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Investing Mistakes Were Made on Wall Street, and Now Opportunity Abounds


Let me let you in on a little secret: The stock market isn’t perfect. Oftentimes, it makes investing mistakes.

And when it does, you need to pay attention. Indeed, the best investment opportunities in history have emerged when the stock market has made a “mistake.”

For example, in 2001, it wrote off all internet stocks as overhyped, passing fads doomed for bankruptcy. That mistake allowed everyday investors to buy world-changing internet stocks like Amazon (Nasdaq:AMZN) at $5. That’s an investment that would’ve turned $10,000 into more than $2 million.

A graph depicting the change in AMZN stock price

The stock market also made a “mistake” in 2008. Wall Street believed that the financial crisis and housing bubble pop would lead to the end of consumers spending money. That mistake allowed everyday investors to buy high-quality consumer discretionary stocks like Lululemon (Nasdaq:LULU) at less than $5. That would’ve turned $10,000 into more than $1.2 million.

A graph depicting the change in LULU stock price

Yet again, in 2018, the market made another investing mistake. It assumed the Fed was going to purposefully nosedive the U.S. economy through a series of rate hikes. But it didn’t. And that mistake allowed investors like you and me to buy excellent growth stocks like Enphase Energy (Nasdaq:ENPH) at huge discounts. Indeed, that could’ve turned $10,000 into $450,000 in just over two years.

A graph depicting the change in ENPH stock price

And, like clockwork, the market made a mistake again in March 2020. It thought the COVID-19 pandemic would obliterate the global economy. Of course, it didn’t. But this mistake allowed investors to buy tech stocks like Nio (NYSE:NIO) at $2. And that investment would’ve turned $10,000 into more than $250,000 in less than a year.

A graph depicting the change in NIO stock price

The Market’s Biggest Mistake in a Quarter-Century

You see, the market isn’t perfect. Every few years, it makes some big investing mistakes. And investors who capitalize on them set themselves up to make personal fortunes.

Well, today, the market is making another “mistake.” And this may be its biggest mistake over the past 25 years.

Investors who capitalize on this stand to make a fortune over the next few years.

So, what “mistake” am I talking about?

It’s forgetting the simple reality that technology is redefining everything about our lives.

Tech Continues to Redefine the World

Tech stocks have received a lot of negative press recently, mostly because they’re crashing.

But during this crash, investors would be wise to zoom out from the price action and take a look around. What are they going to see? Technology is everywhere.

About a third of Americans today either entirely or mostly work from home. And that hybrid work lifestyle is powered by remote work technology platforms like Zoom (Nasdaq:ZM), DocuSign (Nasdaq:DOCU) and Atlassian (Nasdaq:TEAM).

Globally, around 1 of every 5 purchases is made online these days. That’s thanks to the super-high convenience and super-low prices of e-commerce sites like Amazon, Etsy (Nasdaq:ETSY) and Chewy (NYSE:CHWY).

A graph depicting the rise of global ecommerce retail sales

More than 60% of advertiser budgets are now allocated toward digital advertising channels, mostly because of the enhanced targeting tools offered by digital ad platforms like Snap (NYSE:SNAP), Pinterest (NYSE:PINS) and The Trade Desk (Nasdaq:TTD).

Thanks to the flurry of cheap and high-quality streaming services like Netflix (Nasdaq:NFLX) and Roku (Nasdaq:ROKU), U.S. consumers now watch more content through TV-streaming devices than through legacy devices like set-top boxes and DVR.

Take Advantage of Wall Street’s Investing Mistakes

Regardless of where you look, technology has and will continue to redefine every facet of our lives.

This reality has not changed. Yet, the stock market is acting like it has, sending tech stocks significantly lower because “they’re too expensive.”

This is a major mistake, just like in 2001, 2008, 2018 and 2020. Today the stock market is making a huge mistake, and it’s creating a generational investment opportunity.

To emphasize the size of this opportunity, let me illustrate the size of the mistake.

Over the weekend, my team and I constructed the following chart. It notes the valuations of different types of stocks based on their current market caps relative to 2025 sales estimates. It then compares that valuation multiple to how quickly the company is growing.

The first basket of stocks we looked at was your typical blue-chip value stocks like Coca-Cola (NYSE:KO), Johnson & Johnson (NYSE:JNJ) and Honeywell (Nasdaq:HON).

The second was a group of growth stocks like Shopify (NYSE:SHOP), Roku and Block (NYSE:SQ).

And the third were 10 “Strong Buy” stocks from our flagship Innovation Investor model portfolio. It’s basically a collection of smaller hypergrowth stocks.

The data shows that the stock market is currently making its biggest mistake ever.

On average, value stocks are trading at around 3.3X 2025 estimated sales. And those companies are growing sales at around 4% per year. Growth stocks, however, are trading at a lower sales multiple (2.3X) for about 7X the growth (~30% average revenue growth).

And our “Strong Buy” stocks are trading at less than 2X 2025 estimates with an average revenue growth rate of 76%.

A chart comparing value and growth stocks' growth rates and valuations

Hypergrowth stocks growing ~10X as quickly as Coca-Cola are trading at a ~70% discount to that company’s valuation multiple.

That is an enormous discount – and it creates an enormous opportunity.

The Final Word on Investing Mistakes

The stock market has blunders. And the key to being a great investor is capitalizing on those missteps.

Right now, the market is arguably making its biggest mistake of the past 25 years. The result? The biggest investment opportunity of the past quarter-century is emerging right before our very eyes.

Will you capitalize on it?

Find out how to turn today’s market volatility into your personal fortune. Better yet, I’ll give you the names, ticker symbols and key business details of those 10 “Strong Buy” stocks above. They’re stocks that are growing 10X as quickly as Coca-Cola — yet are 70% cheaper, too.

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

Article printed from InvestorPlace Media, https://investorplace.com/hypergrowthinvesting/2022/05/investing-mistakes-were-made-on-wall-street-and-now-opportunity-abounds/.

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