We are not in a bubble!
With returns like that, many investors are asking fear-driven questions and who could blame them, again #2020. A fear-driven question like “Has it gone too high?” can be flipped to “How high can it go?” Just take Cloud Computing as an example. It’s up (30.83%*) ytd, so does that mean it’s due to collapse or does that even come close to pricing in the $1+ Trillion** of revenues these high margin businesses were predicted to receive BEFORE COVID-19? Some are even so leary that they are asking for parallels with 1999’s infamous Tech Bubble. With central banks pumping excess liquidity into markets, has this new money supply artificially inflated the FANG stocks? With those sitting on the outside waiting to buy any potential dip, we bang the drum for a rules-based approach to help remove the dangers of sentiment driven trading, empowering you to act in the face of uncertainty, fear and exuberance.
Here’s a good example: the FANG stocks are valued at more than the FTSE100 Index. But let’s turn that around and raise an crucial question: when was the last time you used the services of a FTSE100 company? Aside from who you bank with? Food for thought.
When asked if we’re in a bubble, we’ll ask, what stock would you say supports an argument that we are in a bubble? Tesla, we’re told, and we’ve all heard of Tesla, but by comparison how many of you have heard of Fastly? Fastly is a cloud platform which delivers faster, safer, and more scalable websites and apps to customers. YTD, both in performance terms and on a chart basis, they appear similar, so if one is in a “bubble,” does that mean the other stock is also?
Fundamental analysis is not one dimensional. We are going to compare Fastly and Tesla. Both are up nearly 400% (YTD - as of 30th September, 2020).
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