It's time for some brutal honesty...
In late 2018, I warned readers not to make a truly boneheaded investing mistake. It's one that's easy to laugh at after the fact... but just as easy to fall for in real time.
I knew that my warning probably wouldn't help next time around, though.
That's because I figured it would be a long time before such an "opportunity" cropped up again. And even the select few who did read my warning might forget it by the time they needed it.
Well folks... here we are again.
In the last month, investors fell into the same painfully dumb trap. And more of these traps could be waiting just around the corner.
So let's take time, once again, to explore this investing mistake. Hopefully, it'll help you avoid becoming the "Greatest Fool"...
We're in the midst of a crisis... one that has sent investors hunting for opportunities. Love it or hate it, that's how the markets work.
Today, "social distancing" is the name of the game. And investors are looking for the few companies that stand to benefit from our "new normal."
Now, don't get me wrong. That's not necessarily a bad thing. Some stocks will turn into big winners as companies adapt to this crisis... And it makes sense to look for them.
In fact, some companies seem perfectly positioned for what's happening. And ZOOM Technologies (ZOOM) sure looks like one of them. I'm guessing you've heard about it by now.
Obviously, I'm talking about the video-conferencing company. It allows users to host virtual meetings online...
It's the perfect service to keep folks working and connecting in today's "new normal." And the company has been all over the news as a result.
There's a big problem with everything I just said, though. Did you catch it?
ZOOM Technologies has nothing to do with the video-conferencing software we just discussed.
It's some other technology company... based in China... that hasn't disclosed financials since 2015!
But that didn't stop investors from pouring money into it. Check it out...
The "wrong" Zoom traded for around a dollar a share at the start of the year. Its market value was less than $20 million. Then it soared nearly 20-fold to its peak on March 20... And its market value grew to more than $300 million.
By then, the U.S. Securities and Exchange Commission ("SEC") figured out what was going on. It stepped in to halt trading. But for some investors, the damage was already done.
The right Zoom – Zoom Video Communications (ZM) – is thriving this year. It has nearly doubled in value... And it's shaping up to be one of the few big winners in this crisis.
Now, this may seem like a one-off event, but it's not. History is littered with examples of mistaken-identity trades.
Back in 2018, I covered how investors got confused in the run-up to a Google acquisition. And I shared how folks piled into a stock with "Tweeter" in its name... on the day that social media company Twitter (TWTR) went public.
In those instances, folks who bought made a foolish mistake. It doesn't matter what the excuse was. They started clicking away in their brokerage accounts... and bought the wrong ticker without bothering to double check.
I sincerely hope you never make this mistake.
Please, take time to think before you click "buy." That's especially true of hot, perfectly positioned companies that you're just hearing about for the first time. You don't want to end up becoming the "Greatest Fool."
And if you have made this mistake... forgive yourself, move on, and don't make it again.
Good investing,
Vic Lederman
Further Reading
"These days, people seem to be looking for fancy ways to profit during the current health crisis," Vic writes. But if you're trying to get clever right now, you might need to take a step back and look at what's obvious in the markets today... Read more here.
"Taking time to assess an uncertain situation doesn't always mean you're going to be left behind," Vic says. It can be tempting to rush into the latest hot stock trend. But it's usually an easy way to lose money... Get the full story here: The Hot IPO Trap Is Back.
Buying the latest hot stock tip is a dangerous bet. It can lead to grave mistakes. If you want to become a successful investor, look for dominant businesses with big profits...
DEMAND FOR DATA IS RAMPING UP
Today, we're looking at a company benefiting as more people stay at home...
The COVID-19 pandemic has many Americans working from home. And Internet usage is soaring as a result. Comcast (CMCSA) recently said that usage on its broadband network surged 32% in March. Verizon (VZ) has even added emergency spectrum to keep up with high demand. That's good news for today's company...
Equinix (EQIX) is a $60 billion data-center real estate investment trust ("REIT"). It owns and operates data centers, then rents out data storage to companies that can't (or don't want to) store it themselves. These services are seeing an influx of demand because of the pandemic. Chipmaking giant Micron Technology (MU) recently announced that it would shift supply from smartphones to data centers to help companies like Equinix meet the high demand worldwide.
As you can see in today's chart, EQIX shares have been trending higher over the past 12 months. Shares are up roughly 40% over that time frame, recently hitting a fresh all-time high. As people continue to work from home, expect this trend to continue...
