Let’s look for a few over-hyped stocks. Sure, you say, it would be good to know which stocks are over-hyped, but where should we look for them, and how will we know them when we find them?
First things first: where to look. Let’s start with the market’s current obsession. No need to name names, or at least there wouldn’t be the need in most contexts. In this context… naming the names is exactly what we’re doing here, and the first name on the list is Bitcoin. Because of the excitement surrounding Bitcoin—an exuberance that long ago rose above the level we typically refer to as “irrational,” everything that comes into context with Bitcoin is driven higher. In the case of stocks such as NVIDIA (NVDA), the upward pressure is minor compared to the actual virtues of the stock, and so can safely (I hope*) be overlooked. In other cases, such as that of the company formerly known as Long Island Iced Tea (LTEA), where the stock price tripled at the company’s mere suggestion that it was going to explore avenues to make money using blockchain technology (the technology behind Bitcoin), I feel it is scarcely necessary to waste my breath by telling you not to bother.
Ah, but what about the companies in between? Are there some companies which, while making a more or less believable case for the value of their stock, also display, upon careful examination, the swirling rainbow colors of a hype bubble? And what about the over-hyped industries of yesterday? Are there stock bubbles, blown months or years ago, just waiting for the appropriate needle that will cause the bubble to pop? My answer to both questions is an emphatic yes.
* I am long NVDA