Tech bubble or opportunity?





Numerous stocks from the technology sector have recently been hit hard. Is the Opportunity there now to buy or leave it alone?

Many tech stocks have only had one direction for the past year and a half: up, up and beyond. But in the last few weeks the environment has become much rougher. For former corona profiteers, the recently exorbitant growth rates are normalizing, and the forecasts are also becoming more cautious again. In addition, the intermittent rise in US bond yields has triggered a rotation away from expensive tech stocks and towards standard stocks. The result: some stocks are now 30, 40 or even 50 percent lower than their highs.

But courageous investors can get one or two bargains after the selloff or at least place a stop limit.

One of the strongest reasons for buying technology stocks was its high growth potential. In addition, there were prospects of extremely high profits, if those market leaders lead with high margins and their expansion in a wide variety of directions.

Technology stocks like Zoom Technologies (ZOOM.US) , Amazon (AMZN.US) or Tesla (TSLA.us) have are just a few examples that show the potential that technology stocks can have. 2021 was a record year for initial public offerings for tech stocks. Looking to take advantage of hot markets, companies raised more money than ever before. Dating app Bumble (BMBL.US) rallied 64% in its debut trading session. Traders bet on firms becoming the next Amazon (AMZN), which warned of “substantial operating losses for the foreseeable future” when it went public in 1997. The internet giant now posts billions of dollars in profit each quarter.

The purchase of such assets, even if they are still producing high losses today, is justified. Recently, however, more and more investors and analysts have doubted the real price the retail investor should be willing to pay.

In some cases, evaluation standards have developed that appear anything but realistic. For example, sales multipliers between 20 and 100 were paid - and that for non-market leaders with high losses.

The fear of a tech bubble, like the Dot.com bubble in 2000, is there. In the recent past we have consistently seen high volatility among technology stocks. However, every decrease was used to replenish stocks. So further record ratings were achieved.

This time, too, the US tech stocks are on the sell-off (as of 20 December 2021). This is a large-scale sale and not individual shares.

The background this time could be the spread of the highly contagious virus variant Omnikron in combination with a burgeoning risk of inflation.

Inflation is poison for highly valued and risky stocks. The background is that venture capital is becoming more expensive.

The question of the current positioning now arises.

If you own technology stocks that you continue to believe in, you should probably keep them.

After all, you bought the shares to take advantage of the potential for the next ten or twenty years. If nothing has changed in terms of the quality and potential of the company, there is objectively no reason for a panic sale.

Despite the recent sell-off - some technology stocks have already lost half their value - prices are still high.

The good thing, however, is that you may soon reach a level where you can get fair prices for well-growing companies. Of course, then it is worth taking a closer look at the true market leaders of tomorrow.


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