again after the financial crisis of 2008.
Divergence and Tech Stocks
Every time this divergence phenomenon arose, it created generational buying opportunities in high-quality companies that kept growing despite market chaos.
We’re talking about buying Microsoft (NASDAQ:MSFT) stock at less than 40 cents, Apple (NASDAQ:AAPL) stock at 25 cents. How about Amazon (NASDAQ:AMZN) stock at $5? We’re talking about life-changing investment opportunities.
And guess what’s happening in the markets right now as you read this?
One of these rare divergence windows is opening in a special group of stocks. Our research suggests that this is the biggest divergence window in stock market history. We firmly believe that investors who buy the right stocks today will position themselves to score life-changing returns.
That’s not hyperbole. That’s honesty.
An All-in-One Play With Tech Stocks
As many of you know, we are exceptionally bullish on technological transformation. We believe many exponential technologies are converging, setting the stage for a fundamental remaking of society over the next decade.
Innovations like the metaverse will redefine how we shop and interact with media. Self-driving cars will reshape how we get around. Augmented reality will transform how we view the world. And artificial intelligence will change how we think about the world.
Everything about our lives will shift over next decade. And that won’t be due to one or two exponential technologies but to the convergence of dozens of them.
So why not buy a stock that represents a compelling play on all those technologies?
That’s what we did yesterday in Innovation Investor. We bought a stock that we believe represents a picks-and-shovels play on multiple transformative technologies.
Long story short, the world is shifting from 2D to 3D content creation and consumption. We used to interact with digital media through 2D screens. Now, we’re increasingly implementing immersive 3D digital experiences.
This change is still in its early stages. It’s starting with gaming. Players are going from gaming on consoles to using headsets to play in 3D virtual environments. But it’s quickly extending into many more industries as well. Construction, architecture, engineering and even self-driving companies are using 3D content to simulate real-world experiences. And the inclusion of AI is allowing them to create smart and dynamic 3D simulations that almost mirror real life.
We believe the growth of 3D content usage in industry will be enormous throughout the 2020s.
Someone needs to create all that content and design the systems that operate it. Whoever does that best will create a trillion-dollar empire at the epicenter of multiple exponential technologies.
And the stock we bought yesterday is that “someone.”
The Final Word
Listen. It’s easy to be spooked by what’s going on in the markets right now. The term “bear market” isn’t supposed to be comforting. Stocks are getting crushed.
But technological progress and the U.S. economy are two of the most resilient forces in human history. They always bounce back.
And according to that history, investors who buy tech stocks when they enter a bear market will make more than 20% over the next year.
This time will be no different. In fact, this time should be even better. This bear market is happening alongside the rise of an ultra-rare divergence that’s produced the biggest market winners in history.
If you want to run for the hills right now, I understand. It’s the natural response.
But if you want to capitalize on what could be a life-changing market phenomenon emerging right at this very moment… Well, let’s just you’re my type of person. I’ll tell you everything you need to know to make big money in these wild markets.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.