You’ve likely heard someone talk about the “new economy” before…
Analysts first used this buzzword in the late 1990s to describe Internet companies. They believed these hyper-growth companies would be “disruptive” and change our way of life.
This phrase symbolized a shift from the business of yesteryear…
We wouldn’t rely on a manufacturing-based “old economy” to thrive anymore. Rather, thanks to technology, we would create new products and services much faster than ever.
That’s exactly what happened with many tech innovators. But not every company thrived…
You see, some dot-com businesses weren’t actually disruptive at all. And investors who chased these new-economy companies suffered massive losses when the bubble popped.
As I’ll explain today, we need to know when a one-time “new economy” leader becomes an ordinary “old economy” company. That will help us know when to look elsewhere…
These days, most folks don’t use the “new economy” buzzword. But investors still want to be able to identify, discuss, and invest within a group of disruptive super stocks…
That’s why many people still watch the tech-heavy Invesco QQQ Trust (QQQ) closely. Back in the day, QQQ was essentially the vehicle for investing in the new economy.
And it’s why folks still listen to everything Cathie Wood says. They can’t get enough of the ARK Investment Management founder and her futuristic exchange-traded funds (“ETFs”).
The Invesco QQQ Trust and Wood’s ETFs make for good conversation. And frankly, they’re still all great ways to track the tech sector today.
But we need to be more selective with our investment decisions.
For example, we all appreciate how Zoom Video Communications (ZM) changed the world…
The company was founded in 2011. That was almost a decade before the COVID-19 pandemic. But the ensuing shutdowns launched the business into the mainstream…
Zoom let everyone work, socialize, go to school, and more without leaving home.
Naturally, Wall Street loved this new-economy juggernaut. From the start of 2020 through mid-October 2020, the stock soared more than 730%. That’s roughly 75% per month.
But then, the bottom fell out. Since its October 2020 peak, Zoom is down about 86%.
We all know why that happened, of course…
In short, Zoom satisfied the new-economy storyline. The popular new-economy stock soared to a wildly overvalued level. Then, it fell prey to its harsh valuation reality.
Even worse for investors, Zoom thinks it’s still disrupting the world…
A recent press release from the company had a great new-economy headline, “Zoomtopia 2022: New Innovations to Power Modern Work Experiences.” But it’s a bunch of hype…
Now, instead of just remote video-conferencing, Zoom sees itself as the go-to platform for all sorts of tasks. The company believes growing numbers of folks will turn to it for…
- Calendar
- Virtual co-working (Zoom Spots)
- Artificial intelligence for customer service (Zoom Virtual Agent)
- Training salespeople (Zoom IQ Virtual Coach)
Importantly, Zoom expects that all of those things will happen on one platform. That way, “users no longer need to leave the Zoom platform to access their e-mail and calendar.”
The “Zoomtopia” report suggests a new-economy flavor. But even if the company develops any truly new features, its rivals will likely imitate them without much effort…
It’s like the first automaker to offer built-in CD players, the first refrigerator to dispense drinking water from its door, or the first “smart” TV to integrate apps.
Sure, Zoom is still innovating. But it’s not disruptive. It’s garden-variety “feature creep” – a lot of stuff that’s just as likely to confuse as delight. That’s a recipe for disappointment.
Zoom is already down about 86% over the past two years. It’s no longer a new-economy business juggernaut. It’s no longer special. Now, it’s just an ordinary old-economy outfit.
Before long, more investors will see that. So the stock’s downfall likely isn’t over yet.
Good investing,
Marc Gerstein
Editor’s note: Zoom isn’t the only “new economy” stock to fall off a cliff this year. And according to Chaikin Analytics founder Marc Chaikin… more pain could be coming.
In just a few days, Marc will deliver an urgent warning for investors. He believes a historic financial reset in 2023 could cause a run on the banks unlike anything we’ve ever seen.
To prepare, Marc urges folks to move their money out of cash and popular stocks and into a new vehicle 50 years in the making. He’ll share all the details during a FREE broadcast at 10 a.m. Eastern time next Tuesday, November 15. Save your spot right here.
