Today’s Money Morning is going to be brief. I’m just going to ask one question and then give you the answer.
Did you buy the dip?
You should have.
OK, OK, I’ve got a bit more to say than just that. But seriously, if you have a look at all the major tech stocks around the world, they’re at bargain prices.
Just have a look at the one-month charts of Amazon.com, Inc. [NASDAQ:AMZN], Intel Corporation [NYSE:INTC], Netflix, Inc. [NASDAQ:NFLX], NVIDIA Corporation [NASDAQ:NVDA], Alibaba Group Holdings Ltd [NYSE:BABA], Tencent Holdings Ltd [HKSE:0700].
They’ve all fallen off the proverbial cliff.
Now I’m not the first to tell you about this. If you’ve paid any attention to any news source in the last month, this won’t be an awakening for you.
But how many of the information sources you were paying attention to cut through to the reality of the situation?
I bet they all told you how much tech stocks were ‘crashing’. Some are still saying this is the beginning of a stock market plunge like the days of 2008/09.
Maybe that’s the case. But I don’t think so. In fact I think this was perhaps the last chance investors had to snaffle up some of the world’s great companies for bargain basement prices.
You should have, and should buy the current tech dip..
Take NVIDIA for example, here’s a company that when I first recommended it in Revolutionary Tech Investor in December 2013, was trading at just US$15.90, with a market cap of just US$8.9 billion.
When we sold it in January this year it was trading around US$245. It was the hardest decision we’ve ever made on a stock. A 1,440% gain might sound like a no brainer to capitalise on. But a company that’s so important to the future of a high-tech, digital world is hard to cut loose.
But we did, 1,440% is exactly what we were aiming at when we recommended the stock. But this year after NVIDIA kept charging to more than US$290 in September, we were left wondering…
Had we tapped out too early? Was it the right call? Ultimately it was the right call. And thanks to the markets’ massive overselling of tech stocks in the last couple of weeks, NVIDIA fell below US$200…and then below US$190.
All of a sudden we’re now thinking is this something we should be looking at again? Is NVIDIA value again? Have the markets lost all sense and rationality?
Well we’re certainly of the view this massive tech sell off is irrational and doesn’t make sense. Not with how we see the world developing and advancing. A company like NVIDIA is advancing artificial intelligence, self-driving cars, augmented reality and the shift to quantum computing.
What the company is doing versus what the market is doing is utterly nonsensical.
So does that make the likes of NVIDIA, Amazon, Intel, Netflix, Alibaba, Tencent and a host of other tech stocks a buy? [openx slug=inpost]
Tech stocks experienced triple-digit gains
Well if we look at NVIDIA, they’re not a US$8.9 billion company anymore. Today (at the time of writing) they’re back to a US$126 billion market cap. Will NVIDIA deliver another 1,440% return from here?
If they did that’d make them worth around US$1.89 trillion…so it’s probably unlikely anytime soon. As it stands, Apple Inc. [NASDAQ:AAPL] is currently the only public company worth over US$1 trillion.
In that sense, NVIDIA isn’t going to return to our Revolutionary Tech Investor portfolio anytime soon. Besides we’ve already added in a stock we think is the ‘next NVIDIA’.
But just because NVIDIA might not deliver 1,440% again in the next couple of years, doesn’t mean it’s not worth a look at. Same story for Amazon, Netflix, Tencent, Intel and more. We could also probably add Apple, PayPal, Cisco and Microsoft to the mix as well.
This is the cream of the crop of the world’s largest tech companies. And most of them are trading double digits lower thanks to the last couple of weeks. Is there more pain to come? Or are we in the midst of a false crash?
We think that we’re actually at the start of another major tech mega-boom.
We’ve seen every one of the companies above deliver at a minimum, triple-digit returns to shareholders within the last five years.
In fact, here’s the run sheet (1 November 2013 to 1 November 2018):
- NVIDIA — 1,238%
- Amazon — 308%
- Netflix — 485%
- Tencent — 197%
- Intel — 100%
- Apple— 176%
- PayPal (1 July 2015 to 1 November 2018) — 117%
- Cisco — 116%
- Microsoft — 182%
That’s astonishing. All of these companies are household names though. Five years ago, you knew who Amazon was. You probably had (or still have) an Apple product or three in your house. You knew about Microsoft, Intel and even Netflix (although not in Australia yet), was still something everyone was talking about.
The start of the next tech mega-boom
Over the last five years our world has become more reliant immersed with these companies, their products and services.
So what happens over the next five years? Those periods are easy to look back on, but hard for people to see forward with.
But we know what’s coming. These companies will form part of the future in another five years’ time. And we’ll continue to see more augmented technology, connected devices, machine-to-machine, machine-to-human and human-to-machine communications.
We’ll be able to transfer data with even greater speed (thanks to 5G) and process even more information (thanks to quantum computing), and do it all with greater efficiency (thanks to self-driving cars).
These are just three of the areas of development that will drive (excuse the pun) our markets to even higher highs. Those big tech giants will do well out of things. And we may very well see them deliver more triple-figure gains over the next five years.
But the next NVIDIA — the next 15-bagger is going to come from behind the pack. They won’t be the one that’s already riding high with these tech giants. They’ll be lurking somewhere lower, maybe with a market cap of a few hundred million or just over one billion.
They will be the ones that make the next five years truly astonishing for tech investors. And those that tap revolutionary mega-trends like quantum computing, intelligent automation or ultimate energy (nuclear fusion) will be the next giants of industry.
So is it time to buy tech stocks? You bet it is. This last week was a market reacting to everything that has nothing to do with how the world is really developing.
It’s a time to buy while the prices are low. And then sit back and hold on as we enter another five years of a massive tech-mega-boom.