Believe in the Digital Transformation
It’s the start of a new year, and traders are instinctively throwing out stocks that performed best the previous year in favor of laggards … but this is a huge mistake.
Many of the stocks getting caught in the selling frenzy are tech winners. Investors are exiting these positions under the premise they are over-loved and overpriced.
My analysis shows this is simply not true.
Investors are missing the bigger picture, though it’s easy to understand why.
In the first part of every new year, analysts who have been wrong get an opportunity to re-pitch their flawed theories. Many of these analysts have been bearish on technology stocks since 2009. They don’t believe any of the major themes driving stock prices since then are valid.
Related Post: How to Spot a Digital Transformation Winner
If you skim through the digital pages of the Wall Street Journal, or worse, Twitter, Inc. (NYSE: TWTR), you will find countless posts about artificial intelligence, digital transformation, machine learning and other big themes being nonsense. These pundits, while widely followed and often noisy, miss the point.
Stock prices reflect what investors believe about the future, and the digital transformation is shaping those beliefs. Many are ignoring the fact that many of these leading companies are reporting tremendous sales growth.
That process is going to continue … despite what misanthropic pundits prescribe in their year ahead missives. They have been wrong for years anyway.
Still, savvy investors will capitalize on their foolishness. The selling means lower prices and better entry levels.
Last week I wrote about The Trade Desk, Inc. (Nasdaq: TTD). Shares of the programmatic digital ad platform have been under pressure following several stories about digital ads being ineffective. Investors should take all these stories with a big grain of salt. Sales growth for digital ads is going through the roof.
Related Post: The Digital Transformation Isn’t Going Anywhere
The company is a clear digital transformation winner and it will continue to use its competitive advantages to beat out competition, as I’ve written about in the past.
In the chart below, you can see the deepening pullback that began early last month. It’s still declining, but I believe that’s just in the short term.
Currently, shares are trading around $763. Savvy investors should be patient and use any significant pullback as a buying opportunity.
This is just one of many picks that investors should be considering. We’re still at the cusp of one of the greatest investment opportunities in history.
Jon D. Markman